C.O.B. Tuesday

Mike Wirth from Chevron discusses energy landscape, global dynamics, CERAWeek, customer needs, mergers, fostering collaboration, and the challenges of investments relying on subsidies. They explore cultures in mergers, geopolitics in oil investments, and the complexities of major transactions in the energy sector.

It was our privilege today to welcome Paul Dabbar, CEO of Bohr Quantum Technology. In addition to his position at Bohr, Paul is a Senior Research Scholar and Distinguished Visiting Fellow at Columbia University’s Center on Global Energy Policy, a member of the Council on Foreign Relations, a Board Member of Dominion Energy, and a Contributor to the Wall Street Journal. Paul’s distinguished career in the energy sector spans several significant roles including his tenure as the Under Secretary for Science at the US Department of Energy from 2017 to 2021. Prior to that, he held senior finance and strategy roles at JP Morgan and he is also a nuclear marine officer and graduate of the US Naval Academy. We were delighted to visit with Paul. Our discussion centered on a recent piece Paul wrote for the Hoover Institution entitled “US Energy Superpower Status and a New US Energy Diplomacy” (linked here). The report examines how US energy diplomacy should shift to a more positive and powerful tone given the country’s achievements in the industry in the past decade and its newfound status as the global energy superpower. In our conversation with Paul, we cover key themes from his report, the concept of an “all of the above” energy policy and the importance of balancing energy production, prices, emissions, and national security, the potential for collaboration between the US, Canada, and Norway, anticipated growth in electricity demand, strategies for developing countries in meeting their energy demand while reducing reliance on coal, and the benefits of the US partnering with other countries in offering both traditional energy resources and new technologies with lower carbon intensity. We discuss whether explicit carbon reduction goals are necessary, the effectiveness of innovation-led strategy, the government’s role in supporting energy innovation, national security concerns particularly with regards to importing EVs and other energy-related technologies, Paul’s perspective on reforming the IRA, the coordination of energy policy across various government agencies, and much more. It was a wide ranging and fascinating discussion. Thank you for joining, Paul!  Mike Bradley kicked us off by discussing the February CPI report, noting it was hotter than expected but had little impact on broader energy markets. Bitcoin and broader energy markets continue to be in a “risk-on-mode” driven by consensus of a soft-landing U.S. economic scenario and seem less focused on interest rates and more focused on AI/big tech euphoria. WTI continues to be relatively rangebound, crude oil time spreads have pulled back modestly but still remain in steep backwardation, and OPEC reiterated its previous 2024 demand growth forecast of 2.2mmbpd. In natural gas, prompt and the 12-month natural gas strip have pulled back modestly, U.S. natural gas storage this week increased to >30% above normal, and lower 48 dry gas production has decreased due to continued producer cutbacks. Mike also highlighted Shell’s upcoming Energy Transition Report, the UK’s allowance for new natural gas generation into the 2030s, and that data centers are desperate for power and could look at natural gas power generation as part of their power mix. He mentioned the EQT Corp and Equitran’s Midstream merger and suggested that U.S. natural gas demand estimates may be underestimated given data center and C&I growth. Arjun Murti built on the themes Mike raised and emphasized the need for a healthier energy evolution that aligns policies with the necessity of meeting unmet energy needs while addressing environmental concerns and the evolving role of traditional energy in power generation. We hope you all enjoy the discussion as much as we did. Our best to you all!

