Cop: G20 momentum key to Cop climate finance outcome

Spanish Market: Battery materials, Coal, Crude oil, Electricity, Emissions, Natural gas, Oil products
18/11/24

The outcome of the G20 leaders' summit in Brazil taking place on Monday and Tuesday on climate financing will be key to the success of the UN Cop 29 climate conference in Baku, Azerbaijan, summit president Mukhtar Babayev said today.

"We cannot succeed without [the G20], and the world is waiting to hear from them," Babayev said. The leaders' summit takes place at the beginning of the second week of the Cop 29 conference. Progress at Cop 29 last week towards agreeing a new climate finance target for developing countries — the so-called NCQG — was not sufficient, Babayev said. He is concerned that parties are not moving towards each other fast enough. Little progress was made in the first week on three main areas of disagreement: the amount of climate finance which should be provided, how it should be structured, and which countries should contribute. Babayev urged G20 leaders, including US president Joe Biden who will be present in Brazil, to send a "positive signal of commitment to solving the climate crisis," and deliver clear mandates for Cop 29.

The talks in Baku move from the technical to the political phase this week. Ministers typically have more authority to move red lines. But parties should focus on wrapping up less contentious issues early in the week so as to leave time for major political decisions, according to Simon Stiell, executive secretary of UN climate body the UNFCCC.

Babayev expects talks on the amount of climate financing which will be on the table to continue until the last day of the summit at the end of this week, he said.

The Cop presidency has invited former and upcoming Cop hosts the UK and Brazil to advise and "ensure an ambitious and balanced package of negotiated outcomes." Both countries have in the past week communicated more ambitious emissions reduction targets, which have been broadly welcomed.

The EU today called for the Cop presidency to step up its role in the process. "We do need a presidency to lead, to steer us in the direction of a safe landing ground," European commissioner for climate action Wopke Hoekstra said.

Hoekstra declined to be drawn on the amount of climate financing that the EU would like to see. Developing countries have pushed for a high goal of $1.3 trillion/yr, well above the previous target of $100bn/yr. The EU today reiterated instead its desire for the base of contributor countries to be enlarged beyond the current roster of countries defined as developed under the UNFCCC, and for as much private finance to be mobilised as possible to add to public finance.

