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Trump’s ‘drill, baby, drill’ risks industry pushback
Trump’s ‘drill, baby, drill’ risks industry pushback
New York, 25 November (Argus) — The biggest obstacle standing in the way of president-elect Donald Trump's campaign pledge to unleash the full force of the nation's oil potential could end up being some of his biggest cheerleaders in the industry. Top energy executives are broadly supportive of Trump's plans to slash red tape and adopt pro-fossil fuel policies, such as opening up more federal land to drilling and speeding up the permitting process for oil and gas projects. But his plea for producers to pump flat-out in order to help bring down energy costs might quickly bump up against reality. The industry is sitting tight against an uncertain macro-economic backdrop, with crude prices on the back foot and a global oil market that is forecast to be in surplus next year. Shale bosses that learnt the hard way the lessons of prior boom-and-bust cycles are in no hurry to repeat the mistakes of the past. "It's kind of hard to look at a world that has 4mn-6mn b/d of surplus capacity on the sidelines and try to think we can grow effectively into that," US independent Diamondback Energy chief executive Travis Stice says. For the time being, shareholders are in the driving seat and generating cash flow remains the rallying cry. "We're going to just stay conservative and let volume be the output of cash flow generation," Stice says, summing up the mood of many of his peers. As a result, Trump might have his work cut out for him trying to persuade US producers to open up the floodgates. Measures such as rolling back environmental regulations will only help at the margin. One difference from Trump's first term is that the industry is emerging from a frantic round of consolidation that has resulted in ownership of vast tracts of the shale patch falling into the hands of fewer but larger public operators, for whom capital discipline is sacrosanct. Last year's 1mn b/d boost to overall US crude production took market watchers by surprise, but the rate of growth is slowing even as output continues to hit new record highs. ExxonMobil and Chevron are deploying their vast scale and technology prowess to ramp up output from the Permian basin of west Texas and southeastern New Mexico, but the rest of the industry is playing it steady. Cycle path For the most part, public companies were hesitant to set out their stalls for 2025 during recent third-quarter earnings calls. Those that have outlined tentative plans indicate a desire to maintain the status quo, leading to expectations for little or minimal growth. "Nearly every company cited continued improvements in cycle times that are allowing for more capital-efficient programmes," bank Raymond James analyst John Freeman says. "Efficiency gains show no signs yet of ending." US independent EOG Resources forecasts another year of slower US liquids growth on the back of a lower rig count and dwindling inventory of drilled but uncompleted wells. "The rig count really hasn't moved in just about a year now," chief executive Ezra Yacob says. "That's really the biggest thing that's informing our expectation for slightly less growth year over year in the US." In the immediate future, weaker oil prices might translate into slower growth for the Permian, delaying the inevitable peak in overall US crude production, producer Occidental Petroleum chief executive Vicki Hollub says. But the top-performing US basin will continue to lead the way further out while other basins lose their edge. In a fast-maturing shale sector where the priority is to lower costs and maximise returns, that suggests a flat production growth profile going forward. "We see no change to the intermediate-term drilling path for oil set by the fundamentals," bank Jefferies analyst Lloyd Byrne says. By Stephen Cunningham Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Clean NH3 integration needs CoC methods: Hinicio
Clean NH3 integration needs CoC methods: Hinicio
London, 25 November (Argus) — Some ammonia producers are implementing their own chain of custody (CoC) approaches in order to incorporate upcoming reduced carbon tonnes into existing ammonia supply chains, ahead of unified regulation, certification or wide-scale clean ammonia availability. But approaches will vary, depending on whether producers are targeting regulatory or voluntary markets, Belgian-headquartered consulting firm Hinicio told Argus ahead of the Clean Ammonia Europe Conference in Rotterdam this month. Hinicio is consulting on three different ammonia certification schemes currently under development. The schemes are being developed in partnership with Fertilizers Europe, the Fertilizer Institute in the US and the Ammonia Energy Association, which is developing a global scheme. The schemes have a mix of both mass balance or book and claim CoC methods, as producers and buyers seek to optimise on cost and carbon intensity (CI) when clean ammonia tonnes become available. Clean ammonia includes renewable ammonia produced with electrolysis and renewable electricity, or ammonia produced with a natural gas feedstock that uses carbon capture and storage (CCS) to reduce carbon emissions. The mass balance approach is well established in other values chains and has been set forth by the EU as the regulatory standard in the Renewable Energy Directive, FuelEU Maritime and the Gas Directive. And the CoC method has already been adopted by ammonia producers such as Yara and OCI. In a mass balance approach, the ratio of sustainable material incorporated into the value chain is tracked and reflected in the products produced and sold to customers. Physical trade flow is accounted for and a defined time (reconciliation) period is assigned. "When talking about chain of custody, the European regulation really dictates to use mass balance for everything you want to call RFNBO or low-carbon in Europe, or for anything that you want to bring to Europe," Hinicio manager Thomas Winkel said. But a ‘book-and-claim' system grants significantly more flexibility for economic operators that are looking to trade in voluntary markets — where companies buying reduced carbon