Author: Ricardo Perez

Czech utility CEZ has booked 2 billion cubic metres (bcm) of annual capacity at a yet-to-be build land-based terminal for liquefied natural gas (LNG) imported into Germany’s Stade from 2027, spurring the build-up of transport infrastructure and securing itself future energy supplies.

Germany’s quest to increase LNG import capacity has intensified as it seeks to end reliance on Russian pipeline gas, on which the European region relied heavily prior to Moscow’s invasion of Ukraine last year.

Pending the provision of fixed terminals, Germany is using floating storage and regasification terminals (FSRUs) to help to replace piped Russian gas supplies.

Three FSRUs are working at the Wilhelmshaven, Brunsbuettel and Lubmin ports after Germany arranged their charter and onshore connections.

Wilhelmshaven, Stade and Mukran, a port on the Baltic Sea island of Ruegen due to be connected with Lubmin on the mainland, are due to add more FSRUs for the 2023/24 winter.

Industry and the government are also building up terminal capacity in anticipation of increased use of hydrogen at the sites, which when produced using renewable energy can help the transition to a lower carbon economy.

State-owned Deutsche Energy Terminal held auctions for regas capacities in 2024 at Brunsbuettel and Wilhelmshaven 1 earlier this month and plans Stade and Wilhelmshaven 2 rounds in December.

MUKRAN
Private company Deutsche ReGas reported in August that suppliers have booked 4 billion cubic metres (bcm) of capacity for 10 years per annum at Mukran, where the company wants to pull together two FSRUs for deliveries to the mainland.

It has chartered a second FSRU, the Transgas Power, with regasification capacity of 7.5 billion cubic metres (bcm), to complement the Neptune currently active at Lubmin.

LNG from Mukran is aimed to flow to onshore grids via gas grid company Gascade’s new pipeline from the first quarter of 2024, which obtained approval for completion from mining authorities earlier this month.

The project has triggered local opposition. But two legal challenges by environmental groups DUH and Nabu were thrown out by the federal administrative court in September.

WILHELMSHAVEN
Utility Uniper launched Germany’s first FSRU operations, Wilhelmshaven 1, last December at the deep-water port on the North Sea. [LNG/TKUK]

Tree Energy Solutions (TES) will operate a second FSRU from later in 2023 for five years, Wilhelmshaven 2.

Uniper plans to add a land-based ammonia reception terminal and cracker in the second half of this decade. Ammonia is at times used as a carrier for hydrogen, whose low density otherwise makes transportation over long distances complicated.

TES also has plans to eventually convert its operations to clean gases.

LUBMIN
The FSRU Neptune, chartered by Deutsche ReGas, began receiving LNG at Lubmin in the Baltic Sea early this year.

The gas is first delivered to another storage vessel, the Seapeak Hispania, and shuttled to Lubmin in a set-up taking account of shallow water.

ReGas holds long-term supply deals with France’s TotalEnergies and trading group MET.

The government wants the Neptune to move to Mukran, allowing the Seapeak Hispania to depart, and join the second FSRU there, the Transgas Power.

Regas plans hydrogen electrolysis plants at both Lubmin and Mukran.

BRUNSBUETTEL
The EU Commission approved a 40 million euro support measure for the land-based liquefied natural gas (LNG) terminal at Brunsbuettel on the North Sea, citing its contribution to the security and diversification of supply.

The Brunsbuettel FSRU, operated by RWE’s trading arm, became operational in mid-April.

It is the forerunner of a land-based LNG facility, now in receipt of a parcel of approved state support, that could start operations at the end of 2026, when an adjacent ammonia terminal could also start up.

State bank KfW, Gasunie and RWE are stakeholders and Shell has committed itself to sizeable purchases.

The total costs of the land-based terminal are 1.3 billion euros.

STADE
The inland port on the river Elbe in January started work on a landing pier for an FSRU, to be ready in the 2023/24 winter. Designated vessel Transgas Force is moored at Bremerhaven port to be fixed up for the purpose.

