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P66, Marathon RD conversions clear California hurdle

  • Market: Biofuels, Hydrogen, Oil products
  • 04/05/22

Northern California regulators cleared Phillips 66 and Marathon Petroleum to proceed with converting their petroleum refineries into the two largest US renewable diesel (RD) production facilities, dismissing appeals from environmental campaigners seeking to slow the projects.

The Contra Costa County Board of Supervisors yesterday voted unanimously to authorize land use permits allowing Phillips 66 to convert its 120,000 b/d Rodeo refinery near San Francisco into a 67,000 b/d renewable diesel facility. The regulators also unanimously approved a permit allowing Marathon Petroleum to convert its idled Martinez refinery into a 48,000 b/d renewable diesel facility by 2023.

Environmental justice groups the Natural Resources Defense Council and Communities for a Better Environment earlier this year appealed to the Contra Costa County Board of Supervisors to send the projects' environmental impact reports back to the county's planning commission for more scrutiny.

Environmental campaigners in California have persisted in calling for regulators to impose stricter requirements on the renewable diesel conversions, citing concerns over local community impacts, renewable fuel production hazards and deforestation concerns associated with the harvesting of soybeans, a key feedstock.

But state and county officials have continued to support the companies' visions for the projects, which would create the largest two US renewable diesel refineries within a 20-mile stretch just east of the San Francisco Bay, with Phillips 66 laying claim to the largest such facility in the world. In addition to recognizing renewable diesel's role in reducing hard-to-abate emissions from long-haul trucking, supervisors suggested that stopping local projects would do little to slow the growth of renewable diesel production.

"The fact of the matter is that whether if we approve these projects here in Contra Costa or not, these fuels are going to be manufactured somewhere," supervisor John Gioia said today during a hearing on the appeal against the Phillips 66 Rodeo project. "Our action here approving or denying is not going to stop the manufacture of these fuels."

Renewable diesel production in the US is forecast to increase by 75pc this year and another 25pc next year as planned new capacity comes online, according to the Energy Information Administration (EIA).

Authorization of the land use permit concludes the required environmental review behind the Martinez project, but a few more permits are forthcoming before groundbreaking, Marathon Petroleum said. The Phillips 66 decision paves the way for a final investment decision on Rodeo "in the coming weeks," the company told Argus.

Full production in 2023, 2024

Both the Rodeo and Martinez projects will repurpose existing crude oil refining units to turn soybean oil, tallow and other feedstocks into renewable diesel eligible for federal and state renewable fuel credits.

Marathon hopes to start up production of renewable diesel at Martinez by the second half of this year, with full rates expected in 2023. The company has partnered in the project with Finnish biofuels producer Neste, which will provide $1bn toward the $1.2bn project through a proposed 50-50 joint venture. The joint venture deal should close now that Marathon has secured the land use permit, US bank Cowen analyst Jason Gabelman said.

Phillips 66 has chosen to go it alone on its project for now, with chief executive Greg Garland saying on 29 April that the company "does not really need the expertise that others might need" given its fuels marketing business and forays into renewable fuels production at its 230,000 b/d Humber refinery in Killingholme, UK.

Phillips 66 expects Rodeo to hit full production rates in 2024. The company last year took a minority stake in Shell Rock Soy Processing in Iowa, through an agreement granting it 100pc ownership of the processing plant's 4,000 b/d soybean oil output.


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04/11/24

US railroad-labor contract talks heat up

US railroad-labor contract talks heat up

Washington, 4 November (Argus) — Negotiations to amend US rail labor contracts are becoming increasingly complicated as railroads split on negotiating tactics, potentially stalling operations at some carriers. The multiple negotiating pathways are reigniting fears of 2022, when some unions agreed to new contracts and others were on the verge of striking before President Joe Biden ordered them back to work . Shippers feared freight delays if strikes occurred. This round, two railroads are independently negotiating with unions. Most of the Class I railroads have traditionally used the National Carriers' Conference Committee to jointly negotiate contracts with the nation's largest labor unions. Eastern railroad CSX has already reached agreements with labor unions representing 17 job categories, which combined represent nearly 60pc of its unionized workforce. "This is the right approach for CSX," chief executive Joe Hinrichs said last month. Getting the national agreements on wages and benefits done will then let CSX work with employees on efficiency, safety and other issues, he said. Western carrier Union Pacific is taking a similar path. "We look forward to negotiating a deal that improves operating efficiency, helps provide the service we sold to our customers" and enables the railroad to thrive, it said. Some talks may be tough. The Brotherhood of Locomotive Engineers and Trainmen (BLET) and Union Pacific are in court over their most recent agreement. But BLET is meeting with Union Pacific chief executive Jim Vena next week, and with CSX officials the following week. Traditional group negotiation is also proceeding. BNSF, Norfolk Southern and the US arm of Canadian National last week initiated talks under the National Carriers' Conference Committee to amend existing contracts with 12 unions. Under the Railway Labor Act, rail labor contracts do not expire, a regulation designed to keep freight moving. But if railroads and unions again go months without reaching agreements, freight movements will again be at risk. By Abby Caplan Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Trump unlikely to fully end US clean energy policies