ammonia are looking to reduce scope 3 emissions or EU ETS obligations. Book and claim allows for physical flow of a product to be completely decoupled from attributes like CI. Characteristics are ‘booked' into a central registry to be ‘claimed' by consumers, without a connection to the physical material, like renewable electricity certificates. "The voluntary market is going towards a combination of mass balance and book and claim," Winkel said. Elements of book and claim can be employed if required, within geographic or other constrictions. But Europe's stance on CoC could force companies to employ mass balancing. "I think many players around the world are looking at Europe as their main export market and they are starting to understand their criteria well," Winkel said. Europe currently accounts for around one-fifth of global ammonia imports, or around 4mn-5mn t/yr, according to Argus line-up data. And at least a quarter of the 40-plus offtake agreements Argus is tracking from clean ammonia projects are likely to supply the European market. Renewable ammonia projects in India and Canada have received pre-certification of RFNBO compliance from certification body Certifhy, with European offtakers already lined up. Under currently announced agreements alone, at least 500,000t of renewable ammonia will be shipping to Europe from 2027, pending project delivery, with the potential for a substantial scale-up in volume as the decade draws to a close. That is excluding large-scale ammonia projects with CCS that are scheduled for start-up in the US in 2025-26 and are also eyeing the European market for export opportunities. "Mass balance is the standard — the schemes that are being developed that are for voluntary purposes allow a bit more flexibility otherwise," Winkle said. For most jurisdictions, the regulatory playbook is still being written. Australia, Japan, South Korea, the US and the UK are still developing regulations surrounding low-carbon fuels. But in the meantime, fledgling supply agreements for voluntary markets may opt for book and claim where possible. But regulatory markets in Europe have declared mass balance as the standard. The development of regulatory and certification schemes in other regions will determine global standards moving forward. By Lizzy Lancaster Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Cop: Talks leave ‘mountain of work’ for Brazil in 2025
Cop: Talks leave ‘mountain of work’ for Brazil in 2025
Baku, 24 November (Argus) — The UN Cop 30 climate talks in Brazil next year may take on a new level of importance after countries at the now-completed Cop 29 in Baku, Azerbaijan, left some significant issues on the table, most notably now to keep the world on track to meet the goals of the Paris Agreement. Negotiators in Baku completed their work just after 05:30 local time (01:30 GMT) on Sunday — nearly a day and a half after the scheduled end of the Cop — with a deal on climate finance that has left developing countries furious. The Indian negotiator called the finance agreement, which the country opposed after it was gavelled, "nothing more than an optical illusion". She complained that the text was adopted even though they had informed the secretariat they wanted to make a statement before its adoption. Nigeria and Bolivia came out in support to India to say were rejecting the deal, with the latter calling the agreement "an insult". Known as the new collective quantified goal (NCQG), the deal sets a target of "at least" $300bn/yr for developing countries by 2035, with developed countries "taking the lead". The goal is meant to build on the $100bn/yr that developed countries agreed to deliver to developing countries over 2020-25. The finance will come from "a wide variety of sources, public and private, bilateral and multilateral, including alternative sources". This is more than the $250bn/yr first proposed by developed countries. But this is well below the $1.3 trillion, including $440bn-600bn/yr in public finance mostly in grants and concessional finance, sought by developing economies. The delegations salvaged what for a time appeared to be talks headed for collapse, with two groups temporarily walking out of the negotiations. But developing countries indicated that the Baku deals falls far short of what they need to deal with climate change and support their energy transition. "They were never going to be enough," special envoy for climate change and environment for Vanuatu Ralph Regenvanu said. "And even then, based on our experience with such pledges in the past, we know they will not be fulfilled," he said. India's negotiator pointed to the "unwillingness from developed countries to fulfill their responsibilities". This will severely impact growth in developing nations, she added. EU climate commissioner Wopke Hoekstra, the only developed party to take the floor just after the finance deal was agreed, said that increasing the goal three-fold, from $100bn/yr, "is ambitious, needed, realistic and achievable". He said that with the help of the multilateral development banks (MDBs), the bloc is confident $1.3 trillion/yr of climate finance for developing economies could be reached. Baku to Belem The finance deal agreed in Baku calls on all actors "to enable the scaling up of financing" from all public and private sources to at least $1.3 trillion per year by 2035. A "Baku to Belem Roadmap to $1.3 trillion", was launched to that effect. The only other major decision to come out of Baku was the adoption of the rules that will operationalise the international carbon market under Article 6 of the Paris Agreement. Progress on the implementation of the first global stocktake — the main outcome document from Cop 28, which included the historic call to transition away from fossil fuels — was left for next year. The talks failed to overcome a broad north-south divide and were hampered by the finance talks and efforts by some delegations to undo past decisions. Developed countries called for stronger global action on emissions reductions, but developing nations responded that they cannot implement an energy transition without adequate finance. Many Latin American and African nations, as well as island states, also complained during the