Over the last century, power demand and supply have been unmistakably intertwined. However, with the addition of variable renewable power this is no longer the case. As the power industry shifts toward the adoption of sustainable resources, there is pressure to ensure generation and capacity meet growing demand. Intermittent generation resources such as solar and wind cannot be dispatched when the sun doesn’t shine or the wind doesn’t blow. As such, growth in additional, always dispatchable resources, such as natural gas, is needed to mitigate the discontinuity of these resources. Since battery assets are not cost-effective on a seasonal basis, Enverus Intelligence® Research (EIR) predicts that adoption will be limited. In the meantime, natural gas additions are crucial to maintain grid balance.
The prevalence of volatile renewable energy is likely to result in overgeneration, creating potential challenges when not relying on dispatchable generation to meet peak demand. The future generation mix will be determined on a local scale based on load growth, retirements and existing availability. EIR’s optimal capacity expansion model, along with our risked interconnection queues, was able to build a realistic forecast of the generation mix, showing that solar and wind assets will be the most prevalent capacity additions in the next 25 years.
Join Enverus Intelligence® Research for the webinar, “Gas-Fired Generation | Power’s Burning Question,” and discover how natural gas will play a key role in powering the future, even as its role evolves amid the transition to renewable energy.
Research Highlights
(You must be an Enverus Intelligence® Research subscriber to access links below.)
Long-Term Capacity Expansion – Market Makeover–This report encompasses Enverus Intelligence Research’s capacity expansion model for the Lower 48, based on forecast load, risked interconnection queues and technology cost curves.
Long-Term Load Forecast – Returning to Growth – Our long-term power demand forecast model considers historical drivers of power demand across the L48 and models variables that we believe will impact future load, including data centers, electric vehicles, residential solar and storage, cryptocurrency mines, green hydrogen, CCUS and electrification trends. This report analyzes the effects that these new exponential load drivers will have on our power demand forecasts from 2024-50.
Renewable Diesel – Too Much of a Good Thing – The 2Q24 edition of the ETR team’s equity tracking report provides coverage across various energy transition sectors as well as integrated traditional energy businesses.
About Enverus Intelligence®| Research Enverus Intelligence® | Research, Inc. (EIR) is a subsidiary of Enverus that publishes energy-sector research focused on the oil, natural gas, power and renewable industries. EIR publishes reports including asset and company valuations, resource assessments, technical evaluations and macro-economic forecasts, and helps make intelligent connections for energy industry participants, service companies and capital providers worldwide. EIR is registered with the U.S. Securities and Exchange Commission as a foreign investment adviser. Click here to learn more.
As we move into the final stretch of the 2024 presidential election, the implications of a Republican or Democratic win are top of mind for energy leaders. Both Kamala Harris and Donald Trump are on the record and have made policy suggestions that demonstrate contrasting approaches to energy policy that will shape the industry for years to come. While there are implications for energy with either candidate, the outcome of next month’s election will determine just how rapid change is likely to be.
In the following analysis, we present Derek Brower’s views on the potential impacts that a victory for either candidate might have on the energy industry across the United States and internationally. The insights, claims and information originate from Derek Brower’s participation in Andrew Gillick’s captivating webinar, “Morning Energy Live With Derek Brower: Trump vs. Harris: A Tale of Two Energy Policies.” Derek Brower is the U.S. political news editor overseeing the Financial Times Washington DC Bureau and the 2024 presidential election coverage. Andrew Gillick is a managing director with Enverus Intelligence® Research.
To hear firsthand Derek Brower’s assessment and opinion on energy in the aftermath of the 2024 US election, watch our on-demand webinar here:
Foreign Energy Policy: Status Quo vs. Isolationism
The election outcome could significantly impact the country’s stance on foreign relations, given the president’s substantial control over foreign policy. Case in point, current geopolitical tensions, especially in the Middle East, pose high risks to energy stability with the United States using its diplomatic and military levers to address increased risks from potential conflicts involving Israel, Iran, and oil supply. Add in the Ukraine war and heightened tension with China, the last four years have been disastrous in terms of foreign policy, which sets the stage for either candidate’s next step.
A win for Harris is likely to result in the status quo. With veteran statesman Phillip Gordon as her foreign policy advisor, Harris’ approach will probably mirror the Biden administration’s existing policies. She would likely maintain the U.S.’s supportive stance toward traditional allies as she pledged during her speech at the Democratic National Convention. This means continued support for Israel and a cautious approach toward adversaries such as Russia and Iran.
When it comes to renewable energy and democratic values, Harris might adopt a pragmatic approach that seeks to balance American energy interests. Her administration might pursue gradual progress in energy transition while ensuring foreign alliances remain secure, maintaining the current geopolitical status quo.
Viewing American energy independence as just that, Trump could revive an administration centered around a more isolationist stance. He has repeatedly stated his desire to pull back from foreign conflicts by ending them with a phone call. His administration might de-emphasize involvement in international conflicts, which could lead to a reduced U.S. presence in global energy disputes. While this approach would allow his administration to focus on domestic priorities such as immigration policy, reducing the immediate foreign policy risks might create uncertainties regarding the stability of global energy supply.
Trump has also shown a willingness to renegotiate trade agreements and ignite trade wars, particularly with China. These foreign policy strategies could impact the global economic landscape and, in turn, energy demand and supply chains.
To get the full commentary on Derek Brower’s views on the candidate’s foreign policy outcomes, watch our on-demand webinar here:
Domestic Energy Policy: Green Energy vs. Hydrocarbons
Domestically, both Harris and Trump have distinct perspectives on hydrocarbons and renewable energy investments, which could affect policies on LNG exports, offshore drilling and renewable energy infrastructure. Specifically, Trump is expected to sustain U.S. energy dominance by prioritizing oil and gas over renewable energy development, expanding drilling opportunities and reducing regulatory oversight. He has also indicated plans to expedite permits for pipelines and is an outspoken advocate for revitalizing nuclear power generation.
