With the election of U.S Democratic Party’s Presidential candidate Joe Biden, as the 46th President of the United States of America, the question many oil and gas industry watchers are asking is how the future of oil and gas industry with Joe Biden in the helm of affairs will be.
Energynewsafrica.com reached out to Dr. Babajide Agunbiade, a Subject Matter Expert in Subsea Engineering and Director at National Oilwell l Varco, to seek for the implications of U.S oil and gas industry with Joe Biden in the helm of affairs.
Below is the response of Dr. Agunbiade
I believe the following agendas will drive Joe Biden’s Energy policy: First, An irreversible path to achieve economy-wide net-zero emissions by 2050. Secondly, a drive towards a historic investment in clean energy and innovation and finally, requiring aggressive methane pollution limits for new and existing oil and gas operations; developing rigorous new fuel economy standards aimed at ensuring 100% of new sales for vehicles will be zero-emissions; protecting America’s natural treasures by permanently protecting the Arctic National Wildlife Refuge and other areas impacted by President Trump’s policy on federal lands and waters; banning new oil and gas leasing on public lands and waters.
While Trump had sought to maximize domestic oil and gas production within the United States, Biden will ban the issuance of new drilling permits on federal lands and waters to fight global climate change.
According to data from the Interior Department, the US produced nearly 3 million barrels of crude oil per day from federal lands and waters in 2019, along with 13.2 billion cubic feet per day of natural gas.
That amounts to about a quarter of total domestic oil output and more than an eighth of total US production of gas. A federal ban on new permits would mean those numbers trend toward zero over a matter of years.
I foresee that without the political sheltering by Trump’s leadership in Washington, U.S. majors like ExxonMobil and Chevron that have remained focused mainly on the traditional energy business will begin implementing strategies for a global energy transition more like European oil and gas companies like BP and Royal Dutch Shell.
The implication for Sub-Saharan Oil and gas production is that with renewable energy taking the more central stage during the Biden administration, fossil fuel demand will continue to decline, leading to reduced drilling, production and exploratory activities.
Impact
There would also be an impact on global and the US public revenues – Oil and gas production generated about $12 billion in public revenue in 2019, divided between the US Treasury, states and counties, tribes, and cleanup funds.
According to Wood Mackenzie, 2020, there’s Potential legal Implications – Upstream producers have already invested billions of dollars into exploration and development projects. In US GoM alone, companies have invested over US$180 billion since 2005 in drilling and exploratory activities on the land the Biden government is looking to ban.
There would be removing subsidies for fossil fuels, which, some environmentalists say, inject roughly $20 billion into the industry annually.
There would be an emphasis on low or zero-carbon energy production, green industry manufacturing, and more climate-friendly regulations.
There will be generous government research grants to renewable energy start-ups. The solar and wind producers will enjoy munificent tariffs, and, hopefully, the nuclear industry and fusion pioneers.
Potential job losses in areas that traditionally rely on oil and gas employment.
However, this could be balanced out by Biden’s plan that would create millions of new jobs.
There is a further decrease in global demand for hydrocarbons due to renewable Energy options coming to play, which will impact the already volatile oil prices.
Conclusion
To conclude, it will be imperative for the incoming federal government to maintain a balanced curve in passing such legislation. The Oil and Gas industry still maintains a reliable place in annual revenue generated. Biden’s proposals could bring about some of the most substantial deviations that the US offshore industry has ever seen. Careful thoughts need to be made. After all, not every President has fully stuck with their pre-election promises. The fact that Biden mentioned that he wouldn’t end fracking could be a good omen and some light at the end of the tunnel for the USA oil and gas industry.
Dr. Babajide Agunbiade is a Subject Matter Expert in Subsea Engineering and Director at National Oilwell Varco, based in Houston, Texas, United States
