Southeast Asian oil demand to rise to 2050: IEA

Spanish Market: Crude oil, Electricity, Natural gas
22/10/24

Southeast Asia's oil demand is set to increase to 7mn b/d in 2050 under current policies, according to the IEA's latest Southeast Asia Energy Outlook released today.

Oil demand in the southeast Asian region is set to rise from 5mn b/d in 2023 to 6.4mn b/d in 2035, and to 7mn b/d in 2050. This is a downward revision from the IEA's previous outlook in 2022, which projected oil demand rising to about 7mn b/d in 2030 and 7.5mn b/d in 2050.

The IEA's stated policies scenario (Steps) is based on countries' existing policies, while the announced pledges scenario (APS) assumes that governments meet all their national energy and climate targets, including long-term net zero goals. Under the APS, oil demand continues to grow but to a lesser extent to 5.2mn b/d in 2035, and then falls to 3.8mn b/d in 2050.

The transport sector is the main driver of the region's increase in oil demand, with oil consumption in that sector more than doubling from 1.3mn b/d in 2000 to 2.8mn b/d currently. Under current policies and trends, gasoline and diesel consumption for road transport rises by around 30pc by 2050, reaching nearly 1.6mn b/d.

The region's gas demand is projected to rise from around 170bn m³ currently, to around 210bn m³ in 2030 and about 270bn m³ in 2050. This compared to the IEA's 2022 projections of 240bn m³ in 2030 and about 340bn m³ in 2050.

Gas demand has increased by 5pc since 2022, according to the IEA. This recovery comes after a 4pc fall in demand over 2019-22, resulting from Covid-19 and a rise in LNG prices following Russia's invasion of Ukraine.

Overall energy demand is expected to rise by "about a third by 2035 and two-thirds by 2050," according to the IEA, with just under half of this demand growth to be met by fossil fuels. Under the APS, energy demand grows to a smaller extent of around 40pc to 2050, reflecting accelerated improvements in efficiency, electrification and fuel switching.

The share of fossil fuels in the total energy mix falls from 78pc currently to 65pc in 2050. This is lower than the 2022 outlook's projection that fossil fuels would make up more than 70pc of the energy mix in 2050.

The downward revisions in fossil fuel demand and their share in the energy mix is likely because renewables are set to grow rapidly in the region. Renewable energy already accounts for just under 20pc of the region's energy mix, through hydropower, geothermal and bioenergy. Clean energy is set to meet more than 35pc of energy demand growth to 2035 under the Steps scenario, because of rapid expansions in wind and solar power.

IEA's growing presence in southeast Asia

The IEA and Singapore inaugurated the IEA Regional Co-operation Centre on 21 October — the first office outside of the organisation's Paris headquarters. The centre will serve as a hub for IEA's activities and engagement in the region, so the organisation can provide policy guidance, technical assistance, training and capacity-building to address areas such as scaling up the deployment of renewables and increasing access to finance for clean energy investments.

Southeast Asia is projected to be second only to India in the contribution to global energy demand growth over the coming years, said IEA's chief energy economist Tim Gould on 22 October at the Singapore International Energy Week. This is why the new regional center is so important, he added.

Cross-border electricity trade, in particular, is going to be a high priority, Gould said. "A key work, from an IEA perspective, is to make those opportunities to bring in the private sector and different sources of finance for these projects," he added.

