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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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Oil Majors Aren’t Worried About A Biden Presidency

The U.S. oil and gas industry has been fretting about the implications of a Biden Presidency on the sector in view of Joe Biden’s energy plan to favor renewables development and ban new oil and gas leases on federal lands.  Yet, oil industry executives and professionals have said in recent days that a President Biden would not be as devastating to U.S. oil and gas as doomsayers fear.  

Sure, Biden’s plan to fight climate change with a pivot to renewables and a pledge for net-zero emissions in the power sector by 2035, as well as a ban on fracking on federal lands, will impact the level of U.S. oil and gas production in the coming years. 

However, the ambitious climate plan of a Biden Administration will likely have to be watered down, especially if Republicans keep the Senate majority, with this race to be decided in January run-offs in Georgia, analysts say. 

Meanwhile, oil industry executives said on the ADIPEC Virtual 2020 Strategic Conference this week that the energy transition and the so much hyped ‘net zero’ would not happen overnight and that policymakers would have to take into account the cost of the transition and understand the mix of energy sources and technologies better, before jumping to promises to please the progressive base. 

“Talking about climate is often like talking about religion with some politicians. They don’t actually understand the complexities of the energy system very much and that’s never very satisfying,” Bob Dudley said during an ADIPEC panel moderated by CNBC’s Steve Sedgwick

Dudley was BP’s chief executive before Bernard Looney, who took over as CEO in February and immediately set out to transform the supermajor into an integrated energy company from an international oil company. Dudley currently chairs the Oil and Gas Climate Initiative (OGCI), a CEO-led voluntary alliance that includes U.S majors ExxonMobil, Chevron, and Occidental, Europe’s biggest oil firms BP, Shell, Total, Eni, Equinor, and Repsol, as well as Petrobras of Brazil, CNPC of China, and Saudi Aramco. 

Related: This Just Became The World's Largest Gas Hub During the same panel, Occidental Petroleum’s CEO Vicki Hollub said any new regulations from a Biden Administration would most probably be “workable” for the industry and expressed hope that the oil sector and the Administration would find ways toward “collaboration” in the future U.S. energy policies. 

“I’m not as worried as some people are. It is going to take some work to share that knowledge and to get his staff on board,” Hollub said, noting that Biden’s energy plan would likely be “mitigated” under a Republican Senate, which she expects after the Georgia run-offs.  

Occidental this week announced a strategy to reach net-zero emissions by 2050, including Scope 3 emissions, those associated with the use of its products. 

“In the end, as long as we have our long-term development plans in place, I think we will be okay as an industry,” Hollub said at the ADIPEC panel. 

“We’re realistic that with a Biden win, doing business on BLM land will become more difficult,” Marathon Oil’s president and CEO Lee Tillman said on the earnings call last week. 

If Biden bans new leasing in federal waters, the impact will be more significant than onshore, according to Ed Crooks, Wood Mackenzie’s Vice-Chair – Americas. 

Related: Will Biden Be As Bad For Oil As Critics Suggest?

“A ban on new leasing, if permanent, would mean that by 2035 US offshore oil and gas production would be about 30% lower than if lease sales had continued,” Crooks says.

Another sector in the industry that could see a significant impact under Biden is pipeline infrastructure, with the Administration likely creating new hurdles for developers of oil and gas pipelines and export facilities because it would want to include the emissions impact in federal reviews, according to WoodMac’s Crooks. 

Reductions of methane emissions and a ban on new leases on federal lands and waters could be enacted without Senate support, via Executive Orders, although the methane regulations will face a tough battle in the courts, Wood Mackenzie’s analysts said this week.

The oil and gas industry is “still an important source of tax revenue for certain states and a big employer – not least in New Mexico and Pennsylvania, key Democratic wins. There’s a delicate balance to be struck between nursing oil and gas through its current crisis and tightening the screws to align with the Democratic fossil fuel goals,” they noted.  

By Tsvetana Paraskova for Oilprice.com

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  • Mamdouh Salameh on November 15 2020 said:
    Why should they be worried in the first place? American presidents have long wanted the US to be self-sufficient in oil and President-elect Joe Biden will likely have a similar agenda but with an added emphasis on clean energy.

    And while President-elect Biden has greener goals for US energy, he will still ensure that no one will undermine the US shale oil industry on his watch for two reasons. The first is that it is an industry valued at $8 tn and employing 2% of the US work force and therefore important to the economy and the geopolitics of the United States. However, he may increase regulation of the sector by limiting methane emissions and fracking on federal land.

    The second reason is that any undermining of the industry or a reduction in US oil production will mean higher crude oil imports from the current 9 million barrels a day (mbd) to 12-13 mbd in coming years and this will deepen US budget deficit. Biden will look at oil prices and oil diplomacy through the lens of the broader global economy, the US economy and US jobs.

    A Biden administration would likely see natural gas as an important bridge to cleaner fuels and a reduction in coal usage and also an important export. Furthermore, he says he will make fighting climate change a priority and will re-join the Paris Climate Agreement, which is one of the international accords that Trump dumped.

    Trump saw tackling global warming as a threat to the economy. He has promoted fossil fuels and rolled back scores of environmental protections and climate regulations. A Biden administration is promoting an ambitious $2 tn plan to cut emissions.

    And while a ban on fracking on federal lands and a reduction of methane emissions could impact the level of U.S. oil and gas production in the coming years, that impact will be very limited since economics always trumps politics in the final analysis. However, Biden’s pledge for net-zero emissions in the power sector by 2035 is an illusion. His ambitious climate plan will likely have to be watered down, especially if Republicans keep the Senate majority.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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