Bolivia starts exporting power to Argentina

: Agriculture, Electricity
23/03/15

Bolivia began exporting electricity to neighboring Argentina on 14 March as drought and record heat continued in the southern part of the hemisphere.

The 132kV power line stretches 120km from Bolivia's Tarija southern department and Argentina's northern Salta province. The power line was built by Bolivia's state-owned power company, ENDE.

Inauguration of the transmission line, which is part of Bolivia's long-term plan to export power, comes as Argentina and nearby countries struggle with power supply amid scorching weather.

Temperatures in Argentina from November-January were the hottest since 1961, the national weather service has said. The drought began in 2019 and intensified in 2022. Argentina received its lowest rainfall in four decades in the final quarter of 2022.

The drought is hurting crops, including those for biofuel. Argentina's agribusiness association, Crea, estimated in early March that the soybean harvest would be 31.2mn metric tonnes (t), down from its original estimate of 50mn t. Corn output is now forecast at 38.6mn t, down from 55.2mn t.

The collapse of agriculture production will add to Argentina's tough economic conditions, including inflation, which was 6.6pc in February and 102.5pc annualized through the month.

Neighboring Uruguay is dealing with similar drought conditions, which forced it to import electricity from Brazil as its hydroelectric supply has dropped. Hydroelectric power accounted for 43pc of average supply in 2022, dropping to 26pc so far this year.

The largest hydroelectric plant, the 1,890MW Salto Grande complex it shares with Argentina, provided an average of 98GWh in the first two months of this year, slightly more than 10pc of what it provided during the same two months of 2022.

Silvia Emaldi, president of Uruguay's state-run power company, UTE, told Argus that the country opted to import power rather than rely on thermal generation.

"We want to avoid firing up thermal generating plants to save on the cost of using fuel oil," she said.

Bolivian authorities hope that the first transmission line with Argentina will be the start of an interconnected system including Brazil, Paraguay and Uruguay.

Bolivia has installed capacity to generate 3,600MW, with national demand currently at 1,650MW, according to the energy ministry.

Bolivia also exports natural gas through pipelines to Argentina and Brazil, with an average of 17mn m³/d to Brazil and 10.8mn m³/d to Argentina last year.

By Lucien Chauvin

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24/12/26

Viewpoint: US gas market poised for more volatility

New York, 26 December (Argus) — US natural gas markets may be subjected to more dramatic price swings in 2025 as growing LNG exports and increasingly price-sensitive producers place greater pressure on the US' stagnant gas storage capacity. Those price swings could pose challenges for consumers without ample access to gas supplies, as well as producers interested in keeping some output unhedged to capture potentially higher prices without taking on excessive financial risk. But volatility may also present opportunities for traders looking to exploit unstable price spreads, and for producers that can adapt their operations to fit a more unpredictable pricing environment. Calm before the storm High storage levels and low spot prices this year — averaging $2.11/mmBtu through November this year at the US benchmark Henry Hub — triggered by an unusually warm 2023-24 winter, may have obscured some of the structural factors pushing the US gas market into a more volatile future. But those structural factors remain and loom increasingly large for prices. The US has moved from a roughly 60 Bcf/d (1.7bn m³/d) market eight years ago to a more than 100 Bcf/d market today, "and we haven't grown our storage capacity at all", Rich Brockmeyer, head of North American gas and power at commodity trading house Gunvor, said earlier this year. As supply and demand for US gas grow, the country's roughly 4.7-Tcf storage capacity becomes ever less effective in stemming demand shocks, such as extreme winter weather events, which can more rapidly draw down inventories than in years past. Additionally, a growing share of US gas is being consumed by LNG export terminals being built and expanded on the US Gulf coast. When those facilities encounter unexpected problems and cease operations — as has happened numerous times at the 2 Bcf/d Freeport LNG terminal in Texas in recent years — volumes that were previously being liquefied and sent overseas were instead backed up into the domestic market, crushing prices. More LNG exports may mean more opportunities for such supply shocks. US LNG exports are expected to increase by 15pc to almost 14 Bcf/d in 2025 as operations begin at Venture Global's planned 27.2mn t/yr Plaquemines facility in Louisiana and Cheniere's 11.5mn t/yr Corpus Christi, Texas, stage 3 expansion, US Energy Information Administration data show. Spot price volatility will be most acutely felt in regions like New England that lack underground gas storage. "In areas like the Gulf coast, where you have a lot of storage, it won't be a problem," Alan Armstrong, chief executive of Williams, the largest US gas pipeline company, told Argus in an interview. Producers' trade-off Volatile gas markets are a mixed bag for producers, many of whom profit from volatility while also struggling to plan and budget based on uncertain revenues for unhedged volumes. Though insufficient gas storage deprives the market of stability, "from the standpoint of a marketing and trading guy that's trying to manage my gas supply to customers and my trading book, I love volatility",said Dennis Price, vice president of marketing and trading at Expand Energy, the largest US gas producer by volume. BP chief financial officer Sinead Gorman in November 2023 specifically named Freeport LNG's eight-month-long shutdown in 2022-23 from a fire as a driver of volatility in the global gas market. The supermajor was able to exploit the "incredibly fragile" gas market, she said, which was a key factor driving the success of its integrated gas business. "Those opportunities are what we typically seek and enjoy," Gorman said. Increasingly, producers have also been adapting to a more volatile market by switching production on and off in response to prices, but often without revealing the price at which a supply response will occur. Expand Energy, for instance, told investors in October that it was amassing drilled but uncompleted wells and wells that had yet to be brought on line, which it could activate relatively quickly when prices rise. It declined to name the price at which that would occur. Market participants, attempting to price in this phenomenon by anticipating producers' next moves may respond more dramatically to supply signals than in the past, when production was steadier. Producers' increased responsiveness to prices could help to balance the market somewhat, though more aggressive intervention into operations could take a toll on well performance and pipelines, FactSet senior energy analyst Connor McLean said. Producers are "treating the reservoir itself like a storage facility", Price said. By Julian Hast Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: Brazil ethanol demand to remain strong