Project firm Hanseatic Energy Hub (HEH) also plans a land-based terminal where it has allocated regasification capacity to become operational in 2027, including volumes for state-controlled SEFE, utility EnBW and now CEZ.

It has begun sounding out the market to determine whether the longer-term plans should be based largely on ammonia to be reconverted into clean hydrogen. It has identified a construction consortium.

HEH is backed by investment firm Partners Group, logistics group Buss, chemicals company Dow and Spanish grid operator Enagas.

EnBW, which is also a buyer at Wilhelmshaven and Brunsbuettel, doubled annual purchases to 6 bcm.

Market Screener, Vera Eckert, November 25, 2023

Brazil’s state-owned oil and gas giant Petrobras has unveiled its new strategic plan for the 2024-2028 period, outlining that oil and natural gas will be given the biggest slice of the Brazilian player’s $102 billion investment pie, seeing them as drivers of growth which will propel and fund the energy transition to greener sources of supply. In line with its net zero goals, the company plans to dish out $11.5 billion on projects that will enable a reduction in its carbon footprint, spotlighting the role of biorefining, wind, solar, carbon capture, utilization and storage (CCUS), and hydrogen in this decarbonization quest.

Petrobras’ board of directors approved the firm’s strategic plan for the 2024-2028 five-year period on November 23, 2023. This strategic plan aims to strengthen and prepare the company for the future by initiating a process of integrating energy sources, which the Brazilian giant perceives to be essential for “a fair and responsible energy transition.” To this end, the new plan will be implemented with “total attention to people, safety and respect for the environment, perpetuating value for future generations, with a focus on capital discipline and a commitment to keeping the company’s indebtedness under control,” according to Petrobras.

The firm’s CAPEX forecast for the 2024-2028 period totals $102 billion, 31% higher than the previous plan, with $91 billion corresponding to projects under implementation and $11 billion composed of projects under assessment, which are subject to additional financial feasibility studies before contracting and execution begin. This increase in CAPEX is mainly associated with new projects, including potential acquisitions; assets that were in divestment and returned to the company’s investment portfolio; and cost inflation, which impacted the entire supply chain.

Furthermore, the CAPEX amount in the Exploration and Production (E&P) segment represents 72% of the total, followed by Refining, Transportation and Marketing (RTM) with 16%, Gas and Low Carbon Energies with 9%, and Corporate with 3%.

“Oil and natural gas commodities will continue to be the main drivers of value, with economic and environmental resilience, financing the just transition. Profitable low-carbon investments will gain relevance for long-term value generation. Governance will be respected in all decision-making processes and project evaluations, guaranteeing sustainability and profitability, with more transparency,” underlined Petrobras.

Pre-salt getting largest share of $73 billion E&P CAPEX
Based on the Brazilian player’s E&P CAPEX for the 2024-2028 period of $73 billion, around 67% will be allocated to the pre-salt. Petrobras claims that pre-salt has “a major economic and environmental competitive advantage,” with the production of “better quality” oil and lower emissions of greenhouse gases. In terms of exploration, $7.5 billion is planned for the five-year period, covering $3.1 billion for exploration in the Equatorial Margin; $3.1 billion for exploration in the Southeast Basins; and $1.3 billion for other countries. This investment encompasses the drilling of around 50 wells in areas where the company has exploration rights in acquired blocks.

“The E&P segment remains relevant to the company, with a strategic focus on profitable assets and investments compatible with a long-term vision aligned with the energy transition. At the same time, the company maintains significant deepwater revitalization projects (REVIT), as well as complementary projects, in order to increase recovery factors in mature fields,” pointed out Petrobras.

The Brazilian giant is adamant that the E&P segment maintains the premise of double resilience both economic and environmental, and high economic value, with a portfolio that is viable in scenarios of low oil prices in the long term, including Brent with a prospective average break-even of $25 per barrel, and with a carbon intensity commitment of up to 15 KgCO2e per barrel of oil equivalent by 2030.

