CCUS and nuclear plans confirmed in UK budget
UK finance minister Jeremy Hunt announced Wednesday a raft of measures that his government says are designed to boost resilience to future energy price shocks, including increased investment in carbon capture schemes, support for new nuclear plants and an extension of energy efficiency programmes. But the government's controversial windfall tax on offshore oil and gas profits did not get a mention in today's budget statement.
As anticipated, the UK finance minister announced plans to further develop the UK's carbon, capture, utilisation and storage (CCUS) industry. "I am allocating up to £20bn ($24bn) of support for the early development of CCUS, starting with projects from our east coast to Merseyside to north Wales, paving the way for CCUS everywhere across the UK as we approach 2050," Hunt said, adding that this will support up to 50,000 jobs and attract private-sector investment. The government's existing target to capture 20mn-30mn t/yr of CO2 by 2030 remains intact, he said.
The planned investment marks a sharp rise from the government's previous commitment of £1bn for CCUS funding, although some businesses have pledged more. The CCUS projects selected "will also receive funding while operating through their contract length", which will last around 10-15 years depending on the project, the finance ministry told Argus today. "This funding will help support the construction and operation of this vital CCUS technology across a number of industrial projects. It is not a specific payment for capturing carbon but an envelope of funding covering support through capital grants, contracts for difference and other sector specific business model contracts," the ministry added.
The £20bn of funding will be spread out over 20 years, according to UK energy minister Grant Shapps, while an energy ministry official added that it is not possible to know the exact funding profile for CCUS projects as this is still under negotiation. A shortlist of projects for the first phase of CCUS deployment will be announced this month, while other projects will be able to "enter a selection process for Track 1 expansion launching this year", the government said. The government will also select two additional CCUS clusters to add to the HyNet and East Coast clusters, which were selected as the UK's first two CCUS projects in October 2021.
Among the other energy-related announcements in today's budget was the launch of what the government is calling the "Great British Nuclear" initiative. It is designed to "bring down costs and provide opportunities across the nuclear supply chain to help provide up to one-quarter of our electricity by 2050", Hunt said. He also announced the launch of the UK's first competition for small modular reactors.
Road fuel excise duty rates are to be kept at current levels for another 12 months through the extension of a temporary 5 pence/litre cut introduced last year. Meanwhile, the UK's Climate Change Agreement scheme, which gives eligible businesses tax relief on energy efficiency measures, is to be extended by two years. And Hunt also confirmed that the government's Energy Price Guarantee, which capped typical yearly household energy bills to £2,500, will be kept in place for an additional three months until the end of June.
Critical thinking
Responding to the budget, environmental activist group Greenpeace was critical of what it said was "the stranglehold [that] fossil fuel and nuclear lobbies have" on the government.
"Squandering taxpayers' money on nuclear reactors that don't even exist yet and fanciful carbon capture is irresponsible, and does nothing to reduce our emissions now. Committing to £20bn over 20 years is frankly pathetic compared to the green growth investments being made in the US, EU and China," a Greenpeace spokesperson said. "The government must instead prioritise renewables, invest in a smarter grid, and insulate people's homes at the scale we need to keep us warm, save money on bills, and bring down carbon emissions."
Notable by its absence from Hunt's budget statement was the status of the Energy Profits Levy, a windfall tax on North Sea oil and gas profits which was increased to 35pc from 25pc from the beginning of January. Earlier this month, North Sea producer Harbour Energy complained that its 2022 profit had been "all but wiped out" by the levy. UK North Sea operators met government ministers in December to try to set an oil price floor under which the windfall tax would not apply, a measure that Hunt is reportedly considering.