Today we had the pleasure of welcoming back Jigar Shah, Director of the U.S. Department of Energy Loan Programs Office (LPO). Jigar joined the LPO in 2021 and is the former founder of SunEdison and former co-founder of Generate Capital. As you may know, the LPO is equipped with more than $400 billion in loans and loan guarantees to help deploy innovative clean energy, advanced transportation, and Tribal energy projects in the US that support a cleaner and stronger energy economy. With 205 active applications and an average of 2.1 new applications per week, they are busier than ever. We were thrilled to visit with Jigar for an insightful update on the LPO’s progress and preview of the LPO’s planned activities at CERAWeek. In our discussion, we touch on growing electricity demand and the utility loan applications the LPO has received focused on demand flexibility, grid enhancement technologies, and virtual power plants. Jigar shares his perspective on increasing interest in geothermal, nuclear and next generation hydro projects, the cost of new energy infrastructure and the impact on electricity affordability, team developments at the LPO, carbon capture and sequestration projects, EPA regulations and their impact on energy plants (particularly coal plants), tech companies’ focus on securing sufficient power for their operations to meet their growing power demands (see link to AWS Talen story from this week here), and market dynamics in methane detection and reduction technologies. We discuss the critical importance of permitting reform and the LPO’s connectivity with permitting-related government offices, the Presidential election’s potential impact on the LPO, financing mechanisms and the LPO’s interest rates, and much more. Jigar is such a fun and upbeat guy and we always enjoy a visit with him. We also appreciate that he'll field any question we throw his way, especially our questions about the inner workings of Washington DC. Thank you, Jigar! Mike Bradley started the show by noting that this week was a light economic week with the January JOLTS Job Openings report being most watched. On the broader equity market front, AI euphoria seemingly pushes equities to new highs every week, but this week has witnessed a bit of a pullback. WTI has pulled back marginally, but still trades at the high end of its 3-month trading range. OPEC extended its 2mmbpd of production cuts through Q2’24. Physical crude markets seem tight given WTI time spreads continue to trade in steep backwardation. The 12-month natural gas strip is trading up from $2.55/MMBtu to $2.85/MMBtu on news that EQT Corp has made a strategic decision to curtail ~1bcfpd of gross production through the end of March (link here). Over the last 2 weeks, lower 48 natural gas production has averaged ~2bcfpd lower than in prior weeks. On the utility sector front, he highlighted the staggering 5-year capex plans being laid out on electricity utility Q4 calls. He noted the massive YTD performance of a handful of nuclear levered electricity equities, which look to be getting rerated markedly higher (by generalist investors) due to a more robust long-term earnings growth profile and the increasing likelihood of securing lucrative long-term datacenter electricity deals. He also noted that in time, the utility sector could also be rerated higher as investors begin viewing them more as growth stocks. Jeff Tillery and Brett Rampal also joined and added their perspectives and inquiries to the discussion with Jigar. For our COBT history buffs, today’s episode marks Jigar’s third guest appearance on COBT. He previously joined on Feb. 27, 2023 (episode linked

Today we were thrilled to welcome our good friend Pat Wood, CEO of Hunt Energy Network. Pat’s extensive career in power and energy includes serving as Chairman of the Federal Energy Regulatory Commission and Chairman of the Public Utility Commission of Texas during the administration of President George W. Bush. Additionally, he has held several independent director and advisor roles in solar, power, and utility-related organizations. Pat is also a civil engineer Aggie who went and got a Harvard law degree. Perhaps that’s why he calls himself an armadillo – someone who likes the middle of the road! Under Pat’s leadership, Hunt Energy Network has deployed a portfolio of distributed power assets across Texas. The organization aims to reach a portfolio of 1,000 MWs of batteries and peaker generation attached to the ERCOT grid by 2026. It was our pleasure to host Pat and hear insights from his unique perspective as a former regulator turned industry executive. Pat first provides background on the Hunt Energy Network, the organization’s focus on decentralized power solutions including battery deployment and peaker generation, and the role of gas peaker plants in the energy grid to meet sudden spikes in demand. Pat shares his perspective on the complexities and challenges of managing energy infrastructure, the transition from a regulated utility business to a market-driven approach during his tenure at the PUC, the historical context of power prices, the role of subsidies and ongoing debate surrounding their effectiveness, and the need for innovative thinking and proactive measures to address growing demand for electricity. We touch on market approaches to integrating new technologies into the energy sector, the importance of having a diverse portfolio of power-generating technologies to meet future demands, economic implications of energy policy decisions, the effectiveness of market-driven