By Rhys Talbot

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18/11/24

Q&A: If you break it down, it is tried, tested: Xlinks

London, 18 November (Argus) — Start-up developer Xlinks plans to connect 11.5GW of Moroccan wind and solar capacity, and a 5GW battery energy storage system, with the UK through two 1.8GW sub-sea cables, an ambitious project using "tried and tested" technologies. Argus spoke to chief executive James Humfrey about the project's timeline and progress. Edited highlights follow: For those who may not know, can you describe the Xlinks project? We are excited to bring clean energy from the Moroccan Sahara to north Devon. This will be a transformational surge of reliable, clean power, and we will bring it during the hours the UK needs electricity most, supporting Britain's ambitions to decarbonise, which you see in the news and most recently in Baku [at Cop 29]. The project will benefit the broader economy by displacing expensive, volatile imported gas and reducing wholesale power prices. It will also help balance the grid, feeding into the south of England, which has very high demand without significant grid upgrades. The independent Afry consultancy group calculated the project's socioeconomic benefit to be at least £17bn. It will also offer a reliable wind and solar energy supply, with nearly two times the solar radiation factor. [Moroccan] wind generation is slightly negatively correlated to UK output, helping overcome the dunkelflaute [dark lull] scenario, which is the advantage of moving electrons in time and space. This reliability complements the UK domestic renewables pipeline, primarily offshore and onshore wind, while aligning with Morocco's green export ambitions. Can you provide our subscribers with an update on the project, its timeline and any key milestones? It will be ready next decade. We are supporting the domestic supply chain through XLCC's HDVC cable expansion in Hunterston, Scotland . And we are set up to rapidly mobilise and deliver the project. We have a strong team of people who have worked on these projects before. For example, our HVDC cable team, led by Nigel Williams, built the North Sea Link between Blythe and Norway, tackling more complex problems than we face. They've built lots of interconnectors and know how to do it. I realise that Xlinks holds connection agreements for two 1.8GW connections with National Grid. Has Xlinks progressed with other national authorities, particularly those through which the cable will transit? We have worked with the Moroccan government, including [plans] around the land and conducting one of the world's longest [wind and solar] measurement campaigns. So, we've got excellent resource data regarding wind and solar energy. We have already obtained permits from [the transit countries] for route surveys and we have vessels in the water at the moment, undertaking geophys and geotech. Next year, we'll apply for the final installation permits, based on the environmental studies and other benefit data. We've taken a longer but less challenging route, with lower water depths, making it technically easier. It is, for example, less deep than the North Sea Link, which was a deliberate technical decision. The previous government marked Xlinks as a project of national significance . Do you expect any change under the new administration, and in what way has this classification affected progress ? No, it hasn't affected us. We completed the public consultations over the summer and are about to submit our DCO [development consent order] application, which is a large amount of work. We have finished that, with no changes [since the change of government]. It is probably worth saying that our land route in Devon is all underground. We don't have any pylons, which is much less intrusive. Has this improved Xlink's ability to generate capital interest? Is there any specific attempt to generate interest from sovereign wealth funds or other institutional investors? We've been fortunate that our blue-chip investors [Octopus, TotalEnergies, Taqa, GE Vernova and Africa Finance] are very keen on the project, and it matches their strategic plans. They want to go all the way through to construction. We may have further investors at the close, but they are our primary focus right now. Do you have an update on the contract for difference (CfD) process? Xlinks has published a desire to reach a £70-80/MWh strike price at 2012 prices. Yes, that remains our guidance. We are working through the CfD and Treasury Green Book process with the Department of Energy. It is quite a structured process. How do you reconcile that strike price with far lower prices reached in recent allocation rounds (AR), namely AR6, although the technologies are not directly comparable? Firstly, in the NESO report, the forecasts for offshore wind [prices] rise quite a bit as they move out to 2030, so AR6 is a reference, but there are figures in the NESO report that are above our £70-80 [strike price]. Importantly, it is not a comparison between apples and apples. Our profile is completely different from that of offshore wind. We offer firm power for 19 hours a day, optimised for peak hour demand and very high reliability, akin to nuclear. Given our flexibility, we can also provide various other services, including frequency and even black start services. The development contains ambitious plans for vast-scale battery storage of up to 5GW. Given the difficulties faced by several European battery manufacturers, do you foresee any significant supply chain challenges? We have an ongoing battery procurement process, and the invitations to tender have gone out. We've had good interest at competitive levels and are confident in it. We are not seeing any challenges, and it's going very well. And what does the flexibility and opportunity a battery offers at this scale mean for a project like Xlinks? It allows us to optimise during the diagonal shift of solar power, when the UK grid needs us most. Additionally, it gives us a sub-second response, giving us flexibility and opening the door to the frequency services we mentioned earlier. It is very valuable and allows us to provide benefit at scale and at speed. Does the UK's ambition, corroborated by NESO's latest report to become a net power exporter beyond 2030, change the project's economic viability or impact it in any way? No, the report does not change our viability or where we fit in the future system. In fact, it further emphasises the part we can play. If you look at demand, it is very likely to increase again by another 23pc in 2030-35, and considering our generation profile, producing in periods of low domestic wind production, [it fits well]. Additionally, when we compare it to other sources of clean [baseload] generation, such as nuclear, you see solar, wind and transmission projects have extremely good predictability of outcome and a shorter delivery timeline. Xlinks has stated an ambition to investigate a Morocco-German link. What might this look like? Would it involve an entirely new generation facility, too? First, the Morocco-UK power project is very much our first priority. We're focused on that and we think bringing this to a financial close will help unlock a range of projects across the industry. And demonstrate the art of the possible. We do have some early feasibility work going on. It would be entirely separate, and that would include generation as well. Do you have any closing thoughts that you would like to leave our subscribers? What is different about this is its scale. But when you break it down, these are all tried-and-tested technologies. There is nothing unusual about them, whether wind and solar in Morocco or large-scale batteries. We are not an interconnector, but long-distance transmission has a long history in the UK. When you look at the water depths, it is less complicated than North Sea Link. It has all been done before, in its parts — just the scale is different. By Daniel Craig Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Cop: Progress on actions to cut emissions uncertain

