Category: Nieuws

India has approved an incentive plan of 174.9 billion rupees ($2.11 billion) to promote green hydrogen in a bid to cut emissions and become a major exporter in the field, the information minister said on Wednesday.

The move is targeted to help India, one of the world’s biggest greenhouse gas emitters, achieve net-zero carbon emissions by 2070. Reuters reported last month about India’s plans for a green hydrogen incentive programme.

The country aims for annual production of 5 million tonnes of green hydrogen by 2030, cutting about 50 million tonnes of carbon emissions and saving one trillion rupees on fossil fuel imports, the minister, Anurag Thakur, told reporters.

“Our aim is to establish India as a global hub of green hydrogen,” Thakur said. “We will make efforts to get at least 10% of the global demand for green hydrogen (by 2030).”

Hydrogen, made by splitting water with an electrical process called electrolysis, can be used as a fuel. If the devices that do that, electrolysers, are powered by renewable energy, the product is called green hydrogen.

India also plans to build electrolyser capacity of 60 gigawatts to 100 gigawatts to help produce green hydrogen, Thakur said.

The incentive by the government aims to make green hydrogen affordable and bring down its production cost, currently at 300 rupees to 400 rupees per kg, according to industry sources.

Fertiliser, refining and iron and steel units currently consume grey hydrogen, made through fossil fuels, of 5 million tonnes per annum, according to industry sources.

Grey hydrogen costs around 200 rupees per kg to produce, sources added, as gas costs have pushed the prices from 130 rupees per kg.

To promote the use of green hydrogen, Thakur said obligations – such as mandatory targets for green hydrogen consumption – would be required of fertiliser units, petroleum refineries and city gas distribution networks.

The government expects investments totaling 8 trillion Indian rupees ($96.65 billion) in the green hydrogen sector by 2030, Thakur said, adding that incentives will be given for manufacturing of electrolysers and production of green hydrogen.

The United States and the European Union have already approved incentives worth billions of dollars for green hydrogen projects.

Indian companies such as Reliance Industries (RELI.NS), Indian Oil (IOC.NS), NTPC (NTPC.NS), Adani Enterprises (ADEL.NS), JSW Energy (JSWE.NS), ReNew Power (RENE.BO) and Acme Solar (ACMO.NS) have big plans for green hydrogen.

The government’s incentive programme, named the “Strategic Interventions for Green Hydrogen Transition Programme (SIGHT)”, will also need additional government spending of 14.66 billion rupees for pilot projects and about 8 billion rupees towards research and other expenses.

($1 = 82.8000 Indian rupees)

Reuters by Sarita Chaganti Singh, January 10, 2023

Europe has been forced to shore up its energy supplies since Russia invaded Ukraine.

The continent has averted a worst-case scenario for this winter. Now, it’s racing to build new liquified natural gas infrastructure ahead of the next one.

Europe raced to shore up its energy supplies in the wake of Russia’s invasion of Ukraine, and it appears to have averted a worst-case scenario this winter — largely thanks to liquified natural gas.

For years, Europe was heavily dependent on Russian pipeline gas. But when Russia attacked Ukraine, and Europe could no longer count on those gas flows, it pivoted hard to LNG, a flexible energy source that comes largely from the United States, Qatar, Australia and Algeria.

Europe has successfully filled its gas storage capacity to 95%, which means all should be OK this winter. But next winter is a different story.

Because Europe was so reliant on Russia, it has limited LNG import capacity. European countries are scrambling to build new infrastructure to be able to import more of it.

CNBC by Julianna Tatelbaum, January 5, 2023

Rising COVID case counts in China and fears about an impending global economic recession continue to weigh on sentiment and positioning.

Brent time spreads flipped back into contango pointing to a possible surplus in Q1 2023.

But most of these headwinds are going to be transitory, and once China’s reopening digests all of the excess product inventories, crude buying will return, which should result in the physical market flipping back into a shortage.Looking for a helping hand in the market?

Members of HFI Research get exclusive ideas and guidance to navigate any climate.

For most energy investors by now, a casual drop of $8/bbl in WTI in the span of 48 hours is normal.

While there aren’t headlines we can point to that caused such a dramatic selloff, we can tell you based on the data we are seeing that the market is implying Q1 2023 oil market balances to be weak.

If you take a step back from the minutiae of the oil markets, you can’t blame the broader market for wanting to avoid oil and energy exposure in the near term.

China’s COVID case counts are spiking likely leading to further compression in economic activities in the near term.

Brent time spreads have fallen back into contango leading to CTAs being biased to the short side.

Global PMI continues to falter pointing to more slowdowns ahead.

What I can say is that there’s no shortage of worries for investors, and what felt like the exact opposite scenario for energy bulls just 6-months ago now feels like hope is being lost.

However, this is where you have to be calm and collected. Situations like these require investors to really think things through.