The future of renewables and green energy looks brighter with a Harris win. She is anticipated to foster a diversified energy mix that balances renewables with oil and gas. While she might retain Biden’s focus on green energy, her pragmatic approach could foster a slower, more measured transition. Her administration might continue to encourage renewable energy investments through the Inflation Reduction Act (IRA), though potential legislative hurdles could complicate full implementation.
In terms of LNG, both Harris and Trump are likely to reverse the Biden administration’s pause on exports to countries who have not signed a formal free trade agreement. Trump is likely to reverse on principal while Harris reverses the executive decision because the ban on LNG exports to non-FTA countries has had no discernable benefit to allies.
Derek Brower’s full view on the candidate’s domestic energy policy can be found on our on-demand webinar here:
While 2022’s IRA introduced a treasure trove of potential tax credits for renewable energy and carbon capture, utilization and storage (CCUS) developers, it also placed new restrictions on oil and gas operators in the form of the waste emissions charge and sweeping reforms to the federal leasing process. However, permitting remains a contentious issue with implications for both traditional energy, power, and renewable energy projects. Combined with IRA tax credits with expiration dates and a sluggish response from federal agencies to create the processes to actually pay out credits, developers are hesitant to take on certain projects, including CCUS and hydrogen.
Consider Boston, which imports LNG from abroad when permits to build a pipeline from the nearby Marcellus Shale would be a logical solution. Or renewable energy advocates who oppose permits to build wind turbines or solar farms in line of sight of their home. Lack of permits is also holding back the large-scale modernization and expansion of the power grid by preventing transmission from being built all across the country. For many traditional and renewable energy developers, permits are standing in the way of progress. As a result, on day one as president, Trump or Harris will come under intense pressure to reform permitting processes that currently delay projects.
Harris is likely to advocate for balanced permitting reform that supports both green energy initiatives and traditional infrastructure. While progressive Democrats might resist reforms that facilitate oil and gas development projects, there is growing bipartisan support for reforming the process to accommodate green energy demands. Trump will probably take a more aggressive stance on permitting, accelerating the process for oil and gas while potentially stalling renewable energy projects. However, large-scale repeal of the IRA is unlikely without strong congressional support. Rather than dismantling the IRA, Trump could hinder its implementation through executive actions that delay funding for green energy initiatives.
Get Derek Brower’s full commentary on the future of the IRA by viewing our on-demand webinar here:
Both candidates offer unique perspectives on energy policy that reflect broader ideological differences. Trump’s isolationist foreign policies and focus on American energy independence may boost domestic oil and gas development, permitting and midstream infrastructure while injecting uncertainty into global energy markets. In contrast, Harris is likely to borrow several chapters from the Biden administration’s international relations playbook, focusing on a balanced energy mix at home and maintaining a commitment to both traditional and renewable energy sources.
While the energy sector is likely to see policy changes with either a Trump or Harris administration, the direction and speed of those changes will vary based on who occupies the Oval Office. Regardless of the election outcome, energy leaders should prepare for a complex landscape, marked by evolving regulatory frameworks and geopolitical uncertainties. In that sense, the next four years are likely to look and feel like the last four.
To hear Derek Brower’s firsthand assessment and opinion on energy in the aftermath of the 2024 U.S. election, watch our on-demand webinar here:
Enverus Intelligence® | Research, Inc. (EIR) is a subsidiary of Enverus that publishes energy-sector research focused on the oil, natural gas, power and renewable industries. EIR publishes reports including asset and company valuations, resource assessments, technical evaluations and macro-economic forecasts and helps make intelligent connections for energy industry participants, service companies and capital providers worldwide. EIR is registered with the U.S. Securities and Exchange Commission as a foreign investment adviser. See additional disclosures here.
Calgary, Alberta (Oct. 16, 2024) — Enverus Intelligence Research (EIR), a subsidiary of Enverus, the most trusted energy-dedicated SaaS company that leverages generative AI across its solutions, is releasing its summary of 3Q24 upstream M&A activity. Following 12 months of heightened consolidation in oil and gas, the pace of deals significantly slowed in the third quarter of 2024 with $12 billion in announced deals, the lowest quarterly total since 1Q23. The drop in M&A value was largely attributable to a pause in public company consolidation as well as fewer deals to be had in the prolific Permian Basin.
“Upstream M&A was bound to drop after the unprecedented lift of corporate mergers and private equity exits since 2023. Those deals raised asset prices and cut the number of potential targets,” said Andrew Dittmar, principal analyst at EIR. “An additional factor could have been increased volatility in crude prices during the third quarter. Any time commodities get more volatile, oil and gas deals are harder to negotiate. However, that is a short-term turbulence until buyers and sellers feel more confident on the direction oil prices are moving.”
Top 5 Operated Upstream Deals of 3Q24
Source: Enverus M&A Analytics
The most notable shift in the just-completed quarter was the lack of consolidation between publicly traded E&Ps, the first time that has happened in a quarter since 2022. The $188 billion in public company consolidation since the start of 2023, with 11 public deals over $2 billion, leaves significantly fewer targets to pursue. In addition, large buyers like Chevron, ConocoPhillips, Diamondback Energy and ExxonMobil have been busy closing and integrating deals, with timelines often delayed by extra anti-trust scrutiny by the Federal Trade Commission.
