Ecuador refinery project caps Moreno reform effort

: Crude oil, Electricity, Natural gas, Oil products
21/01/15

Ecuador's outgoing administration is seeking to consolidate an overhaul of its oil industry on the eve of next month's general elections.

The capstone of the government's ambitious reform plans is a proposed $3bn deep conversion project and 25-year lease of the 110,000 b/d Esmeraldas refinery. A consortium led by South Korea's Hyundai and US contractor KBR — the only group that purchased a tender package in a process launched last year — is expected to present a formal proposal on 19 February. Morgan Stanley would structure the project financing.

"This marks the return of American companies, which were mistreated during the previous regime," Ecuador's minister of energy and non-renewable natural resources René Ortiz said on an Institute of the Americas roundtable today, referring to the populist 10-year administration of former president Rafael Correa, a close ally of Venezuela's late president Hugo Chavez and his successor Nicolas Maduro, who stepped down in May 2017. "Some upstream companies were even forced to sue Ecuador in arbitration tribunals and of course Ecuador lost, and it has cost Ecuador more than $4bn in indemnity," Ortiz said.

The Esmeraldas refinery project could be supported by the government's new $2.8bn framework agreement with the US development bank DFC to refinance debt and support private sector investment. For the US, the 14 January agreement aligns with a wider strategy to counter Chinese lending in the region. The Correa administration signed billions of dollars in oil-backed loans with Beijing, some of which are still outstanding.

Esmeraldas is one of three refineries owned by state-owned PetroEcuador, which absorbed its upstream counterpart PetroAmazonas on 1 January as part of President Lenin Moreno's austerity program. Together the companies have some 10,000 employees on the payroll, which will be reduced in the first quarter to avoid redundancies, Ortiz said.

Speaking this afternoon on the roundtable, PetroEcuador's new chief executive Gonzalo Maldonado said the new merged company could eventually list shares in a public-private model similar to Brazil's Petrobras. "This would be a way to democratize the company, not privatize it," Maldonado said. He touted the company's success in placing heavy sour spot barrels in the market in transparent tenders, and highlighted plans to improve export infrastructure to enable larger-scale loadings.

Slower rhythm

Further downstream, Ecuador has slowed the adjustment of domestic diesel prices as a way to alleviate pressure on the economy, which has been pummelled by the Covid-19 pandemic.

Under a May 2020 policy aimed at removing heavy subsidies, gasoline and diesel prices are now tied to WTI and adjusted on a monthly basis. The monthly adjustment in the case of diesel was recently reduced to 3pc from a previous 5pc, postponing the convergence with international levels to December 2021 from a previous target of June, Ortiz said.

"Last year ended with $648mn in savings from the process of eliminating the (fuel) subsidies -- this is the result," Ortiz said. Residential LPG is still subsidized, but the government is working on a program of targeting subsidies for that fuel as well.

The government is hoping the new market-based pricing policy will also encourage private companies to import fuel, leasing storage and other infrastructure from PetroEcuador and establishing a parallel system of non-regulated fuel prices.

Ecuador's declining natural gas production in the Gulf of Guayaquil could be offset by future LNG imports as well, Ortiz said.

Quito withdrew from Opec a year ago, and currently produces around 510,000 b/d of Oriente and Napo crude grades, some of which PetroEcuador exports through monthly tenders.

Among the government's other priorities is renewable energy. Recently awarded solar and wind projects offering a combined 400MW of installed capacity represent $400mn in investment. A project on the Galapagos islands is scheduled to be awarded soon.

Election bonanza

Ecuadoreans go to the polls on 7 February to elect a new president from among 16 candidates. The National Assembly is on the ballot as well. The elections are widely seen as a referendum on Moreno's economic reform agenda. A presidential run-off, if necessary, would be held on 11 April, a watershed political date for the region. On the same day, neighboring Peru holds presidential elections and Chile holds elections for a constitutional convention, governors, mayors and city councils.