18/11/24

Cop: Progress on actions to cut emissions uncertain

Baku, 18 November (Argus) — Progress on mitigation — actions to cut greenhouse gas emissions — is uncertain at the UN Cop 29 climate summit, as talks on a specific text related to the issue are at risk to be pushed back to 2025, losing any progress made in the past year. Some countries had proposed using the mitigation work programme — a work stream focused on reducing emissions — to progress the commitment made at Cop 28 in 2023 to "transition away" from fossil fuels. But talks have stalled and could end without a conclusion at the summit. Developed countries as well as developing nations including some small island states and countries in Latin America — such as Brazil, Colombia, Peru, Mexico — have expressed disappointment about how mitigation talks were going. New Zealand called on countries to follow up on last year's decision on mitigation at Cop 28 and Norway added that these issues deserved "more than silence on mitigation". Switzerland complained that mitigation was "held up by a select few", and said that the discussion was critical for increased commitments for next year's 2035 Nationally Determined Contributions (NDCs). NDCs are countries' climate plans that include emissions reduction targets. Cop parties are due to submit new versions by February 2025. The US also said that Cop 29 needed to "reaffirm the historical Global Stocktake decision" taken last year. And developed nations, led by the EU, called for the discussion to continue this week — the second week of Cop 29. But countries including Bolivia, Iran and Saudi Arabia, for the Arab Group, pushed back on this. The mitigation work programme is "not… open to reinterpretation", Saudi Arabia's representative said today. The country said earlier that it did not want new targets to be imposed, complaining about the "top-down approach" taken by developed countries. India reminded developed countries that they have yet to deliver on their new finance commitment — a crucial step for more ambitious NDCs in developing nations. But "Cop 29 cannot and will not be silent on mitigation", the summit's president, Mukhtar Babayev said today. "On mitigation we have been clear that we must make progress, "he said, adding that he has asked ministers from Norway and South Africa to consult on what an outcome on mitigation could look like. EU climate commissioner Wopke Hoekstra today said that it is "imperative that we send a strong signal this week for the next round of NDCs", he said. Points related to mitigation — including transitioning away from fossil fuels and phasing out inefficient fossil fuels subsidies — are currently mentioned in the draft text for the new finance goal, known as the new collective quantified goal (NCQG). It is the key issue at Cop 29. Developed countries agreed to deliver $100bn/yr in climate finance to developing nations over 2020-25, and Cop parties must decide on the next stage — including the amount. Developed countries are likely push for the fossil fuel language to stay in the finance goal text, especially if mitigation talks stall elsewhere. But countries such as Saudi Arabia have long opposed this, while developed countries have received some criticism for still not having given an amount for the new finance target. By Georgia Gratton, Prethika Nair and Caroline Varin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

German diesel demand at year-high with winter shift

18/11/24

German diesel demand at year-high with winter shift

Hamburg, 18 November (Argus) — Traders in Germany noted a significant increase in diesel demand at the start of the past week because of lower prices and the transition to winter-grade fuel. Spot sales of heating oil and gasoline rose, particularly in the south and southwest. Middle distillates in Germany traded on 11-12 November at lower prices than in the week prior, pressured by declining Ice gasoil futures. But these rose in the following days. There is uncertainty in the market around the potential impact of US President-elect Donald Trump's trade policy from January. The upcoming switch to winter diesel in Germany could be leading to increased demand. Most tank storage and refinery operators have, since 1 November, been offering diesel and gasoline in winter quality. Only winter-grade fuel can be dispensed from 16 November. Consumers in recent weeks have been ordering smaller amounts of diesel, waiting for the switch to winter specification before replenishing stocks, traders told Argus . Consequently, diesel spot volumes reported to Argus increased to the highest this year on 11 November. Traded quantities of heating oil and gasoline also rose. But buying interest for middle distillates and gasoline weakened as the week went on. This month has seen high imports into northern Germany and elevated refinery production. On the Rhine river, falling water levels at the Kaub bottleneck has led to increased freight rates from Amsterdam-Rotterdam-Antwerp (ARA) to destinations on the Upper Rhine. But demand for shipping space from importers in mid-November is so weak that the effect of low water levels on the rates was dampened, shipowners said. Water levels are forecast to rise in the coming days. TotalEnergies' 240,000 b/d Leuna refinery in eastern Germany, close to the border with Czech Republic, ended a maintenance shutdown in the past week. The shutdown had only minor effects on product availability but lasted longer than expected because of technical problems when ramping up. Leuna producing again marks the end of this year's maintenance season in Germany. By Johannes Guhlke Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