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Hurricane Beryl threat to US offshore oil lower
Hurricane Beryl threat to US offshore oil lower
Calgary, 5 July (Argus) — A northward shift in forecasts for Hurricane Beryl could bring the storm to the mid-Texas coast early next week, but its threat to US Gulf of Mexico oil and gas production appears limited. US Gulf oil and gas operators evacuated non-essential workers from some offshore facilities earlier in the week as a precaution. But on Thursday those concerns appeared to lessen, with BP saying the storm "... no longer poses a significant threat to our Gulf of Mexico assets". Beryl had weakened to a Category 2 hurricane, according to a 5pm ET advisory from the National Hurricane Center (NHC), with maximum sustained winds of 110 mph. The storm is expected to reach the Yucatan Peninsula in Mexico by early Friday, bringing heavy rain, hurricane-force winds and storm surge. Beryl will likely weaken to tropical storm status as it passes over the Yucatan but regain hurricane status when it enters the Gulf of Mexico late Friday-early Saturday. Current forecasts have it turning northwest to make landfall again somewhere between the northeastern coast of Mexico and the mid-Texas coast on Sunday. The US Coast Guard changed the status of the port of Corpus Christi, Texas, -- a key US oil export hub -- to "whiskey" on Thursday, meaning gale force winds are expected to arrive at the port within 72 hours. The port remains open to all commercial traffic. Earlier in the week Beryl was a Category 5 storm, which made it the strongest on record for the month of July. It was a Category 4 storm on Wednesday with maximum sustained winds of 140 mph as it brushed past the southern coast of Jamaica. By Brett Holmes Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
French power sector braces for change ahead of election
French power sector braces for change ahead of election
Paris, 4 July (Argus) — The outcome of the French parliamentary election on Sunday could bring reforms that will impact the country's power industry, causing mixed reactions among market participants. The far-right National Rally (RN) and its allies gathered 33pc of votes in the first round of the French legislative election on 30 June, placing it ahead of the coalition of left-wing parties, the New Popular Front (NFP), and the current government's Ensemble coalition. But energy agendas strongly differ across the three political groups, creating a climate of uncertainty in the French power sector, especially as those programmes were put together in a rush after Emmanuel Macron called a surprise snap election, and they will probably need some fine-tuning. Divide over the renewable line On the topic of wind farms, the RN has reiterated its proposal to halt the construction of new wind projects, which could put at risk the achievement of French renewable targets. Despite the halt of new projects, RN leader Jordan Bardella in the party's last press conference said he does not plan to "stop all variable sources of energy", adding that wind farms currently in operation would not be dismantled. He also mentioned an ambition to "recreate a French solar PV [photovoltaic] industry" and to protect it by raising tariffs on the European level. But the party did not respond to Argus on the specifics of its programme. The NFP intends to develop both offshore wind and tidal energy, and has called for a vote on an "energy and climate law". And the current government has raised solar PV targets in its updated national energy and climate plan (NECP), in addition to raising the offshore wind goal to 45GW by 2050. "The pressure on public support mechanisms for renewable development would depend on the next majority in parliament," director of power and PPA advisory at consultancy firm Greensolver, Alexandre Soroko, told Argus . "It could change the way in which renewable energy projects under development generate their revenues and finance their development. If the pressure is increased, it would probably have a bigger impact on wind projects than on solar PV ones." Other market participants told Argus they expect delays in permitting processes if RN wins the election. Parliament last year passed the "renewable acceleration law", to speed up permitting processes that are longer in France than in neighbouring countries. A boost to nuclear energy The RN plans to strengthen the French nuclear fleet with a massive investment programme, making it the pillar of the French energy mix, while NFP's position is not clear on the matter. RN aims to increase French nuclear capacity through the construction of