14 new FPSOs on the five-year horizon
With Petrobras’ strategic focus at the forefront, exploration and production activities are expected to be concentrated on profitable assets, thus, pre-salt production will represent 79% of the company’s total at the end of the five-year period. As a new generation of platforms is being built, more modern, more technological, more efficient, and with lower emissions, the Brazilian player’s production curve considers the entry of 14 new FPSOs in the 2024-2028 period, ten of which have already been contracted. Thanks to this plan, the firm aims to produce 3.2 million barrels of oil and gas equivalent per day in five years.

In accordance with this, the projections for oil production, total production, and commercial production of oil and natural gas for 2024 have been increased by approximately 100,000 bpd/boed compared to the previous plan, considering the performance of the fields, the forecasts for ramp-ups and the entry of new wells. During 2025 and 2026, oil production, total production, and commercial production of oil and natural gas are anticipated to be around 100,000 bpd/boed, lower than projected in the previous plan.

The company elaborates that this deviation is mainly due to current market conditions arising from the global context, where some production systems and complementary deepwater projects have had their schedules impacted. However, the fluctuations are part of the dynamics of the industry and are within the range of uncertainty disclosed in the last plan. Come 2027, the projections for oil production and total and commercial production of oil and natural gas are maintained in relation to the previous plan.

Moreover, the Gas & Energy (G&E) segment’s CAPEX totals $3 billion for the five-year period and Petrobras emphasizes that progress is being made not only in competitive and integrated operations within the gas and energy trade but also in improving the portfolio, working towards the inclusion of renewable sources aligned with decarbonization actions. One of the Brazilian player’s priorities in this segment is to expand the infrastructure and portfolio of natural gas offers.

Considering the investments in gas production and disposal in the E&P segment, the firm plans to boost domestic gas supply by investing around $7 billion over the next five years. To this end, Route 3 will come into operation in 2024 with a processing plant with a capacity of 21 MMm³/day and a pipeline with a capacity of 18 MMm³/day. Four years later, the Raia project gas pipeline (BM-C-33) will come into operation, with a capacity of 16 MMm³/day; while the Sergipe Águas Profundas – SEAP project gas pipeline will be online in 2029, with a capacity of 18 million m³/day.

The hydrocarbon exploration and production steps Petrobras is taking are in line with the Brazilian Ministry of Mines and Energy (MME)’s program – unveiled in March 2023 – to boost investments in oil and natural gas exploration in a bid to promote regional development and foster national production while turning Brazil into the fourth largest oil producer in the world.

Multi-billion spending for low-carbon future
As Petrobras’ priorities entail several elements, including reducing its carbon footprint, protecting the environment, caring for people, and acting with integrity, the firm reaffirms its ambition of “zero fatalities and zero leakages, in line with its commitment to life and the environment, which are non-negotiable values.”

To bring its energy transition vision to life, the firm will allocate up to $11.5 billion to low-carbon projects over the next five years, considering transversal investments in the various business segments. This covers initiatives and projects to decarbonize operations, alongside the maturing and development of businesses in the low-carbon energy segment, with emphasis on biorefining, wind, solar, CCUS, and hydrogen.

As a result, low-carbon investment represents 11% of Petrobras’ total investment in the 2024-2028 average, indicating progress in the company’s current position in relation to its market peers. The forecast indicates that low-carbon investment will gradually gain ground in the firm’s portfolio over the period, reaching 16% by 2028.

Petrobras says that investments should be financed primarily by operating cash flow, at levels equivalent to those of its peers, preferably through partnerships that allow for the sharing of risks and expertise, and seeking a return on investment, a reduction in the cost of capital, and the strengthening of the firm as an integrated energy company.

“Accompanying the great transformations in the world, especially in the energy, digital, social and environmental segments, Petrobras is going through a phase of changes and new perspectives, aiming to prepare for the energy transition and for a fair, inclusive low-carbon economy, with changes in energy use patterns, assessing and minimizing social impacts for all parties: its employees, communities and the entire supply chain,” underlined the Brazilian giant.

