Energy Executives Discuss Reliability Standards, Secure Project Growth Despite Low Crude Prices
The C. T. Bauer College of Business Global Energy Management Institute (GEMI) brought together energy thought leaders from industry and academia during its March 11 symposium, “Reliability and Security across the Energy Value Chain.”
Sponsored by GDF Suez, Northstar Offshore Group LLC and Schlumberger, the event drew attendance from more than 100 mid-level and senior energy executives to take part in essential discussions on regulation, infrastructure, contracts and financing and risk management.
“The energy industry speaks a language not easily understood, and the GEMI Symposium is an attempt to simplify that language,” Dean Latha Ramchand said. “We are experiencing huge industry shifts, and this event helps take what companies are already doing and communicate what’s happening to everyone else. This is the place where best practice begins.”
A keynote presentation from C. Gregory Harper (MBA ’97), president of pipelines and processing for Enbridge Inc., focused on opportunities for midstream projects despite the current low oil price situation. Harper noted the industry layoffs and bankruptcies, but spoke confidently that deals made this year will come online by 2018.
“Midstream deals are out there and they are getting done,” Harper said. “It’s not just about the standard supply and demand equation; it’s about opportunity.”
The event included focused panel discussions for various aspects of the industry’s value chain, with highlights noted below:
Regulation panelists emphasized the need for consistency between environmental and greenhouse emissions policies and the realities of the energy and electricity sector, and discussed challenges faced between energy companies and the Environmental Protection Agency (EPA).
“The idea is that there is a principle that you do not bring risk to the general public,” University of North Carolina Distinguished Professor Victor Flatt said. “The principle is that health and environment are to be protected as the private sector operates effectively to meet customers’ needs.”
Flatt, who teaches environmental law, says that there will be climate regulation in some form or another. Other panelists outlined regulations from the North American Electric Reliability Council (NERC) and the Federal Energy Regulatory Commission (FERC) so that companies can better understand compliance methods and how it strongly impacts industry growth.
Panelists included Navigant Consulting, Inc. Director Matt Blizard, Vinson & Elkins retired Partner Kathleen Lake, North American Energy Standards Board President Rae McQuade and GDF Suez Gas NA Vice President Tony Scaraggi.
The infrastructure panel, led by Bauer Executive Professor Art Smith, touched on the impact current low international crude prices will have on moving forward with planning and execution of new energy infrastructures, specifically natural gas export projects that the United States needs.
According to Svetlana Valonis, director of Pricewaterhouse Coopers (PwC) U.S. Energy Advisory practice based in Houston, most LNG export projects will need to see global oil prices of $50-$60 to go forward. Audience members were eager to find out if a possible solution could be found in moving drilling operations up to Alaska, considering the lower cost structure in comparison with Japan and South Korea.
“There’s a little bit of a question in everybody’s mind if Alaska is where the major LNG players should focus,” Valonis answered. “But most have decided to keep their focus on the gulf.”
Other panelists included Port of Houston Deputy Executive Director Erik Eriksson and Brattle Group Principal Sam Newell.
Contracts & Financing
During the contracts and financing panel, heavy discussion developed on asset ownership issues and emphasizing benefits of Master Limited Partnerships (MLPs). With the ability of combining tax benefits of a limited partnership and liquidity of publicly traded securities, private MLPs are increasing and are being joined by recent developments of alternative power ownership structures like Yieldcos.
“The MLP has a lot of staying power and it makes a lot of sense,” said Scott Archer, Managing Director of Investment Banking for Tudor, Pickering & Holt.
Panelists included Bauer College Professor and Director of GEMI Praveen Kumar, Managing Director for Alinda Capital Partners Sean Dolan and Vinson & Elkins Partner Katy Gottsponer.
Panelists described the various risks faced by energy companies: counterparty risk, regulatory risk, information/data risk, volumetric risk and price risk. A lively discussion developed with the audience on how these risks can be identified and managed in energy companies.
Volumetric risk was becoming serious for owners and traders of Marcellus natural gas: “The U.S. has lots of gas trying to go south,” Smead said. “Most are existing pipelines with expansions, but you hope the market’s going to be there.”
Panelists included Bauer College Executive Professor Chris Ross, PwC Partner John Corrigan, GDF Suez Energy Resources Vice President Vikram Kulkarni and Vice President of Retail Strategy and Business Development at EDF Trading Bojana Popovic.
By Danielle Ponder