Energy, (Geo)Politics & Money - 2024.03.27
Non-partisan, objective & neutral analysis where global developments in energy, business & geopolitics intersect & curated from leading global sources & resources.
Welcome to EPM, where we take our daily look at the interconnected worlds of Energy, (Geo)Politics and Money. Curated from the world’s leading sources of information, we provide you both the information and the objective, neutral commentary that you need to make sense of it all – and beat the market.
In this roundup, we look at:
Russia’s increasing difficulties in getting paid for its crude oil shipments
Chinese President Xi Jinping’s meeting with top business executives from the U.S.
The challenge by China and Russia to US claims regarding a wide area of mineral-rich seabed, made possible by the fact that the US failed to ratify the 1982 United Nations Convention on the Law of the Sea (UNCLOS)
The Japanese government’s plan to collaborate with the private sector in order to develop a next-generation, hydrogen fueled passenger aircraft by 2035
Germany’s experiment with “climate protection contracts”, under which companies in sectors like steel, cement and glass can receive government subsidies to cover additional expenses incurred in using cleaner technologies, compared with conventional processes
Hyundai’s massive ($51 billion) investment in electrification
Ferrari’s partnering with South Korea’s SK On to develop batteries for its future electric supercars
Why the commercialization of solid-state battery technology remains years away, according to the CEO of CATL
Why the current energy transition plans of 10 of Europe's and North America's biggest listed oil and gas companies are not good enough, according to the world's leading investor climate action group Climate Action 100+
General Energy News
US SANCTIONS DELAY PAYMENTS TO RUSSIA FOR ITS OIL
Russian oil firms face delays of up to several months to be paid for crude and fuel as banks in China, Turkey and the United Arab Emirates (UAE) have become more wary of U.S. secondary sanctions, writes Reuters. In the UAE, banks First Abu Dhabi Bank (FAB) and Dubai Islamic Bank (DIB) have suspended several accounts linked to the trading of Russian goods, two sources said. UAE's Mashreq bank, Turkey's Ziraat and Vakifbank and Chinese banks ICBC and Bank of China still process payments but take weeks or months to process them.
OMAN NEW TRANSFER SPOT FOR RUSSIAN CRUDE TO INDIA EXPORTS
Meanwhile, Bloomberg writes, the waters off Oman are emerging as a hot spot for ship-to-ship transfers of Russian oil heading to India. Oman and Fujairah in the United Arab Emirates are common locations for such transfers in the Middle East, while in Asia they’re often done in the waters off Malaysia. Oman now seems to be gaining in popularity as a location for the reloading of Russian barrels – quite possibly because of the banking issues discussed below, EPM notes.
Macroeconomics
CHINESE PRESIDENT MEETS WITH TOP US BIZ EXECS
Chinese President Xi Jinping on Wednesday met top business executives from the U.S., writes Nikkei Asia. Blackstone CEO Stephen Schwarzman, Qualcomm President and CEO Cristiano Amon, MGM Resorts International President and CEO William Hornbuckle and U.S.-China Business Council President Craig Allen were among the executives at the meeting. Xi took a photo with the group before proceeding to a meeting at the Great Hall of the People in Beijing where he told attendees that both China and the U.S. were inseparable. The meeting was a rare occasion, as foreign executives attending usually meet Premier Li Qiang, China's second-in-command whose portfolio includes the economy.
Geopolitics
US CLAIMS TO OFF-SHORE TERRITORY CHALLENGED BY CHINA AND RUSSIA
US claims to a swath of mineral-rich seabed are being challenged by China and Russia, writes the Financial Times. In December said it would extend its jurisdiction over a resource-rich seabed area that makes up its continental shelf – something EPM covered at the time. The extended area is twice the size of California and spans regions that include the Pacific and Atlantic oceans, the Gulf of Mexico and other regions. Chinese and Russian diplomats say the US claim is unacceptable given the US position on the 1982 United Nations Convention on the Law of the Sea (UNCLOS). Washington failed to ratify that treaty, which governs access to resources in international waters. Hundreds of former US government officials and military officers recently wrote to Senate leaders urging the body to ratify UNCLOS as soon as possible.
Energy Transition & Technology News
JAPANESE GOVERNMENT TO COLLABORATE ON NEW EV AIRCRAFT
Japan's government has revealed a plan to collaborate with the private sector to develop a next-generation, preferably hydrogen fueled passenger aircraft, writes Nikkei Asia. The public and private sectors together will invest 5 trillion yen ($33 billion) to debut the airliner by around 2035.
