Secretary Brouillette speaks with IHS Markit vice chairman, Daniel Yergin for the CERAWeek Conversations series — available at www.ceraweek.com/conversations
U.S. Secretary of Energy Dan Brouillette discusses how the United States emerged as a key broker in international agreements to stabilize energy markets following COVID-19 demand shock and a Saudi Arabia/Russia oil price war; his thoughts on leasing the U.S. Strategic Petroleum Reserve and COVID-19 stimulus for the U.S. energy industry in a new installment of the CERAWeek Conversations series.
In a conversation with Daniel Yergin, vice chairman, IHS Markit (NYSE: INFO), Sec. Brouillette talks about how the United States’ energy position today allows it to be a “bigger player” in international energy agreements, how COVID-19 impacts could restructure the U.S. industry and what breakthrough energy innovations he sees coming out of the strong research pipeline from the national laboratories.
The complete video is available at: www.ceraweek.com/conversations
(Edited slightly for brevity only)
On the U.S. government’s role brokering international dialogues to balance global energy markets:
“The president directed me to begin a conversation with my counterparts in both Saudi Arabia and Russia. In the context of those conversations it became clear that it wasn't going to be resolved purely at the ministerial level. We engaged in really good dialogue. Obviously we're not, as the United States, part of OPEC, so our participation initially was at the margin. But I was able to convince the parties to agree to a G-20 conversation that allowed many other nations to come to the table and understand the situation more fully, and to begin a discussion about what was happening in our respective markets.
“All throughout this process, it became clear that nations were going to reduce production and for some nations who are cartel members that meant that they were going to agree to cut within the context of OPEC or OPEC+. But for those of us who are G-20 nations and free markets, we were able to explain to the parties engaged that our production was going to go down as well, simply as a matter of market demand and investment falling off.
“But it was important that we all have this conversation together so that we could understand the impact of our individual actions and what was going to be not only the short-term situation, but what was going to be the recovery plan as well. I do think it's going to be very bright on the other side of this pandemic.”
How the current U.S. energy security position enables a bigger role in international dialogues:
“I can't imagine this happening in 1973 or 1974 when the United States was an importing nation and not an exporting nation. The fact that our energy situation—our energy industry—turned around so dramatically in these three or four decades, I think allowed our president, allowed our country, to be a bigger player, a bigger part of these international conversations.”
His views on production cut compliance to the recent OPEC+ and G-20 agreements:
“In the past where you may have had an agreement amongst cartel members to honor certain agreements or certain production numbers, here we have both that agreement and a situation in the market that really doesn't allow non-compliance in many respects. We have a decreased demand curve. You also have this increasing pressure on storage around the world as demand is falling off and production is beginning to fall off. We're facing enormous pressures on storage. So as a result, I don't think players have many options.
“If you're an OPEC or OPEC+ member and you're thinking about not honoring the agreement, I’m not quite sure where you are going to put the oil because there's no market to send it to and there's no storage available for you. So I think it's a very unique situation in that regard.”
The DOE’s role working across government to provide liquidity for energy companies:
“Last week we were able to extend eligibility to the energy industry to what is known as the Main Street Lending Program that will provide for what we refer to as the mid-cap players, the people right in the middle of the industry. It's not the investment grade companies, although they have access to other programs should they choose to avail themselves to them, and it's not really the folks who are probably going to exit the business anyway. It's really that middle category of players—very strong companies, very good technologies, very good at what they do—but simply facing an extraordinary time given the lack of demand. Our intent is to provide them with liquidity so that they can make it beyond this pandemic period and come back on the other side stronger than ever.”
On leasing the U.S. Strategic Petroleum Reserve:
“We’ve opened up the storage for use by the private industry and we're charging rent essentially for using the strategic reserve. So rather than going out and buying oil or charging people rent and having them paying cash, they pay in oil. So as a result, we're filling the strategic reserve and we're doing it at the best price available. For the taxpayer that’s a really, really good deal, because we're going to fill it up at some point in the future—not for free, but essentially for free at a very low price.”
Utilizing Department of Energy (DOE) supercomputing to support COVID-19 research:
“We combined our biosecurity talent, our expertise with biological sciences, with our super computing capabilities at our Oak Ridge National Laboratory in Tennessee where we own the world's fastest supercomputer—we call it ‘Summit.’ We're able to take the scientific expertise, apply artificial intelligence to many of the things that we had learned there, run it through our supercomputers and literally within a matter of hours in some cases, identify drug compounds that would have a particular positive effect on this virus.
