New Energy World™
New Energy World™ embraces the whole energy industry as it connects and converges to address the decarbonisation challenge. It covers progress being made across the industry, from the dynamics under way to reduce emissions in oil and gas, through improvements to the efficiency of energy conversion and use, to cutting-edge initiatives in renewable and low-carbon technologies.
US announces biggest ever release from SPR
6/4/2022
News
US President Joe Biden’s administration announced on 31 March that it will release 1mn b/d of oil over six months from the country’s Strategic Petroleum Reserve (SPR) in a bid to help stabilise global energy markets following Russia’s invasion of Ukraine.
A total of 180mn barrels will be released, equivalent to about two days of global demand and about one-third of the US SPR.
It is the third time the US has tapped its strategic reserves in the past six months and is the largest release in the near 50-year history of the SPR.
US drillers –‘use it, or lose it’
The US government also announced that it is looking to increase domestic production to meet demand, having banned the import of Russian oil following the outbreak of war with Ukraine. Stating that there is ‘nothing standing in the way of domestic US oil production, which is expected to increase by 1mn b/d this year alone’, the White House noted that ‘while some companies have already announced they are increasing immediate production, too many are choosing right now to make extraordinary profits without investing in more supply’. As a result, President Biden is proposing a ‘use it or lose it’ policy to incentivise companies to produce more in the short term with the resources they already have.
According to the US authorities, the US oil and gas industry is currently sitting on more than 9,000 unused but approved permits for production on federal lands and more than 12mn unused acres. It is proposed that companies pay fees on unused wells on federal lands and on acres of public land that they are sitting on without producing.
IEA members agree new emergency oil release
Shortly after the US announced its latest SPR release, the International Energy Agency’s (IEA) 31 member countries also agreed to a new release of oil from emergency reserves in response to the market turmoil. The agreement follows last month’s action, when IEA member countries pledged a total of 62.7mn barrels. IEA members hold emergency stockpiles of 1.5bn barrels.
According to the IEA, Russia is the world’s third largest oil producer and the largest exporter. The country exports about 5mn b/d of crude oil, representing roughly 12% of global trade – and its approximately 2.85mn b/d of petroleum products represent around 15% of global refined product trade. Around 60% of Russia’s oil exports go to Europe and another 20% to China.
Oil prices have surged since Russia invaded Ukraine in late February, with Brent crude futures prices reaching $139/b at one point in March. The US and allies responded to the incursion with hefty sanctions on Russia, which, coupled with a reluctance (and a ban in some instances) to purchase Russian oil could remove about 3mn b/d of Russian oil from the market starting in April, according to the IEA.
In response to the ongoing turmoil in global energy supplies following Russia’s incursion into Ukraine, the IEA recently published a 10-point plan to cut oil use as a guide for member countries to reduce their oil consumption. It also released a 10-point plan to reduce the EU’s reliance on natural gas by next winter and it is working closely with the European Commission on next steps.