talks about the lack of mitigation ambition. But countries including Saudi Arabia opposed including language on fossil fuels, or any mention that countries should undertake deep emissions cuts. India even pushed back on the 1.5°C temperature limit of the Paris Agreement, which was reinforced in Dubai last year. The rejected draft text for the stocktake reaffirms "the need for deep, rapid and sustained reductions in greenhouse gas emissions in line with 1.5 °C pathways". It refers to the energy package without going into details, and keeps the door open to "transitional fuels". Parties will revisit mitigation next year in Belem, leaving Baku "with a mountain of work to do," according to UN climate body UNFCCC executive secretary Simon Stiell. Mitigation was always going to be the focus of Cop 30, particularly with countries due to submit their new emissions-reduction pledges, or nationally determined contributions (NDCs), to the UNFCCC by February. But the struggle in Baku could bring new pressure to the Brazilian government. The country's environment minister Maria Silva on Saturday warned that failure in Baku would likely damage the UN process, especially with the US, one of the world's leading emitters, expected to exit the Paris Agreement again after former president Donald Trump takes office in January. By Michael Ball and Caroline Varin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Cop: Carbon market rules adopted as finance talks stall
Cop: Carbon market rules adopted as finance talks stall
Baku, 23 November (Argus) — Countries at the UN Cop 29 climate talks in Baku, Azerbaijan, on late Saturday adopted the rules for international carbon trading under the Paris Agreement, a rare bright spot in contentious negotiations that have dragged on well past their scheduled end. After adopting rules for Article 6.2 and Article 6.4 of the Paris Agreement during a late evening plenary, ministers and negotiators applauded in recognition of their efforts. The decisions come a year after the carbon market rules were supposed to have been adopted at Cop 28 in Dubai, nine years after Cop 29 in Paris, and about 24 hours after the Baku talks were scheduled to end. "We have ended a decade-long wait and unlocked a critical tool for keeping 1.5 degrees in reach," Cop 29 president Mukhtar Babayev said. "Climate change is a transnational challenge and Article 6 will enable transnational solutions. Because the atmosphere does not care where emissions savings are made." Article 6.2 and Article 6.4 govern how countries can use carbon credits to meet their greenhouse gas (GHG) emissions-reduction pledges, known as nationally determined contributions (NDCs). Article 6 aims to help set rules on global carbon trade. Article 6 discussions helped get Cop 29 off to a positive start, with the adoption of key standards for the creation of carbon credits under the Paris accord. But after that, negotiators still had to resolve a number of issues, most notably the design of an international registry to keep track of the credits. The talks ultimately settled on a "dual layer" approach, agreed to create a registry to issue and trade credits that would be run by the UN and would be separate from the Article 6 registry, which would only serve an accounting function. The text also says that the inclusion of any emissions credits — known as internationally transferable mitigation outcome (Itmo) units — in the UN registry does not represent any sort of validation of their environmental integrity, in response to concerns raised by the US and others. Further refinements were made to the decision text over the last three days before the Saturday night decision, including the details on what countries need to include in electronic reporting of the credits. Carbon market supporters have generally backed the Baku texts, although some do not agree with all of the details. But they say the text does not harm or constrain international carbon trading, meeting their main objective for Baku. Saturday standoff But Cop 29 has reached a stalemate in negotiations on a new climate finance goal, as developed and developing countries struggle to bridge a huge divide on how much the latter should receive from the former. The lack of progress has raised the possibility the talks could collapse and end without any agreement at all. "This is the final stretch you have all been working very hard and I know that none of us want to leave Baku without a good outcome," Babayev said. "However, time is not on our side." The cop presidency suspended the plenary after the Article 6 decisions to give countries more time to try to reach an agreement, saying it would resume "later tonight." Earlier in the evening, delegates from the Alliance of Small Island States (AOSIS) and the Least Developed Countries (LDCs) group staged a temporary walkout to protest what they say has been a process that lacks inclusion. "The process is not including us as much as it should be, and when it does, and we provide input, our inputs are being ignored," said Evans Njewa, a Malawai environment official who chairs the LDC Group. The most recent negotiating text , released on Friday, angered developing country officials by proposing that developed economies provide $250bn/yr in climate finance by 2035, from a broad range of sources, not just public funds. Developing economies earlier this week floated numbers of $440bn-$600mn/yr for a public finance layer. They also called for $1.3 trillion/yr in total climate finance from developed countries, a sum which the latest draft instead calls for "all actors" to work toward. As a potential compromise, some countries, including Brazil and Somalia, have suggested at least $300bn/yr and up to $350bn/yr or $390bn/yr. Further eroding trust among delegates were reports that an official from Saudi Arabia had been allowed to make changes to negotiating text. "At Cop 29, we are witnessing a geopolitical power play by some fossil fuel states at the expense of the poorest. As the EU, we strongly oppose abandoning the path set in Dubai," German foreign affairs minister Annalena Baerbock said. By Michael Ball Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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