Japan's Tokyo Gas invests in nature-based carbon fund
Japanese gas retailer Tokyo Gas is investing up to $25mn in Climate Asset Management's nature-based carbon fund.
The carbon credits provided by the fund are natural carbon credits created from efforts such as afforestation and nature regeneration. Its carbon credits require large, continuous areas of land to be created, so supplies are limited and are expected to become difficult to purchase in the medium to long term, Tokyo Gas said.
It has secured carbon credits over a 12-year period until 2037 with its investment in the carbon fund of Climate Asset Management, a partnership between HSBC Asset Management and climate change advisory and investment group Pollination.
Tokyo Gas sees carbon credits as an important tool in the transition period from city gas. It aims to replace half of its domestic supplies of city gas with synthetic methane, or so-called e-methane, by 2040 after it starts commercial use in 2030. Japan's trade and industry ministry aims to replace 1pc of the country's city gas volumes to e-methane by 2030 and 90pc by 2050.
The gas retailer is already participating in five e-methane projects globally, including the ReaCH4 project in Cameron in the US state of Louisiana, partnering fellow Japanese gas utilities Osaka Gas and Toho Gas and trading house Mitsubishi. The four companies aim to export 130,000 t/yr of synthetic methane to Japan by 2030 using the 15mn t/yr Cameron LNG facility. This project aims to move to an initial engineering stage this year.
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US issues first non-FTA LNG export permit since pause
US issues first non-FTA LNG export permit since pause
London, 2 September (Argus) — The US Department of Energy (DOE) has authorised Mexico's 1.4mn t/yr Altamira LNG export terminal to export cargoes produced from US gas to countries without a free trade agreement with the US (non-FTA authorisation). This is the first new non-FTA permit issued to a LNG export terminal since President Joe Biden's administration announced a pause on issuing new non-FTA authorisations in January, as it planned to review the impact of a further build-out of LNG export capacity using US gas. Altamira uses US feedgas, requiring permits from the DOE to export to countries that do and do not have a free trade agreement with the US. Altamira exported its first — partial — cargo last month , and already had a licence to export to countries with which the US has free trade agreements. The terminal was under construction when Biden announced the pause on new licences. The DOE did not immediately respond to an Argus request for comment on new non-FTA authorisations. Terminal operator New Fortress Energy said in February that it was unfazed by a lack of non-FTA authorisation, as it has enough supply commitments to countries that have FTAs with the US. Altamira non-FTA authorisation to end in 2029 The DOE has granted Altamira LNG a five-year non-FTA authorisation — not the multi-decade authorisation New Fortress sought. New Fortress wanted authorisation until 2051, but the DOE authorisation expires on 30 August 2029. The DOE said it will re-evaluate the export term when it has a "more complete record on which to evaluate" New Fortress' request. The re-evaluation would take place no sooner than 31 August 2026. The DOE acknowledged that re-exporting gas from the US as LNG in Canada and Mexico raises concerns that do not hold for straight US exports of LNG — namely that the US' economy "does not receive a significant portion of the benefits DOE has recognised for LNG exported directly from the US, particularly with respect to the jobs and infrastructure investment associated with construction and operation of liquefaction facilities". The DOE also said "long-term consequences may arise from the fact that foreign infrastructure is not directly subject to US environmental laws", so it would "carefully consider the development of this market segment". The DOE has now approved 46.45bn ft³/d of non-FTA exports from operational and planned projects in the US' lower 48 states, with a further 6.71bn ft³/d approved for non-FTA exports using US gas from terminals in Mexico and Canada. By Martin Senior Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Investment funds hold record long position on Ice TTF
Investment funds hold record long position on Ice TTF
London, 2 September (Argus) — The net long position of investment funds at the Dutch TTF gas hub has reached a record high of nearly 267TWh, according to the latest data released by the Intercontinental Exchange (ICE). The net long position had already reached a 2.5-year high of nearly 130TWh by mid-June . This position was roughly unchanged until late July. But there then came a sharp 61TWh jump between 26 July and 2 August, and a further 42TWh increase by 9 August. For the week ending 16 August, investment funds held a combined net long position of just under 266.6TWh, although it had edged down to 263.2TWh by the week ending 23 August, the most recent data show. Both of these figures surpass the previous record on 16 April 2021 of 262.6TWh ( see net position graph ). This first week of August was when prices in Europe shot up to a nine-month high following news of damage to the metering station at Sudzha, where the only still-functioning interconnection point between Russia and Ukraine is located. Such a large increase in investment funds' position over that period hints at their influence on overall price formation. The overall change in net position has been driven by both the opening of more long positions as well as the closing of short positions. Between 26 July and 23 August, investment funds' long positions increased by 79TWh to 465TWh. In the same period, their short positions dropped by just over 53TWh. Their short positions increased by 10TWh in the week of 16-23 August, just as TTF prices fell as market concerns around fighting near Sudzha subsided. Expectations of continued price volatility may have driven investment funds to