“While corporate M&A has slowed, the industry is not done consolidating. If you look out a few years from now, there are going to be fewer companies operating in the main U.S. shale plays,” said Dittmar. “However, the path to get there may be a bit bumpier from this point. The most obvious deals in terms of a good strategic fit between assets and a ready seller got done earlier in the consolidation cycle. Buyers may need to offer higher premiums than the average 15% paid to selling companies so far to tempt some of these remaining companies into a deal. However, that needs to be balanced against not overpaying and still striking a deal that also makes sense for the acquirer.”
While the market waits for further corporate consolidation, asset deals by public companies are likely to play a more prominent role in upstream M&A. Companies that were buyers are now likely to sell parts of the combined portfolios. APA, which purchased Callon Petroleum in early 2024, has already been active on that front, selling a portfolio of Permian conventional assets for $950 million to a private buyer. Occidental also sold off a piece of its Delaware Basin position to Permian Resources for $818 million after closing the CrownRock acquisition. Future non-core sales by public companies could target lower quality or extensional areas of the Permian, the Mid-Continent and areas like the Uinta Basin, where Ovintiv has been reported to be shopping its position.
Sales by private equity companies are also likely to continue to feature prominently in upstream deal activity, with a larger focus outside the Permian Basin where there are more remaining opportunities and pricing for undeveloped drilling inventory is more reasonable. The largest transaction of 3Q24 was Devon Energy’s acquisition of EnCap-funded Grayson Mill Energy in the Williston Basin for $5 billion. Areas like the Williston and Eagle Ford, where private companies like Verdun Oil and WildFire Energy operate, offer the chance for buyers to get larger chunks of undeveloped inventory for less money per location, even if the inventory isn’t as economic to drill as the core Permian assets that sold earlier.
“Ideally in a transaction, the buyer wants to improve the overall quality of their inventory portfolio and lengthen the years of total inventory they have to drill,” said Dittmar. “However, with the remaining opportunities that is going to be challenging to do at a reasonable price. Instead, you are going to see buyers pick up bigger chunks of middle-quality inventory or buy small pieces of high-quality drilling opportunities that go right to the front of the line for development. That is what Vital Energy did with its acquisition of Point Energy in the Delaware Basin. The deal added locations that are competitive with the best inventory Vital has left to drill, even if there wasn’t that much total inventory associated with the asset.”
While private equity has featured most prominently in deal markets as a seller of shale inventory to public companies, these firms are still raising new capital and putting it to work, but at a slower pace than before 2020. With fewer opportunities to get into the main shale plays, private firms are broadening the search to areas without competition for deals from public companies. That is also leading to more private-to-private transactions between groups that have been invested for a lengthy time to ones that have raised fresh capital. The sale of Caerus Oil & Gas, which operates gas assets in Colorado’s Piceance Basin and Utah’s Uinta Basin, to Quantum Capital Group for $1.8 billion is an example.
“There is still a significant amount of oil and gas to develop outside the main shale plays focused on by bigger public companies,” Dittmar said. “In some cases, like the Piceance Basin, the economics aren’t compelling to public companies that have higher-return drilling opportunities elsewhere. In other cases, like western Oklahoma assets or the Northwest Shelf of the Permian, there are pockets of economic inventory but not enough scale to interest the larger public E&Ps. We’re going to see more interest in these types of assets from private companies and small public companies locked out of the better-known plays. That includes an IPO pipeline for new, small public companies that is busier than it has been in years. Now that the big shale plays are increasingly consolidated, the industry is dusting off maps and rediscovering areas that have been under the radar for the last decade.”
You must be an Enverus Intelligence® subscriber to access this report.
About Enverus Intelligence Research Enverus Intelligence ® | Research, Inc. (EIR) is a subsidiary of Enverus that publishes energy-sector research focused on the oil, natural gas, power and renewable industries. EIR publishes reports including asset and company valuations, resource assessments, technical evaluations and macro-economic forecasts; and helps make intelligent connections for energy industry participants, service companies and capital providers worldwide. EIR is registered with the U.S. Securities and Exchange Commission as a foreign investment adviser. Enverus is the most trusted, energy-dedicated SaaS company, with a platform built to create value from generative AI, offering real-time access to analytics, insights and benchmark cost and revenue data sourced from our partnerships to 95% of U.S. energy producers, and more than 40,000 suppliers. Learn more at Enverus.com.
Insurance companies are largely backing away from making investments in fossil fuel producers. However, two major exceptions, Berkshire Hathaway and State Farm, have increased their holdings so much that they skewed the entire sector’s results, according to a report from the Wall Street Journal. More than half the 238 property-and-casualty insurers in the analysis reduced their investments in oil, gas and coal companies over the past decade, sending their median percentage down to 1.8% of insurers’ 2023 portfolios compared with 3.4% in 2014. By contrast, Berkshire Hathaway and State Farm increased their fossil fuel positions by around $200 billion in that period—so much that it pushed fossil fuels’ presence to 4.4% of the insurance industry’s cumulative portfolios from 3.8%.
For half of insurers, fossil fuels make up 1.8% or less of their portfolios.
Climate change was cited as a reason most insurers reduced their fossil fuel holdings. Facing higher claims from wildfires and storms associated with a warming planet, some companies are questioning whether supporting fossil fuel companies is counterproductive. To reject fossil fuel companies, however, crosses off valuable investment opportunities in a sector that will be the core of the energy mix for the foreseeable future. An Enverus Intelligence® Research (EIR) analysis last December, available to EIR subscribers, found that oil and gas assets have stronger returns on average than renewables projects.
Berkshire Hathaway, the Warren Buffett-led company whose insurance arm includes not only namesake companies but also auto insurer Geico, owns stock in just two oil and gas companies, Occidental Petroleum and Chevron Corp., and it has invested heavily in both.
