Tag: Special Report

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Both natural gas and liquefied natural gas (LNG) are much in the news these past few weeks, as Europe looks for alternative sources of energy to replace natural gas supplied from Russia. However, Berkshire Hathaway has been making key natural gas and LNG acquisitions long before the latest headlines.

Already a major player in natural gas distribution, in 2020, Berkshire made a big strategic bet on natural gas and LNG when it paid $4 billion for the natural gas transmission and storage assets of Dominion Energy, and assumed $6 billion of its debt. The acquisition, rocketed Berkshire from roughly 8 percent of all U.S. natural gas transmission to 18 percent.

Berkshire Hathaway’s Expanding Natural Gas and LNG Operations

Berkshire’s natural gas pipelines consist of BHE GT&S, LLC, Northern Natural Gas Company and Kern River Gas Transmission Company.

Berkshire’s BHE GT&S, which was acquired in the Dominion Energy deal in November 2020, is an interstate natural gas transmission and storage company headquartered in Richmond, Virginia, that operates around 5,500 miles of transmission lines in the eastern U.S and 756 bcf of total natural gas storage — with 420 bcf of working gas capacity — as well as gathering, processing and field services businesses. It provides a variety of LNG solutions through Pivotal LNG, its 25% operating stake in Cove Point LNG — the import, export and liquefaction facility in Lusby, Maryland — and other LNG processing and storage initiatives.

One of BHE GT&S’s key LNG assets is currently undergoing rapid expansion. Located along the St. John’s River in Jacksonville, Florida, the JAX LNG facility began operations in 2018 as a joint venture between Pivotal LNG, a BHE GT&S company, and NorthStar Midstream. In May 2021, Pivotal LNG announced that it will be tripling liquefaction to 360,000 gallons a day and doubling its LNG storage to 4 million gallons by early 2022.

Following the completion of the JAX LNG expansion, Pivotal’s full network of LNG assets will reach a production capacity of over 470,000 gallons per day and a storage capacity of approximately 9 million gallons at its three facilities in Alabama, Florida, and Pennsylvania.

This LNG will mostly serve customers in the eastern U.S. and Puerto Rico, with some of the JAX LNG committed to reducing international maritime emissions through a long-term LNG supply agreement with a major maritime company for its dual-fueled ships.

As for other Berkshire natural gas and LNG assets, Northern Natural, which is based in Nebraska, not only operates the largest interstate natural gas pipeline system in the United States, as measured by pipeline miles, but also has three underground natural gas storage facilities and two LNG storage peaking units.

And Kern River, which is based in Utah, operates a 1,400 miles interstate natural gas pipeline system travels from supply areas in the Rocky Mountains to consuming markets in Utah, Nevada and California. Kern River transports natural gas for electric and natural gas distribution utilities, major oil and natural gas companies or affiliates of such companies, electric generating companies, energy marketing and trading companies, and financial institutions.

Just a couple of years ago, some analysts were saying that a push towards electrification of homes in order to meet climate change goals would reduce worldwide demand for natural gas and LNG.

Shell, a major LNG producer, thinks otherwise. The company notes that pre-COVID worldwide demand for LNG was at 358 million metric tons in 2019, and according to Shell’s LNG Outlook 2021, “Global LNG demand is expected to reach 700 million tonnes by 2040, according to forecasts, as demand for natural gas continues to grow strongly in Asia and gains further traction in powering hard-to-electrify sectors.”

Once again Berkshire Hathaway finds itself in the right place at the right time, as its natural gas and LNG distribution investments proved prescient.

© 2022 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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What Saudi Arabia’s oil fields are to the fossil fuel era, lithium reserves are to the dawning battery-powered electric vehicle era.

A dying California lake could be the Saudi Arabia of lithium if new extraction methods prove viable, and Berkshire Hathaway could be in position to profit handsomely from the coming boom in the metal.

With the rise of the electric vehicle, global lithium demand is projected to grow tenfold by 2030, as lithium-ion powered EVs move from the fringe to the dominant mode of transportation, eclipsing fossil fuel powered vehicles.

The transition is already underway. California, which has the most car registration in the U.S. with over 15 million, recently announced that it will phase out the sale of all gasoline-powered vehicles by 2035.

With the demand for lithium-ion batteries growing rapidly, the need for raw lithium is increasingly under pressure. As of 2020, 95% of global lithium extraction comes from Australia, Chile, Argentina and China.

However, California may be on the verge of taking its seat at the table.

Key to meeting worldwide lithium demand may be the Salton Sea, a roughly 400 square mile inland sea that was accidentally created in 1905 when high spring flooding on the Colorado River crashed the canal gates leading into the developing Imperial Valley. For the next 18 months the entire volume of the Colorado River rushed downward into the Salton Trough. By the time engineers were finally able to stop the breaching water in 1907, the Salton Sea had been born. Over a hundred years later, the Salton Sea now has a higher salinity than the Pacific Ocean.

The lake has one asset that may turn it from environmental disaster to one of the key assets in the global climate change battle, and that’s an abundance of lithium. Its briny water may contain enough lithium to meet one third of the world’s current lithium demand if it can be economically extracted.

The Salton Sea’s Riches Have Not Gone Unnoticed

A group of investors is hoping to turn the area into a “Lithium Valley” that may join Silicon Valley for economic impact. The goal is to make the Salton Sea area of California a world-wide hub in lithium extraction and battery production. It is a goal already supported by state officials, and Gov. Newsome recently signed a bill to create a “Blue Ribbon Commission on Lithium Extraction in California.”

On October 6, 2020, New Energy Nexus an international non-profit that supports clean energy entrepreneurs, released a report “Building Lithium Valley.” The report notes that the U.S. is only “1% of global lithium supply. But according to the USGS, the U.S. has 8.5% of the world’s lithium resources.”

