Energy, Politics & Money (EPM) - 02 Mar. 2023
Independent, objective, and politically neutral analysis of global developments curated from sources covering the world of energy, geopolitics, and money.
In this roundup, we take a closer look at:
Forecasts that Russia will continue to maintain prewar hydrocarbon production this year
Globally, capital investment in oil and gas projects is down to $310 Billion from $477 the prior year
Saudi Aramco invests in new engine company with Renault and Geely
China continues to grow its intellectual property lead over the rest of the world
Antony Blinken, US Secretary of State, and Sergey Lavrov, Russian Foreign Minister, met briefly at sidelines of the G20 meeting in India
Tesla’s plans – surprisingly thin – on its next steps
Global energy-related emissions of CO2 hit a record high last year
The US nominee for the World Bank to double down on Climate Change
General Energy News
JP Morgan now says it believes Russia will be able to maintain its oil production at pre-war levels of 10.8 mbd (million barrels a day) but will have difficulties getting back to peak pre-COVID volumes of 11.3 mbd, writes Reuters. It expects Indian and Chinese demand to absorb an additional 1 mbd of Russian barrels. EPM notes this is an update to earlier estimates, which said that Russian production would have to go down as the Russians would not have the logistics available to reroute everything to Asia.
Despite record profits last year, oil and gas companies globally invested about $310 billion into capital spending, versus $477 billion in 2014.Had they followed the “drill, baby, drill” approach of the past, they could have invested as much as $580 billion, writes the Financial Times. Meanwhile, investments in clean energy have not risen fast enough. They currently sit at a ratio of 1.5:1 compared to fossil fuels. This needs to increase to 9:1 by 2030 if net zero goals are to be achieved. In this energy transition, therefore, it is not demand that adjusts first, but supply. This can have unintended consequences. If state-owned groups fill the void, global energy supply will become more subject to the control of the world’s petro states, making for an uncomfortable geopolitical situation.
Oil giant Saudi Aramco has agreed to take a minority stake in a new powertrain engine company that French car maker Renault and China's Geely plan to set up jointly, writes Hydrocarbon Processing. The new joint venture is aimed at developing more-efficient gasoline engines and hybrid systems at a time when the focus of much of the automobile industry has been on the capital-intensive transition to purely electric vehicles. The new company would have an annual production capacity of more than 5 million internal combustion, hybrid and plug-in hybrid engines and transmissions per year, the companies said.
Macroeconomics
China has a “stunning lead” in 37 out of 44 critical and emerging technologies, and in some fields all of the world’s top 10 research institutions are based in China, writes Reuters based on a new report by the Australian Strategic Policy Institute (ASPI). The study, funded by the United States State Department, found the United States was often second-ranked, although it led global research in high-performance computing, quantum computing, small satellites and vaccines.
Geopolitics
There are several reasons why China is unlikely to provide significant aid to Russia, writes George Friedman at Geopolitical Futures. The most important is that the Chinese economy could not pay the price of American and European sanctions, or a military blockade of the shipping lanes it depends on. EPM’s perspective is that economic interests, while important, are not the main driver for geostrategic decisions. At least equally important to China is the cost of losing a Russia as a strategic ally (in case the Ukraine War is decisively lost by Russia, triggering a revolt against the Putin regime) or a significant weakening of Russia.
US Secretary of State Antony Blinken and Russian Foreign Minister Sergey Lavrov had a brief encounter on the sidelines of the G20 meeting in India, writes Nikkei Asia. The United States and its European allies urged the Group of 20 nations to keep up pressure on Moscow to end the conflict, now in its second year. Russia hit back, accusing the West of turning work on the G-20 agenda into a "farce" and said Western delegations wanted to shift responsibility for their economic failures onto Moscow.
Energy Transition & Technology News
At Wednesday’s investor day, Tesla shared little new information about forthcoming car models. But, writes Bloomberg, Elon Musk and his executive team did offer a tidbit of information about a different technology of interest to Tesla — heat pumps. Heat pumps are already installed in Tesla’s Model Y SUV and in newer versions of the company’s other models. The potential upside for Tesla is enormous. Locking in heat pump customers would bolster the company’s push for its own “walled garden,” in which a home’s entirely-Tesla technology — electric car, solar panels, Powerwall battery and heat pump — could stay seamlessly connected.
Climate Politics
Global energy-related emissions of carbon dioxide hit a record high last year, the International Energy Agency (IEA) said according to Reuters. Global emissions from energy rose by 0.9% in 2022 to a record 36.8 billion tonnes. Carbon dioxide (CO2) emissions from coal grew by 1.6% last year with many countries turning to the more polluting fuel after Russia’s invasion of Ukraine and a reduction in Russian gas supply to Europe sparked record high gas prices. CO2 emissions from oil rose by 2.5% but remained below pre-pandemic levels the report said. This was partly offset, however, by a rise in renewable power sources like wind and solar, energy efficiency measures and electric vehicles. These avoided an additional 550 million tonnes of CO2 emissions last year, the IEA said.
The White House’s nominee to lead the World Bank said there’s sufficient scientific evidence that burning fossil fuels contributes to climate change, writes Bloomberg. Banga said:
Climate change is not just greenhouse gases. It’s also the quality of water development. It’s soil, it’s biodiversity, it’s carbon capture. There’s a lot of things involved in those two simple words of climate change, and I think we need to focus attention on them for sure.
The background to all this is that the World Bank has been urged to tackle global and transnational issues, particularly climate change, and expand its so-called capital adequacy, allowing it to share more funds and take on more risk, all while continuing its traditional role of poverty reduction and project finance.