Berkshire is the leading shareholder in Oxy, owning 27.3% of its equity, a stake worth $16.1 billion at the end of Q2, according to SEC filings. It also is the third-largest institutional shareholder in Chevron, owning a 6.5% stake worth $18.6 billion at the end of H2. Combined, the two holdings make up 9.6% of Berkshire’s portfolio, the company reported.
State Farm holds nearly $4.8 billion in stocks and bonds of companies including Chevron, ExxonMobil and Diamondback Energy, according to the Wall Street Journal. State Farm owns less than 1% of those companies’ shares, unlike Berkshire’s large equity positions. However, Exxon makes up 3.0% and Chevron 1.7% of the equity portfolio of State Farm’s investment arm.
Property-and-casualty insurance companies collected a combined $930 billion in premiums in the U.S. during 2023, money that needs to be invested somewhere until they need to pay out claims. State Farm ranked as the largest such insurer by direct premiums in 2023 with $88 billion, while Berkshire was third with $58.1 billion.
Find more great news and exclusive data on deals, finance and operations in the E&P sector in the latest issue of Upstream Pulse.
About Enverus Intelligence Publications
Enverus Intelligence Publications presents the news as it happens with impactful, concise articles, cutting through the clutter to deliver timely perspectives and insights on various topics from writers who provide deep context to the energy sector.
CALGARY, Alberta (Oct. 15, 2024) — Enverus Intelligence Research (EIR), a subsidiary of Enverus, the most trusted energy-dedicated SaaS company that leverages generative AI across its solutions, has released a new report that quantifies the quality of remaining drilling inventory across key North American plays.
North America is one of the few global jurisdictions that has meaningfully grown hydrocarbon production over the last 20 years. Thanks to the shale revolution, North America has added 15 million barrels a day of liquid hydrocarbon and 50 billion cubic feet a day of gas production to the global market since 2005. Looking forward, the globe will require the addition of approximately 7 MMbbl/d in liquids production and about 40 Bcf/d more in natural gas by 2030.
“We believe North America is well positioned to add approximately 2 MMbbl/d of liquid hydrocarbon and approximately 15 Bcf/d of natural gas production by the end of the decade at $70-80 WTI and $3.50-$4.00 Henry Hub,” says Alex Ljubojevic, EIR director. “Should lower prices persist, production growth in North America will be constrained.”
“Oil-directed drilling inventory that can generate adequate returns below $60 WTI is limited to about five years in the U.S. at current activity levels. At $70 WTI, our U.S. inventory estimates double,” says Dane Gregoris, EIR managing director. “The Canadian oil sands and Montney are home to 15 years of drilling inventory that can generate adequate returns below $60 WTI.”
Key takeaways from the report:
The global economy will require an additional ~7 MMbbl/d of liquids production and ~40 Bcf/d more natural gas by 2030. North America can deliver 30%-40% of these incremental molecules at mid-cycle prices of $70-$80 WTI and $3.50-$4.00/MMBtu Henry Hub.
Sub-$60/bbl WTI PV-50 breakeven oil resource has become considerably scarcer in the U.S. since 2022. This is driving global investors and operators to start looking outside of the U.S. for low-cost oily locations.
Canadian plays like the oil sands and Montney are home to 15 years of sub-$60/bbl WTI PV-50 breakeven oil resource at current activity levels, nearly triple those of the U.S.
EIR’s analysis pulls from a variety of Enverus products including Enverus Intelligence® Research, Placed Well Analytics and Forecast Analytics.
You must be an Enverus Intelligence® subscriber to access this report.
About Enverus Intelligence Research Enverus Intelligence ® | Research, Inc. (EIR) is a subsidiary of Enverus that publishes energy-sector research focused on the oil, natural gas, power and renewable industries. EIR publishes reports including asset and company valuations, resource assessments, technical evaluations and macro-economic forecasts; and helps make intelligent connections for energy industry participants, service companies and capital providers worldwide. EIR is registered with the U.S. Securities and Exchange Commission as a foreign investment adviser. Enverus is the most trusted, energy-dedicated SaaS company, with a platform built to create value from generative AI, offering real-time access to analytics, insights and benchmark cost and revenue data sourced from our partnerships to 95% of U.S. energy producers, and more than 40,000 suppliers. Learn more at Enverus.com.
Energy industry consolidation continues with a recent surge in North American midstream M&A activity. Approximately $30 billion has been transacted in the U.S. and more than $2 billion in Canada year-to-date. A significant portion of this activity is driven by the strategic focus on expanding integrated gas processing and natural gas liquids (NGL) systems. This expansion positions midstream companies to bolster their processing footprint, capture synergies and enhance their value proposition to customers in a highly competitive market.
What to Do With Permian Stranded Gas?
As negative Waha prices have shown, the Permian has an associated natural gas problem. On one hand, producers are discouraged to flare amidst regulations and investor pressure while on the other hand takeaway capacity to move the excess gas to LNG trains under construction on the Texas Gulf Coast rapidly fills up. However, midstream companies see this as an opportunity to capitalize on Permian gas and NGL processing, turning lemons into lemonade.
Midstream companies are investing heavily in gas processing facilities that enable them to extract and fractionate NGLs, resulting in more lucrative operations compared to handling crude oil volumes alone. A notable example is Enterprise Product Partners’ $950 million acquisition of Piñon Midstream. This deal not only gives Enterprise exposure to the eastern margins of the Delaware Basin—a growth area for several operators—but also includes sour gas treatment facilities that are central to unlocking further development in the region. Similarly, Energy Transfer’s $3.25 billion acquisition of WTG Midstream involved the addition of eight processing plants with a combined capacity of 1.3 Bcf/d, with an additional 400 MMcf/d of processing under construction. These types of accretive acquisitions are likely to continue as midstream companies reach for more ways to bolt gas processing and fractionation capacity on to existing midstream systems to maximize value vs. growing their footprint organically.