approaches versus government-led initiatives in shaping energy systems, investing in cybersecurity and grid resilience to protect against potential threats, and much more. Before we wrapped up, we talked about states and countries around the world and the building blocks of getting power policy right. Overall, Pat did exactly what we really needed today as he supplied plenty of optimism and humor in an area (power) lacking in both these days. For some additional power thinking, please click here for a chart Pat provided showing estimated US energy sources, consumption, and “lost energy” from 2021. Mike Bradley kicked off the show by noting this week was a relatively light week for economic stats, with the PCE deflator release being the only real stat that traders seemed focused on. Broader markets continue to set new weekly highs but could lose some trading momentum in coming weeks given that Q4 earnings (especially AI and Big Tech) are essentially done. On the crude oil market front, he highlighted that WTI (~$79/bbl) is trading at the upper-end of its recent 3–4-month trading range despite large U.S. crude oil inventory builds from historically low seasonal refining runs, but that it will reverse in coming weeks. He noted that physical crude markets have tightened as WTI crude oil time spreads have moved into steep backwardation, and are now trading at levels last seen in October 2023, when WTI price was trading at ~$90/bbl. He flagged that nat gas prompt price has completely reversed gains post Chesapeake Energy’s production cut announcement last week and that the 12-month natural gas strip has rallied, since that announcement, on an expectation that 2024 lower-48 natural gas production will be several bcf per day lower heading into summer. In energy news, he noted energy sector Q4 reporting was essentially complete and also noted another mid-sized E&P merger announcement from last week. He wrapped by h

One of the issues that we have become fascinated with over the last couple of years is power: power availability, power costs, power reliability, growth in demand for power, and the overall complexity of our power systems. We’ve also become extremely interested in how these power issues are meaningfully affecting states, countries and industries. With all of that in mind, we read with particular interest recent publications from today’s COBT guest, Susan Shelley, Columnist and Member of the Editorial Board for the Southern California News Group. Susan covers local, state and national issues across eleven daily papers including the Los Angeles Daily News, the Orange County Register, the Riverside Press-Enterprise and the Long Beach Press-Telegram. Much of the energy transition discussion is around decarbonization and economic justice, extremely important and complicated topics. What is often missing is an examination of the costs of various decarbonization alternatives and the ways in which those choices could be hitting different segments of society. On today’s COBT, we greatly enjoyed discussing with Susan California’s power choices and talking about their costs and their debatable benefits. As we talked to Susan, one thing we reflected on is that everyone loves California. It’s beautiful, it’s creative, it’s a huge part of the US economy and has been a historical driver of innovation from Hollywood to Silicon Valley. In our discussion, we touch on one of Susan’s recent articles entitled "Why California’s Electricity Is So Expensive" (linked here), the disconnect between the perceived benefits of green energy policies and the reality of high energy costs for Californians, and how Californians are reacting to rising energy costs, with some leaving the state due to affordability issues. We discuss California’s political landscape and recent legislation, the solar energy market and how fixed charges for electricity may disincentivize solar investment among residents, the California Air Resources Board (CARB) and the California Independent System Operator (CAISO), leaders in the environmental community, utility and infrastructure management, and advocacy for transparency regarding the costs of climate policies. With California planning to outlaw sales of new combustion engine cars by 2035 and to be fully powered by renewable energy by 2045, we reflected on whether California is "leading or lagging" when it comes to power choices. We also took a minute to ask Susan for her outlook for California in ten years. Overall, we are hopeful that California will find a better balance between hitting climate goals and providing affordable and reliable energy and power for their residents and their industry. The current path doesn’t feel sustainable. To kick us off, Mike Bradley noted this coming week would be notably lighter on economic stats versus last week which saw hotter than expected CPI & PPI prints. On the broader equity market front, he flagged that trading this week would be dominated by quarterly results from Nvidia (NVDA), which likely set the tone for broader markets, the tech sector, and AI levered equities. He highlighted that WTI price increased to the upper end of its 3-month trading range and that DOE inventory stats in the coming weeks likely show continued large crude oil builds on historically low refining runs but will likely then reverse. He noted prompt price has declined to ~$1.55/M and the 12-month strip to ~$2.40/M and further noted that most natural gas E&Ps break-even price is above the current strip, and as such, have lowered their 2024 capex guidance. This coming week will be a heavy Q4 reporting week for E&Ps and Oil Service, and investors will be closely monitoring 2024 capex plans. He wrapped by highlighting Intuiti