The report goes on to state that a “Lithium Valley anchored ‘Clean Energy Hub’ focused on attracting battery component, battery cell and electric vehicle manufacturers to Imperial County could supercharge the state’s financial recovery while also promoting the sustainable wellbeing of a county with the highest unemployment rate in the state.”

Among the key companies already involved is Oakland, California-based Lilac Solutions, which is commercializing a new ion exchange technology for lithium extraction from brine resources that it claims is significantly faster, cheaper, and more scalable than existing technology.

The technology was developed by CEO Dave Snydacker, a battery expert and materials engineer focused on bringing lithium extraction into the 21st century.

Ion exchange technology has been in operation for 80+ years in various industries including mineral recovery, and Lilac tailored this technology to be highly selective for lithium achieving recovery rates of about 90%. Lilac states that it has successfully demonstrated the technology at large scale, and with dozens of brine resources from around the world.

Money is already pouring into Lilac to see if they are right. In February 2020, Lilac raised $20 Million in Series A funding that included money from Breakthrough Energy Ventures, a Bill Gates-founded fund with more than $1 billion in committed capital to support bold entrepreneurs building companies that can significantly reduce emissions from agriculture, buildings, electricity, manufacturing, and transportation.

Berkshire Hathaway’s Role in Lithium Extraction

Berkshire Hathaway Energy owns ten geothermal energy plants in the Salton Sea/Imperial Valley area of California, putting it at the heart of a potential lithium boom. The plants sell power to Southern California Edison Company, City of Riverside, Salt River Project, Sacramento Municipal Utility District, Imperial Irrigation District (IID) and Arizona Public Service.

Currently, the wastewater from geothermal energy plants is reinjected into the geothermal reservoirs from which it came. However, this wastewater is rich in lithium and other minerals, including manganese and zinc.

The goal of extracting commercial quantities of lithium from the Salton Sea is already moving forward. The California Energy Commission awarded $6 million to Berkshire Hathaway Energy for a demonstration project to produce battery-grade lithium carbonate.

BHE Renewables, a wholly owned subsidiary of Berkshire Hathaway Energy, is working on modifying its existing geothermal power plants operating in the Salton Sea for lithium extraction. These power plants are operated by another wholly owned subsidiary, CalEnergy, and will serve as the site for BHER’s pre-commercial geothermal brine pre-treatment for the lithium recovery.

BHER is working with AquaMin to scale up its lithium recovery technology to process 100 gallons per minute (gpm) of geothermal brine from the Region facilities to recover lithium chloride and convert it into lithium carbonate, and BHE Renewables currently produces 350MW of its 4,000 MW of renewable power with geothermal generation in Imperial Valley.

There is an estimated 5.5 year timeline until full commercialization, measured from end of Q2 2020. Initial operating plant estimated to be operational after 30 months and reach capacity of 1,000mt in the following year. The initial plant will serve as pilot and example for cash generation to validate full scale plant ideas.

According to the Nexus report, BHER’s resources alone could produce as much as 300,000 metric tons per annum of high-quality, battery-grade lithium carbonate equivalent.

If good luck comes down to being in the right place at the right time, Berkshire Hathaway certainly seems to be in for some very good luck.

© 2020 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell a stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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In mid-November 2015, Berkshire Hathaway Energy’s Australian subsidiary, CalEnergy Resources, drilled a test well in Western Australia for what the company called a “significant gas field.”

The gas field, which is located below the Whicher Range, is estimated to contain four trillion cubic feet of gas-in-place.

CalEnergy is the sole titleholder and operator of the exploration permit EP 408 located approximately 280 kilometers south of Perth, and covers both the Whicher Range and Wonnerup gas fields.

The Long, Very Slow History of the Whicher Range Gas Fields

The gas fields were first discovered in 1968 and 1971, respectively, and are located in ancient sandstone reservoirs nearly four kilometers underground.

The big problem since its discovery has been how to get the gas and not lose your shirt doing it.

According to CalEnergy, the field is a candidate for traditional drilling methods, and hydraulic fracking is not considered a viable option.

In 2016, Peter Youngs, the Managing Director of CalEnergy Resources Group, discussed with MazorsEdge the progress on the development of the gas field, noting that “the field represents a large in place gas resource, its characteristics are challenging and there is much work still remaining to move this resource to a commercially developable status.”

As for the initial test well, Youngs said at the time, “we are encouraged by the flow rates, as seen during the test, but that the critical commercial assessment (of the flow rates) is subject to a period of substantial subsurface data integration work (which is ongoing).

Youngs also doubted that the field could be commercialized by 2017, and that has proven true.

As to when the gas field could start to produce meaningful amounts of natural gas, it still looks to be years away.

CalEnergy recently requested and received, a variation to the permit work program from the Department of Mines and Petroleum (DMP) to undertake reservoir pressure monitoring – this involves data gauges being placed in the Whicher Range 1 (WR-1) and Whicher Range 4 (WR-4) wells.

The company is continuing with reservoir pressure monitoring, and is focused on enhancing their understanding of reservoir behavior.

In the interim, CalEnergy has launched a Care and Maintenance Environment Plan (CMEP) to maintain the current well sites and drilling pads.

Tantalizing Fruit, Just Out of Reach?

For fifty years, the gas fields of the Whicher Range have both held out the promise of enormous economic benefit, and the frustration of inaccessibility.

CalEnergy notes that in the past, “feasibility studies have failed to identify an economic technical strategy for the development of commercial gas production.”

The good news is that as a result of its tests, the company now believes that gas recovery is feasible, and it’s just a matter of when.

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.