For example, if markets are worried about China’s spiking case counts causing a further slowdown in the near term, instead of falling in line with the market, you should ask the simple question, “Doesn’t the rapid spread of COVID imply an even faster recovery down the road?” And the answer is invariably, yes, it does.

And what about the weak Brent time spreads we are seeing? Doesn’t this imply that oil market balances may build in the near term?

Keep in mind also that the weather outlook is very warm in Europe, so there’s been no gas-to-oil switching. In fact, it’s so warm, we think heating oil demand has also been impacted.

The time spreads, in essence, are telling me that demand will be weaker than expected in Q1.

The physical oil market is already starting to trade March barrels, and from the looks of it, things look loose. The COVID case spike coupled with a surplus of product inventories in China just means that it will take a while before we fully digest the excess crude.

This is a reason why you are only seeing contango in the prompt month time spreads and not the latter half of the year.

But we know that this will be a transitory event. Once the case count spike is over, China’s demand will return in a meaningful way.

And the reason we say that is because if you take a look at China’s crude inventories relative to its import levels, there was no spike in inventory despite the steep jump in crude imports.

For December, China imported nearly ~11 million b/d of seaborne crude imports, and Kpler’s satellite inventory data shows that December crude inventories went down.

Now oil bears could attribute this to refineries increasing throughput resulting in a product surplus (another reason why the export quota was increased by ~50% y-o-y).

But we think all of this is still a transitory event. Why? Because the reopening trade was never going to be a smooth line. Cheap crude allows Chinese refineries to run harder causing product inventories to get bloated. Chinese refineries get the ok to export the excess product inventory.

The rest of the world will have to digest this excess. This, in turn, will hit refining margins in the short run, but if demand continues to recover, and China’s reopening is real, then that excess inventory will get used up.

All of this just means that Q1 oil market balances this year will be weak. The question for oil bears and bulls is how weak will balances be. If we build, what do the builds look like?

Using our very conservative demand assumption model, we think the build is somewhere around ~0.51 million b/d.

But the surplus is not expected to last. Q2 oil market balances should flip back into a deficit in a hurry, and once the reopening hiccup is over, China’s excess product inventory will turn into a shortage, which will fuel crude buying down the road.

So while the oil market is starting off with a whimper, we think the headwinds that are keeping prices down will dissipate.

The signal to watch for readers will be when Brent time spreads flip back into backwardation and headlines saying the excess product inventories in China turn into a deficit.

By Seeking Alpha, January 6, 2023

That would require an improvement in global growth, as well as a change in Chinese domestic conditions. Neither will happen any time soon.

Amid the doom and gloom of a crude oil market that looks like it may end this tumultuous year with prices below where it started, there’s been one glimmer of hope: China.

The country consumes roughly one in six barrels of oil in the world, and for most of this year has been stumbling from lockdown to lockdown as it attempted to uphold Covid Zero.

Now that policy has been unceremoniously junked, we’ll surely see an immediate demand surge comparable to what happened when the rest of the world reopened in 2021, sending energy markets into overdrive.

Up to a point. But assuming a direct correlation with other countries risks misreading the crucial ways in which China’s oil consumption is different.

For one thing, transport simply isn’t as dominant as it is elsewhere. Gasoline, diesel and jet kerosene use up 72% of the oil barrel in the US and 68% in the European Union.

In China, it’s just 54%. Petrochemicals, broadly defined to include everything that’s not a liquid fuel, account for another quarter of the barrel in the US and Europe. In China, it’s 42%. 1

That should put a dampener on the notion that 2022 has been a bust year for China’s oil demand. Gasoline and jet fuel output, as one might expect from the lockdowns, has been in the doldrums: 146 million metric tons were consumed in the 10 months through October, down 17 million tons on 2021.

Other products, however, have been booming, in line with the surging value of export trade. When foreign countries buy more Chinese imports, that tends to be bullish for the plastic feedstocks that go into making them, as well as the diesel that’s used to transport goods from factory to port, to fire up generators at industrial plants, and to help power the ships carrying products to foreign harbors.

In the same 10 months, output of the feedstocks of LPG, naphtha and ethylene was 112 million tons, up 9.1 million tons on the previous high.

Diesel consumption was 153 million tons, up a whopping 23 million tons (possibly due to some change in how China’s statisticians define diesel).

In fact, the only factor that’s prevented China’s crude oil consumption from hitting a fresh record this year has been a precipitous collapse in asphalt production. Output through October fell 16 million tons from a year earlier, a drop of nearly a third that subtracted more from total demand than any other single product.

That parallels the bust in the country’s real estate sector: bitumen is mainly used for surfacing the roads that connect new property developments to towns, as well building materials such as roofing.

Oil demand is always a more complex story than a direct relationship between driving behavior and crude consumption, but in China that’s more the case than in any other large economy.

Petrochemicals are not just a huge share of the barrel, but a sector unusually exposed to exports, and thus the state of demand beyond China itself.

Even diesel, the largest slice of the barrel, is less transport-exposed than in other countries, thanks to its role providing feedstock to chemical plants and powering on-site generators in the vast construction sector.