Today we had the pleasure of hosting Fred Hutchison, President and CEO of LNG Allies, for a comprehensive discussion on an important and timely topic, LNG. Fred founded LNG Allies in 2014 and is a leading spokesman for the US LNG export industry with over four decades of experience in government and public relations. LNG Allies is an independent, non-profit association focused on advancing the interests of the US LNG industry and promoting the benefits of LNG exports. We were thrilled to visit with Fred. We covered a lot of territory in our conversation starting with background on the formation of LNG Allies, the significant shift in the US from being an importer to becoming the world’s largest exporter of LNG in a relatively short period, gratitude from European countries towards the US for supplying LNG in the post Ukraine invasion energy crunch, the ongoing debate about natural gas as a lower impact fuel and its role in the energy transition, the impact of recent geopolitical events and energy prices on energy security and industrial activity, and potential motivations and implications behind the Biden Administration’s pause on LNG approvals. We touch on the shift in resistance to long-term LNG contracts, opposition and lobbying against LNG exports, global trust in the US as a supplier and concerns about reliability with changing administrations, the potential for LNG growth in other countries, the impact of US policy decisions on energy supply, and concern with the lack of understanding among policymakers about energy issues. Fred shares his perspective on the diverse export market for LNG, emerging markets in future LNG demand, challenges faced by countries in accessing financing for LNG projects due to credit rating issues, and much more. We ended by asking Fred for his view on the state of journalism and public debate as a writer himself. It was a wide-ranging and in-depth conversation and we can’t thank Fred enough for sharing his time and thoughts with us. In our discussion, you will hear we reference a few items. The IEEJ’s January 2024 report is linked here and the Wall Street Journal op-ed regarding the IEA is linked here. For additional LNG reading, the LNG Allies’ report on US LNG projects and contracts as of February 3rd is linked here and a recent letter to Congress on the LNG Moratorium is linked here. Mike Bradley kicked us off by sharing key economic, equity market, commodity and energy sector thoughts. On the economic front, January CPI printed hotter than expected, pushing the 10-year yield bond up and calling into question the pace of future FED rate cuts. On the broader equity market front, even though the hotter than expected CPI pushed the DJIA down over 500 points, he stressed that market volatility remains historically low and investor sentiment remains bullish. On the commodity market front, WTI price surged to ~$78/bbl. (+$5/bbl. on the week) which is the upper end of its 3-month trading range. He noted several recent crosscurrents effecting crude oil markets and highlighted that U.S. natural gas prompt price plunged to ~$1.65/MMBtu (lowest price level since Covid in 2020 and prior to that 1999) and noted that the 12-month strip traded down to ~$2.50/MMBtu, which is below “most” U.S. natural gas E&Ps break-even price. On the traditional energy sector front, he highlighted this week’s $26 billion merger deal between Diamondback Energy and Endeavor Energy, w

Today we had the very interesting opportunity to visit with Ernest Scheyder, Senior Correspondent at Thomson Reuters and author of the newly released book entitled "The War Below: Lithium, Copper, and the Global Battle to Power Our Lives." The book was officially published on January 30th and examines the multifaceted world of metals, mining, and processing with insights from investors, miners, landowners, environmentalists, and politicians. Ernie provided a balanced perspective in telling this complex story and has an extensive background covering both shale in its heyday and now critical minerals/mining for Reuters. As you will hear, our whole team thoroughly enjoyed the book and the discussion.Our session with Ernie spanned the themes and insights in his book including the challenges and controversies surrounding the extraction of critical minerals, the complexity of mining operations, environmental concerns, community opposition, historical events and their implications for present-day mining projects, and the varying perspectives on greenfield versus brownfield mining. We touch on the lack of certainty in long-term projects across different administrations and various departments in the US, projects facing uncertainty with permitting issues, associated issues with outsourcing processing to countries like China, the tough choices the US will have to face regarding resource extraction to ensure national security, the potential for armed conflicts over critical minerals, and developing countries’ desire to develop their own supply chains. Ernie also shares his experiences with environmental groups and conservationists of all types, efforts by the mining industry to establish global standards (for additional reading on "IRMA" – the Initiative for Responsible Mining Assurance, click here), growing consumer interest in responsibly sourced materials, initial feedback Ernie has received on the book, and his overall goal to maintain a neutral