By Patricia Garip

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24/11/21

Cost of government support for fossil fuels still high

London, 21 November (Argus) — The cost of government measures to support the consumption and production of fossil fuels dropped by almost third last year as energy prices declined from record highs in 2022, according to a new report published today by the OECD. But the level of fiscal support remained higher than the historical average despite government pledges to reduce carbon emissions. In an analysis of 82 economies, data from the OECD and the IEA found that government support for fossil fuels fell to an estimated $1.1 trillion in 2023 from $1.6 trillion a year earlier. Although energy prices were lower last year than in 2022, countries maintained various fiscal measures to both stimulate fossil fuel production and reduce the burden of high energy costs for consumers, the OECD said. The measures are in the form of direct payments by governments to individual recipients, tax concessions and price support. The latter includes "direct price regulation, pricing formulas, border controls or taxes, and domestic purchase or supply mandates", the OECD said. These government interventions come at a large financial cost and increase carbon emissions, undermining the net-zero transition, the report said. Of the estimated $1.1 trillion of support, direct transfers and tax concessions accounted for $514.1bn, up from $503.7bn in 2022. Transfers amounted to $269.8bn, making them more costly than tax concessions of $244.3bn. Some 90pc of the transfers were to support consumption by households and companies, the rest was to support producers. The residential sector benefited from a 22pc increase from a year earlier, and support to manufacturers and industry increased by 14pc. But the majority of fuel consumption measures are untargeted, and support largely does not land where it is needed, the OECD said. The "under-pricing" of fossil fuels amounted to $616.4bn last year, around half of the 2022 level, the report said. "Benchmark prices (based on energy supply costs) eased, particularly for natural gas, thereby decreasing the difference between the subsidised end-user prices and the benchmark prices," it said. In terms of individual fossil fuels, the fiscal cost of support for coal fell the most, to $27.7bn in 2023 from $43.5bn a year earlier. The cost of support for natural gas has grown steadily in recent years, amounting to $343bn last year compared with $144bn in 2018. The upward trend is explained by its characterisation as a transition fuel and the disruption of Russian pipeline supplies to Europe, the report said. By Alejandro Moreano and Tim van Gardingen Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Investment funds’ net long on Ice TTF reaches new high

24/11/21

Investment funds’ net long on Ice TTF reaches new high

London, 21 November (Argus) — Investment funds' net long TTF position on the Intercontinental Exchange (Ice) jumped to a new all-time high earlier this month, outstripping the previous record in late August. The latest weekly data from Ice show investment funds' net long TTF position shot up to a new record at just under 273TWh by 15 November, topping the previous all-time high of roughly 268TWh in the week ending 30 August , revised data show. After peaking in August, the position dropped to 192TWh on 20 September, and held broadly stable before jumping 33.6TWh in the week ending 25 October . TTF prices rose in the following two weeks, but funds trimmed their net long position to around 226TWh on 8 November ( see graph ). But in the most recent week of data from Ice, investment funds' net long position shot up to just under 273TWh by 15 November, a new record high. Over the same period of 8-15 November, The Argus TTF front-month contract rose by more than 9pc, and there were similarly large moves for the first-quarter 2025 and summer 2025 contracts. The calendar 2025 price was also up by 8pc ( see table ). Significant price volatility in recent trading sessions has also prompted Ice to increase margin rates by around 20pc on all contracts out to September 2025 , with smaller increases further down the curve. Austrian incumbent OMV announced this week Russia's Gazprom would halt its contractual supply from 16 November , prompting sizeable day-on-day price moves across Europe and possibly encouraging investment funds to go longer and capitalise on the volatility. But central European flows have changed only slightly since then, with roughly the same amount of Russian gas entering the region. Higher TTF prices have also caused LNG diversions from Asia to Europe in recent days, which reached double digits on 19 November . Such a large net long position suggests investment funds may still expect a tight European gas balance this winter. Record-low freight rates have brought the cost of shipping US LNG to Asia closer to the cost of the shorter US-Europe route, meaning European prices have to rise sufficiently high enough to offset this and close the inter-basin arbitrage again in order to attract uncommitted cargoes. Cold weather has also prompted EU firms to draw down storage stocks heavily so far this month . Aggregate EU withdrawals averaged just under 3 TWh/d on 1-15 November, four times the 756 GWh/d average for that period in 2018-22 and sharply contrasting the 965 GWh/d of net injections across the bloc on 1-15 November 2023. Unlike investment funds, the two other major categories of Ice market participant — commercial undertakings and investment/credit firms — boosted their net short positions by a combined 53TWh, leaving the latter with nearly 200TWh in net shorts, the highest since mid-September. Despite significant storage withdrawals, commercial undertakings ‘risk reduct' contracts — generally used for hedging — in the week to 15 November jumped by just under 30TWh to nearly 211TWh, the highest since 24 December 2021. Some of that increase may have been driven by a need to hedge the LNG cargoes diverted to Europe in recent weeks as European hub prices rose. A 9TWh increase in the net long position of commercial undertakings' other contracts slightly moderated the overall net short increase. The gross short and long positions of commercial undertakings totalled 1.95PWh, nearly twice as large as the investments funds' 646TWh and investment/credit firms' 421TWh combined. By Brendan A'Hearn Argus TTF prices 8-15 Nov €/MWh Dec-24 1Q25 Sum 25 Win 25 Cal 25 8-Nov 42.08 42.31 40.81 38.41 40.65 15-Nov 46.02 46.12 44.12 41.00 43.98 % change 9.4 9.0 8.1 6.7 8.2 Argus Net positions on ICE TTF TWh Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Cop: Talks in Baku torn between mitigation and finance