04/11/24
News
04/11/24

Trump unlikely to fully end US clean energy policies

Houston, 4 November (Argus) — Although former US president Donald Trump has promised to end climate policies enacted during the administration of President Joe Biden, the political complications of reversing course make a full change of direction unlikely should Trump return to the White House. Trump has frequently criticized Inflation Reduction Act (IRA), promising to terminate the " Green New Scam " and rescind all unspent funds in the Biden administration's climate policy suite, if he is elected to a second term. But fulfilling that pledge may be difficult for many reasons, not least of which is whether Republicans have control of both chambers of Congress after Tuesday's election, including the unlikely outcome of a 60-seat majority needed to bypass a Senate filibuster. Beyond the math, Republican districts are benefiting from IRA funding, with some lawmakers from Trump's party already opposing the turmoil that could arise from an about-face on tax policy. "There's no way they're going to be able to replace and repeal the IRA, in large part because so many of the dollars are flowing to [Republican] states," said David Shepheard, a partner at consultant Baringa who specializes in energy and resources. "I think the pieces of the IRA that are most at risk are the [electric vehicle] tax credits, potentially some of the stimulative pieces around offshore wind." The IRA established a host of federal incentives to support clean electricity growth and the associated domestic supply chain. Those include technology-agnostic production and investment tax credits for electricity generators based on their emissions intensities. But the law went well beyond the power sector and also established credits for hydrogen production, electric vehicles and the manufacture of components needed by clean electricity systems. Project developers are counting on a policy trajectory that does not match Trump's rhetoric, which would allow some incentives to stay on the books. Companies expect market forces, such as corporate demand, and state mandates to continue to drive growth for solar and onshore wind and energy storage, rather than national politics. But there is more trepidation around offshore wind, a less mature sector for which the federal government is effectively the landlord for project sites. "There is no doubt that the trajectory of the US offshore wind industry will be impacted by the November election," Liz Burdock, chief executive of offshore wind industry group Oceantic Network, said. "Its outcome will influence how we maintain our momentum." Uncertainty around the US presidential election has dampened private investment in the sector this year, according to Oceantic. At the same time, companies say the industry has come a long way since 2016, with a handful of projects now operating, while recent macroeconomic challenges are subsiding. Furthermore, demand for offshore wind would continue at the state level, and these factors could make the industry more resilient to headwinds. Executive decisions Trump still could use the executive branch to "stonewall" sectors helped by the IRA in the absence of a repeal, including by influence the timing or distribution of IRA funds, according to Shepheard. He could shift regulators' priorities to new oil and gas development, which, along with other actions, could make resources such as combined-cycle natural gas plants more attractive than renewables. "The extent that renewables and other cleaner energy assets are competing with gas, that'll be the big change from a Trump administration," Shepheard said. At the same time, funding for onshore wind and solar is "relatively safe", and tax credits for hydrogen and carbon capture are on comparably firm ground because of support from the oil and gas industry, Shepheard said. Some companies have expressed cautious optimism that some elements of the IRA, such as the advanced manufacturing tax credit, will survive. The incentive is not only important for the solar supply chain but also offshore wind, as state-level solicitations often require developers to invest in local manufacturing. Republican states in the US southeast have already benefited from new factories springing up on the back of the credits. For example, Enel chose Oklahoma for a new new module plant , First Solar located a factory in Alabama and Qcells has expanded production in Georgia. Moreover, removing that carrot could leave the US solar industry reliant on Chinese companies, which could run afoul of Trump's protectionist trade instincts. Trump's campaign did not respond to multiple requests to elaborate on his policy plans. By Patrick Zemanek Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Canada advances oil and gas GHG cap