G20 takes climate spotlight as Cop 29 stalls

18/11/24

G20 takes climate spotlight as Cop 29 stalls

Rio de Janeiro, 18 November (Argus) — A top UN climate official is urging G20 leaders to step up the pace of developing new climate finance goals, as talks on the topic have stalled at the UN Cop 29 climate talks in Baku, Azerbaijan. "Climate finance progress outside of our process is equally crucial, and the G20's role is mission-critical," said UN climate body chief Simon Stiell in a letter to the G20 leaders, who start two days of meetings today in Rio de Janeiro. "[The summit] must send crystal-clear global signals." Leaders at the G20 summit have already promised to discuss terms of a fair energy transition, as Brazil — which is holding the group's presidency this year — picked the topic as one of its three goals, along with combating hunger, poverty and inequality and the reform of global governance. The leaders will present a joint statement on the energy transition on Tuesday and on the other two goals on Monday. Brazilian president Luiz Inacio Lula da Silva and UN secretary general Antonio Guterres already met over the weekend at the end of the G20 Social, a Brazilian initiative parallel to the G20 meetings that seeks to "broaden the dialogue between countries and society" to discuss climate and environmental crises. Lula and Guterres discussed the need for a "coordinated international response to mitigate the effects of climate change, promote adaptation and protect the most vulnerable populations," according to a statement from the Brazilian environmental ministry. They also agreed that increasing international financing for climate action in developing countries is "urgent." The leaders discussed the increase in global climate ambitions through new Nationally Determined Contributions, aligned with the 1.5°C target of the Paris Agreement and in line with the scientific recommendations of the Intergovernmental Panel on Climate Change. By Lucas Parolin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

US west coast refiners boost Canadian TMX intake

18/11/24

US west coast refiners boost Canadian TMX intake

Houston, 18 November (Argus) — US west coast refiners have increased heavy Canadian crude purchases by almost 75pc since the 590,000 b/d Trans Mountain Expansion (TMX) pipeline started operations in May, but imminent California refinery closures threaten demand. The 590,000 b/d TMX project nearly tripled the capacity of Trans Mountain's pipeline system to 890,000 b/d when it opened on 1 May. The line runs from Alberta's oil sands to Vancouver on Canada's west coast, giving direct access to lucrative Asian markets, where buyers are eager for heavy sour crude. About 305,000 b/d of mostly heavy sour Canadian crude has loaded at the Westridge terminal in Vancouver in the six months since the pipeline made its debut, according to analytics firm Vortexa, hitting a record of nearly 415,000 b/d in October (see graph). US west coast refiners received just over 150,000 b/d during this period, up from less than 40,000 b/d a year earlier, and deliveries rose to a high of nearly 205,000 b/d last month (see graph). Most TMX crude destined for the US west coast has gone to Californian refiners, with Marathon, Chevron and Phillips 66 emerging as consistent buyers. Proximity to Vancouver and cheaper prices are attracting west coast buyers to TMX grades. The voyage time to California takes four days, compared with 10-14 days for Ecuadorean grades and over a month for Saudi crude. The new flows have undermined west coast interest in Mideast Gulf and Latin American supply. West coast imports from the Mideast Gulf fell by 25pc on the year to just under 260,000 b/d in the first six months of TMX operations, Vortexa data show. Crude arrivals from Saudi Arabia have been hardest hit, falling to only 40,000 b/d over the period, a third of the 2023 amount. Refiners are also turning away from Latin American grades. Mexican crude imports have dropped by 65pc since TMX started up, while imports of Ecuadorean heavy sour Napo and Oriente have fallen by 14pc. Napo differentials have weakened as a result, dropping to a $9.70/bl discount to Nymex WTI for October from a $6.70/bl discount for May. Oriente fell by $1.20/bl to a $5.70/bl discount to WTI between May and October. Alaskan ANS differentials have also come under pressure. December-delivery ANS averaged a $1.09/bl premium to Ice calendar-month average Brent, down from $4.30/bl a year earlier (see graph). But that drop has bolstered west coast demand for Alaskan crude, and spot ANS sales to the region rose by 8pc on the year to 1.6mn bl in May-December, Argus data show. Lower-priced ANS is also attracting interest from further afield — almost 1.2mn bl loaded for delivery to China in September, the highest such flows since April 2021, according to Vortexa. Rising tide Canadian crude remains plentifully supplied to refiners in the US midcontinent, despite earlier concerns that the TMX line would constrain availabilities. Rising Canadian oil sands output has meant that Enbridge's 3.1mn b/d Mainline system from west Canada to the US midcontinent has been operating at full capacity, and 2.9mn b/d flowed to the region in July, the highest for the month since 1993, US EIA data show. August imports fell to 2.6mn b/d after wildfires limited production in Canada's key upstream province Alberta. West coast demand for TMX crude could be undermined over the longer term by refinery closures. Phillips 66 aims to shut its 139,000 b/d Los Angeles refinery in late 2025. US west coast operators say more plants will close after then, citing a "hostile regulatory environment" in California and increased costs as the state government tightens the regulations governing refineries and production. By Rachel McGuire Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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