build up their long positions. The future of Russian transit through Ukraine beyond this year is unlikely to be decided until late in the year, while significant Norwegian maintenance will drive down European supply this month and may continue to be adjusted at short notice. Investment funds typically make their money from price volatility, whereas utilities make most of their money from the margins on their sales to customers and associated services. The nearly 132TWh increase in investment funds' net long position between 26 July and 23 August is in sharp contrast to movements from other types of market participants. Commercial undertakings, defined as companies with retail portfolios, switched from a small net long position of 49TWh to a net short position of 40TWh. And investment and credit firms, which had already held sizable net short positions, increased them by a further 44TWh in this time to a total net short of 223TWh. Combining the total net short positions of commercial undertakings and investment and credit firms gives a total of around 263TWh, almost exactly matching investment funds' net long positions. Commercial undertakings' movements were largely driven by "risk reduction contracts", which more than tripled from a net short of 60TWh on 26 July to nearly 191TWh on 16 August, before falling to 177TWh on 23 August ( see commercial undertakings graph ). On aggregate this is the largest net short position on risk reduction contracts since the end of 2021. Firms have to hedge large physical long positions in the storage market, with EU storage sites already over 92pc full. At the same time, commercial undertakings' net long positions on contracts classified as "other" rose by around 30TWh to 138TWh, leaving a total net short position of 40TWh. By Brendan A'Hearn Ice TTF net positions 2018-present TWh Commercial undertakings' net positions 2018-present TWh Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Green projects struggle to access €724bn EU funds
Green projects struggle to access €724bn EU funds
Brussels, 2 September (Argus) — EU auditors today raised concerns about the ability of member states to make full use of the €724bn pot allocated to climate-related objectives under the Recovery and Resilience Facility (RRF) — designed to mitigate the economic impact of the Covid pandemic — by the 31 August 2026 deadline. Auditors also highlighted significant compliance challenges facing hydrogen and renewable energy projects. Romania, for instance, had to remove a sub-measure for a hydrogen-ready and renewable gas distribution network, as it became evident the project would not be completed within the RRF's tight timeline. And Italy withdrew a project for offshore electricity generation infrastructure, including wave-based energy, over deadline concerns. "We are flagging risks, as EU countries had drawn down less than a third of the planned funds at the halfway point and made less than 30pc progress towards reaching their predefined milestones and targets," European Court of Auditors (ECA) member Ivana Maletic said. Maletic told Argus that no specific data are available yet on the progress of green deal, as opposed to other RRF projects, such as digitalisation. By the end of 2023, the ECA calculates that the European Commission had disbursed just €213bn, including €56.5bn in pre-financing. Beyond the challenge of meeting the 31 August 2026 completion deadline, some countries' administrative bottlenecks have also hindered progress. For example, Romania's failure to submit contracts for projects with a combined generation capacity of at least 300MW led to the partial suspension of a measure for combined heat and power generation in district heating systems. Another obstacle for projects is the 'do no significant harm' principle — a key component of EU sustainable finance legislation. The principle imposes strict criteria, typically excluding funding for companies deriving 1pc or more of their revenues from hard coal and lignite, 10pc from oil fuels, or 50pc from natural gas. Companies generating more than 50pc of their revenue from power generation with a greenhouse gas intensity exceeding 100g of CO2 equivalent/kWh would also normally be excluded from funding. By Dafydd ab Iago Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
CCUS, hydrogen manage expectations ahead of Cop 29
CCUS, hydrogen manage expectations ahead of Cop 29
London, 2 September (Argus) — The final text from last year's UN Cop 28 climate summit in Dubai included a nod to carbon capture, use and storage (CCUS) and "low-carbon hydrogen" production — a first mention for both in Cop outcome texts and rare specificity. But these developing technologies have made little tangible progress since the conference, with few new commercial CCUS projects announced, while investment in hydrogen has slowed. Hydrogen industry participants are not predicting immediate strides forward for the sector at Cop 29, scheduled to take place in Baku, Azerbaijan, in November — industry association Hydrogen Europe is managing expectations for the event, and is already pinning hopes on next year's Cop 30, in Brazil. But it may benefit indirectly from the summit's higher-level initiatives, such as boosting energy transition finance and spurring bilateral carbon credit trading, they say. Baku may struggle to meet the high bar set at last year's Cop, which was described as a "historical moment" by industry group the Hydrogen Council. Perhaps in tacit recognition that hydrogen will be out of the limelight in Azerbaijan — which lacks robust ambitions for the technology — Hydrogen Europe has its hopes pinned on broader initiatives to give the sector a leg-up. Azerbaijan's aim to set up a climate fund bankrolled by fossil fuel companies and oil-producing country governments would be welcome, Hydrogen Europe chief executive Jorgo Chatzimarkakis says. Details of the potential fund are not clear, but it could back renewables, as well as supporting countries struggling to adapt to climate change. Progress at Cop 29 in finalising