“Think about what's out there in the world today—literally billions of pages of literature and research, not only on the virus, but on the drugs that might be effective on the virus itself. We're able to cull through all of this material in a matter of hours and pull out the most relevant pieces of data and share it with the task force so that they can make progress attacking the virus.”
On potential for COVID-19 Impacts to restructure the U.S. oil industry:
“There's no question that's going to be changed. There's no doubt about that. We've all read the stories about certain players here in the United States looking to take pretty serious risk in joining either a shale play or unconventional play. Many of the players were highly leveraged. I think it's fair to say that you'll see some of those players go by the wayside. They may be purchased by larger players in the marketplace, they may just simply close up shop and go by the wayside.
“That's the free market system. It's the way it works here in the United States. But I have no doubt that in a few months, or perhaps six months, we're going to see our industry almost back to where it was pre-pandemic levels. That assumes, of course, we open up the economy.”
On the resiliency of the U.S. energy industry:
“Roughly 25 or 26 states that comprise about 41% of the U.S. demand are open for business today. So, if that trend continues, if that happens over the course of the next 60 days, I think you're going to see the U.S. energy industry bounce right back. These are some very strong players and, importantly, they're very innovative players.
“I'm reminded of a comment that one of the energy ministers told me in a conversation. He said, every time we do something like this, everybody thinks that the United States is going to leave the playing field, that the United States is dead or certain parts of the industry is dead —and that never really happens. They take a small break and they come back stronger than ever. And I do think that's going to happen again.”
On breakthrough oil and gas innovations in the DOE research pipeline:
“I'm very excited about what I see in some of the upcoming work in the laboratories and I think in the very near future we're going to fix some of the challenges we faced around technologies involving, for instance, hydraulic fracturing. We're on the cusp of developing technologies for a desalination process that will take the salt and chemicals out of the water that was used as part of the fracking process and we can return that water either to a body of water cleaner than which we took it from or give it back to the industry for reuse in a fracking operation or perhaps other operations. We're very, very close to solving that important problem. It’s just yet another example of the type of work that's being done in our science laboratories all throughout the Department of Energy.”
Watch the complete video at: www.ceraweek.com/conversations
About CERAWeek Conversations:
CERAWeek Conversations features original interviews and discussion with energy industry leaders, government officials and policymakers, leaders from the technology, financial and industrial communities —and energy technology innovators.
The series is produced by the team responsible for the world’s preeminent energy conference, CERAWeek by IHS Markit.
New installments will be added weekly at www.ceraweek.com/conversations.
Recent segments also include:
- Leadership Dialogue with Hon. Shri Dharmendra Pradhan – India’s minister of petroleum and natural gas and minister of steel interviewed by IHS Markit vice chairman Daniel Yergin.
- Petrobras: Reinventing the Fundamentals – Roberto Castello Branco, CEO, Petrobras interviewed by Carlos Pascual, senior vice president, global energy, IHS Markit.
- Competing Today, Innovating for Tomorrow – Mark Little, chairman and CEO, Suncor interviewed by Carlos Pascual, senior vice president, global energy, IHS Markit.
- Leadership Dialogue with Chris Crane – Exelon president and CEO interviewed by Lawrence Makovich, vice president and senior advisor, energy, IHS Markit
- DOE National Labs: Super Computing Against COVID – Hon. Paul Dabbar, undersecretary for science, U.S. Department of Energy and Thomas Zacharia, director, Oak Ridge National Labratory share innovations that can help us get closer to the pandemic’s end.
- Energy Innovation is a Marathon Not a Sprint – Barbara Burger, president, Chevron Technology Ventures, Vijay Swarup, vice president of research and development, ExxonMobil and Robert Armstrong, director, MIT Energy Initiative
- Leadership Dialogue with Lord John Browne – Lord John Browne, executive chairman, LI and former group chief executive, BP interviewed by IHS Markit chairman and CEO Lance Uggla.
A complete video library is available at www.ceraweek.com/conversations.
About IHS Markit (www.ihsmarkit.com)
IHS Markit (NYSE: INFO) is a world leader in critical information, analytics and solutions for the major industries and markets that drive economies worldwide. The company delivers next-generation information, analytics and solutions to customers in business, finance and government, improving their operational efficiency and providing deep insights that lead to well-informed, confident decisions. IHS Markit has more than 50,000 business and government customers, including 80 percent of the Fortune Global 500 and the world’s leading financial institutions. Headquartered in London, IHS Markit is committed to sustainable, profitable growth.
IHS Markit is a registered trademark of IHS Markit Ltd. and/or its affiliates. All other company and product names may be trademarks of their respective owners © 2020 IHS Markit Ltd. All rights reserved.