Japan mulls financial support for upstream CCS projects

Spanish Market: Crude oil, Metals, Natural gas
19/02/21

Japan is drawing up plans to provide domestic upstream oil and gas developers with financial support for carbon capture and storage (CCS) projects, targeting to reduce potential financial risks in fulfilling costly CCS requirements in upstream operations and lure additional overseas oil and gas investments.

The trade and industry ministry (Meti) recently outlined a policy to continue to seek upstream oil and gas assets overseas after 2030, as part of efforts to enhance the country's energy security during its transition towards a decarbonised society. The ministry is considering measures to support Japanese investors' efforts in decarbonisation, which is becoming an important component in the upstream oil and gas industry.

Development of large-scale CCS projects require huge investments. Shell's Quest CCS project in Canada, the world's first commercial-scale CCS project launched in 2015, was estimated to have cost C$1.35bn ($1.1bn). Norway's Longship CCS project is estimated to cost 25.1bn kroner ($3bn).

Such huge CCS costs may make Japanese upstream firms more hesitant in committing to upstream oil and gas investments, leading to a fall in Japan's equity oil and gas output and harming energy security, Meti said. The government is expected to offer financial incentives, including financial assistance by state-owned financial institutions such as JBIC, Jogmec and Nexi, to encourage CCS investments and active participation in overseas carbon-offset projects and markets.

Japanese upstream developers are much smaller in corporate size than majors and state-owned oil firms. Oil and gas output by Japan's upstream leader Inpex hit 573,000 b/d of oil equivalent (boe/d) in 2020, less than one-fourth of that by oil majors, while its capital expenditure amounted to $1.9bn last year compared with that of oil majors, which hovered at $15bn-20bn.

Japanese oil firms have co-operated with overseas firms to study and develop CCS technologies, but commercialisation has been so far limited to carbon dioxide-enhanced oil recovery (CO2-EOR) projects. Japanese refiner Eneos has teamed up with Indonesia's state-owned Pertamina to explore CO2-EOR opportunities, while carrying out actual CO2-EOR projects in Vietnam and the US.

Meti is also considering enhancing the country's joint crediting mechanism (JCM) scheme to provide additional options for Japanese upstream developers in CCS projects. Japanese plant engineering firm JGC and power producer J-Power are set to start a CCS demonstration project in Indonesia in the April 2021-March 2022 fiscal year. The project, if it materialises, could become the first CCS project under the JCM scheme, targeting to capture and store 300,000 t/yr of CO2 at Indonesia's Gundih gas field.

Japan in 2013 set up the JCM, under which verified emissions reductions and removals through low-carbon projects can be used to quantify participating parties' efforts in greenhouse gas (GHG) mitigation. The country had set up the joint mechanism with 17 countries, mostly in Asia.

By Rieko Suda

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18/11/24

India cuts allocation to city gas firms again

Delhi, 18 November (Argus) — The Indian government has reduced the domestic gas allocation to the city gas distribution sector by state-run distributor Gail, effective from 17 November. This is the second cut after they first slashed allocation by 20pc, or 4mn-5mn m³/d , last month. The cut for Delhi-based city gas entity Indraprastha Gas is a reduction of 20pc, for Mumbai-based Mahanagar Gas it is 18pc, and for privately owned Adani Total Gas it is 13pc, the firms' stock exchange filings stated over the weekend. The move would reduce the overall share of domestic gas allocation to city gas distributing companies to 30-37pc from 50pc last month and 70pc at the beginning of the year. City gas firms had received priority status for gas allotment over the past two years. "It is uncertain what could have re-instigated this cut, but this may translate into 6.5mn-7mn m³/d based on the different growth rates of city gas firms," Moody's affiliate ICRA senior vice-president Prashant Vashisht told Argus . City gas entities are mulling a hike in CNG rates and are heard to be in talks with the government over the policy changes. The government is yet to formally announce a statement over the cuts and is heard to be asking retailers to give a cost break-up to justify the hike, sources say. These cuts are mainly aimed at compressed natural gas (CNG) supply that has been receiving domestic gas allocation at a fixed price by the government of $6.5/mn btu under New Delhi's pricing mechanism — almost half the price that firms would pay for spot LNG. City gas firms are discussing the possibility of increasing CNG prices by Rs5-5.5/kg by the end of the year to preserve their margins. This would represent a 7pc increase compared with the average CNG price of Rs75.1/kg ($0.88/kg) against Rs94.77/litre of petrol in New Delhi. But the price hike may reduce CNG's competitiveness, hampering further development of the sector and limiting LNG demand growth. CNG vehicles have rapidly expanded their share of the Indian fleet, accounting for 14pc of all four-wheelers at present, up from 8pc three years earlier, data from the government's Vahan website show. The reduction in allocation is linked to reduced supply from conventional gas fields run by state-controlled upstream companies such as ONGC and Oil India. The sector received 27.8mn m³/d of domestic gas over April-September, including about 5mn m³/d of higher-priced supply from high-pressure, high-temperature fields, oil ministry data show. Allocation to the sector was largely unchanged during the same time last year. To bridge this shortfall, city gas firms are exploring options of sourcing gas through LNG , domestically produced high-pressure and high-temperature gas, production from ONGC's new wells, and long-term gas contracts. By Rituparna Ghosh Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Trump taps oil services head as US energy secretary