the details of the Paris Agreement's Article 6 — which allows countries to transfer carbon credits earned from cutting greenhouse gas (GHG) emissions to help other countries meet their climate targets — would "benefit hydrogen big time", Chatzimarkakis adds. It could help to unlock projects in hydrogen-hopeful countries such as Namibia and Mauritania, which have plentiful sun, wind and space but lack straightforward access to finance, he says. For African countries, securing finance is the "single most critical challenge" in sustainable development, the African Climate Foundation says. The continent receives less than 3pc of global renewables investment and its governments will make a "concerted push" for more access to financing at Cop 29, the foundation's energy access and transitions programme manager, Sahele Fekede, says. Hydrogen's bubble deflating? But access to finance is only part of the battle, as several hydrogen-focused investment funds were already established at previous Cops, and governments have earmarked generous subsidy schemes for the sector. The biggest bottleneck this year appears to be commercially viable projects with confirmed customers. The industry has experienced sluggish progress over the past 12-18 months — far from the frenzy of projects and partnerships announced at Cop 27 in 2022, when hydrogen optimism ran high. Firms and governments have pulled back on hydrogen targets recently, but Cop 29 could see some new announcements. And a recent rise in hydrogen investment decisions in Europe, India and Canada, worth billions of dollars collectively, may mean the industry is turning a corner. Cop 29 offers the chance for "material advancements" for hydrogen in global technical standards and certification solutions, Hydrogen Council chief executive Ivana Jemelkova says. But 39 governments pledged to support mutual recognition of hydrogen certificates at Cop 28, so it is doubtful if anything more could be presented on this front in Baku. Key governments also endorsed the first set of technical standards to measure the CO2 footprint of different hydrogen plants at Cop 28 — a vital step to underpin certification. But work to expand this CO2 methodology to cover the midstream section is not expected until 2025-26. Implementing clear "demand drivers" must be the other "critical" talking point, Jemelkova says. Market participants see a lack of willingness to pay for clean hydrogen stifling investment decisions. In contrast, demand within the CCUS industry appears strong, with significant numbers of industrial emitters committing to capture CO2, and setting up pilot projects, while most oil and gas producers are diversifying to some extent into CO2 storage. But subsidy schemes are still under development in many countries and the sector's evolution is often hampered by logistical challenges — getting the capture, storage and transport elements ready simultaneously. The vast majority of CCUS and carbon capture and storage (CCS) facilities are at the planning stage, and many have not yet started construction. Of the almost 840 CCS facilities mapped by energy watchdog the IEA, just 51 are operational. Of these, 10 sequester the CO2 in dedicated storage, while the CO2 from a further six will be used. These 16 plants have announced a combined maximum capacity of 12.7mn t/yr CO2, IEA data show. Carbon capture controversy CCUS and CCS projects frequently attract criticism. They are used to justify continued fossil fuel use and delay action on cutting GHG emissions, non-governmental organisations (NGOs) say. The technology, while cautiously backed by the UN Intergovernmental Panel on Climate Change's overarching climate science reports, is not fully proven at scale for climate purposes, and can be energy-intensive. Oil-producing countries often cite the technology at climate talks, arguing the need to reduce emissions from oil and gas use rather than removing the source of those emissions. The specific language on CCUS in the Cop 28 outcome text is likely to have been included to mollify fossil fuel-producing countries. The EU was clear ahead of Cop 28, setting a firm position that CCS or CCUS should play a minor role in tackling climate change. Use of fossil fuels with CCUS should only be an option for "specific hard-to-abate sectors", EU climate commis sioner Wopke Hoekstra said. He doubled down during the summit, telling delegates that "we cannot CCS ourselves out of the space" to address climate change. But the bloc has since released a proposed carbon management strategy that leans heavily on CCUS to hit ambitious climate goals — although work would have started on the plan well before Cop 28. The EU aims to map potential CO2 storage areas and wants carbon capture to cover all industrial process emissions by 2040. Europe — including non-EU members Norway, Iceland and the UK — is by far the region furthest ahead, with significant CO2 storage potential and the resources to drive a nascent industry. The past year has seen some new CO2 storage licences awarded, and incremental progress on subsidy frameworks, but a lack of commercial agreements and concrete decisions persists, while start dates for existing developments have been pushed back. Both CCUS and hydrogen are developing industries and need substantial investment — from the private sector, but also public funding to de-risk an emerging market. Just five jurisdictions — the US, EU, Canada, Norway and the Netherlands — are responsible for 95pc of public funding for CCS and "fossil hydrogen" to date, NGO Oil Change International says, putting subsidies for the technologies at $30bn in total. Finance will be the "centrepiece" of Cop 29, and given previous mention in a Cop text, CCUS and hydrogen are both well positioned to receive energy transition funding. But the industries also need mandates, subsidies and widely used regulatory frameworks to advance. By Georgia Gratton, Pamela Machado and Aidan Lea Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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