Aramco chief decries 'fantasy' of phasing out oil

Spanish Market: Crude oil, Hydrogen
18/03/24

Oil and gas will remain the backbone of the global energy system for decades to come, state-controlled Saudi Aramco's chief executive Amin Nasser told CERAWeek by S&P Global conference.

Just a year ago, Nasser's UAE counterpart, Adnoc chief executive Sultan al-Jaber exhorted the oil industry leaders at CERAWeek to step up efforts to decarbonize their operations and the global energy system. But Nasser's message appears to have been received more warmly in Houston.

"We should abandon the fantasy of phasing out oil and gas and instead invest in them, adequately reflecting realistic demand assumptions," Nasser said, drawing a round of applause.

Conversations on energy transition are led by the advanced economies, ignoring the needs of emerging economies that have accounted for most of the growth in oil and gas demand, Nasser said.

The so-called "global south" accounts for the majority of the world's population and energy demand growth, but draws just a fraction of global investments in renewable capacity, Nasser said. "These nations cannot afford expensive energy solutions."

Despite the development of renewable alternatives, focusing on reducing emissions from hydrocarbons produces better results in cutting back greenhouse gas, Nasser said. Aramco itself plans an ambitious gas production growth, in part to reduce the use of oil in domestic power generation.

"The future of energy transition in Indonesia is gas," Indonesia's energy ministry director general Tutuka Ariadji told a different CERAWeek panel today.

Aramco is still keen to pursue hydrogen production agreements with partners in South Korea and Japan, but high costs are an issue, Nasser said. Aramco estimates the cost of producing hydrogen produced from natural gas with carbon capture at oil-equivalent $200/bl, while renewable hydrogen production costs are oil-equivalent $400/bl, Nasser said. "Our partners, our customers, especially in Japan and Korea, are waiting for government incentives" before moving forward on those projects, he said.

By Haik Gugarats

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20/12/24

US House votes to avert government shutdown

Washington, 20 December (Argus) — The US House of Representatives voted overwhelmingly today to extend funding for US federal government agencies and avoid a partial government shutdown. The Republican-controlled House, by a 366-34 vote, approved a measure that would maintain funding for the government at current levels until 14 March, deliver $10bn in agricultural aid and provide $100bn in disaster relief. Its passage was in doubt until voting began in the House at 5pm ET, following a chaotic intervention two days earlier by president-elect Donald Trump and his allies, including Tesla chief executive Elon Musk. The Democratic-led Senate is expected to approve the measure, and President Joe Biden has promised to sign it. Trump and Musk on 18 December derailed a spending deal House speaker Mike Johnson (R-Louisiana) had negotiated with Democratic lawmakers in the House and the Senate. Trump lobbied for a more streamlined version that would have suspended the ceiling on federal debt until 30 January 2027. But that version of the bill failed in the House on Thursday, because of opposition from 38 Republicans who bucked the preference of their party leader. Trump and Musk opposed the bipartisan spending package, contending that it would fund Democratic priorities, such as rebuilding the collapsed Francis Scott Key Bridge in Baltimore, Maryland. But doing away with that bill killed many other initiatives that his party members have advanced, including a provision authorizing year-round 15pc ethanol gasoline (E15) sales. Depending on the timing of the Senate action and the presidential signature, funding for US government agencies could lapse briefly beginning on Saturday. Key US agencies tasked with energy sector regulatory oversight and permitting activities have indicated that a brief shutdown would not significantly interfere with their operations. But the episode previews potential legislative disarray when Republicans take full control of Congress on 3 January and Trump returns to the White House on 20 January. Extending government funding beyond 14 March is likely to feature as an element in the Republicans' attempts to extend corporate tax cuts set to expire at the end of 2025, which is a key priority for Trump. The Republicans will have a 53-47 majority in the Senate next month, but their hold on the House will be even narrower than this year, at 219-215 initially. Trump has picked two House Republican members to serve in his administration, so the House Republican majority could briefly drop to 217-215 just as funding for the government would expire in mid-March. Congress will separately have to tackle the issue of raising the debt limit. Conservative advocacy group Economic Policy Innovation Center projects that US borrowing could reach that limit as early as June. By Haik Gugarats Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