European pressurised reactors (EPRs) paired with small modular reactors (SMRs) and fast-neutron reactors. This plan echoes Emmanuel Macron's recent pledge to build 14 EPRs of type 2 reactors by 2050, with three pairs already planned . In contrast, the topic of nuclear reactor construction has been absent from the NFP's programme as views on it diverge among participants in the union, mostly between green party Les Ecologistes, which has been traditionally against nuclear energy, and the communist faction. An exit of the European power market? Criticising the rules of the European power market has been a recurring discourse on the French political scene. Bardella said he wanted a "French power price, that corresponds to the costs of nuclear production", while far left La France Insoumise (LFI), which is part of the NFP group, opposed the EU power market design reform in April. During the Europ'Energies conference this week, energy consumers association CLEEE's president Frank Roubanovitch said he was "favourable to the idea supported by RN and LFI of ending the marginal pricing mechanism while maintaining physical interconnections". But an exit of the European market would mean a "not optimal use of transmission infrastructure", according to European Commission team leader on the internal energy market, Mathilde Lallemand. Points of convergence Nuclear power, a protection of current hydropower concessions and the conversion of coal-fired plants to biomass are topics that are found in both the RN and Ensemble agendas. Although the RN plans to invest into hydropower plants to increase their production capacity, it is strongly opposed to the introduction of competition to the hydropower concessions system. The latter was mentioned in the draft energy sovereignty proposal unveiled by the government in February, but was never introduced to parliament. The RN party also wants to phase out coal and convert coal-fired plants to biomass — an ambition announced by Emmanuel Macron for 2027 at the end of 2023 . The second round of the elections is planned for 7 July. By Tatiana Serova Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Saudi Aramco cuts official August crude prices for Asia
Saudi Aramco cuts official August crude prices for Asia
London, 4 July (Argus) — Saudi Arabia's state-controlled Saudi Aramco has reduced the official formula prices of August-loading crude exports for buyers in its core Asia-Pacific market, while increasing prices for European customers. For customers in Asia-Pacific, Aramco has cut the August formula prices of its Arab Light and Extra Light grades by 60¢/bl compared with July and reduced the prices of its other grades by 20-70¢/bl. The price cuts for Asia-Pacific are within customers' expectations. Refiners in the region expected a narrower Dubai backwardation to prompt a reduction in Saudi formula prices . The month-on-month change in Dubai intermonth spreads is one factor that producers such as Aramco consider when setting the formula prices for their Asia-bound cargoes. For customers in northwest Europe, Aramco has raised the official August prices of its Extra Light, Arab Light, Arab Medium and Arab Heavy grades by 90¢/bl. For Mediterranean-bound exports of the same grades, it increased prices by 90¢/bl on a fob Ras Tanura basis and by 80¢/bl a fob Sidi Kerir basis. European refiners were anticipating an increase in Saudi formula prices on the back of firm values for rival crudes and tighter global supply. The North Sea's largest crude grade, Norway's medium sour Johan Sverdrup, averaged $1.60/bl above the North Sea Dated benchmark fob Mongstad in June, up from a $0.29/bl premium in May. Values of heavier grades in Europe have recently begun to improve. The Argus Brent Sour Index, which prices northwest Europe's heavier and sourer crudes, has averaged a 35¢/bl premium to Dated so far this week. The index averaged 10¢/bl above Dated in June and 7¢/bl below the benchmark in May. Aramco is expected to export less crude in the summer months when domestic demand peaks. Saudi Arabia announced in early June that it will extend a 1mn b/d "voluntary" additional crude output cut — first implemented in July 2023 — for three months until the end of September. For customers in the US, Aramco has lifted the August formula prices of Extra Light and Arab Light by 10¢/bl compared with July. It has left formula prices of the other grades unchanged. By Edmundo Alfaro and Lina Bulyk Saudi Aramco official formula prices $/bl August July ± United States (vs ASCI) Extra Light 7.10 7.00 0.10 Arab Light 4.85 4.75 0.10 Arab Medium 5.45 5.45 0.00 Arab Heavy 5.10 5.10 0.00 