Scholz Saves German Nukes Until Spring // Global O&G Exploration Drops by 60% // Dozens of LNG Tankers Stuck on European Coast

Scholz Saves German Nukes Until Spring

German PM Olaf Scholz has decided to keep the country's three remaining reactors online until April 2023.

"Scholz’s decision, which came late Monday after a day of speculation, is designed to end a standoff between his two coalition partners, the Greens and the Liberals," reports Bloomberg. "While Habeck’s Greens are ideologically opposed to nuclear power, the business-friendly Free Democrats under the leadership of Finance Minister Christian Lindner argue that Germany should use all the generation capacity available to tackle the crisis."

"As Federal Chancellor, I have made the following decision in accordance with Paragraph 1 of the Federal Government's Rules of Procedure," Scholz said on Monday in a letter to the finance, economy, and environment ministers. "The legal basis will be created to enable the power operation of the Isar 2, Neckarwestheim 2, and Emsland nuclear power plants beyond 31 December 2022 until 15 April 2023 at the latest."

While this isn't a total victory for Germany's nuclear plants--it's a short-term extension and there are another three plants that began decommissioning earlier this year that aren't being rescued--it does signal a break between the governing parties and a concession that the Energiewende is no longer workable. Thus it's a hopeful sign in an otherwise dismal picture.

Global O&G Exploration Drops by 60%

The world's experiencing a molecule shortage--it needs more hydrocarbons and it can't seem to get them. In fact, it looks like the pain is here to say for the medium term.

Global exploration for oil and gas has plummeted by 60% this year.

"[O]nly two new blocks had been licensed for drilling in the U.S. as of the end of August this year with no new offers for oil and gas leases originating with the Biden administration itself," reports Oilprice.com. "Indeed, the handful of auctions that have gone ahead under Biden or bled into his presidency were decided upon during the presidency of Donald Trump."

A new report from the energy analytics firm Rystad has shown that Brazil, Norway, and India have now become world leaders for new oil leases.

The major oil companies may see their reserves vanish in as soon as 15 years. What's driving this famine? A lack of investment.

"Global oil and gas companies cut their capex by a staggering 34% in 2020, in response to shrinking demand and investors growing wary of persistently poor returns by the sector," Oilprice.com reports. "Capex is only set to rise ~12% in the current year."

While there are signs of life in the UK, which plans to take advantage of offshore drilling the North Sea, and in Senegal, where substantial reserves have been discovered, many of these projects will take a decade or more to develop.

Moreover, the West's schizophrenic energy policy worsens the situation. The developed world can't expect to keep threatening to end the fossil fuel industry and then panic when prices soar.

Dozens of LNG Tankers Stuck on European Coast

Dozens of LNG tankers are milling around the Spanish coast desperate to find a slot where they can unload. The situation has "prompted grid operators for the country to warn they may have to suspend loading to deal with this 'exceptional situation,'" reports Reuters.

If the ships can't find a place to unload, they make look for ports beyond Europe--a situation Europe can ill-afford as the weather gets colder.

"There are more than 35 LNG-laden vessels drifting off Spain and around the Mediterranean, with at least eight vessels anchored off the Bay of Cadiz alone," Reuters reports. The Spanish government announced on Monday that it may have to turn LNG tankers away due to a lack of import capacity.

Floating storage is at an all-time high, but a dearth of pipeline and regasification capacity has bottlenecked the flows to Europe. Regasification returns LNG back down to its gaseous state so it can be transported via pipeline.

"The bottlenecks have been compounded by lower industrial demand as Europe's economy slows as well as lower-than-expected domestic consumption in Spain due to unseasonably warm weather," Reuters reports.

According to Alex Froley, LNG analyst at data intelligence firm ICIS, the expectation that prices will increase as winter approaches, thus increasing heating demand, has encouraged some ships to wait so that they can sell their cargo at a higher price.

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Conversation Starters

1. The EU has published a proposal for its Emergency gas cap. "According to the proposal, several conditions would need to be met before the price cap would be imposed," reports Oilprice.com. "The first of those conditions would be some assurance that gas flows between EU countries isn’t interrupted. The other condition is that gas consumption within the EU not grow as a result of the price cap. The third and final condition that would trigger a price cap would be that the derivative markets continue to work effectively."

2. Two environmental groups--BLOOM and The Green Connection--are protesting TotalEnergies's plan to begin offshore drilling in South Africa. "TotalEnergies is the operator of Block 11B/12B offshore block which contains the Brulpadda and Luiperd discoveries made in 2019 and 2020 with up to one billion barrels of oil equivalent in total. Last month, the company filed for production rights on the block and relinquished the northern portion of the block," reports The Rigzone.

3. Nine-five percent of all ethanol fuel in America moves by rail according to a recent report from the Energy Information Administration. "In the first half of 2022, nearly all of the fuel ethanol that was delivered by rail (97%) originated in the Midwest. Rail accounted for 96% of the Midwest’s fuel ethanol deliveries to the East Coast and 90% of deliveries to the Gulf Coast," the EIA reports. "All fuel ethanol deliveries to the Rocky Mountain and West Coast regions were transported from the Midwest by rail. These percentages have held relatively steady since 2010, the earliest data on record." If negotiations break down between the rail unions and the rail companies and a strike breaks out this winter, it will cause pain at the pump due to the Renewable Fuel Standard, which demands gasoline be sole with ethanol in it.

Crom's Blessing