viewpoint in the book. We thoroughly enjoyed the conversation!To start the show, Mike Bradley flagged the recent surge in 10-year bond yields due to hotter-than expected recent job stats, which is making traders question the consensus expectation for interest cuts in March. From an equity markets perspective, broader equity indices continue hitting all-time highs with volatility trading near historic lows. On the commodity front, global crude oil prices declined ~$4/bbl. over the last week, but in general remain directionless due to varying global crosscurrents. On the U.S. natural gas front, natural gas traded briefly below $2.00/MMBtu and investors seem to be in little rush to be stepping into natural gas levered equities today but are sniffing around for a 2025 gas-levered trade. From an energy equity market perspective, he indicated that most oil majors have reported solid Q4 results, with one of the bigger themes coming from Euro majors being a modest pivot away from alternative energy spending and favoring increasing shareholder returns. He wrapped by highlighting the boom/bust for the lithium industry, with lithium prices down ~80% from its Nov. ’22 peak and with many lithium equities over the last year down >70%. Todd Scruggs emphasized the complexity involved in the energy transition by noting a recent announcement from Germany to commission 10 GW of new natural gas-fired power plants with the expectation of converting them to hydrogen fuel in the future (story linked here), Germany’s intention to introduce a capacity market feature to their power market, and the overall projected surge in demand for critical minerals like lithium, cobalt, copper, silver, and rare earths.We are e

For today’s discussion we were delighted to welcome back our good friend Robert Bryce. Robert is the author of six books (his most recent being "A Question of Power: Electricity and the Wealth of Nations"), host of the Power Hungry podcast, and a former journalist with more than 30 years of experience reporting on the energy sector. He is a frequent contributor to the energy discussion and his Substack is linked here. Robert has just released his latest docuseries focused on power titled "Juice: Power, Politics, and the Grid" (available to watch here). The series officially debuts today, January 31st, and we were thrilled to visit with Robert to discuss the vitally important examination this docuseries brings to light around the state of power grids both domestically and internationally. "Juice: Power, Politics, and the Grid" is a five-part docuseries with 20-minute episodes titled "Texas Blackout," "Undermined by Enron," "Green Dreams," "Nuclear Renaissance," and "Industrial Cathedrals." In our conversation with Robert, we touch on Canada’s recent nuclear power developments, the challenges and legacy of Enron and Enron-type thinking in today’s electricity market, the importance of government involvement in supporting nuclear energy, the consequence of electricity being treated as a commodity rather than a service, and the crucial role of reliability in the grid. Robert shares his perspective on the impact of permitting delays, regulatory issues and land use conflicts, the difficulties of building infrastructure, including high voltage transmission lines, the need for long-term bipartisan support for nuclear energy, and how the "anti-industry industry" affects energy policy. We also discuss policy as a reliability risk, industrial consumers (i.e. Dow, Microsoft) becoming more interested in nuclear (see recent Microsoft news here), NGO influence, the need for balanced priorities among decarbonization, affordability and reliability, and more. We want to congratulate Robert for the launch of "Juice: Power, Politics, and the Grid" and for his contributions to help change the conversation. It was a fantastic discussion!To kick us off, Mike Bradley highlighted the upcoming FOMC meeting, continued bullish equity market sentiment, rebound in crude oil prices, and broadening out of Q4 energy subsector reporting in the coming weeks. Wednesday’s FOMC Rate Decision meeting looms large, with most expecting the FED will continue to pause interest rates. Equity volatility is still very low and equity market sentiment remains very bullish. On the commodity front, global crude oil prices continue to rise and the biggest surprise for crude oil markets this week was Saudi Aramco’s decision not to proceed with plans to increase their maximum sustainable capacity up to 13mmbpd, which weighed heavily on the consensus positive sentiment towards internationally levered oil service equities. Brett Rampal flagged Canada’s recent announcement to refurbish the Pickering nuclear plant, extending its operational life by several decades, and showcasing the ability of groups, advocates and the nuclear industry to execute large-scale refurbishment projects efficiently. As mentioned, Robert previously joined COBT on Jan. 5, 2021 (episode linked here) and first on Aug. 11, 2020 (episode linked here). Our COBT episode with Meredith Angwin, author of "Shorting the Grid," is linked here from June 8, 2022. As is almost always the case, this past week was a busy one with many things happening i

Dr. Dan Yergin, S&P Global Vice Chairman, shares insights from Davos and previews CERAWeek. Topics include oil market dynamics, OPEC+ cohesion, global energy forecasts, geopolitics, and the impact of global political figures on economics. The podcast also covers challenges in the oil market, energy transitions, and mineral market complexities.