04/11/24
News
04/11/24

Canada advances oil and gas GHG cap

Houston, 4 November (Argus) — Canada is proposing to use a cap-and-trade system to reduce greenhouse gas (GHG) emissions from its oil and gas sector, a long-promised but politically contentious move. The proposed program aims to reduce emissions from the sector by 35pc, compared to 2019 levels, by 2030-32, according to a draft rule published by Environment and Climate Change Canada (ECCC) on Monday. It would cover upstream production activities, both onshore and offshore, including for oil, natural gas and liquified natural gas. After an initial four-year phase-in over 2026-29, entities would then need to meet their emissions obligations over the first 2030-2032 compliance period. While all operators must report emissions, only those producing more than 365,000 b/yr of oil equivalent, equal roughly to 99pc of upstream emissions, would be covered by the trading program. Covered entities would receive free allowance allocations, which would decline in line with their emissions cap. Companies could also buy allowances on the secondary market if needed, use carbon offsets or contribute funds to a decarbonization program. The first three-year compliance period of 2030-31, would be set at 27pc below emissions reported for 2026, which ECCC said would be equivalent to the 35pc target. The federal program will not link with the California-Quebec joint carbon market, known as the Western Climate Initiative, regulators said. ECCC officials stressed that the resulting program would cap emissions, not production, for Canadian oil producers, pushing back at a common criticism from opponents. The federal move will keep the industry accountable to its own promise of net-zero by 2050 and result in a greener and more competitive industry, said Canada Natural Resources Minister Jonathan Wilkinson. "As the world moves to reduce emissions generated by the production and combustion of fossil fuels, oil and gas extracted with the lowest production of emissions will have value in the world," Wilkinson said. But Alberta premier Danielle Smith claimed on Monday that the proposed program violates Canada's constitution. Provinces have exclusive authority over non-renewable natural resource development and the proposal ignores ongoing projects in the province, such as the Pathways Alliance, she said. Canadian Natural Resources, Cenovus, ConocoPhillips Canada, Imperial, MEG Energy and Suncor Energy are involved in the project. The program is a cap on production and will cost the province "anywhere from C$3bn-$7bn ($2.1-5bn)/yr" in absent royalty payments because of a loss of 1mn b/d in production, Smith said, promising future legal challenges against the federal government. "The only way to achieve these unrealistic targets is to shut in our production, I know it, they know it. We are calling them out on it, and they have to stop it," she said. Canada, a major net exporter of oil, has committed to reducing emissions by 40-45pc, compared to 2005 levels, by 2030 and net-zero by 2050. But emissions from the country's oil and gas sector remain an obstacle to meeting those goals. The sector accounts for 31pc, or 217mn metric tonnes, of the country's emissions in 2022 , according to the most recent federal data. Emissions from this sector increased by 83pc from 1990 to 2022. Over the past year Canada's federal government has focused on competitive climate change-related policies, from rolling out investment tax credits for decarbonization technologies to enforcement of the government's new Clean Fuel Regulations. But the road for the Liberal Party-led government to meet the climate goals remains a rocky one ahead of a federal election that must take place no later than October 2025. In September, the Conservative Party, led by Pierre Poilievre, attempted a no confidence measure on prime minister Justin Trudeau's government, fed by discontent around the federal carbon tax. While the motion failed, it highlights the balancing act for the Liberal Party ahead of the election. Trudeau has resisted calls from within his party to cede the field as his popularity waned, to the benefit of Poilievre. ECCC plans to request public comment on the proposal through 8 January 2025 and estimates it will finalize the regulations next year. By Denise Cathey Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Mexico GDP outlook dims in October survey