Climate Politics
GERMANY INTRODUCES CLIMATE COST HEDGE FOR INDUSTRIAL SECTOR
Germany has introduced “climate protection contracts” to help companies in sectors like steel, cement and glass cover additional expenses incurred in using cleaner technologies, compared with conventional processes, writes Bloomberg, which calls the scheme an “experiment”. Under the program, applicants present proposals for the amount of support needed, with the bids offering the highest CO2 reductions for lowest price receiving funding. The way the new support system works is tied to Europe’s Emissions Trading System. For example, if a company bids that the cost of decarbonizing steel is €120 per ton, the government will promise to pay the sum minus the price of carbon on the ETS, which currently is hovering around €60 per ton. If in the future the price of pollution goes to €140 per ton, then the company has to pay the government the excess €20 per ton. Once the auction is won, the pricing support is available for 15 years. The first auction round offering up to €4 billion worth of contracts recently launched, and another bidding opportunity with a €19 billion pot will follow this summer. Other industrialized nations with equivalent net zero ambitions will likely be paying close attention to the results.
The Electrification of Transport
SOUTH KOREA INVESTS HEAVILY IN EV AND MOBILITY BUSINESSES
South Korea's Hyundai has said it will invest 68 trillion won ($51 billion) over three years to drive growth in electric vehicles and new mobility business, writes Nikkei Asia. More than half of the investment, or 35.5 trillion won, will be allocated for new research and development infrastructure and assembly lines for electric vehicles. Another 31.1 trillion won will be slated for research and development in electric vehicles, including software-defined vehicles (SDVs) and battery technology. As part of the push in EVs it will hire 80,000 new employees. A majority of the new jobs created will be to promote future business, with 44,000 new staff in electrification, SDVs and carbon neutrality.
FERRARI AND SOUTH KOREA’S SK PARTNER ON BATTERY DEVELOPMENT
Ferrari is partnering with South Korea’s SK On to develop batteries for its future electric supercars, writes Bloomberg. Both companies will share expertise to advance cell technology, now that a memorandum of understanding has been signed. Ferrari plans to unveil its first fully electric car in the fourth quarter of next year and is building a new EV factory in northern Italy that’s expected to be ready in June.
COMMERCIALIZING SOLID STATE BATTERIES A LONG WAY OFF
Solid-state battery for electric cars remain years away from commercialization, with “a lot of showstoppers” blocking its development, says Robin Zeng, founder and chief executive of CATL, in an interview with the Financial Times. The technology could transform electric cars by enabling greater driving range. Japanese carmaker Toyota has trumpeted its progress, pledging to deliver solid-state batteries as early as 2027. But China’s “battery king”, a PhD physicist, questioned whether his Japanese rival was really on the path to near-term commercialisation. “We fully support solid-state, but I have been investing in this for 10 years,” said Zeng. “I watch the development people working on solid-state almost every month, so I know all the progress, and somehow we still have these showstoppers.” One issue is that the lithium in solid state batteries needs to be put under high pressure. A second problem is the expansion of lithium during charging and discharging. This damages the battery and leads to a short lifespan. And there are safety issues, as lithium would react with moisture in the air if a battery broke open during a car accident. Rather than solid-state, Zeng said CATL is targeting sodium-ion batteries and condensed-matter batteries, which use a semi-solid material.
Other
CLIMATE ACTION 100+ SAYS ENERGY TRANSITION PLANS OF LARGEST OIL COMPANIES MISS THE MARK
The current energy transition plans of 10 of Europe's and North America's biggest listed oil and gas companies are not good enough, the world's leading investor climate action group Climate Action 100+ has said, according to Reuters. The assessed companies were ExxonMobil, Shell, Chevron, TotalEnergies, ConocoPhillips, BP, Occidental Petroleum, Eni, Repsol and Suncor Energy. Each was assessed using indicators and sub-indicators under three broad themes - Disclosure, where companies are rewarded for providing information about their activities; Alignment, which tests their climate ambition; and Climate Solutions, which tracks their investments in greener activities. The aim of the assessment was to check alignment with the Paris Climate Accord. Overall, the companies met just 19% of all the NZS metrics. European companies performed the best, led by TotalEnergies, BP and Eni, with North American companies weaker across all three themes. "The inaugural assessment of the Net Zero Standard for Oil and Gas delivers a clear message: while certain companies showcase commendable strides towards robust climate strategy, the overall industry landscape remains alarmingly underprepared for the transition," said Jared Sharp, Project Lead for Net Zero Standards, TPI Centre.