By Prethika Nair

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24/12/24

Viewpoint: California dairy fight spills into 2025

Houston, 24 December (Argus) — California must begin crafting dairy methane limits next year as pressure grows for regulators to change course. The California Air Resources Board (CARB) has committed to begin crafting regulations that could mandate the reduction of dairy methane as it locked in incentives for harvesting gas to fuel vehicles in the state. The combination has frustrated environmental groups and other opponents of a methane capture strategy they accuse of collateral damage. Now, tough new targets pitched to help balance the program's incentives could become the fall-out in a new lawsuit. State regulators have repeatedly said that the Low Carbon Fuel Standard (LCFS) is ill-suited to consider mostly off-road emissions from a sector that could pack up and move to another state to escape regulation. California's LCFS requires yearly reductions of transportation fuel carbon intensity. Higher-carbon fuels that exceed the annual limits incur deficits that suppliers must offset with credits generated from the distribution to the state of approved, lower-carbon alternatives. Regulators extended participation in the program to dairy methane in 2017. Dairies may register to use manure digesters to capture methane that suppliers may process into pipeline-quality natural gas. This gas may then be attributed to compressed natural gas vehicles in California, so long as participants can show a path for approved supplies between the dairy and the customer. California only issues credits for methane cuts beyond other existing requirements. Regulators began mandating methane reductions from landfills more than a decade ago and in 2016 set similar requirements for wastewater treatment plants. But while lawmakers set a goal for in-state dairies to reduce methane emissions by 40pc from 2030 levels, regulators could not even consider rulemakings mandating such reductions until 2024. CARB made no move to directly regulate those emissions at their first opportunity, as staff grappled with amendments to the agency's LCFS and cap-and-trade programs. That has meant that dairies continue to receive credit for all of the methane they capture, generating deep, carbon-reducing scores under the LCFS and outsized credit production relative to the fuel they replace. Dairy methane harvesting generated 16pc of all new credits generated in 2023, compared with biodiesel's 6pc. Dairy methane replaced just 38pc of the diesel equivalent gallons that biodiesel did over the same period. The incentive has exasperated environmental and community groups, who see LCFS credits as encouraging larger operations with more consequences for local air and water quality. Dairies warn that costly methane capture systems could not be affordable otherwise. Adding to the expense of operating in California would cause more operations to leave the state. California dairies make up about two thirds of suppliers registered under the program. Dairy supporters successfully delayed proposed legislative requirements in 2023. CARB staff in May 2024 declined a petition seeking a faster approach to dairy regulation . Staff committed to take up a rulemaking considering the best way to address dairy methane reduction in 2025. Before that, final revisions to the LCFS approved in November included guarantees for dairy methane crediting. Projects that break ground by the end of this decade would remain eligible for up to 30 years of LCFS credit generation, compared with just 10 years for projects after 2029. Limits on the scope of book-and-claim participation for out-of-state projects would wait until well into the next decade. Staff said it was necessary to ensure continued investment in methane reduction. The inclusion immediately frustrated critics of the renewable natural gas policy, including board member Diane Tarkvarian, who sought to have the changes struck and was one of two votes ultimately against the LCFS revisions. Environmental groups have now sued , invoking violations that effectively froze the LCFS for years of court review. Regulators and lawmakers working to transition the state to cleaner air and lower-emissions vehicles will have to tread carefully in 2025. By Elliott Blackburn Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Crude production resumes at Karoon’s Brazil Bauna field

24/12/24

Crude production resumes at Karoon’s Brazil Bauna field

Sydney, 24 December (Argus) — Australia-listed oil producer Karoon Energy has restarted its Bauna project offshore Brazil, the firm said today. Output resumed late on 22 December local time, Karoon said. This followed the repair of one of two mooring chains tethering its floating production, storage and offloading (FPSO) vessel, which failed on 11 December , leading the company to cut its 2024 guidance to 27,600-28,100 b/d of oil equivalent (boe/d), down from an earlier 28,700-29,500 boe/d. The second mooring chain is expected to be repaired by mid-January, Karoon said. An investigation into the failure will be jointly undertaken with FPSO owner and operator Ocyan, and its joint-venture partner Altera Infrastructure. Bauna production was about 24,500 b/d before the shutdown, with Karoon expecting to reach this level again in the coming days. By Tom Major Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: US LPG cargo premiums poised to fall