Offshore Energy, November 24, 2023

The European Union has launched its first green hydrogen auction with a maximum price of €4.50 ($4.91)/kg. The approved projects will receive subsidies for a decade, alongside revenue from hydrogen sales, and must start production within the next five years.

The European Commission has launched the first hydrogen auction supported by the European Hydrogen Bank.

Renewable hydrogen producers can apply for support in the form of a fixed premium per kilogram of hydrogen produced. This should close the gap between the production price and the price that consumers are currently willing to pay in a market where non-renewable hydrogen production is still cheaper.

Bidders have until Feb. 8, 2024, to submit their proposals through the EU tenders and financing portal. Bids must be based on a proposed price premium per kilogram of renewable hydrogen produced, up to a ceiling price of €4 .50/kg.

Bids up to this limit, and that also meet other qualification requirements, will be ranked from lowest to highest bid price and supported in that order, until the auction budget is exhausted.

The selected projects will receive the awarded subsidy in addition to the market revenue they generate from hydrogen sales, for a maximum of 10 years. Once the projects secure their subsidy agreements, they must begin producing renewable hydrogen within five years.

To maintain an equitable environment for all projects, cumulation with other forms of aid from participating member states is not allowed. Member states can, however, finance projects that participated in the auction but weren’t chosen for support from the Innovation Fund, using the Hydrogen Bank’s “auctions as a service” mechanism, particularly in cases of budgetary constraints.

The pilot auction will contribute to the REPowerEU plan to decarbonize the European economy’s goal of domestically producing 10 million tons of hydrogen by 2030. The commission will launch a second round in the spring.

PV Magazine, Pilar Sánchez Molina, November 24, 2023

The EU’s Hydrogen Bank has begun operations and is offering €800 million to hydrogen producers to kickstart demand for the fuel crucial to industrial decarbonisation.

By 2030, Europe wants to produce 10 million tonnes of renewable hydrogen annually. To get companies to switch, Brussels is footing the difference between their ability to pay and the high prices charged by producers of clean-burning gas.

“Today’s launch is about connecting supply and demand for renewable hydrogen,” explained the EU’s new Green Deal chief, Maroš Šefčovič, when launching on 23 November.

Using revenue generated from the EU’s carbon price, currently at €80 per tonne, the “hydrogen bank” will match suppliers to off-takers and smooth over the price difference.

Doing so transparently will allow outside observers to understand the market dynamics of the developing hydrogen economy. Today, little hydrogen is traded as the main consumers and refineries tend to produce it on-site for their own use.

“It is about creating transparency about price points, which will help kickstart a European hydrogen market,” says the Commissioner.

A total of €3 billion was allocated to the scheme, the remaining €2.2 billion will be up for grabs early next year.

Support is capped at €4.5 per kilogramme and will be disbursed for ten years and once signed, production must start within five years. Given the budget, the entirety of the scheme could facilitate the production of a total of at least 0.09 million tonnes of hydrogen or 0.9% of the annual 2030 target.

Meanwhile, Germany’s domestic hydrogen procurement scheme, H2Global, is about €5 billion. Europe’s hydrogen industry has long hoped to marry the two schemes and for other EU countries to also put money into the bank and the idea was officially endorsed by Berlin leadership in May but has yet to be implemented.

More money for other technologies
Meanwhile, €4 billion of ETS revenues is also going towards deploying other decarbonisation technologies – beneficiaries of the hydrogen bank will be excluded.

Projects large and small can have 60% of their cost covered by the EU, provided they can prove their potential to reduce greenhouse gas emissions, are cost-efficient and located in Europe.

“We are investing massively in this transition by using the revenues of emissions trading. This is a sustainable model that brings down emissions and boosts the competitiveness of European industry,” said the Green Deal chief.

In hopes of bolstering the EU’s clean technology manufacturing base, €1.4 billion has been earmarked with a target audience of producers of solar panel components, wind turbine parts, batteries, heat pumps and hydrogen electrolysers.