24/12/23

Viewpoint: Brazil ethanol demand to remain strong

Sao Paulo, 23 December (Argus) — Demand for ethanol in Brazil is expected to remain strong in 2025, as increasing corn ethanol output and less-than-expected crop damage from fires in 2024 should allow retail prices for the biofuel to remain competitive with gasoline. Production of corn-based ethanol in Brazil's center-south rose to 5.25bn l (100,200 b/d) in January-November, a 30pc increase from the same period in 2023, according to regional industry association Unica. The volume accounts for 17pc of the 31.17bn l of ethanol produced in the region during the period. Greater supply of corn-based ethanol should add downward pressure to prices, making ethanol more attractive at retail pumps. The country has 41 corn ethanol plants in operation, according to a survey by agronomist and researcher Rafael Vieira, with more under construction. Dryer weather and wildfires that hit sugarcane fields in 2024 do not appear to be as devastating as initially expected, so biofuel production from sugarcane could be higher than initially expected. Recent data support this outlook. Sugarcane crushing in the center-south surpassed 600mn metric tonnes (t) in April-November, on the high end of the 585mn-605mm t analysts estimated for the full 2023-24 cycle because of the fires and drought. Crushed volumes in the next harvest will depend heavily on the weather in December-January. Rains in this period are crucial for the development of sugarcane plants, as they are in their early growing stages. The more it rains in these two months, the higher the volume processed in 2025-26 should be. Sugar production Rains should also influence sugarcane quality, which affects the production mix, one of the vectors that can sway ethanol prices. The drought made sugarcane less fit for sugar production in 2024. But if the next two months are more humid, producers will be able to achieve a more sugary mix as desired, which tends to boost biofuel prices. Investments in crystallization capacity in recent years are expected to finally translate into greater sugar production in 2025. This is what producers want, as the sweetener currently trades at a premium to ethanol. This trend is supported by India's growing appetite for Brazilian sugar. The Asian country will increase its ethanol blending mandate in 2025, a change that will shift the sugarcane processing profile of the country and create room for Brazilian sugar to fill the resulting supply gap . Hedgepoint Global Markets analyst Livea Coda expects the sugar mix at 51.9c in 2025-26, with room for a revision if summer rains are confirmed. Hedgepoint projects sugarcane crushing at 600mn t in the next harvest, with the possibility of reaching 620mn t if rains "excel". Based on weather forecasts, she expects sugarcane quality to improve. Coda considers it unlikely that ethanol production will pay more than sugar in Brazil, considering that slower growth in the Brazilian economy next year should keep motor fuel demand below 2024 volumes. Analyst Arnaldo Correa, founder of Archer Consulting, predicts the sugar mix at 51.5pc in the next cycle. He expects strong crushing after an increase in sugarcane cultivation area this year, but Correa is not yet ready to make a volume prediction. In his analysis, US president-elect Donald Trump's protectionist policies are also a point of concern for 2025, Correa said. At the start of Trump's second four-year term, the US is expected to impose higher tariffs on products from China , a move that could lead the Asian giant to replace US grains with Brazilian grains. That could lead to higher corn ethanol prices in Brazil, Correa said. By Maria Ligia Barros 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