23/12/24

Viewpoint: US LPG cargo premiums poised to fall

Houston, 23 December (Argus) — The booming US LPG export market has fueled record spot fees this year for terminal operators that send those cargoes abroad, but those fees are poised to fall next year as additional export capacity comes online. US propane exports surged over the past two years, hitting an all-time high of 1.85mn b/d in the first quarter of this year, according to data from the US Energy Information Administration (EIA). Terminal fees for spot propane cargoes out of the US Gulf coast hit an all-time high of Mont Belvieu +32.5¢/USG (+$169.325/t) in mid-September. US propane production is expected to grow by another 80,000 b/d in 2025 to 2.22mn b/d while the outlook for domestic consumption is fairly steady, at 820,000 b/d next year — meaning even more propane will be pushed into the waterborne market. But that is dependent on US infrastructure keeping up with the pace of production. US export terminals in Houston, Nederland and Freeport, Texas, have run at or above capacity for the last two years given the thirst for cheaper US feedstock, largely from propane dehydrogenation (PDH) plant operators in China. This demand has created bottlenecks at US docks, and midstream operators like Enterprise, Energy Transfer, and Targa have rushed to ramp up spending on both pipelines and additional refrigeration to stay ahead of the wave of additional production. US gas output spurs LPG exports As upstream producers have ramped up natural gas production ahead of new LNG projects, most producers are counting on LPG demand from international outlets in Asia to offload the ethane and propane the US cannot consume. For the past four years, Asian buyers have been more than happy to oblige. US propane exports to China rose from zero in 2019, when China imposed tariffs on US imports, to an average of 1.36mn metric tonnes (t) per month in January-November 2024, according to data from analytics firm Kpler, making China the largest offtaker of US shipments. US exports to Japan averaged 480,000t per month throughout most of 2024, and exports to Korea averaged 460,000t per month in the first 11 months of 2024. China, Korea, and Japan received 52pc of US propane exports in 2024, up from 49pc in 2020, according to data from Vortexa. Strong demand in Asia has kept delivered prices in Japan high enough to sustain an open arbitrage between the US and the Argus Far East Index (AFEI). Forward-month in-well propane prices at Mont Belvieu, Texas, have remained well below delivered propane on the AFEI. In 2020, Mont Belvieu Enterprise (EPC) propane averaged a $143/t discount to delivered AFEI — a spread that has only widened as additional PDH units in Asia have come online. During the first 11 months of 2024, the Mont Belvieu to AFEI spread averaged a hefty $219/t, leaving plenty of room for wider netbacks in the form of higher terminal fees for US sellers, especially as a wave of new VLGCs entering the global market has left shipowners with less leverage to take advantage of the wider arbitrage. The resulting wider arbitrage to Asia has kept US export terminals running full for the last two years. So when a series of weather-related events and maintenance in May-September limited the number of spot cargoes operators could sell and delayed scheduled shipments, term buyers willing to resell any of their loadings could effectively name their price. This spurred the record-high premiums for spot propane cargoes in September. New projects may narrow premium An increase in US midstream firm investments in additional dock capacity and added refrigeration in the years ahead could narrow those terminal fees, however. Announced projects from Enterprise and Energy Transfer, in particular, will add a combined 550,000 b/d of LPG export capacity out of Houston and Nederland, Texas by the end of 2026. Enterprise's new Neches River terminal project near Beaumont, Texas, will add another 360,000 b/d of either ethane or propane export capacity in the same timeframe. These additions are poised to limit premiums for spot cargoes by the end of 2025. Already, it appears the spike in spot cargo premiums to Mont Belvieu has abated for the rest of 2024. Spot terminal fees for propane sank to Mont Belvieu +14¢/USG by the end of November. The lower premiums come not only as terminals resume a more normal loading schedule, but at the same time a surplus of tons into Asia ahead of winter heating demand has narrowed the arbitrage. The spread between in-well EPC propane at Mont Belvieu fell from $214.66/t to $194.45/t during November. A backwardated market for AFEI paper into the second quarter of 2025 means US prices are poised to fall more in order to keep the spread from narrowing further. By Amy Strahan Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: US tax fight next year crucial for 45Z