Euractiv, Nikolaus J. Kurmayer, November 24, 2023

Targray, a global leader in the supply of renewable fuels, feedstock, and supply chain solutions, is proud to announce its new partner membership within Green Marine, a renowned voluntary environmental certification program for the North American and European maritime industries.
This strategic engagement solidifies Targray’s commitment to decarbonizing maritime shipping, a sector which consumes more than 330 million metric tonnes of fuel each year, while reinforcing the company’s support of the global transition to low-carbon fuels.

The maritime industry is at a critical juncture with increasing pressure to reduce its carbon footprint and greenhouse gas emissions. Targray’s Green Marine membership highlights the company’s dedication to leveraging its global reach and expertise to contribute significantly to the reduction of greenhouse gas emissions in the maritime sector.

“Maritime shipping is the backbone of global trade, and the industry’s transition to low carbon fuels is essential for a sustainable future,” said Targray President, Andrew Richardson. “Targray’s international presence uniquely positions us to support bunker fuel suppliers and their customers worldwide in the journey toward sustainability and decarbonization.”

Green Marine is a leading non-profit North American environmental certification program for the maritime industry which expanded to Europe in 2020, with a mission of going beyond regulations and fostering real environmental improvement in the maritime industry. They engage stakeholders, including ship owners, ports, terminals, and shipyards, in their commitment to continuous improvement.

About Targray

Targray is a leading global provider of commodities and advanced materials for the renewable fuels, solar, battery and agricultural commodity sectors. Supported by a vast rail fleet and terminal network, the company is an international leader in the sourcing, transportation, storage, trading, and supply of biofuels and feedstock. Its innovative solutions help energy suppliers meet the growing demand for low carbon transportation fuels.

Targray’s Environmental Commodities business offers leading expertise in environmental products & services including renewable energy certificates, carbon credits and offsets for voluntary and compliance carbon market around the world.

Since 1987, Targray has worked with partners in over 50 countries to create sustainable value across the supply chain. The company is committed to delivering solutions that help reduce the world’s carbon footprint while enabling customers to create safer, more reliable products for consumers around the world.

About Green Marine

Green Marine is a voluntary initiative which helps its participants to improve their environmental performance and targets key environmental and maritime transportation issues related to air, water and soil quality, biodiversity protection, and community relations. Founded in 2007, Green Marine quickly distinguished itself through its credibility and its capability to foster the continual improvement of the environmental performance of its participants. Initially conceived for the St. Lawrence and Great Lakes maritime sector, the binational environmental certification program quickly generated unexpected interest in the industry and now has a North American reach.

In 2019, Green Marine collaborated with Surfrider Foundation Europe to export the environmental certification program to France to give birth to Green Marine Europe in 2020. The Green Marine Europe environmental certification program operates on the same proven model as the North American program.

Targray, November 23, 2023

IHI Corporation (IHI) and Royal Vopak (Vopak) have signed a Memorandum of Understanding (MOU) to jointly explore the development and operation of efficient, high value-added ammonia terminals in Japan. IHI and Vopak will furthermore assess a collaboration outside of Japan.

The collaboration focuses on large-scale ammonia storage terminals, strategically positioned for the economical distribution of ammonia. Ammonia plays an important role as a fuel for reducing carbon emissions from thermal power generation and as a hydrogen carrier, both in Japan and abroad. In addition, the study will examine the possibility of streamlining the operation of ammonia terminals to enhance price competitiveness, as well as the conversion and supply of various hydrogen derivatives.

IHI is currently working toward the realization of a decarbonized society through the development of integrated technologies from upstream to downstream, including fuel ammonia production, storage, and utilization. IHI is Japan’s leading manufacturer of ammonia storage tanks, having designed and constructed approximately 70% of all ammonia storage tanks in Japan. Currently, IHI is developing comprehensive technology for large-scale ammonia receiving terminals utilizing the large storage tank technology that IHI has cultivated in the field of LNG storage tanks.