Today we had the pleasure of hosting Rob Gramlich, Founder and President of Grid Strategies. Rob previously oversaw transmission and power market policy for the American Wind Energy Association as SVP and Interim CEO, served as Economic Advisor to FERC Chairman Pat Wood III, and was Senior Economist at PJM Interconnection. Grid Strategies is a power consulting firm headquartered in Washington, D.C. that helps their clients advance grid integration solutions. Given the recent winter weather much of the US and Canada is experiencing, this was a particularly timely discussion and we were thrilled to hear Rob’s insight on power demand growth, infrastructure buildout, cost, and reliability. Our discussion with Rob focused on a report Grid Strategies recently published titled “The Era of Flat Power Demand is Over” (linked here). Rob first shares background on the Grid Strategies team and the inspiration behind writing the report. We cover aspects from the report including the need for the power industry as well as legislators and regulators to acknowledge sharply increased demand forecasts and the need for action, factors contributing to increased power demand, including data centers and AI-driven technologies, the influential players in Washington contributing to shaping policies, regions with notable growth, reliability and resource adequacy, and the need for large-scale robust transmission planning. Rob shares his thoughts on regional differences in power markets and some of the unique market designs, concerns about supply and demand challenges and its effect on rising costs, changing dynamics in the power industry and the power “basketball team” lineup, global comparisons, behind-the-fence power generation, and more. Thank you, Rob, for sharing your insights with us all! We learned a lot. Power has undoubtedly become such an important issue and a topic to which we have dedicated several episodes. The most recent episodes include John Bear from MISO (linked here) and Jim Robb with NERC (linked here). Last year, we also visited with ERCOT (linked here). You may remember that in the ERCOT show, we called on our friends at Orennia to provide analytics around Texas power. For today’s discussion, the team at Orennia provided additional data on summer and winter Effective Load Carrying Capability (ELCC) for solar and wind and cumulative coal retirements up to 2040 (linked here). To kick us off, Mike Bradley highlighted recent key issues across the regulatory, commodity market and energy/electricity space. On the regulatory front, the U.S. Supreme Court will be hearing arguments this week relating to the historical Chevron Deference decision; a decision to reverse could have huge implications for highly regulated industries, like the energy industry, as power to regulate could shift away from Alphabet-Letter Agencies (like the EPA and others). On the commodity front, WTI oil price continues to be stuck in a bit of a trading range (low-$70s/bbl) given that Red Sea ship rerouting/growing Middle East conflict is getting countered by global crude oil S/D that looks modestly oversupplied in Q1’24 without additional OPEC+ production cuts. He noted that U.S natural gas prices have completely round-tripped this week (down $0.30-$0.35/MMBtu to <$3.00/MMBtu) and further noted that in recent days, U.S. natural gas production has plunged (~103bcfpd last week to a low of ~93bcfpd on Monday and now stands at ~97bcfpd) mostly d