US government agencies set to shut down

20/12/24

US government agencies set to shut down

Washington, 20 December (Argus) — US federal agencies would have to furlough millions of workers and curtail permitting and regulatory services if no agreement is reached by Friday at 11:59pm ET to extend funding for the government. US president-elect Donald Trump and his allies — including Tesla chief executive Elon Musk — on 18 December upended a spending deal US House of Representatives speaker Mike Johnson (R-Louisiana) had negotiated with Democratic lawmakers in the House and the Senate. Trump endorsed an alternative proposal that Johnson put together, but that measure failed in a 174-235 vote late on Thursday, with 38 Republicans and nearly every Democrat voting against it. Trump via social media today indicated he would not push for a new funding bill. "If there is going to be a shutdown of government, let it begin now, under the Biden Administration, not after January 20th, under 'TRUMP,'" he wrote. There was little to indicate as of Friday morning that Trump, Republican congressional leadership and lawmakers were negotiating in earnest to avert a shutdown. The House Republican conference is due to meet in the afternoon to weigh its next steps. President Joe Biden said he would support the first funding deal that Johnson negotiated with the Democratic lawmakers. "Republicans are doing the bidding of their billionaire benefactors at the expense of hardworking Americans," the White House said. Any agreement on funding the government will have to secure the approval of the House Republican leadership and all factions of the Republican majority in the House, who appear to be looking for cues from Trump and Musk on how to proceed. Any deal would then require the support of at least 60 House Democrats to clear the procedural barriers, before it reaches the Senate where the Democrats hold a majority. The same factors will be in play even if the shutdown extends into early 2025. The Republicans are set to take the majority in the Senate when new Congress meets on 3 January. But their House majority will be even slimmer, at 219-215, requiring cooperation of Democratic lawmakers and the Biden administration. What happens when the government shuts down? Some agencies are able to continue operations in the event of a funding lapse. Air travel is unlikely to face immediate interruptions because key federal workers are considered "essential," but some work on permits, agricultural and import data, and regulations could be curtailed. The US Federal Energy Regulatory Commission has funding to get through a "short-term" shutdown but could be affected by a longer shutdown, chairman Willie Phillips said. The US Department of Energy, which includes the Energy Information Administration and its critical energy data provision services, expects "no disruptions" if funding lapses for 1-5 days, according to its shutdown plan. The US Environmental Protection Agency would furlough about 90pc of its nearly 17,000 staff in the event of a shutdown, according to a plan it updated earlier this year. The Interior Department's shutdown contingency plan calls for the Bureau of Land Management (BLM) to furlough 4,900 out of its nearly 10,000 employees. BLM, which is responsible for permitting oil, gas and coal activities on the US federal land, would cease nearly all functions other than law enforcement and emergency response. Interior's Bureau of Safety and Environmental Enforcement, which oversees offshore leases, would continue permitting activities but would furlough 60pc of its staff after its funding lapses. The US Bureau of Ocean Energy Management will keep processing some oil and gas exploration plans with an on-call group of 40 exempted personnel, such as time-sensitive actions related to ongoing work. The shutdown also affects multiple other regulatory and permitting functions across other government agencies, including the Departments of Agriculture, Transportation and Treasury. By Haik Gugarats Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: EU at crossroad on H2 rules, competitiveness