With over 20 years of ammonia storage experience, Vopak has extensive knowledge on safe handling and storage of ammonia to facilitate the development of large-scale ammonia import, storage and distribution infrastructures. Currently, Vopak has ammonia storage operations in China, Saudi Arabia, Singapore, Malaysia and in the US. Most recently in the United States, Vopak and its global partners are collaborating on the pre-FEED for the development of a large-scale, low-carbon ammonia production and export project on the Houston Ship Channel.

“We are pleased to begin joint discussions with Vopak on the development and operation of ammonia terminals. As demand for ammonia continues to grow, we recognize the need to rationalize terminal operations and strengthen price competitiveness in order to meet this demand. We will leverage the strengths of both companies to form a terminal that can be utilized in the future and to build a robust supply chain.” said Jun Kobayashi, Board Director, Managing Executive Officer, IHI Corporation.

“We are excited to work with IHI and look forward to collaborating together as we advance the commitment of both companies towards a low-carbon future. As we embark on this journey, we envision synergies between both companies that will create innovative solutions to accelerate the development of new supply chains for the energy and feedstocks of the future,” said Chris Robblee, President of Asia & Middle East, Vopak.

Vopak, Yusuke Saito, November 21, 2023

Clean energy is flush with growth potential and these stocks stand ready to benefit.

Air Products & Chemicals (APD): This pick offers a diversified play on green hydrogen backed by a solid core business.

BP (BP): While this is a controversial pick if clean energy is what you’re after, this gas titan has announced plans to build out its alternative energy arms with a focus on hydrogen.

Plug Power (PLUG): This group has a stronghold on the hydrogen fuel cell market.

Economies around the world are turning to clean energy sources in a bid to slow global warming, and that’s brought hydrogen stocks into demand. Hydrogen on its own is nothing new. Chemical companies have been producing and selling it for years. But using it as an energy source is a new concept. At present, it makes up around 0.1% of the world’s energy mix. That’s expected to surge to 10% by 2050 if we continue to push for net zero. And while 10% isn’t a massive slice of the pie, the growth between 0.1% and 10% in just over two decades opens the door for opportunity.

When it comes to hydrogen stocks to buy now, you have two strategy options. The first and more obvious choice is to go all-in on a company supporting the transition. That means companies that make and sell the technology we need to turn hydrogen into power efficiently. Ideally, you’re looking for a company that supports green hydrogen, the cleanest form there is. But other types of hydrogen, like blue and grey also come with a fair helping of opportunity.

For those without such a strong stomach for risk, there are some diversified picks. These are companies whose bread and butter come from other businesses, but they’re still building out a hydrogen business. While the highs won’t be quite as high for these picks while green energy picks up steam, the low risk of failure is minimal.

Let’s take a look at three hydrogen stocks together, focusing on two diversified picks and one all-in alternative.

Air Products & Chemicals (APD)
On the risk spectrum, Air Products & Chemicals (NYSE:APD) probably ranks lowest on this list of hydrogen stocks. That’s because hydrogen isn’t the only weapon in this chemical company’s arsenal. In fact, it’s only a drop in the bucket at present, because the group’s backed by an enormous international industrial gas business that supplies a wide range of industries and geographies.

However, it’s working to build out its green hydrogen arm with big capital commitments to its green and low-carbon hydrogen projects. APD’s contracts tend to be relatively sticky and stretch well into the future, meaning cashflow is reliable and healthy. That means the group can continue to fund its core business without compromising future growth in hydrogen.

APD is working to create a sprawling network for hydrogen plants, with more than 100 already under its umbrella. Given that most governments are keen to push the net zero agenda forward, the group also has a fair bit of support in getting its projects online. This will be a welcome tailwind as APD continues to build itself a top-tier foundation within the hydrogen energy space.