24/11/21

Cop: Talks in Baku torn between mitigation and finance

Edinburgh, 21 November (Argus) — Developing and developed nations remain at loggerheads on what progress on climate finance and mitigation — actions to cut greenhouse gas emissions — should look like at the UN Cop 29 climate summit. But Cop 30 host Brazil has reminded parties that they need to stick to the brief, which is finance for developing countries. Concluding a plenary where parties, developed and developing, listed grievances, environment minister Marina Silva recognised "the excellent progress achieved" on mitigation at Cop 28. She listed paragraphs of the Cop 28 deal, including the energy package and its historic call to transition away from fossil fuels in energy systems. "We are on the right track," she said, talking about mitigation, but "our greatest obligation at this moment is to make progress with regard to financing". "This is the core of financing that will pave our collective path in ambition and implementation at Cop 30," Silva said, adding that $1.3 trillion for developing countries should be "the guiding star of this Cop". Parties are negotiating a new collective quantified goal (NCQG) — a new climate finance target — building on the $100bn/yr that developed countries agreed to deliver to developing countries over 2020-25. But developed countries insist that a precise number for a goal can only be produced if there is progress on mitigation and financing structure for the NCQG. "Otherwise you have a shopping basket but you don't know what's in there," EU energy commissioner Wopke Hoekstra said. Some developing nations said they need the "headline number first". Some developing countries, including Latin American and African nations as well as island states, have also complained about the lack of mitigation ambition. Cop is facing one of the "weakest mitigation texts we have ever seen," Panama said. But they also indicated that financial support was missing to implement action. Developed countries at Cop 29 seek the implementation of the energy pledges made last year. "What we had on our agenda was not just to restate the [Cop 28] consensus but actually to enhance and to operationalise that," but the text goes in the opposite direction, Hoekstra said, talking about the latest draft on finance. Whether hints that Brazil has mitigation in focus for next year's summit will be enough to assuage concerns from developed countries at Cop 29 on fossil fuel ambitions remains to be seen. The communique of the G20, which the country hosted, does not explicitly mention the goal to transition away from fossil fuels either. The developed countries' mitigation stance grew firmer after talks on a work programme dedicated to mitigation, the obvious channel for fossil fuel language, was rescued from the brink of collapse last week. Discussions have stalled, but another text — the UAE dialogue which is meant to track progress on the outcomes of Cop 28 — still has options referring to fossil fuels. But in these negotiations too, divisions remain. "The UAE dialogue contains some positive optional language on deep, rapid and sustained emissions reductions and the [Cop 28] energy package, E3G said. But Saudi Arabia has made clear that this was unacceptable, while India, which worked to water down a coal deal at Cop 26, is pushing back on the 1.5°C temperature limit of the Paris Agreement. Negotiators are starting to run out of time. Draft after draft, the divide fails to be breached with no agreement on an amount for the finance deal. "We cannot talk about a lower or higher number because there is no number," noted Colombia's environment minister Susana Muhamad. The next iteration should have numbers based on the Cop 29 presidency's "view of possible landing zones". The fact that the draft text on finance has no bridging proposal is a concern, non-profit WRI director of international climate action David Waskow said. Finance was always meant to be the centrepiece of Cop 29. Parties have not formally discussed the goal in more than 15 years, and have been trying to prepare for a new deal through technical meetings for the past two years. But the discussion needs to end in Baku. By Caroline Varin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Cop: EU, four countries commit to 1.5°C climate plans