20/12/24

Viewpoint: EU at crossroad on H2 rules, competitiveness

London, 20 December (Argus) — The new team of EU commissioners will enter 2025 bent on reversing the bloc's economic stagnation and the flight of industry to cheaper parts of the globe, which have been salient themes in 2024. Hydrogen industry participants will keenly monitor Brussels' choice of interventions, which promise to restart the sector's engine, but must avoid undermining faith in rules. Pledges from re-elected president Ursula von der Leyen to tackle overcomplexity and "structurally high energy prices" both concern hydrogen, and her notion of a pivotal moment for the EU rings true for the hydrogen market because of its connection to industry and because stubborn costs and underwhelming growth in 2024 undermined confidence. Frequent vows for urgency, simplicity and speed have worn thin, and the European Commission's latest reformist push could flatter to deceive. But multiple warning shots fired last year — including from the European Court of Auditors and respected former Italian prime minister and president of the European Central Bank Mario Draghi — pile on pressure to tweak hydrogen policy in 2025. The auditors' report urged a "reality check" and strategy review, cautioning Europe could spectacularly miss its targets, while Draghi stressed cost-efficient decarbonisation to protect European industry — a view shared by member states and energy-intensive companies. Von der Leyen's "Clean Industrial Deal", promised inside 100 days of her new term, could set the tone. But some, like chemicals firm BASF, have already voted with their feet by relocating jobs outside Europe. For hydrogen, the commission's easiest reform might be setting realistic 2030 targets to replace the 20mn t/yr renewable hydrogen supply, since industry deems it impossible and the commission's own notes predict a 3mn-6mn t/yr market. But this is hardly the most pressing change and would not help morale. A more radical move would be to somehow relax the renewable hydrogen definition, which many market participants consider overly burdensome. The bloc's biggest economy, Germany, put its weight behind changes in September, saying "reality has now shown these requirements were still too high". Berlin's volte-face could hand Brussels an easier climb down. But reopening that can of worms would dent the investment climate and distract from the low carbon hydrogen rules coming in 2025. All this makes radical change risky, but postponing certain aspects might be slightly more palatable. Brussels must also decide to maintain or soften its 2030 mandates for renewable hydrogen. Several countries and companies want openness to hydrogen from other low-carbon production pathways, which are backed in the US, Canada, the UK and others. Some have more fundamentally urged freedom to find the cheapest route towards cutting CO2. The first interpretation of the industry mandates from the Netherlands highlights the difficulty balancing mandates with fair competition versus competitors inside and outside the bloc. But loosening rules would frustrate first movers that took pains to comply. Moreover, some firms champion the EU's forte of creating demand via rules over subsidies that cannot last forever nor compete with the US. "Don't blink, because people will invest money against 2030 mandates," Spanish integrated Moeve's director and chief executive Maarten Wetselaar urged Brussels recently. EU policymakers accept they must cut hydrogen costs and are weighing options with member states. "The market has changed, and we are probably more technology neutral and more colour friendly than we used to be... this is realism," commission deputy director general for energy Mechthild Worsdorfer said in November. But Worsdorfer opposed "changing anything right now" after the "intense" debates to settle definitions. Commission and members will "find the right balance", Worsdorfer said, but hydrogen participants need clarity sooner rather than later. By Aidan Lea Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: More changes for Dated crude benchmark ahead

