Freeport Seeks Restart Approval // PJM's Interconnection Costs Soar // US Oil and Gas M&A Saw 13% Drop

Freeport Seeks Restart Approval

Texas's Freeport LNG terminal has applied for approval to partially restart operations.

"Federal Energy Regulatory Commission staff published Monday a request submitted by the Houston-based company requesting permission to begin reintroducing liquefied natural gas through its Loop 1 system connected to its dock," reports Natural Gas Intelligence. "The Texas facility has been idled since a June explosion investigators have said could have originated with Freeport’s LNG transfer equipment between its storage area and dock."

Freeport asked FERC to respond by Tuesday. At time of writing, FERC has not responded.

In a statement to Rigzone last week, Rystad Energy's Vice President Emily McClain said she expected Freeport to come back online this year, "but the timing remains uncertain." McClain also said that she did not anticipate a full restart until mid-year.

Freeport, which accounts for 15-20% of total liquified natural gas exports from the United States and generated $35 billion in revenue in the first nine months of 2022, was in high demand in Europe last year as the continent sought to alleviate an energy crisis during the winter. European traders have been eyeing its return--as more imports from the facility will likely depress gas futures as Europe's fuller-than-expected inventories keep prices mellow.

"Strong LNG flows and healthy inventories are providing confidence Europe will end this winter without energy shortages. That’s helping counter lower pipeline flows from Russia and maintenance-related curbs in supplies from Norway. Gas prices fell to a 16-month low earlier this month, easing some concerns over inflation and the economy in the region," reports Bloomberg.

PJM's Interconnection Costs Soar

Who pays for renewables to interconnect to the grid? And qui bono--who benefits?

A new report on PJM's interconnections from Berkeley Lab says that power plant owners tend to pay. The report also found that interconnection costs have skyrocketed in PJM.

The report states that average interconnection costs for projects that have finished interconnection studies rose from $42/kW before 2020 to $84/kW between 2020 and 2022. Also, the report found that costs for active and withdrawn storage and solar hybrid projects were unexpectedly high at $337/kW, while costs for completed storage projects were $4/kW and solar hybrid projects were $20/kW.

Over 95% of the projects undergoing interconnection studies consist of wind, solar, storage, and hybrids of solar or wind with batteries.

US Oil and Gas M&A Saw 13% Drop

Oil and gas deal-making dropped by 13% to $58 billion last year according to energy tech firm Enverus.

"The decline comes as large companies with strong balance sheets are targeting the best properties in deals valued upwards of a billion dollars, while smaller firms with discounted equity have been unable to find financially attractive assets," Reuters reports.

According to Enverus, oil companies are facing challenges with declining production from their wells; some are turning to acquisitions as a solution to maintain their oil and gas output. Larger companies with strong financial positions and good inventory tend to have a higher stock value, giving them greater purchasing power.

Diamondback Energy and Marathon Oil, two publicly traded U.S. shale firms, have recently made acquisitions to increase their drilling location inventory. Diamondback spent $3 billion on Lario Oil & Gas and Firebird Energy, adding 500 drilling locations, while Marathon Oil acquired Ensign Natural Resources for $3 billion, adding 550 drilling locations.

Smaller companies aren't so lucky. “There are a few options available for small-cap companies struggling to secure inventory in the current market," Enverus's Andrew Dittmar told Reuters.

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Conversation Starters

1. Pakistan has restored power. "Pakistan's energy minister on Tuesday blamed the worst power outage in months on a lack of investment in the network, saying the aid-dependant nation had 'learned lessons' from the breakdown that left millions of people without electricity," reports Reuters. "Like much of the national infrastructure, the power network desperately needs an upgrade, but funding has been patchy as Pakistan lurched from one International Monetary Fund bailout to the next. The outage, which began on Monday morning, was the second major breakdown since October."

2. The United Kingdom has been relying on curbing electricity consumption to stave off blackouts. "National Grid has extended plans for households to be offered discounts for cutting their energy usage – activating its demand flexibility service for a second day in a row. Customers with smart meters will be eligible for reductions in their energy bills if they save energy between 4.30pm and 6pm when demand is at its peak," reports Oilprice.com. "National Grid’s electricity system operator (NGESO) argued the scheme was part of 'cautious measures' to ensure the UK has 'adequate operational reserves tomorrow,' but played down the possibility of a supply crunch that could lead to blackouts."

3. Libya is leaning into offshore drilling. "Libya's state-owned National Oil Corp. and Eni will sign a production agreement to spend $8 billion to produce about 850 MMcf/d from two offshore gas fields in the Mediterranean Sea, the company's chairman said Jan. 23," reports S&P Global. "NOC and Eni, who will sign the agreement on Jan. 28, will develop the two fields that were already explored according to a 2008 deal and were supposed to start production between 2017-2018, Farhat Bengdara told Libya's Al-Masar TV."

Crom's Blessing