Energy, Politics & Money - 05 April 2023
Independent, objective, and politically neutral analysis of global developments curated from sources covering the world of energy, geopolitics, and investment.
In this roundup, EPM takes a closer look at:
TotalEnergies’ agreement with the Iraqi government on its long-delayed $27 billion energy project
Jamie Dimon’s warning that the (SVB induced) financial crisis is not yet over and its effects will be felt for years
Finland’s entry into NATO
An update on the US efforts to block China off from advanced semiconductors, and China’s response
ExxonMobil’s belief that by 2050, CCUS, hydrogen and biofuels will be a business as large as conventional oil & gas
Europe as the most ambitious test bed for new technologies for aviation decarbonization
General Energy News
Crude Oil Stabilizes
Oil prices stabilized during early trading on Wednesday. As the OPEC+ cut is now firmly priced in, focus is shifting to other drivers of global supply and demand, primarily the economic outlook. Brent crude futures are now at $85.16 per barrel and WTI at $80.83 per barrel.
TotalEnergies - Developments in Iraq
TotalEnergies has confirmed it has reached an agreement with the Iraqi government on a long-delayed $27 billion energy project, writes Reuters. The deal was signed in 2021 for TotalEnergies to build four oil, gas and renewables projects with an initial investment of $10 billion in southern Iraq over 25 years. The Iraqi government has now agreed to take a smaller than initially demanded stake in the project of 30%. TotalEnergies will own 45%, with QatarEnergy holding the remaining 25%. The Gas Growth Integrated Project aims to improve the country’s electricity supply, including by recovering flared gas on three oil fields to supply power generation plants. TotalEnergies says it will in addition develop a 1 GW solar power plant to supply electricity to the Basrah regional grid, inviting Saudi company ACWA Power to join the project.
Macroeconomics
Banking turmoil - not over yet
The financial turmoil that led to the downfall of Silicon Valley Bank in the US and Credit Suisse in Europe is not yet over and its effects will be felt for years, warned Jamie Dimon, boss of America’s biggest bank JP Morgan according to The Guardian. Echoing what we at EPM have also said regarding the likely fall out of the crisis, Dimon warned banks are now more likely to show caution when approving new lending for businesses and households, with consequences for an economy already struggling with rate increases.
Geopolitics
Finland Joins NATO
Finland formally joined the NATO military alliance on Tuesday, writes Nikkei Asia. The Nordic country’s membership doubles Russia’s border with NATO, as Finland’s border with Russia stretches 1,340-kilometers (830-miles). Russia warned it would be forced to take “retaliatory measures” to address what it called security threats created by Finland’s membership. It had also warned it would bolster forces near Finland if NATO sends any additional troops or equipment to what is its 31st member country.
Micro chip war - China’s counter attack
The author of “Chip War: The Fight for the World’s Most Critical Technology”, Chris Miller, provides an update on the US efforts to block China off from advanced semiconductors in Nikkei Asia. When the US began its efforts to form an international coalition in this regard, many wondered whether they would be able to pull it off, he says. Six months later, the chip controls coalition is looking unexpectedly durable. Though business is not happy about the controls, the security apparatus in each key country involved is supportive. And, he says, even China looks to have come to terms with the new restrictions, as Beijing has not retaliated.
What China has done in response, is take the matter to the WTO, writes Reuters. Chinese representatives told a WTO meeting this week that Japan, the Netherlands and the United States should report their plans and subsequent measures to the body, which it urged to step up supervision on the matter. It is of the opinion the move of the three nations in alignment to curb chip exports to China “violates the fairness and transparency principles of WTO”. The US has previously said its actions relate to national security grounds and should not be subject to review by the WTO.
Energy Transition & Technology News
ExxonMobil places its bets on a low carbon future
ExxonMobil believes its Low Carbon business has the potential to generate hundreds of billions of dollars in revenue and outperform the company’s traditional oil and gas as soon as a decade from now, writes Reuters. By 2050 it believes carbon capture, hydrogen and biofuels could be worth $6.5 trillion globally, equivalent to the traditional oil and gas business. The company notes, however, that how quickly this vision becomes a reality will depend on regulatory and policy support for carbon pricing.
EPM’s perspective? Why then, did CEO Darren Woods stubbornly resist development of an energy transition for the company? Why are they placing their bets on biofuels? We believe this will remain a niche energy source simply because the feedstock for this segment is limited. So, does Exxon’s strategy hinge on hydrogen and CCUS? As for hydrogen, EPM believes, for the most part, its prospects exist in “hype” territory, meaning its actual market share by 2050 will likely to be significantly smaller than what is commonly and optimistically assumed. Therefore, ExxonMobil’s Low Carbon business growth must come from CCUS. While we believe there is room for “carbon management as a service”, we refuse to believe this business will ever become anything of the size ExxonMobil predicts – simply because all that carbon management is a cost to the global economy, and it can simply not afford to spend 30 – 50% more for energy – government incentives can kickstart it, but no government can afford to subsidize industries in perpetuity. In other words, we believe ExxonMobil’s outlook is far too rosy.
European aviation and efforts to decarbonize
Europe - home to Airbus, engine makers, such as Safran and Rolls-Royce, as well as a host of aviation startups - is emerging as the most ambitious test bed for new technologies for aviation decarbonization writes Bloomberg.
The effort is fraught with technical and economic hurdles, not least of which are the unbending laws of physics. Airbus is betting that planes powered by hydrogen could be a solution for zero-emissions flying. Startups such as Swedish hybrid-electric plane company Heart Aerospace are working on smaller battery-powered planes. Companies such as Finland’s Neste have promised to ramp up production of sustainable aviation fluid (SAF) as demand grows. It’s also testing synthetic jet fuels manufactured by combining captured carbon with (green) hydrogen extracted from water through renewable-powered electrolysis
Extracting Rare Earth Mineral from Mining Waste
Reuters looks at the push to extract rare earth minerals from mining waste. A key element to making this possible is technology developed to separate the rare earths.
The Electrification of Transport
Developments in New EV Battery Technology
A new generation of electric vehicle (EV) batteries that hold more energy, achieve longer driving range and charge more quickly should begin reaching customers by mid-decade, powered by new silicon-based electrodes that are slated to go into production next year, writes Reuters. Two startup companies, Group14 Technologies and Sila Nanotechnologies, are focused on new applications for silicon, an abundant element that is being developed as a supplement or replacement for graphite in battery anodes. Backed by hundreds of millions of investment from automotive, battery petrochemicals and technology companies, both are working to open manufacturing plants in 2023 and 2024.