17/11/24

Trump taps oil services head as US energy secretary

Washington, 17 November (Argus) — President-elect Donald Trump intends to nominate oil services company Liberty Energy's chief executive Chris Wright to lead the US Department of Energy (DOE), giving him oversight over LNG export facilities and a vast portfolio of federally-backed energy projects. Wright also will serve on Trump's planned Council of National Energy, which will oversee policies across the federal government affecting energy production, permitting, transportation and regulation. Trump said he wants Wright to work alongside North Dakota governor Doug Burgum, who Trump has nominated as US interior secretary, to oversee "the path to US ENERGY DOMINANCE" by cutting regulations and supporting investments from the private sector. "As Secretary of Energy, Chris will be a key leader, driving innovation, cutting red tape, and ushering in a new 'Golden Age of American Prosperity and Global Peace,'" Trump said. Liberty Energy, which was founded in 2011, focuses on hydraulic fracturing services and earned $1.2bn last year. Wright has downplayed the urgency for the world to address climate change or transition away from fossil fuels. He has criticized the use of phrases like "climate crisis" and "carbon pollution", which he says are impeding projects that could alleviate energy poverty. Those terms "are not only deceptive, they are in fact destructive deceptions," Wright said in a video he posted last year on YouTube. "Destructive because they drive centrist politicians and regulators to oppose life-critical infrastructure, like building pipelines and natural gas export terminals." If confirmed by the US Senate, Wright would be responsible for deciding how to resolve a "pause" on US LNG export licensing that President Joe Biden put in place in January. DOE has been studying whether allowing more gas exports would exacerbate climate change or hurt consumers by increasing domestic natural gas prices. The vast majority of DOE's budget goes to maintaining the US stockpile of nuclear weapons and cleaning up contaminated nuclear sites. DOE also manages the four facilities that make up the US Strategic Petroleum Reserve, which currently holds 387.8mn bl of crude, and oversees 17 national laboratories that are spread across the US. In the last four years, the US Congress substantially increased DOE's role in energy. DOE is currently managing billions of dollars in funds provided by the 2021 infrastructure law, such as an $8bn initiative meant to support "hydrogen hubs" and a $2.5bn carbon capture demonstration program. The Inflation Reduction Act expanded DOE authority to issue loans for clean energy projects by about $100bn. By Chris Knight Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Cop: Parties continue slow work on finance goal: Update

