In this roundup, we look at:
The decision by Saudi Arabia and Russia to extend their unilateral additional voluntary cuts in crude oil supply until the end of the year; and how this decision affected the oil price
The Pentagon plan to build a fleet of AI-based fleet of drones to counter China
ADNOC’s mistaken belief that doing a new, 1.5 million tons per annum, CCS project for EOR purposes will be appreciated as a positive step forward by the general public
The G20 compromise solution regarding energy policy, under which the ambition will be to triple renewable energy capacity by 2030, while also supporting CCS technology that can sustain the use of fossil fuels
The inaugural African Climate Summit, and the resulting proposal by African leaders to establish new global taxes to fund climate change action, and debt relief to help them manage climate change induced disasters
The misguided belief among Europe’s major carmakers that e-fuels will enable them to sell internal combustion engine powered cars that can compete with EVs
The impact of a series of scandals on the voluntary carbon market (VCM)
The S&P Global Billion-Dollar Club ranking of the top chemical companies in the world by revenue
General Energy News
Saudi Arabia and Russia have announced that they will extend their unilateral additional voluntary cuts in crude oil supply until the end of the year, writes Energy Intelligence. The announcements mean that Saudi Arabia will extend an additional cut of 1 million barrels per day, while Russia will extend a cut in exports of 300,000 b/d. The additional voluntary cuts come on top of OPEC-plus cuts of more than 3.6 million b/d implemented in November of 2022 and May of 2023. Energy Intelligence expects that the extension of the Saudis' additional voluntary cut in particular will help drive an average reduction in global inventories of 900,000 b/d in the second half of this year.
Oil prices rose sharply following the news, with Brent rising above $90 a barrel for the first time since November, writes Reuters. Today, Wednesday, after traders had digested the information, Brent and WTI futures declined again, with Brent going below $90 a barrel, writes Reuters. It quotes an analyst as saying, "The reason the market gave back half of the gains and is listless this morning, is because within the language of the joint announcement there is a caveat that these cuts will be reviewed on a monthly basis."
Geopolitics
The Pentagon is considering the development of a vast network of AI-powered technology, drones and autonomous systems within the next two years to counter threats from China and other adversaries, writes the Wall Street Journal. The plan is to spend hundreds of millions of dollars to develop an array of thousands of air-, land- and sea-based artificial-intelligence systems that are intended to be “small, smart, cheap.” She added, “Imagine distributed pods of self-propelled [autonomous] systems afloat, powered by the sun and other virtually limitless resources, packed with sensors aplenty, enough to give us new, reliable sources of information in near-real-time.” Other capabilities that are being considered are autonomous ground-based systems to provide logistics, space-based autonomous systems that would be so numerous they would be difficult for an adversary to destroy and autonomous systems that could defend against incoming missiles. Autonomous systems use artificial intelligence to detect and engage enemy targets, and can include self-piloting air- and sea-based drones.
Energy Transition & Technology News
ADNOC is developing a project that will capture 1.5 million tons a year of carbon dioxide emissions from its Habshan natural gas processing facility, writes Bloomberg. The carbon dioxide gas that’s captured will be pumped into an oil field where it will be used to boost output in a process known as enhanced oil recovery. We at EPM remain surprised that there are very senior oil and gas leaders still out there who believe that financing CCS for EOR will earn them “brownie points” from the general public. Instead, we predict, they should expect a wave of “greenwashing!” accusations to come their way.
Scientists estimate that billions of tons of manganese, iron, magnesium, titanium, potassium, cobalt and nickel can be found in ocean crusts and nodules, with some arguing that certain minerals are more abundant on the seafloor than on land. As a consequence, writes Nikkei Asia, efforts to regulate deep sea mining are likely to become geopolitical.
Climate Politics
The G20 has found a compromise solution regarding energy policy. It has agreed an ambition to triple renewable energy capacity by 2030, while also offering support to CCS technology that can sustain the use of fossil fuels, writes Bloomberg. More green washing!
The first African Climate Summit was a star-studded event, writes the Financial Times. The list of attendees included more than 20 African presidents, including Rwanda’s Paul Kagame and Ghana’s Nana Akufo-Addo. Also in attendance were U.S. climate envoy John Kerry, European Commission president Ursula von der Leyen and UN secretary-general António Guterres
As to the outcome, African leaders are proposing new global taxes to fund climate change action, writes Reuters. The proposal is documented in the “Nairobi Declaration”, the outcome of a three-day Africa Climate Summit in Kenya. The declaration will form the basis of their negotiating position at November's COP28 summit. The declaration also calls for the tenor of sovereign loans to be extended, debt pauses when climate disasters strike and a 10-year grace period on interest payments. Those measures would go some way to allowing some of the world’s most vulnerable countries to bolster their climate resilience and develop their economies, writes Bloomberg.
Speaking at the Sarawak Renewable Energy Forum in Malaysia, Christiana Figueres, a climate advocate and former executive secretary of the UN Framework Convention on Climate Change, was quite critical of the United Nations Conference of Parties (COP) summits, calling them a “circus”. The majority of the 90,000 people scheduled to attend COP28 summit in Dubai at the end of November are not government delegates, Figueres said, but key individuals from private and public sectors who need to “execute” the Paris accord. “Any business plan, if it just stays on the shelf, then it is good for nothing. The Paris Agreement is good for nothing if it is not financed and executed”, writes Bloomberg.
The Electrification of Transport
Europe’s main carmakers believe e-fuels will enable them to continue to sell cars with internal combustion engines, writes the Financial Times. Speaking on the sidelines of the biennial Munich motor show, executives from BMW, Renault and Mercedes-Benz said e-fuels, which are not yet commercially viable, were a pragmatic solution in their quest to cut emissions. EPM is baffled by this level of hope masquerading as vision. The reality is that EVs are becoming cheaper as battery technology improves and the industry scales up, while the few barrels per day of e-fuels currently available cost a multiple of the conventional fuels – and they will always be more expensive. Simple economics make clear, therefore, that e-fuels will never be able to compete on costs with electrification. The fact that Europe’s car companies still discuss nonsense such as this, means the mindset of denial that has left them significantly behind in the electrification of transport remains alive and well among them. And EPM says, it is likely to be the death of them. Clearly, if these executives read our updates, they would know China is focused on taking their market share away with better and cheaper products.
Other
The voluntary carbon market (VCM) has been gripped by a steady stream of scandals, leading to wild price swings and even collapsing valuations, writes Bloomberg based on a Morgan Stanley report. Futures prices have fallen between 38% and 77% so far this year “amidst significant negative press of the market,” the analysts wrote. “Efforts to improve the integrity of the Voluntary Carbon Markets come after months of negative headlines and a 90% selloff in futures,” the Morgan Stanley analysts wrote. “We think these developments are a material tipping point for the market with the reputational risk now shared, but do not expect prices to reflect these changes till 2024.” For that reason, they expect “the market will be in a wait-and see mode between now and 2024.”
S&P Global has published its annual Billion-Dollar Club, a ranking of the top chemical companies in the world by revenue. In 2022, BASF SE again topped the list, for the seventh time in the past 10 years. China National Chemical Corp. moved up to third place as the Chinese economy reopened in fits and starts. Sinopec, Formosa Plastics Corp., Dow, LyondellBasell Industries NV, Saudi Basic Industries Corp., Exxon Mobil Corp. and INEOS Group Ltd. all reappeared in the top 10. Nutrien Ltd. moved into the number 10 spot, reflecting a year in which fertilizer prices soared in response to Russia’s invasion of Ukraine and rebounding demand in agriculture.