04/11/24
News
04/11/24

Mexico GDP outlook dims in October survey

Mexico City, 4 November (Argus) — Private-sector analysts have again lowered their projections for Mexico's gross domestic product (GDP) growth this year, with minimal changes in inflation expectations, the central bank said. For a seventh consecutive month, median GDP growth forecasts for 2024 have dropped in the central bank's monthly survey of private sector analysts. In the latest survey conducted in late October, analysts revised the full-year 2024 growth estimate to 1.4pc, down from 1.46pc the previous month. The 2025 forecast also dipped slightly, to 1.17pc from 1.2pc. The latest revisions are relatively minor compared to the slides recorded in preceding surveys, suggesting negativity in the outlook for Mexico's economy may be moderating. This aligns with the national statistics agency Inegi's preliminary report of 1.5pc annualized GDP growth in the third quarter, surpassing the 1.3pc consensus forecast by Mexican bank Banorte. Inflation projections for the end of 2024 inched down to an annualized 4.44pc from 4.45pc, while 2025 estimate held unchanged at 3.8pc. September saw a second consecutive month of declining inflation, with the CPI falling to 4.58pc in September from 4.99pc in August. The survey maintained the year-end forecast for the central bank's target interest rate at 10pc, down from the current 10.5pc. This implies analysts expect two 25-basis-point cuts to the target rate, most likely at the next meetings on 14 November and 19 December. The 2025 target rate forecast held steady at 8pc, with analysts anticipating continued rate reductions into next year. The outlook for the peso remains subdued, following political shifts in June's elections that reduced opposition to the ruling Morena party. The median year-end exchange rate forecast weakened to Ps19.8 to the US dollar from Ps19.66/$1 in the previous survey. The peso was trading weaker at Ps20.4/$1 on Monday, reflecting temporary uncertainty tied to the US election. Analysts remain wary of Mexico's political environment, especially after Morena and its allies pushed through controversial constitutional reforms in recent months. In the survey, 55pc of analysts cited governance issues as the primary obstacle to growth, with 19pc pointing to political uncertainty, 16pc to security concerns and 13pc to deficiencies in the rule of law. By James Young Mexican central bank monthly survey Column header left October September Headline inflation (%) 2024 4.45 4.44 2025 3.80 3.80 GDP growth (%) 2024 1.40 1.46 2025 1.17 1.20 MXN/USD exchange rate* 2024 19.80 19.66 2025 20.00 19.81 Banxico reference rate (%) 2024 10.00 10.00 2025 8.00 8.00 Survey results are median estimates of private sector analysts surveyed by Banco de Mexico from 17-30 October. *Exchange rates are forecast for the end of respective year. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Oil use still flat to 2030 in TotalEnergies scenarios


04/11/24
News
04/11/24

Oil use still flat to 2030 in TotalEnergies scenarios

Edinburgh, 4 November (Argus) — TotalEnergies continues to see oil demand plateauing until 2030, and then to decrease slower than natural field decline even in a scenario limiting global warming below 2°C. In its annual energy outlook released today, TotalEnergies updated two different scenarios for energy demand to 2050. The 'Momentum' scenario assumes countries with 2050 net zero targets reach their goals and China hits its 2060 target, with low carbon energy meeting half of developing countries' needs. It has temperature rising by 2.2-2.3°C by 2100, compared with 2.1-2.2°C in the same timeframe last year. The Paris climate agreement seeks to limit global warming to "well below" 2°C above the pre-industrial average and preferably to 1.5°C. "In this scenario, fossil fuels still cover half of the growth in energy demand in the Global South, due to insufficient low-carbon investment," TotalEnergies said. The 'Rupture' scenario assumes global co-operation supports net-zero development in India and developing countries, with energy demand growth met by low-carbon energies and efficiency gains. It has temperature rising by 1.7-1.8°C in 2100, unchanged from last year. "Beyond 2040, all decarbonisation levers are applied globally, in particular the deployment of new energies and carbon capture, use and storage (CCUS)," TotalEnergies said. TotalEnergies still sees oil demand plateauing until 2030 in Momentum and Rupture, reaching around 70mn b/d in the former and 44mn b/d in the latter in 2050. This compares with 63mn b/d in the Momentum scenario and 41mn b/d in the Rupture scenario by 2050 in last year's report. Around 25pc of oil demand stems from the petrochemical sector in 2025 in the Rupture scenario, according to the firm. Oil demand starts decreasing around 2035 in Momentum, but slower than the 4-5pc natural decline of existing fields, requiring new developments. It decreases faster in Rupture — by 3.9pc per year over 2030-50 — but still more slowly than natural decline, the firm said. In the Rupture scenario, the aviation and shipping sector need sustainable liquid fuel supply to rise four-fold compared with today. But a higher EV penetration rate in this scenario reduces biofuels requirements for road transportation, freeing up more supply for aviation and shipping, according to the firm. By Caroline Varin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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