Driving Cost and Operational Efficiencies
Synergy capture is another driving force behind many of these M&A deals. By integrating new assets into their existing footprints, companies can realize significant cost savings and operational efficiencies.
ONEOK’s recent acquisitions are a prime example of this strategy. In the largest midstream merger this year, ONEOK acquired Global Infrastructure Partners’ 43% interest in EnLink Midstream for more than $5.5 billion, adding exposure to key growth areas like the Permian, Mid-Continent and Haynesville. EnLink’s Haynesville assets include two gas processing plants with a total capacity of 710 MMcf/d and three NGL fractionation facilities. The integration of these assets into ONEOK’s portfolio allows for more efficient and profitable operations by leveraging EnLink’s NGL value chain to fill 75% of the company’s Haynesville fractionation capacity with its own assets and serving a more diversified customer base, including petrochemical, refining and export.
Recent M&A deal flow also points to ways midstream companies are seeking synergy in crude oil operations. A good example is ONEOK’s $2.1 billion purchase of the Medallion crude and condensate system in the Midland Basin. The company identified $250 million in base-case run-rate synergies across both the EnLink and Medallion deals, with the potential to reach $450 million when including probable and longer-term synergies. This emphasis on synergy capture was reflected in the modest 6.3x EBITDA multiple ONEOK assigned to the Medallion system, after accounting for synergies, compared to an average 8x multiple or higher in other recent midstream M&A deals.
Newly merged midstream operators who can successfully drive synergy can pass on net cost savings to customers, further sharpening competitive edge.
Sustaining Midstream M&A Momentum
Major midstream operators, with healthy balance sheets, are expected to remain active and competitive in acquiring assets that enhance their integrated systems. Defensive M&A, particularly in the Permian, is anticipated as large operators seek to keep volumes within their systems and out of competitors’ hands. Companies that successfully expand and integrate their gas processing and NGL systems will be better positioned to capture value and drive growth in an evolving energy landscape.
As gas pipelines like the Dela Express are built out in the coming years, Permian associated gas will flow to the Texas Gulf Coast where LNG facilities open the doors to global markets. Midstream companies focused on processing are likely to turn their eye toward gathering systems if there is a recovery in natural gas prices in 2025 that boosts the attractiveness of these assets, sustaining the merger momentum in M&A activity into the next year.
Want more insights into North American basin trends, M&A activity and price moves? Check out Enverus Intelligence® Oil and Gas Research | Enverus
Find more great content on the gathering and processing, pipeline transport, LNG and downstream sectors in the latest issue of Midstream Pulse.
Enverus Intelligence® Research (EIR) expects that the number of electric vehicles (EV) will exceed 40 million, 20% of U.S. light-duty vehicles (LDV), and 80 million, 40% of LDVs, by 2035 and 2050, respectively. There are a variety of drivers that are taken into account to generate EIR’s load forecast. Charging behavior is one important driver in understanding EV impact.
Current EV charging behavior causes a peak in load during late evening hours when motorists return home and plug in their vehicles. This behavior is expected to change as adoption of EVs increases. As solar capacity continues to the expand the large supply of energy and lack of demand during the day will lower the cost of electricity. Drivers, enabled by smart charging, can optimize charging hours to minimize system peaks and mitigate retail costs. Today’s volatility in charging profiles (Figure 3A) has a minimal impact due to the small number of EVs on the road. These profiles are unsustainable at scale and market signals like price and time-of-use tariffs will enforce a reduction in volatility (Figure 3C).
Research Highlights
(You must be an Enverus Intelligence® Research subscriber to access links below.)
Long-Term Load Forecast – Returning to Growth – Our long-term power demand forecast model considers historical drivers of power demand across the Lower 48 U.S. and models variables that we believe will impact future load, including data centers, EVs, residential solar and storage, cryptocurrency mines, green hydrogen, carbon capture and storage and electrification trends. This report analyzes the effects that these new exponential load drivers will have on our power demand forecasts from 2024-2050.
Join Enverus Intelligence® Research for the webinar, “Gas-Fired Generation | Power’s Burning Question,” and discover how natural gas will play a key role in powering the future, even as its role evolves amid the transition to renewable energy.
About Enverus Intelligence®| Research Enverus Intelligence® | Research, Inc. (EIR) is a subsidiary of Enverus that publishes energy-sector research focused on the oil, natural gas, power and renewable industries. EIR publishes reports including asset and company valuations, resource assessments, technical evaluations and macro-economic forecasts and helps make intelligent connections for energy industry participants, service companies and capital providers worldwide. EIR is registered with the U.S. Securities and Exchange Commission as a foreign investment adviser. Click here to learn more.
Petroleum systems lose natural gas to the atmosphere in many ways that have drawn a laser focus from regulators seeking to stem the impact of greenhouse gases on global warming. Emission sources include pneumatic controllers at production facilities, venting from compressors, inefficiently flared gas and methane that is simply lost and unaccounted for. But whether you are a producer, pipeline operator or gas processor, a new waste emissions charge (WEC) is poised to create financial penalties for these excess emissions beyond an allowable threshold. Assuming consistent operations, Enverus estimates the WEC will create up to a $2.1 billion annual impact on the oil and gas industry in 2025, adding more than $0.50 per BOE in costs to more than 70 of the country’s largest producers.
