analysts examine the oil and gas impact of new US bills | Rigzone

New infrastructure and new social bills will be put to a vote in the United States on Thursday, assuming there is no further extension of deadlines, analysts at Rystad Energy have pointed out – but what impact will they have on climate change and oil and gas stakeholders?

Well, when it comes to the infrastructure bill, we are unlikely to see any short-term impact on oil and gas stakeholders and market capitalization, Claudio Galimberti, vice-president, told Rigzone. Rystad’s senior president of oil markets; and Emily McClain, Rystad’s senior analyst. .

Still, the reconciliation bill includes environmental initiatives that would help meet Biden’s goal of reducing carbon emissions by 50 percent and for the U.S. electricity grid to get about 80 percent of the electricity to from zero-emission sources by 2030, “Rystad representatives said in a joint statement.

“This is where we could see that the bills really have an impact on the oil and gas stakeholders. The regulatory bill could potentially add polluter fees / carbon tax and tax rebates / incentives for clean energy, as well as several other programs to reduce carbon emissions, ”added the petroleum experts in the press release.

In its current baseline scenario, Rystad Energy predicts that gas demand is expected to peak in the 2030s with the start of the energy transition. However, there is a downside risk if significant short-term structural changes are made, noted Galimberti and McClain.

“The difficult path to a Biden-compliant energy scenario, in which we assume a 27% reduction in gas demand by 2030, would put 30 billion cubic feet per day of natural gas at risk over the next decade. , this risk may increase if we see the extensive infrastructure plans escalate, ”said Rystad representatives.

“Therefore, these two bills will have divergent impacts on the areas of demand for oil and gas. The infrastructure bill will surely increase the demand for oil in the United States in the short to medium term while the reconciliation bill is likely to accelerate the energy transition to renewables in the medium to long term by increasing the costs of emissions. of carbon, ”they added.

Commenting on the bills, Artem Abramov, head of shale research at Rystad Energy, said the biggest near-term impact for domestic oil and gas will really come from methane polluter charges.

“If it is in place from 2023, we will see additional industry-wide costs north of $ 10 billion per year under the proposed pricing structure ($ 1,800 per metric ton in 2023, growth five percent faster than inflation from 2024), ”Abramov told Rigzone.

“There is no clear understanding in the industry at this time as to what the government is actually going to use as input when calculating methane emissions. The current wording of the bill doesn’t make life easier for anyone, but it explicitly refers to EPA data, ”he added.

“Many challenges with this option as larger producers will be disproportionately affected as facilities less than 25,000 metric tonnes CO2e per year are not required to report to the EPA and many smaller producers do not always follow the EPA’s 100% methane-CO2 reporting standards. , which usually results in a bias in favor of CO2, ”Abramov continued.

What is the status of the invoices?

The $ 1,000 billion bipartisan infrastructure bill will provide new federal funding to modernize U.S. infrastructure over the next five years, including funding for roads, bridges, public transit, road improvements, power grid and water supply system, broadband network upgrade and modernization of airports, ports and waterways, as well as funds to provide electric vehicles to educational institutions and build in from a nationwide network of electric vehicle charging stations, said Galimberti and McClain.

The larger ‘reconciliation’ bill for social and environmental spending, with its price tag of $ 3.5 trillion, would provide funding to improve and expand education, health care / child care, as well as childcare. environment / climate change initiatives, stressed Rystad representatives.

According to Galimberti and McClain, there is still quite a bit of uncertainty around bipartisan support. Rystad’s two oil experts noted that this was partly due to the fact that an original bill had included much more in terms of childcare and education as well as climate agendas and that progressives threatened to refuse their support if the bill on social and environmental expenditure is not adopted at the same time as the bill on infrastructure.

Galimberti and McClain also pointed out that it was a very timely and happy coincidence that the infrastructure bill would be approved at a time when China’s largest real estate developer, Evergrande, was on the verge of the collapse, raising fears of a slowdown in investments.

To contact the author, send an email andreas.exarheas@rigzone.com