Energy, Politics & Money - 13 February 2023
Independent, objective, and politically neutral analysis of interconnected global developments in the world of energy, geopolitics, and money curated to help you thrive in these chaotic times.
In this roundup, we look at:
Russia’s decision to cut crude oil production by 500,000 barrels per day starting March and the impact it has on crude oil futures
Aramco’s argument that ESG is causing an energy crisis
BP’s defense of its energy transition strategy
ExxonMobil’s quiet walk away from the use of algae to produce biofuels
How Methanol is taking the lead in the race for “alternative shipping fuel”
Saudi Arabia’s ambition to become an electric vehicle manufacturing hub
Net Zero emissions reductions plans of 24 large corporations will result only in a 36% reduction of current emissions
General Energy News
Last Friday, Russia’s Deputy Prime Minister Alexander Novak announced it will cut oil production by 500,000 barrels per day - around 5% of output - in March according to Reuters. Russia is framing this as a political move, linked to its threat of not selling energy to countries that “directly or indirectly adhere to the principles of the price cap”.
But at EPM we note, this could also be the result of Russia not being able to find sufficient customers for its crude oil in the current geopolitical context or that it has insufficient capital to replace production while funding the “special military action” in the Ukraine.
Crude price rose on Friday, following the news, writes CNBC. Brent contracts for April delivery rose 2.24% to settle at $86.39 a barrel while WTI rose 2.13% to settle $79.72 a barrel. But in early trading Monday morning, some of those gains were wiped out due to concerns about slowing global growth writes Bloomberg. Brent for April settlement lost 0.9% to $85.64 a barrel and WTI for March delivery lost 1% to $78.94 a barrel.
Amin Nasser, CEO of Saudi Aramco, said on Sunday that an increased focus on climate was undermining investment in oil and gas to the point where it now posed a threat to the world’s energy security writes to Bloomberg. He told the Saudi Capital Market Forum in Riyadh:
Proponents of the popular energy transition narrative paint a picture of a Utopian world where alternatives are ready to replace oil and gas almost overnight. If ESG-driven policies are implemented with an automatic bias against any and all conventional energy projects, the resulting under investment will have serious implications. For the global economy. For energy affordability. And for energy security.
Energy Transition & Technology News
BP was forced to defend its energy transition strategy, after last week announcing a slower exit from oil and gas, writes the Financial Times. Anja-Isabel Dotzenrath, BP’s executive vice-president for gas and low-carbon energy, said the company continues to be committed to rolling out 50 gigawatts of renewable power by 2030:
I have the support to deploy $30bn of capex to the end of the decade in my business.
ExxonMobil is quietly walking away from its efforts to use algae for the production of biofuels, writes Bloomberg. For well over two decades, it was the company’s most advertised sustainability effort. But ExxonMobil has slashed its support for Viridos, a biotech company based in La Jolla, California, that operated as the oil giant’s key technical partner since 2009. It has also halted funding for a multi-million-dollar algae project at the Colorado School of Mines at the end of last year, after supporting the work for eight years. Another venture with the National Renewable Energy Laboratory is set to end within weeks.
To EPM, this does not come as a surprise. We’ve looked at algae extensively, both in the ExxonMobil’s biotech variant and the many others. It is a wonderful process, but challenged by the fact that it is difficult to scale up to the level where it can deliver fuel volumes that have a meaningful impact – either on CO2 reduction or fuels production. That doesn’t mean we see no future for the technology. Algae is extremely efficient at turning sunlight and carbon dioxide into lipids. These can be processed into biofuels, but there are also a variety of other uses. We don’t think, therefore, the future of algae resides within the Oil & Gas industry.
In the search for a greener fuel for the ocean vessels that keep the world economy moving, methanol is taking the lead, writes the Wall Street Journal. But, that doesn’t mean it will be the future for shipping, as billions of dollars of investments in ships, port infrastructure and fuel-production capacity would be required in the coming years to make it so.
And of course, we at EPM note, technological innovation to make the manufacturing and transportation of the fuel easier, safer and significantly more cost-effective.
The Electrification of Transport
Saudi Arabia is preparing billions to become an electric vehicle manufacturing hub, writes the Financial Times. The aim is to produce 500,000 cars a year by 2030 and US-based Lucid Motors, in which Saudi Arabia acquired a majority stake costing roughly $2 billion, intends to produce about a quarter of that target.
Other
The Net Zero pledges made by some of the world’s largest corporations will reduce their greenhouse gas emissions by just 36%, according to Bloomberg. Carbon Market Watch and the NewClimate Institute looked at 24 of the biggest global companies that have pledged to achieve carbon neutrality and positioned themselves as climate leaders, spread across eight industrial and consumer sectors. The report found these climate strategies lack short term ambition, relying instead on long term targets without fully explaining how they’re defined or how they would be achieved. Overall, the authors found the climate strategies of 15 of the 24 companies to be of low or very low integrity. Just five — H&M Group, Holcim, Stellantis, Maersk, and ThyssenKrupp — commit to de-carbonizing their emissions by at least around 90% by their respective net-zero target years.