BP (BP)
Though it may not be top of mind when it comes to hydrogen stocks, BP is another diversified player within the space that’s worth a look. While the group is mainly known for and certainly reliant on drilling for oil, BP is working to develop its hydrogen energy arm in one of several bids to remain relevant in a low-carbon future. In fact, unlike many of its other oil and gas peers, BP has set a net zero goal for 2050. A large part of this plan involves hydrogen energy.

The group says it plans to own some 10% of the hydrogen market in its key markets. If it can make good on those plans, that would offer investors some impressive growth opportunities as the market balloons.

BP is still worlds away from realizing its hydrogen potential—its currently developing various different types of hydrogen production facilities. But these projects appear to be promising, with management saying its UK-based plants could make up 15% of the region’s 2030 hydrogen target.

Plug Power (PLUG)
It’s impossible to talk about hydrogen stocks without bringing Plug Power (NASDAQ:PLUG) into the mix. The group is a leader in fuel cell technology and operates over 180 hydrogen refueling stations across North America. It’s a leader in the process of creating an end-to-end green hydrogen business that will produce, store and deliver the fuel cell.

Without a doubt, PLUG is well on its way to success, with a great deal of expertise across the entire value chain. However, the group’s been building by way of acquisitions, leaving cash thin on the ground. Management says profits are just around the corner, but investors aren’t quite as sure, given the increasingly challenging environment.

While Plug’s journey has been a rocky one, it looks like it could be in for more turbulence ahead. But ultimately, the group looks to be in a strong position among hydrogen stocks looking to capitalize on the market. Positioned to be a major beneficiary of government support for clean energy, PLUG will be well placed to make the most growing popularity for hydrogen fuel.

Investor Place, Tyrik Torres, November 20, 2023

China has set a minimum size for new oil refineries and will ban small crude processors that claim to be chemicals or bitumen producers under a plan to limit total capacity at 1 billion metric tons, or 20 million barrels per day, by 2025.

Following are key details on China’s steps, outlined this week, to rein in a refining industry that recently surpassed the United States to become the world’s largest.

WHAT IS CHINA TRYING TO ACHIEVE?
The overall capacity cap, first unveiled in October 2021 as part of a plan to reach peak carbon emissions by 2030, is aimed at curbing excessive domestic refinery production and supply overhang to reduce greenhouse gas emissions.

China has long sought – and sometimes struggled – to remove excess capacity in highly polluting heavy industrial sectors such as steel and cement.

The think tank Sinocarbon says the refining and petrochemical sectors accounted for 8% of emissions in 2020.

The cap will also help curb China’s already high reliance on imported crude oil, which stood at 76% last year.

HOW HAS CHINA’S REFINERY SECTOR GROWN?
Refining capacity in China increased last year to 920 million metric tons per year, or 18.4 million bpd.

The industry’s recent growth has been driven since 2019 by the creation of three large independent refiners – Zhejiang Petrochemical, Hengli Petrochemical and Shenghong Petrochemical – adding a combined 1.52 million bpd capacity that is highly integrated with petrochemicals making.

Together with dominant state refiner Sinopec and its rival PetroChina, as well as an army of about 60 smaller independent processors known as “teapots”, the refining sector has ballooned into the world’s largest, surpassing the United States last year.

That growth has resulted in a low refinery utilization rate of 73% in 2022, based on official output data, compared with more than 91% in the U.S., which means China has surplus capacity to allow for large volumes of refined fuel exports.

WHAT IS THE LIKELY IMPACT OF THE MEASURES?
The measures could force more closures of small, inefficient plants, which have already taken place in teapot hub Shandong province, where some 400,000-bpd worth of capacity was mothballed in 2020 and 2021 to make way for the new Yulong Petrochemical plant of a similar size.

Others players are expected to look abroad for growth. Polyester fiber maker Tongku Group and Rongsheng Petrochemical are both exploring building new refineries in Southeast Asia.

Many teapots, meanwhile, have over the years quietly expanded processing capacity, invested in oil storage or moved up the product value chain to make energy transition chemicals.

WILL CHINA ACHIEVE ITS GOALS?
Apart from increasing scrutiny in approving new plants, the government can wield the powerful tool of crude oil import quotas, to which all independent refiners are subjected.