16/11/24

Cop: Parties continue slow work on finance goal: Update

Updates throughout Baku, 16 November (Argus) — Parties at the UN Cop 29 climate talks in Baku have asked for more time to work on "specific proposals" for a new finance goal, working from a draft text released yesterday , but it is unlikely to yield progress on key sticking points. Country representatives are seeking to agree on a new climate finance goal for developing nations, following on from the current — broadly recognised as inadequate — $100bn/yr target. A plenary is due to take place later today in Baku. "Over the last few days some people have doubted whether collectively we can deliver. It is time for the negotiators to start proving them wrong," Cop 29 deputy lead negotiator Samir Bejanov said. The current draft text still fails to bridge the huge divide between developed and developing countries on key issues such as an amount for the goal, the contributor base and what the funds should be used for. And the new version due to come out today is unlikely to show meaningful progress on these issues, observers suggested, leaving them for ministers to tackle next week. Technical negotiators continue to try and move forward on topics such as funds' access and transparency. Developed countries have still not proposed a number for the goal, and want the contributor base broadened. Developing countries remain broadly united in calling for climate public finance of over $1 trillion/yr. Options show that developing country parties seek a new finance goal that serves mitigation — actions to reduce emissions — adaptation and loss and damage. Adaptation refers to adjustments to avoid global warming effects where possible, while loss and damage describes the unavoidable and irreversible effects of such change. Developed nations are also pushing for sub-targets of $220bn/yr for least developed countries (LDCs) and $39bn/yr for small island developing states (Sids), in which money for adaptation should come in the form of grants and highly concessional finance and funding for loss and damage "primarily in grants". Multi-layered The multi-layered approach in the draft, mostly supported by developed countries, does not mention loss and damage. On broadening the contributor base, it has options calling on "parties in a position to contribute" or "all capable parties" to "mobilise jointly $100bn/yr for mitigation and adaptation in developing countries by 2035". The UN climate body the UNFCCC works from a list of developed and developing countries from 1992 — delineating 24 countries plus the EU as developed — and many of these note that economic circumstances have changed in some countries, including China, over the past 32 years. China between 2013 and 2022 provided and mobilised $45bn in climate finance to developing countries, equivalent to 6.1pc of climate finance provided by all developed countries in the period, according to think-tank WRI. A few options in the multi-layered approach in the draft talk about "investments", language that developing countries do not support, and "investing trillions "from all sources, public, private, domestic and international". Developing nations are not against private sector financing, but they want the main figure for the new finance goal to come from public sources, observers said. Some parties on both sides are calling for an acceleration of the reforms of multilateral development banks, key to leverage billions in private sector finance, as well as for the use of taxes and levies. But these issues are largely outside of the remit of the Cop, even though they may get a boost from the upcoming G20 leaders summit on 18-19 November. UN climate body chief Simon Stiell today called on G20 to ensure the availability of more grant and concessional finance, make progress on debt relief, and push for additional multilateral development bank reforms. Brazil is looking to use its G20 presidency to advance agreement on energy transition finance, having set fighting climate change as one of its priorities. The country called for a global finance governance that includes rules for financing a "just and equitable" energy transition in developing economies and for an easier access to climate funds. Brazil has also pushing for a 2pc tax on billionaires that could generate up to $250 bn/yr in revenue. By Victoria Hatherick, Jacqueline Echevarria and Caroline Varin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Cop: Colombia’s climate plan to address fossil fuels

16/11/24

Cop: Colombia’s climate plan to address fossil fuels

Baku, 16 November (Argus) — Colombia will seek to address the "divisive issue" of "the proliferation of fossil fuels" in its next emissions reduction plan — nationally determined contribution (NDC), environment minister Susanna Muhammad told Argus, adding that it would prompt a "strong debate" in the country. Colombia's president Gustavo Petro seeks to end the country's dependence on fossil fuels, while promoting a transition to clean and renewable energy. "Of course this is a very divisive issue, especially for a country that is looking for a whole economy transition," Muhammad said on the sidelines of the UN Cop 29 climate summit in Baku. "And trying to get the whole of society and the whole of government behind that will be a strong debate." Petro ordered an end to new hydrocarbon exploration and production contracts soon after taking office in August 2022. Petroleum association ACP said that Colombia's crude output will begin declining in 2027 as reserves are insufficient to maintain output amid falling exploratory activity. Petro's ambition to phase out fossil fuels risks sacrificing key revenues for the country. But Muhammad highlighted the need to achieve an ambitious financial goal that supports a just transition in developing economies. "We cannot continue playing with the same financial rules of the game," she said. "What we are seeing at this Cop 29 is that we need solidarity and fairness in the process of financing this transition." "We said in Dubai that we would triple renewables by 2030. The question remains, who is going to triple renewables and for whom?" she said, pointing to the significant gap in renewables expansion between developed and developing economies. Countries at Cop 28 in Dubai, the UAE, last year agreed on a deal that included transitioning away from fossil fuels, tripling renewable energy capacity and doubling annual energy efficiency gains globally by 2030. Muhammad added that the country will be submitting its NDC to the UN climate body the UNFCCC by June next year because it will "go through a very strong consultation process" with different sectors of the economy. Cop parties are expected to publish their next NDCs to the Paris climate agreement — this time for 2035 — in November-February, as part of a cycle that requires countries to "ratchet up" their commitments every five years. "Our main source of emissions is deforestation, agriculture practices, especially cattle ranching," she said, adding that the government is seeking the participation of actors that are at the forefront of the climate crisis. Risky business Talking about the possibility of the US pulling out of the the Paris Agreement and Argentina's delegation exiting negotiations in Baku, she warned that by not putting the people first in the fight against climate change, leaders are risking that other "authoritarian" regimes or "climate deniers" take more power. Brazil's secretary for climate change Ana Toni said today that private companies like policy consistency and that businesses need to look at the countries that are showing climate commitment and consistency in their NDCs. "The climate crisis is irreversible, we need to focus on climate action and implementation," Toni said. By Jacqueline Echevarria Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Cop: Parties continue work on new finance goal