24/12/23

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.

Viewpoint: Brazil may face road bottleneck in 1Q

24/12/23

Viewpoint: Brazil may face road bottleneck in 1Q

Sao Paulo, 23 December (Argus) — The Brazilian soybean harvest and fertilizer deliveries for the country's 2024-25 second corn crop will likely drive first-quarter grain and fertilizer road freight rates higher. Grain freight rates have been unusually low in 2024 because lower international soybean prices discouraged producers from doing business in most months. But market participants expect greater demand for transportation services in export corridors in 2025, as an expected record 2024-25 harvest combines with a US dollar that has strengthening against the Brazilian real, driving export demand. Brazil will produce 166.2mn metric tonnes (t) of soybeans in the 2024-25 cycle, an increase of almost 13pc from the previous season, according to national supply company Conab's third official estimate for the cycle. The 2024-25 soybean harvest in Mato Grosso state — Brazil's largest producer — will total 44mn t, also 13pc above 2023-24 production, according to the state's institute of agricultural economics Imea. Mato Grosso's soybean planting pace for 2024-25 has fluctuated significantly over the growing season, initially advancing slowly because of dry weather, and then speeding up once rains returned. Planting was complete on only 25pc of the almost 12.7mn hectares (ha) expected for the cycle by 18 October, less than the 60pc reached at the same time in 2023 for the 2023-24 cycle. But planting increased by 68.6 percentage points in the following three weeks, totaling 93.7pc by 8 November. As a result, more than half of the soybean planted area in Mato Grosso was carried out in the same three week period. That raises concerns among market participants about high competition for export transportation and available vehicles when all those crops become ready for harvest at the same time, resulting in a logistical bottleneck. Market participants expect lower freight rates for exports during the 2024-25 second corn harvest, set to take place in the second half of 2025. Demand from the Brazilian domestic market will remain at a consistently high level, especially from ethanol units, whose demand for corn was high in 2024, as prices carried a premium to the export market, and also contributed to lower export volumes. This should lead to lower grain freight rates during the second half of 2025, with a significant portion of grain destined to meet the Brazilian industry's needs. Corn ethanol production in Brazil is expected to total 7.2bn liters (124,865 b/d) in the 2024-25 cycle, a 22pc increase from 5.9bn l in the previous cycle, according to Conab. The company projects that 1t of corn can produce around 400l of ethanol, which means that approximately 18mn t of corn will be consumed by the ethanol industry. Brazil is expected to produce around 86.2mn t of animal feed in 2024, 2.3pc more than it did in 2023, according to the sector's national union Sindiracoes. This should stimulate demand for about 55mn t of corn for all animal feed production expected this year. Animal feed production is expected to grow further in 2025 to 87.8mn t. Ferts freight rates may also increase Fertilizer transportation may face logistical bottlenecks to move inputs from ports to crops in early 2025 because of the slow pace of fertilizer purchases, especially nitrogen, for the 2024-25 second corn harvest. With the purchase window coming to a close by the end of December, market participants estimate that these nutrients have to arrive at Brazilian ports by early January, so that they can be transported in time for application during the grain harvest. That may also increase competition for vehicles in the first quarter of 2025, especially in January, when the supply of trucks is reduced following end-of-year festivities. Under these circumstances, higher fertilizer freight rates and higher costs for road logistics are expected. By João Petrini 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

24/12/23

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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