20/12/24

Viewpoint: More changes for Dated crude benchmark ahead

London, 20 December (Argus) — The crude market has adjusted to the presence of US WTI in the Dated basket, but the past year has revealed some hiccups, suggesting more changes will be needed to the benchmark's structure. WTI has been a part of Dated for more than a year, in which time it has bought much-needed liquidity to a shrinking amount of physical crude underpinning the benchmark, and has encouraged a return of some old, long-absent market participants and the entry of a few new ones. WTI has introduced more transparency to Dated, making it much more easily accessible. While some traders feared the grade would arrest any volatility, which is necessary for trading companies to thrive, this has not happened. Instead, WTI has effectively tied the European market to the US one, with European Ice Brent futures following WTI Nymex futures very closely. But recent months have exposed some flaws, suggesting some more changes to the benchmark are needed. European refiners run as much as 4.5mn b/d of light sweet crude, Vortexa data show. Dated was designed to represent the price moves of this large market via a few crudes produced, and mostly consumed, in the region. But production of several component grades have shrunk because of natural decline at North Sea fields. Production of Brent, the benchmark's namesake grade, has fallen from above 400,000 b/d in 2001 to just 38,000 b/d this year. Forties' exports dropped from more than 600,000 b/d to 175,000 b/d in the same time. Therefore it seemed fair when Dated was set by WTI nearly half of the time, as it is the single largest crude that European refiners buy, accounting for around 14pc of all their supplies. The situation reversed in the last weeks of 2024. WTI has not set Dated since 11 October, with that duty mostly shared between Oseberg, Ekofisk and Troll. But values of these grades — especially Oseberg and Troll — are rather theoretical, due to low liquidity of just 2-5 cargoes a month. It is not uncommon to see bids for those grades in the window, when the scarce supplies loading on the dates covered by bids are already placed. The same applies to Brent, for which loadings range between just 1-2 cargoes every month. WTI and Forties have greater liquidity, allowing them to be more representative of Europe's light sweet market, but their recent marginal role in setting the benchmark price raises a question if grades like Brent, Oseberg and Troll need to be in the basket at all. QPs an almighty relic of the past It might feel counterintuitive that smaller and more expensive grades affect the price of Dated — which is set by the cheapest grade in the basket. But Oseberg, Ekofisk and Troll, which are typically more expensive on a fob basis than is WTI on a delivered-Europe basis, are adjusted by quality premiums (QPs) for benchmarking purposes. QPs are calculated at 60pc of the difference between each grade and the most competitive of the six benchmark grades in the second month prior to the month of loading. The mechanism was made for a basket of crudes that originate in the North Sea and trade on a fob basis. Inclusion of WTI, which in turn is adjusted by intra-European freight to make it a fob price in the North Sea, has widened QPs for the three grades. With price spreads between pricier and cheaper benchmark grades increasingly dependent on volumes of WTI coming to Europe, such an adjustment does not seem to serve its purpose anymore. By Lina Bulyk Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Trump backs new deal to avoid shutdown: Update

19/12/24

Trump backs new deal to avoid shutdown: Update

Adds updates throughout Washington, 19 December (Argus) — US president-elect Donald Trump is offering his support for a rewritten spending bill that would avoid a government shutdown but leave out a provision authorizing year-round 15pc ethanol gasoline (E15) sales. The bill — which Republicans rewrote today after Trump attacked an earlier bipartisan agreement — would avoid a government shutdown starting Saturday, deliver agricultural aid and provide disaster relief. Trump said the bill was a "very good deal" that would also include a two-year suspension of the "very unnecessary" ceiling on federal debt, until 30 January 2027. "All Republicans, and even the Democrats, should do what is best for our Country, and vote 'YES' for this Bill, TONIGHT!" Trump wrote in a social media post. Passing the bill would require support from Democrats, who are still reeling after Trump and his allies — including Tesla chief executive Elon Musk — upended a spending deal they had spent weeks negotiating with US House speaker Mike Johnson (R-Louisiana). Democrats have not yet said if they would vote against the new agreement. "We are prepared to move forward with the bipartisan agreement that we thought was negotiated in good faith with House Republicans," House minority leader Hakeem Jeffries (D-New York) said earlier today. That earlier deal would have kept the government funded through 14 March, in addition to providing a one-year extension to the farm bill, $100bn in disaster relief and $10bn in aid for farmers. The bill would also provide a waiver that would avoid a looming ban on summertime sales of E15 across much of the US. Ethanol industry officials said they would urge lawmakers to vote against any package without the E15 provision. "Pulling E15 out of the bill makes absolutely no sense and is an insult to America's farmers and renewable fuel producers," Renewable Fuels Association chief executive Geoff Cooper said. If no agreement is reached by Friday at 11:59pm ET, federal agencies would have to furlough millions of workers and curtail services, although some agencies are able to continue operations in the event of a short-term funding lapse. Air travel is unlikely to face immediate interruptions because key federal workers are considered "essential," but some work on permits, agricultural and import data, and regulations could be curtailed. The US Federal Energy Regulatory Commission has funding to get through a "short-term" shutdown but could be affected by a longer shutdown, chairman Willie Phillips said. The US Department of Energy expects "no disruptions" if funding lapses for 1-5 days, according to its shutdown plan. The US Environmental Protection Agency would furlough about 90pc of its nearly 17,000 staff in the event of a shutdown, according to a plan it updated earlier this year. By Chris Knight Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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