In recent years, the cap has stood at an annual 243 million tons, or 4.86 million bpd and actual grants have run below that.

Thanks to rigid quota management and crackdowns on illegal quota trading, China has already managed to limit refinery operations to some extent.

Meanwhile, the government also maintains tight control over refined fuel exports, allowing only state refiners and one independent major refiner, Zhejiang Petrochemical Corp, the right to export.

WHICH ARE CHINA’S BIGGEST REFINERS?
China has about 34 refineries of 200,000 bpd or more, with combined processing capacity of 480 million tons, or 9.6 million bpd, according to Sinopec.

Most of these plants are run by Sinopec , PetroChina and China National Offshore Oil Company. Together, the three state giants operate nearly 12 million bpd of processing capacity.

HOW MUCH NEW CAPACITY IS IN THE PIPELINE?
Four new refineries with combined capacity of 1.2 million bpd are planned, including the 400,000 bpd Yulong Petrochemical complex in Shandong, the 300,000-bpd Huajin Aramco Petrochemical Company in Liaoning province in the northeast, and the 320,000-bpd Sinopec Gulei refinery, as well as the 300,000-bpd expansion at Sinopec Zhenhai.

Reuters, Chen Aizhu, November 20, 2023

An oil refinery is one of six major national projects completed by Oman’s Investment Authority, with a value of over 4 billion Omani rials ($10.3 billion).

These initiatives form part of the National Development portfolio, aimed at bolstering economic diversification, stimulating regional development, attracting investments, and generating employment opportunities, particularly for small and medium-sized enterprises.

The Duqm Refinery and Petrochemical Industries project is the most significant venture, and is poised to transform the port town into a major industrial and economic hub in the region.

The initiative comprises a refinery with a capacity of 230,000 barrels per day, producing various petroleum products.

It also includes storage and export facilities at Duqm Port and an 81 km pipeline from Ras Markaz to the refinery, according to a report by the state-owned Oman News Agency.

In Al-Wusta Governorate, the Ras Markaz Crude Oil Storage Terminal underpins government efforts in economic diversification.

This facility holds a storage capacity of up to 200 million barrels, significantly enhancing Oman’s crude oil storage capabilities and export potential.

The Duqm Integrated Power and Water Project in Duqm, with a capacity of 326 megawatts of electricity and 36,000 cubic meters of water per day, aims to support industrial development in the Special Economic Zone at Duqm by catering to the energy and water needs of heavy industrial companies.

Another strategic initiative, the Rabt project in Duqm, comprises 660 km of transmission lines and five main stations.

This project is set to improve the efficiency and integration of the National Electricity Transmission network, focusing on renewable energy sources.

The Khuweimah Shrimp Farm project in Jalan Bani Bu Ali, South Ash Sharqiyah governorate, aims to achieve food security and leverage local raw materials.

The farm, spanning 200 hectares, includes shrimp cultivation and processing facilities with an annual production capacity of 4,000 tons.

Lastly, with its 304 rooms and suites, the JW Marriott Hotel Muscat represents Oman’s focus on tourism development.

This project aligns with the country’s efforts to diversify its economy, boosting the tourism sector’s contribution to the gross domestic product and creating direct job opportunities for the local workforce.

Oman releases 3 electronic platforms to boost investment climate

Oman’s Ministry of Commerce, Industry, and Investment Promotion has inaugurated three digital platforms in Muscat to boost its investment potential.

The Oman for Business, Hazm, and Maroof Oman platforms represent a significant leap toward comprehensive digital transformation in a bid to bolster the country’s business landscape.

Oman for Business streamlines the process for foreign investors to start businesses, while Hazm ensures consumer safety and streamlines customs processes.

Maroof Oman enhances the legal and regulatory framework for e-commerce, fostering a more efficient, secure online business environment.

These initiatives mark a strategic move toward modernizing Oman’s economy and simplifying commercial activities.

Arab News, November 18, 2023