In addition to the WEC, two new methane tracking satellites launched in 2024 are intensifying the scrutiny on the industry’s emissions, MethaneSAT in March and the first Carbon Mapper Coalition satellite in August. With so many regulatory and technology cards on the table, a big wildcard that could add fuel to the fire is the EPA’s Super Emitter Response Program (SERP) that empowers approved third parties to search for large sources of methane in the oilfield and report these events to the EPA, potentially creating massive WEC liability for responsible companies.
Let’s delve into the regulations and risks backed by Enverus data and analysis.
The Regulatory Trifecta
The first piece of the emission’s regulatory trifecta works like a carrot and a stick. The carrot? Billions in Methane Emissions Reduction Production (MERP) incentives to retrofit facilities which were introduced in the Inflation Reduction Act (IRA). The stick is the methane fee, also introduced in the IRA, i.e., the WEC. The government’s WEC is going to tax oil and gas companies on excess methane until emissions are lowered to the point the company is largely in compliance with the EPA’s Quad Ob/c rules, the second piece of the trifecta.
While Quad Oa has a history of being enacted by one federal administration then revoked by the next like a game of ping pong, the most contentious Quad Oc rule may prove sticky and should not be ignored. Quad Ob is applied to new or modified facilities; however, Quad Oc requires all existing facilities to be compliant, entailing wide scale equipment upgrades and inspections to reduce emissions.
The WEC will begin hitting balance sheets in 2025 based on EPA emissions reporting from 2024. The charge begins to apply to methane emissions that exceed 0.20% of gas production for upstream operators, 0.11% of throughput for pipeline and storage, and 0.05% for gas processors. At $900 per metric ton starting this year and stepping up to $1,500 in 2026, the impact could be much higher than initially estimated due to the third component of the regulatory trifecta.
The Congressional Budget Office’s $6.35 billion estimate of revenue from the WEC over a 5-year period preceded a new EPA rule finalized in May that drastically changes how emissions are accounted for using much higher default emissions factors across sources. As a result, many companies are likely on the hook for more than they initially estimated, unless they make operational changes. In the example in Figure 1 generated from Enverus Emissions and Regulatory Analytics, the operator more than doubles its methane emissions with the EPA’s updated calculations leading to a substantial $20 million WEC liability.
FIGURE 1 | New emission factors double example operator’s methane creating a $20 million WEC liability
Previous small categories like methane slippage from compressors using the older calculations suddenly appear with the rising emissions factors, prompting urgent action with an exclamation mark! Enverus estimates companies with older legacy assets, typically private E&Ps and private equity backed independents, are going to be hit hardest with the WEC as Figure 2 shows of emissions by peer group estimates.
FIGURE 2 | The WEC and methane revisions disproportionately impact private operators
A silver lining to this perfect storm is the provision in the EPA rule to net emissions across all operated assets. For example, emissions for an Uinta facility that exceeds the minimum threshold can be offset by a Permian facility that comes in well under. Even this silver lining is uncertain, as the currently proposed implementation rules for the WEC require netting to occur at an operator -level, not the parent company -level, a significant distinction that could limit its effectiveness. This distinction may be changed when the final rules are released before the end of the year.
Super Emitter Response Program
The doubling of WEC liability resulting from updated emissions factors is just the base case for the industry assuming prior operational practices. Adding complexity and even more WEC risk is the intense focus on large emissions events, i.e., super emitters, or those releasing more than 100 kg/hr of methane. Such events often go unnoticed and unreported, until now.
Public emissions data capture is improving, increasing both in resolution and frequency of flyovers. This trend intersects with SERP, which authorizes approved third parties using EPA certified technology to identify super emitters. The events are then reported to the EPA, who notifies the operator potentially leading to higher reported methane and adding to its WEC liability.
So far, no one has yet signed up to participate in SERP, which officially aligns with Subpart W reporting and the WEC in January of 2025. We believe it will likely not pose much of a material risk on day one, however, if the prize for SERP participants is greenhouse gas reduction, then environmental organizations are bound to join eventually, including the Environmental Defense Fund who is a primary backer of MethaneSAT.
Absent facility upgrades, your ability to de-risk and reduce WEC depends on how defensible your data is. When an operator receives a SERP notification, accurate data is required to prove the length of the event to estimate the total emissions. Absent defendable data, a maximum duration of 91 days prior to the detection must be assumed creating large WEC liabilities. Strong data can also help show that a SERP event near your facility was actually a pipeline being blown down from neighboring producer.
A super emitter incident rate of ~1% was calculated based on Stanford’s Million Measurement study (Sherwin et al.) that included just under 95,000 Permian sites. Combined with cloud coverage analysis by Enverus and assumptions about satellite specifications, we can generate a range of WEC liability scenarios (Figure 3).
FIGURE 3 | Example SERP risk for a Permian operator with 1,000 sites
Source | Enverus Intelligence® Research, Enverus Emissions & Regulatory Analytics, Sherwin et al., Jacob et al., Colorado School Mines, MethaneSAT, Carbon Mapper
What’s Your WEC Risk?
The methane fee established in 2022’s Inflation Reduction Act is suddenly upon us. And with a dramatic plot twist, the fee could triple with revised accounting processes and super-emitter impacts. Arm yourself with the data and analysis needed to navigate the regulatory rapids. While rising emissions factors seemed inevitable, Enverus took an early lead in helping energy companies understand their own emissions liability with our Emissions and Regulatory Analytics in Enverus PRISM®. Emission management is now part of the deal. Enverus data and insights can help you understand where you sit in the industry, forecast what is going to change, screen M&A targets for emissions liabilities, provide well-level WEC liabilities and help compare various federal emissions data to both state and direct measured alternatives. Plus, we can run “what if” scenarios and see the impact of upgrading facilities with zero-emission pneumatic controllers, more efficient flare stacks or combustors, and more frequent LDAR, among other variables.