24/11/21

Cop: EU, four countries commit to 1.5°C climate plans

Baku, 21 November (Argus) — The EU, Canada, Mexico, Norway and Switzerland have committed to submit new national climate plans setting out "steep emission cuts", that are consistent with the global 1.5°C temperature increase limit sought by the Paris Agreement. The EU and four countries made the pledge at the UN Cop 29 climate summit in Baku, Azerbaijan today, and called on other nations to follow suit — particularly major economies. Countries are due to submit new climate plans — known as nationally determined contributions (NDCs) — covering 2035 goals to the UN climate body the UNFCCC by early next year. The EU, Canada, Mexico, Norway and Switzerland have not yet submitted their plans, but they will be aligned with a 1.5°C pathway, EU climate commissioner Wopke Hoekstra said today. The Paris climate agreement seeks to limit the global rise in temperature to "well below" 2°C and preferably to 1.5°C. Canada's NDC is being considered by the country's cabinet and will be submitted by the 10 February deadline, Canadian ambassador for climate change Catherine Stewart said today. Switzerland's new NDC will also be submitted by the deadline, the country's representative confirmed. Pamana's special representative for climate change Juan Carlos Monterrey Gomez also joined the press conference today. Panama, which is designated as carbon negative, submitted an updated NDC in June. It is planning to submit a nature pledge, Monterrey Gomez said. "It is time to streamline processes to get to real action", he added. The UK also backed the pledge. The UK announced an ambitious emissions reduction target last week. The UAE — which hosted Cop 28 last year — released a new NDC just ahead of Cop 29, while Brazil, host of next year's Cop 30, released its new NDC on 13 November during the summit. Thailand yesterday at Cop 29 communicated a new emissions reduction target . Indonesia last week said that it intends to submit its updated NDC ahead of the February deadline, with a plan placing a ceiling on emissions and covering all greenhouse gases as well as including the oil and gas sector. Colombia also indicated that its new climate plan will seek to address fossil fuels, but it will submit its NDC by June next year . By Georgia Gratton Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Cop: EU says finance draft text not acceptable

24/11/21

Cop: EU says finance draft text not acceptable

Baku, 21 November (Argus) — The latest draft of the text on climate financing presented at the UN Cop 29 climate summit is not ambitious enough on mitigation — reducing emissions — and "clearly unacceptable," EU energy commissioner Wopke Hoekstra said today. Parties must agree at Cop 29, in Baku, Azerbaijan, on a new collective quantified goal (NCQG) — a new climate finance target — building on the $100bn/yr that developed countries agreed to deliver to developing countries over 2020-25. The text is the main outcome for the summit. "What we had on our agenda was not just to restate the [Cop 28] consensus but actually to enhance that and to operationalise that," but the text goes in the opposite direction, Hoekstra said. Parties to last year's Cop 28 summit in Dubai made an historic pledge to "transition away" from all fossil fuels. The EU has warned against any backsliding on this pledge . "We cannot accept the view that the previous Cop did not happen," Hoekstra said. A draft text on the mitigation work programme — a process that focuses on emissions reduction — was released by the Cop 29 presidency in the early hours of this morning. It does not mention phasing out or reducing fossil fuels in energy systems, or reference the agreement reached on the latter point at Cop 28 last year. Hoekstra indicated today's text does not provide enough clarity to allow the EU to put a concrete number on the amount of climate finance that should be available. The bloc has insisted the final number for climate financing can come only when other elements, including the structure and contributor base, are settled. But recipient country groups such as the G77 and Like-Minded Developing Countries (LMDC) groups have expressed impatience at the lack of a concrete number. Minor bright spots in the numerous draft texts released overnight include those on Article 6, which governs international carbon credits, Hoekstra said. But the commissioner is "sure there is not a single ambitious country who thinks this is nearly good enough." By Rhys Talbot Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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