Will expanded entry to US federal lands spur oil and fuel output? | USAEMALL.com

Welcome to Energy Source, coming to you today from New York.

Almost a week after US President Donald Trump rolled out the red carpet for Russian leader Vladimir Putin in Alaska, the possibility of a peace deal in Ukraine has become more unlikely. Russia’s foreign minister Sergei Lavrov on Wednesday said Moscow would only agree to security guarantees for Ukraine if it is given an effective veto over any future effort to defend Kyiv.

The latest news mean strict new sanctions that have been in place since February will probably endure. But my colleagues Jamie Smyth, Chris Cook and Anastasia Stognei reported that the US oilfield services group Weatherford International is expanding its Russia business despite the restrictions. Rival SLB has also continued to operate and has posted hundreds of job advertisements in the country since February.

In today’s Energy Source we take a look at the Trump administration’s new policy that extends and preserves oil and gas companies’ access to federal lands and waters. — Alexandra

Trump’s push to ‘drill, baby, drill’ on federal lands

The oil and gas industry celebrated the Trump administration’s new tax legislation that gives it more access to drilling on federal lands and waters. But the policy may not fulfil Trump’s “drill, baby, drill” agenda as weak oil and gas prices and economic uncertainty thwart fossil fuel production.

The One Big Beautiful Bill Act expanded and expedited oil and gas leases on federal offshore and onshore land. The Gulf of Mexico must hold at least two offshore lease sales through 2039, starting in 2026. Similarly, Alaska must have a minimum of six offshore lease sales through 2032. Onshore lease sales will also be required quarterly in western states such as Wyoming, New Mexico, Colorado and North Dakota.

The policy marks a departure from Joe Biden’s administration, which aimed to reduce the number of lease sales by creating more restrictions. It also establishes certainty for oil and gas companies that have long been subject to flip-flopping policy, especially for offshore drilling, through the 2030s.

“All of this sends a very clear signal to the industry that development in these areas won’t merely be tolerated but will actually be encouraged,” said Dustin Meyer, senior vice-president of policy, economics and regulatory affairs at the American Petroleum Institute.

Permian Resources co-chief executive Will Hickey also agreed on a call with investors that the industry will “benefit from the reduction in red tape associated with federal drilling permits and federal lease sales”.

But analysts say the Trump administration’s new policy may not be enough to boost oil and gas production on public lands as the industry grapples with low commodity prices and trade uncertainty.

“We don’t see an uptick in production from these policies,” said Matthew Bernstein, an upstream analyst at Rystad Energy. “Any sort of movement in that direction would need to be incentivised by significant improvements in the macro environment.”

Raoul LeBlanc, vice-president of North America upstream at S&P Global Commodity Insights, said only 8 per cent to 10 per cent of US production of oil and gas takes place on federal land and that it is an “overwhelmingly” private land operation.

“Opening up more federal land is potentially useful but it’s difficult to translate that into real economic value,” he added.

Still, the federal government controls almost all of the offshore assets in the Gulf of Mexico, which analysts say could have promising deepwater drilling potential.

But offshore drilling has long lead times. The process of discovering new oil and bringing it to production takes on average seven years, according to Miles Sasser, senior research analyst at Wood Mackenzie.

“Increased access to acreage today isn’t necessarily turning into actual production until the 2030s,” he said.

Oil and gas companies must pay the federal government royalties if they discover fossil fuels on public lands. The government lowered the royalty rate to the historic level of 12.5 per cent, from the previous administration’s 16.6 per cent.

The lower royalty rate could decrease the break-even rate, which is the price of oil that allows drilling to be profitable, but if macroeconomic factors are not favourable a lower break-even price will not be enough to incentivise drilling.

Oil prices have been weak this year, which has caused many producers to curtail drilling. The US Energy Information Administration expects the price of Brent crude to fall further next year to $51 a barrel just as more lease sales begin.

After Opec+ said it would unwind its production cuts by next month, the EIA said it expects most global oil production growth to come from the members of the group. As a result, the EIA expects US producers will accelerate decreases in drilling that has been ongoing throughout most of the year and that crude oil production will decline.

Gas prices have also been low this year. While surging power demand has created more need for natural gas, Nathan Nemeth, an analyst at Wood Mackenzie, said areas with large gas resources are mostly found in Texas and the US north-east and are not as significant on federal lands.

Trump’s new policy may not spur more oil and gas investment in the US as the industry grapples with economic uncertainty that is largely driven by the US trade war.

“De-globalisation tends to be inflationary and it can be recessionary,” said Kevin Book, managing director of research with ClearView Energy Partners. “We are in a moment where long-term investors are waiting to see how it shakes out . . . very few executives want to rush in front of uncertainty.” (Alexandra White)

Job moves

• EOS Energy Enterprises has appointed John Mahaz as chief operating officer.

• AleAnna has named Ivan Ronald as chief financial officer.

• Antero Resources has appointed Benjamin Hardesty as chair of the board.

Power Points

• Ithaca Energy, an oil and gas company operating in the UK’s North Sea, has called for the industry’s tax rates to be revised because lower oil prices has hit groups’ ability to earn “windfall” profits.

• A record amount of renewable energy capacity has been granted planning permission in the UK but the speed of grid connections remains an obstacle.

• Peabody Energy is pulling out of its $3.8bn agreement to buy Anglo American’s coal mines over the unexpected closure of the deal’s flagship mine.

Energy Source is written and edited by Jamie Smyth, Martha Muir, Alexandra White, Kristina Shevory, Tom Wilson, Rachel Millard and Malcolm Moore, with support from the FT’s global team of reporters. Reach us at [email protected] and follow us on X at @FTEnergy. Catch up on past editions of the newsletter here.