Attempts to block the WEC have so far failed with a U.S. Supreme Court decision Oct. 4, 2024 that allows the EPA to continue collecting methane fees. As a result, understanding emissions risk has never been more urgent and for many energy companies could see cash flow surprises at a time of uncertain commodity prices. Turn to Enverus for the actionable insights needed to make the best next steps.
Learn more about the trifecta of emissions regulations, SERP and advancements in methane measurement impacting the energy industry in this webinar replay, Emission Economics: Strategic Insights for 2025.
CALGARY, Alberta (Oct. 9, 2024) — Enverus Intelligence® Research (EIR), a subsidiary of Enverus, the most trusted energy-dedicated SaaS company that leverages generative AI across its solutions, has released a report that analyzes the potential impact of the Environmental Protection Agency (EPA) greenhouse gas standards and guidelines for fossil-fueled power plants in the U.S. In their current form, the regulations will undoubtedly impact new natural gas plants, operating coal plants and the generation mix for specific markets and states in a negative way.
“The new EPA regulations will mandate coal-fired power plants operating post-2039 to reduce emissions by 90% by 2032 or plan to retire early,” said Kevin Kang, analyst at EIR. “The policy has faced controversy, with some 27 states and several companies and organizations challenging the ruling as coal-fired power plants remain a substantial source of generation in states such as West Virginia and Wyoming. Unless something changes, this policy will have a drastic effect on the power markets.”
“To fill the void that coal will leave, there has been a lot of talk about renewable energy and CCUS as the solution; but with natural gas power plants, the economics are clear and will only benefit projects located near Class VI permit sites,” Kang said. “However, even in those cases, operating at a 40% capacity factor and being exposed to merchant pricing during volatile hours often proves more cost-effective, which we believe companies will prefer.”
Key takeaways from the report:
New EPA regulations released in April 2024 mandate that coal-fired power plants operating post-2039 reduce emissions by 90% by 2032 or that they plan to retire early.
Some 27 states and several companies and organizations are challenging the EPA regulation. Regardless of the outcome, EIR predicts all coal-fired generation in the U.S. to be shuttered by 2040.
EIR’s base case shutdown schedule is on a pace that would see a decrease in reserve margin from about 27% in 2024 to just 12% in 2039. This would drive power, ancillary and capacity prices significantly higher.
EIR expects the challenging economics of carbon capture from gas-fired power plants to incent most new gas plants in deregulated markets to operate under a 40% capacity factor.
EIR is inviting members of the media to attend a live webinar Oct. 16, 2024, at noon CDT, to learn more about gas-fired power generation. Learn more and register here.
You must be an Enverus Intelligence® subscriber to access this report.
About Enverus Intelligence® Research Enverus Intelligence ® | Research, Inc. (EIR) is a subsidiary of Enverus that publishes energy-sector research focused on the oil, natural gas, power and renewable industries. EIR publishes reports including asset and company valuations, resource assessments, technical evaluations and macro-economic forecasts; and helps make intelligent connections for energy industry participants, service companies and capital providers worldwide. EIR is registered with the U.S. Securities and Exchange Commission as a foreign investment adviser. Enverus is the most trusted, energy-dedicated SaaS company, with a platform built to create value from generative AI, offering real-time access to analytics, insights and benchmark cost and revenue data sourced from our partnerships to 95% of U.S. energy producers, and more than 40,000 suppliers. Learn more at Enverus.com.
Calling all oil and gas supply chain and operations teams… Are you currently trying to do sourcing from a platform that’s originally designed for manufacturing? Maybe you’re handling all bids via a combination of your email inbox and spreadsheets.
Fear not! There are solutions out there that can remove you from this morass of emails and clunky software. A well-equipped sourcing software not only streamlines processes but also enhances decision-making and operational efficiency. In today’s post, we explore seven essential things that are must-haves in your sourcing platform to meet the unique demands of an oil and gas company.
Get Away From Manual Work With a Sourcing Platform Made for Oil and Gas
Sourcing platforms are more than just specialized software solutions designed to streamline procurement operations. Ideally, they also act as a centralized hub, helping manage and optimize sourcing activities from start to finish, including supplier selection, bid evaluation and negotiation and performance tracking.
The benefits of using a sourcing platform are extensive.
They offer enhanced transparency and visibility throughout the procurement lifecycle. By doing this, they provide a clear view of the supply chain and identifying potential bottlenecks or areas for improvement.
They facilitate access to a broad network of suppliers. This makes it easier to find the best-fit suppliers for specific projects – not only saving you time but also opening opportunities for better negotiation and cost savings.
They streamline the request for proposal (RFP) and bid evaluation processes. By automating these steps, companies can reduce manual effort, standardize evaluation criteria and ensure fair and efficient supplier selection. Some platforms even come equipped with advanced analytics and reporting capabilities, enabling companies to gain valuable insights into their procurement performance and make data-driven decisions.
What to Consider When Evaluating New Sourcing Software for E&P Operations
Here’s what you should look for when considering sourcing software:
1. Quick, User-Friendly RFx and Bid Management
RFx creation and bid management should be user friendly. Instead of creating purpose-built RFxs for each sourcing event, the latest software even leverages AI to provide templates based on past bids.
Why this matters:
This feature drastically reduces the time spent on creating bid requests and managing responses. Quick, user-friendly RFx and bid management empower teams to focus more on strategy and less on administrative tasks, leading to faster procurement cycles. Most importantly, an efficient bid management platform gives you consistent sourcing across the board.
The bid management screen from Enverus RFx. This feature allows you to create a bid in 60 seconds based on existing and AI-powered templates.