23/12/24

Viewpoint: US tax fight next year crucial for 45Z

New York, 23 December (Argus) — A Republican-controlled Congress will decide the fate next year of a federal incentive for low-carbon fuels, setting the stage for a lobbying battle that could make or break existing investment plans. The 45Z tax credit, which offers greater subsidies to fuels that produce fewer emissions, is poised to kick off in January. Biofuel output has boomed during President Joe Biden's term, driven in large part by west coast refiners retrofitting facilities to process lower-carbon fats and oils into renewable diesel. The 45Z tax credit, created by the 2022 Inflation Reduction Act (IRA), was designed to extend that growth. But Republicans will soon control Washington. President-elect Donald Trump has dismissed the IRA as the "Green New Scam", and Republicans on Capitol Hill, who had no role in passing Biden's signature climate legislation, are keen to cut climate spending to offset the steep cost of extending tax cuts from Trump's first term. Biofuels support is a less likely target for repeal than other climate policies, energy lobbyists say. But Republicans have already requested input on 45Z, signaling openness to changes. Republicans plan to use the reconciliation process, which enables them to avoid a Democratic filibuster in the Senate, to extend tax breaks that are scheduled to expire in 2025. "I want to place our industry in a place to make sure that the biofuels tax credit is part of reconciliation," said Kailee Tkacz Buller, president of the National Oilseed Processors Association. But lawmakers "could punt the biofuels discussion if stakeholders aren't aligned." A decade ago, biofuel policy was a simple tug-of-war between the oil and agriculture industries. Now many refiners formerly critical of the Renewable Fuel Standard produce ethanol and advanced biofuels themselves. And the increasingly diverse biofuels industry could complicate efforts to present a united front to Congress. Farm groups worry about carbon intensity scoring hurting crop demand and have lobbied to curtail record-high feedstock imports, to the chagrin of some biorefineries. Those producers are no monolith either: Biodiesel plants often rely more on local vegetable oils, while ethanol producers insist on keeping incentives that do not discriminate by fuel type and some oil majors would back subsidizing fuels co-processed with petroleum. Add airlines into the picture, which want greater incentives for aviation fuels, and marketers frustrated by 45Z shifting subsidies away from blenders — and the threat of fractious negotiations next year becomes clear. There are options for potential compromise, according to an Argus analysis of comments submitted privately to Republicans in the House of Representatives, as well as interviews with energy lobbyists and tax experts. The industry, frustrated by the Biden administration's delays in clarifying 45Z's rules, might welcome legislative changes that limit regulatory discretion regardless of what agency guidance eventually says. And lobbyists have floated various ways to appease agriculture groups without kneecapping biorefineries reliant on imports, including adding domestic content bonuses, imposing stricter requirements for Chinese-origin used cooking oil, and giving preference to close trading partners. Granted, unanimity among lobbyists is hardly a priority for Republican tax-writers. Reaching any consensus in the restive caucus, with just a handful of votes to spare in the House, will be difficult enough. "These types of bills always come to down to what's the most you can do before you start losing enough votes to pass it," said Jeff Navin, cofounder of the clean energy advocacy firm Boundary Stone Partners and a former House and Senate staffer. "Because they can only lose a couple of votes, there's not much more beyond that." And the caucus's goal of cutting spending makes an industry-wide goal — extending the 45Z credit into the 2030s — even more challenging. "It is a hard sell to get the extension right away," said Paul Winters, director of public affairs at Clean Fuels Alliance America. Climate costs Cost concerns also make less likely a simple return to the long-running blenders credit, which offered $1/USG across the board to biomass-based diesel. The US Joint Committee on Taxation in 2022 scored the two-year blenders extension at $5.5bn, while pegging three years of 45Z at less than $3bn. An inconvenient reality for Republicans skeptical of climate change is that 45Z's throttling of subsidies based on carbon intensity makes it more budget-friendly. Lawmakers have other reasons to not ignore emissions. Policies elsewhere, including California's low-carbon fuel standard and Europe's alternative jet fuel mandates, increasingly prioritize sustainability. The US deviating from that focus federally could leave producers with contradictory incentives, making it harder to turn a profit. And companies that have already sunk funds into reducing emissions — such as ethanol producers with heavy investments in carbon capture — want their reward. Incentives with bipartisan buy-in are likely more durable over the long run too. Next time Democrats control Washington, liberals may be more willing to scrap a credit they see as padding the profits of agribusiness — but less so if they see it as helping the US decarbonize. By Cole Martin Tax credit changes 40A Blenders Tax Credit 45Z Producers Tax Credit $1/USG Up to $1/USG for road fuels and up to $1.75/USG for aviation fuels depending on carbon intensity For domestic fuel blenders For domestic fuel producers Imported fuel eligible Imported fuel not eligible Exclusively for biomass-based diesel Fuels that produce no more than 50kg CO2e/mmBTU are eligible Feedstock-agnostic Carbon intensity scoring incentivizes waste over crop feedstocks Co-processed fuels ineligible Co-processed fuels ineligible Administratively simple Requires federal guidance on how to calculate carbon intensities for different feedstocks and fuel pathways Expiring after 2024 Lasts from 2025 through 2027 Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Japan’s Chugoku restarts Shimane nuclear reactor early