Northwest Europe (vs Ice Brent) Extra Light 5.60 4.70 0.90 Arab Light 4.00 3.10 0.90 Arab Medium 3.20 2.30 0.90 Arab Heavy 0.80 -0.10 0.90 Asia-Pacific (vs Oman/Dubai) Super Light 2.75 2.95 -0.20 Extra Light 1.60 2.20 -0.60 Arab Light 1.80 2.40 -0.60 Arab Medium 1.25 1.95 -0.70 Arab Heavy 0.50 1.20 -0.70 Mediterranean fob Ras Tanura (vs Ice Brent) Extra Light 5.60 4.70 0.90 Arab Light 3.90 3.00 0.90 Arab Medium 3.30 2.40 0.90 Arab Heavy 0.60 -0.30 0.90 Mediterranean fob Sidi Kerir (vs Ice Brent) Extra Light 5.65 4.85 0.80 Arab Light 3.95 3.15 0.80 Arab Medium 3.35 2.55 0.80 Arab Heavy 0.65 -0.15 0.80 Source: Saudi Aramco Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Q&A: RAG says EU lacks clear hydrogen storage rules
Q&A: RAG says EU lacks clear hydrogen storage rules
Brussels, 4 July (Argus) — RAG Energy Storage has been one of the front-runners in hydrogen storage, and established the first operational commercial underground hydrogen storage (UHS) in a depleted gas field in April 2023. Argus spoke to its managing director Georg Dorfleutner, who is calling for a clear framework. Are you OK with the EU apparently scaling back from 10mn t/yr of hydrogen imports? We base the modeling of the report for HeartforEurope more or less on 2030 projections from the RepowerEU strategy. The assumptions on our modelling to identify an investment gap for hydrogen storage were rather conservative — that the only demand would come from industry, thus a rather flat profile over the year without seasonal-shift needs yet. From our side we have multiple potential hydrogen storage projects throughout Europe, but the hydrogen market development and support regimes for infrastructure investments will define the timely realisation. How might any scaling back affect your report's projected 36 TWh H2 storage gap? Whatever happens infrastructure needs to be in place very soon. Our report really underlines the need for a clear framework for hydrogen storage. And we come with a toolbox of different possible measures to support this. Storage tariffs alone won't solve the issue of market ramp-up. Policymakers may feel relieved that the gas and hydrogen decarbonisation package was finished before the EU elections. But our report is more or less saying that this alone will not do the trick. Could a strict EU definition of low-carbon hydrogen hinder growth? The wider and more pragmatic the definitions of low-carbon hydrogen are, the easier market ramp-up will be. Market ramp-up is enormously important for infrastructure. You don't build infrastructure just for demand over the next two years but for the next 10-15 years. Do we need more tailored financial support for UHS, at EU and state levels? There's simply no tailored financial support right now. There's a little aid for hydrogen storage research projects. Currently, policy-making appears focused on whether or not hydrogen infrastructure has to be unbundled. As for financial support, we're completely out of the picture for now. And there's this idea that regulated tariffs make commercially viable projects. But that's not true. It's only booked capacity based on a cost-covering approach that delivers a financially viable project. You don't build infrastructure just to have nice infrastructure without customers. Do we need EU and member state UHS targets? We're not looking for a strict mandatory goal. But if there is a certain goal for hydrogen uptake in the market, then you should ensure that you have the necessary infrastructure in place. That said, targets may be helpful at state level in setting a framework for state aid. But we also have to recognise that Europe is very diversified. Some areas may have very well-functioning hydrogen supply while other landlocked countries might depend on longer supply chains, thus being more dependent on storage. Are markets ready for UHS? Firms are already approaching us. The market is willing, but they need to know what the costs are. The best way forward then is providing clear rules for storage and giving industry a clear pricing idea. There also need to be clear state support mechanisms until we get to cheaper hydrogen and sufficient infrastructure utilisation. In the process of creating UHS capacities we need to keep in mind the SOS for natural gas, which currently is crucial. That's why we focus on new sites — caverns, porous reservoirs and aquifers — rather than repurposing. But at some point, post-2030 with a market ramp-up, decisions on repurposing gas into hydrogen storage will need to be taken. Dafydd ab Iago Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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