2. Integrations With Your Existing Data and Procurement Software
For sourcing platforms in the oil and gas industry, integration with existing procurement data, especially pricing and vendor history, is vital. Integrations that include other procurement software completes the circle and gives you a 360° look into your procurement.
Why this matters:
For oil and gas companies, where the dynamics of pricing, vendor relationships and contract management are complex, such integrations are invaluable. They facilitate a seamless flow of information, ensuring that every decision is informed by accurate, up-to-date data. By connecting sourcing with inventory, invoicing and other procurement functions, companies can achieve a synergistic management of their source-to-pay cycle, resulting in improved cost management and streamlined processes.
3. Vendor Safety, Compliance Ratings and Other Records
The best sourcing platforms provide the ability to assess, monitor and mitigate risks associated with supplier reliability, financial stability and compliance with industry standards and regulations in one place. Collaboration tools within sourcing platforms can facilitate seamless sharing of compliance documentation, certifications and audit results between companies and their suppliers. At the very least, sourcing software should offer integrations with existing solutions that allow quick access to this data.
Why this matters:
Vendor safety, compliance ratings and comprehensive record-keeping are crucial features of effective sourcing platforms in the oil and gas industry. This feature allows you to assess supplier reliability and compliance, while offering tools for easy exchange of documentation to ensure regulatory standards are met, mitigating potential risks and penalties.
4. A Robust Network of Suppliers
In an industry that relies heavily on outsourced services, you need a large existing network of industry suppliers at the ready to discover new suppliers and run a competitive bidding process. Manufacturing platforms don’t offer this. With an existing supplier network, all supplier information is easily accessible and updated in real time, simplifying the onboarding process and reducing administrative overhead.
Why this matters:
Success in the oil and gas sector often hinges on the ability to quickly adapt to supply chain disruptions and market demands. Having access to a robust network of pre-vetted industry suppliers ensures you’re not only getting the best price but also working with suppliers who can meet the demanding specifications of the industry. This feature simplifies the procurement process, from discovery through to onboarding, and ensures that operations continue smoothly and efficiently.
The supplier directory from Enverus RFx. Using this feature, you can source suppliers according to service expertise, availability or basin footprint.
5. Supplier Performance Tracking and Evaluation
Tracking and evaluating supplier performance is crucial for informed decision-making and continuous improvement. Look for a platform that provides comprehensive analytics and reporting capabilities to monitor key performance indicators linked to current and past projects and identify areas for improvement.
Why this matters:
By understanding supplier strengths and weaknesses, companies can negotiate better terms, address potential issues proactively and foster stronger, more productive relationships. This level of insight ensures that every link in the supply chain is performing at its best, contributing to overall operational efficiency.
6. Collaborative Features for Efficient Communication and Relationship Management
Sourcing software that enables robust supplier collaboration helps companies quickly adapt to changing market conditions. Whether it’s a sudden spike in demand, fluctuations in oil prices or geopolitical events affecting supply chains, companies can work closely with their suppliers to navigate these challenges. A sourcing platform should offer collaborative features such as messaging, document sharing and task management to facilitate seamless communication with supply chain, operations and your supplier network, fostering strong supplier relationships.
Why this matters:
In an industry where conditions and demands can change rapidly, the ability to communicate efficiently with suppliers is essential. This ensures that everyone, from the supply chain to operations to suppliers, can quickly adapt to new information and manage expectations. Strong, collaborative supplier relationships are vital for the competitive bidding process and getting the best value per bid.
The supplier communications screen from Enverus RFx. Using this feature, you can chat in real time with suppliers, send broadcast messages about specific bids and handle Q&A without needing to use multiple platforms or programs.
7. Advanced Reporting and Analytics
In the oil and gas industry, data-driven decision-making is essential. A sourcing platform with advanced reporting and analytics capabilities can provide invaluable insights into your procurement processes.
Look for a platform that offers customizable reports and dashboards. This functionality allows you to track key performance indicators, monitor supplier performance and identify price trends and anomalies. With these insights, you can make informed decisions and optimize your sourcing strategies.
Why this matters:
In the data-driven world of oil and gas, having access to advanced reporting and analytics is critical for optimizing procurement strategies. A sourcing platform that provides customizable reports and dashboards enables companies to monitor and analyze a variety of key indicators. This insight allows for a deeper dive into supplier performance, pricing trends and market dynamics. Armed with this data, companies can refine their sourcing strategies, negotiate better contracts and identify opportunities for cost savings and efficiency improvements, ensuring they remain competitive.
Introducing Enverus RFx: An AI-Powered Sourcing Platform Built for Oil and Gas
As we wrap things up, it would be remiss not to mention one of the newest built for oil and gas sourcing solutions to hit the market: Enverus RFx (formerly BidOut). Enverus RFx is a complete sourcing solution specifically designed for oil and gas companies. Easily manage bids, connect with suppliers, improve compliance and get transparency into your bidding process. Empower your procurement with our easy-to-use platform and let AI-powered technology enhance your efficiency and preserve your bottom line.
Here’s a few reasons to check out Enverus RFx:
Competitive bidding: Easily compare bids side by side to get the best value. Renegotiate contracts with existing vendors based on market indicators.
Custom AI-powered templates: Speed up the bidding process with customizable bid templates that can be used for high frequency or category-specific bidding. AI learns from past bidding behavior to give you better templates.
Improve collaboration between supply chain and operations: Delegate responsibilities and maintain transparency and integrity in your bidding.
If you want to learn more, check out this overview and demo here. Curious to see how Enverus RFx can help your business? Why not fill out the form below to speak with our team? It’s more than just a software—it’s your next big step towards nailing those procurement goals.
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