23/12/24

Japan’s Chugoku restarts Shimane nuclear reactor early

Osaka, 23 December (Argus) — Japanese utility Chugoku Electric Power restarted the 820MW Shimane No.2 nuclear reactor for test operations on 23 December, two days earlier than originally planned. The No.2 reactor at Shimane in west Japan's Shimane prefecture was reconnected to the country's power grids for the first time in nearly 13 years, after the reactor shut down in January 2012 for stricter safety inspections following the 2011 Fukushima nuclear meltdown disaster. Chugoku reactivated the Shimane No.2 reactor on 7 December, aiming to resume power generation on 25 December. But the target date for commercial operations remained unchanged on 10 January, despite the earlier than expected restart. The Shimane No.2 reactor will be a vital power source as the sole nuclear fleet in the Chugoku area, to help enhance the resilience of the power supply structure, stabilise retail electricity prices and reduce CO2 emissions, said Japan Atomic Industrial Forum's president Hideki Masui on 23 December. The Shimane No.2 reactor is the second boiling water reactor (BWR) to be restarted after the Fukushima disaster, following the 825MW Onagawa No.2 BWR unit that resumed test generation on 15 November, with normal operations scheduled to restart on 26 December. The BWR is the same type as that involved in the meltdown at the Fukushima Daiichi plant. The restart of the two BWRs would pave the way for Japan's nuclear restoration, as 15 BWRs — including advanced BWRs — are still closed in the wake of the Fukushima disaster. Japan has restored 14 reactors as of 23 December, including the Shimane and Onagaw reactors, of which 12 are installed with a pressurised water reactor (PWR) design. Nuclear power's share The Japanese government last week set a target of 20pc for nuclear power's share in the country's draft power mix for the April 2040-March 2041 fiscal year, under the triennial review for the country's Strategic Energy Plan (SEP). Tokyo is seeking to restart all existing reactors to achieve the 20pc goal, adding that replacement reactors would also be possible. The draft SEP allows nuclear power operators that had decommissioned reactors to build next-generation reactors at their nuclear sites, not limited to the same site. The previous SEP did not mention building new reactors or replacements. Japan's Federation of Electric Power Companies (FEPC) has applauded this progress, but FEPC chairman Kingo Hayashi noted that it was disappointing the SEP did not mention a nuclear capacity target which the FEPC had requested. It also did not include building new reactors or the expansion of existing nuclear plants, Hayashi added. By Motoko Hasegawa Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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