16/11/24

Cop: Parties continue work on new finance goal

Baku, 16 November (Argus) — Parties at the UN Cop 29 climate talks in Baku have asked for more time to work on "specific proposals" for a new finance goal, working from a draft text released yesterday , before convening for a plenary session later today, according to the summit's presidency. Country representatives are seeking to agree on a new climate finance goal for developing nations, following on from the current — broadly recognised as inadequate — $100bn/yr target. The draft text still fails to bridge the huge divide between developed and developing countries on key issues such as an amount for the goal, the contributor base and what the funds should be used for. A plenary is due to take place later today in Baku. "Over the last few days some people have doubted whether collectively we can deliver. It is time for the negotiators to start proving them wrong," Cop 29 deputy lead negotiator Samir Bejanov said. Parties continue to stick to their positions. Developed countries have still not come forward with a number for the goal, and want the contributor base broadened. Developing countries remain broadly united in calling for climate public finance of over $1 trillion/yr. Options show that developing country parties seek a new finance goal that serves mitigation — actions to reduce emissions — adaptation and loss and damage. Adaptation refers to adjustments to avoid global warming effects where possible, while loss and damage describes the unavoidable and irreversible effects of such change. Developed nations are also pushing for sub-targets of $220bn/yr for least developed countries (LDCs) and $39bn/yr for small island developing states (Sids), in which money for adaptation should come in the form of grants and highly concessional finance and funding for loss and damage "primarily in grants". The multi-layered approach in the draft, mostly supported by developed countries, does not mention loss and damage. On broadening the contributor base, it has options calling on "parties in a position to contribute" or "all capable parties" to "mobilise jointly $100bn/yr for mitigation and adaptation in developing countries by 2035. The UN climate body the UNFCCC works from a list of developed and developing countries from 1992 — delineating 24 countries plus the EU as developed — and many of these note that economic circumstances have changed in some countries, including China, over the past 32 years. China between 2013 and 2022 provided $45bn in climate finance to developing countries, equivalent to 6.1pc of climate finance provided by all developed countries in the period, according to think-tank WRI. A few options in the multi-layered approach in the draft talk about "investments", which developing countries do not support, and "investing trillions "from all sources, public, private, domestic and international". Some parties on both sides are calling for the reforms of multilateral development banks, key to leverage billions in private sector finance, to accelerate. But these issues are largely outside of the remit of the Cop, even though they may get a boost from the upcoming G20 leaders summit on 18-19 November. UN climate body chief Simon Stiell [today urged G20 leaders to make the climate crisis](https://direct.argusmedia.com/newsandanalysis/article/262963 "order of business number one". He called on G20 to ensure the availability of more grant and concessional finance, make progress on debt relief, and push for additional multi-lateral development bank reforms. Brazil is looking to use its G20 presidency to advance agreement on energy transition finance, having set fighting climate change as one of its G20 priorities. The country called for a global finance governance that includes rules for financing a "just and equitable" energy transition in developing economies and for an easier access to climate funds. Brazil has also pushing for a 2pc tax on billionaires that could generate up to $250 bn/yr in revenue. By Victoria Hatherick and Caroline Varin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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