That’s reason to think even a rapid removal of Covid-Zero restrictions now won’t be sufficient to cause a sudden rebound in demand early next year. This would require an improvement in global growth, as well as a change in Chinese domestic conditions.

Don’t hold your breath. The US Federal Reserve is still pushing interest rates higher to stamp out lingering signs of inflation, and the World Trade Organization is forecasting a sharp slowdown in trade next year, with volumes forecast to rise just 1% compared to 3.5% this year.

This is consistent with where major forecasters see things. The Organization of Petroleum Exporting Countries expects oil demand to continue falling by about 55,000 barrels a day in the first quarter of 2023, before starting to climb through the rest of the year as travel resumes alongside resilient feedstock demand.

The International Energy Agency reckons consumption will run at relatively subdued levels comparable to 2019 until the middle of the year, when it should finally overtake its 2019 highs.

It’s a sign China’s long period as a driver of oil growth is near its end. Apparent domestic oil demand hasn’t appreciably expanded since hitting a plateau in early 2021.

Most of the rise in consumption we’ve seen this year went into exports of products from the country’s refineries and factories. India, which consumes about one barrel for every three used in China, is often these days a more important contributor to marginal demand.

A nation that’s long seen its addiction to foreign crude as a national security risk may be on the brink of kicking the habit.

By The Business Standard, December 28, 2022

Equatorial Guinea’s Ministry of Mines and Hydrocarbons, and the Democratic Republic of the Congo’s Ministry of Hydrocarbons, signed a Memorandum of Understanding (MoU) at the Angola Oil & Gas (AOG) 2022 Conference & Exhibition to develop existing synergies across their respective upstream, downstream, energy infrastructure and logistics sectors.

Signed by Equatorial Guinea’s Minister, H.E. Gabriel Mbaga Obiang Lima, and his Congolese counterpart, H.E. Minister Didier Budimbu Ntubuanga, the agreement provides for the establishment of a working group to achieve shared energy objectives and the implementation of specific projects.

These include the financing and construction of an oil refinery in the Democratic Republic of the Congo (DRC) – to be jointly owned by both countries – to meet regional demand for refined petroleum products, along with the construction of storage facilities for refined products.

“Cross-border cooperation is one of the key tenets of Equatorial Guinea’s energy development strategy, as we aim to increase the availability of affordable and accessible energy in our country and across the region,” noted H.E. Minister, Mbaga Obiang Lima. “This MoU, coupled with previous agreements signed with Cameroon and Nigeria, supports our national mandate to facilitate the production and trade of African petroleum products and create value-added industries.”

“The Congo is advancing its position as a leading African oil producer and we are looking forward to renewing and cementing our partnership with our neighbour Equatorial Guinea, one of the leading oil and gas producers in the region, to fully leverage our hydrocarbon resources, stimulate production and bring energy security to the country,” stated H.E. Minister Budimbu Ntubuanga.

The MoU aims to facilitate the transfer of knowledge and technical expertise from Equatorial Guinea to the DRC, with a view to developing the Congo’s oil and gas blocks, carrying out upcoming block allocation processes, engaging the local oil and gas sector and increasing total production. In August 2022, the DRC launched a 30-block licensing round, comprising three blocks in the coastal basin of the Kongo Central province, 11 near Lake Tanganyika, nine in the Cuvette Centrale, four blocks near Lake Albert, and three gas blocks on Lake Kivu.

Furthermore, the national oil company of Equatorial Guinea, GEPetrol, will assist the DRC’s state oil firm SONAHYDROC in the development of the Congo’s natural gas sector, specifically the promotion of LNG and the storage, distribution and export of LPG.

Hydrocarbon Engineering by Bella Weetch, December 27, 2022

Texas continues to lead the U.S. in energy production, led by the oil and natural gas industry.

In 2021, Texas crude oil accounted for 43% of all U.S. production and 25% of all marketed natural gas production.

Texas also has the greatest number of crude oil refineries and the greatest refining capacity of any state in the U.S. Texas’ 31 petroleum refineries can process a combined nearly 5.9 million barrels of crude oil a day (b/d) – 32% of America’s refining capacity, as of January 2021, according to U.S. Energy Information Administration data.

Texas also produces more electricity than any other state, the EIA reports. In 2021, Texas accounted for about 12% of America’s total electricity net generation.

Btu is short for British thermal unit, which measures the heat content of fuel or energy sources, EIA explains. “A single Btu is very small in terms of the amount of energy a single household or an entire country uses. In 2021, the United States used about 97.33 quadrillion Btu of energy.”

Fossil fuels – petroleum, natural gas, and coal – accounted for roughly 79% of total U.S. energy production in 2021, according to the EIA.

Texas’s oil and natural gas industry also led the U.S. in energy production even during its historic lowest point in 2020.

According to EIA data, Texas generated 23,329.1 trillion Btu of energy in 2020. No other state came close. Overall, the U.S. generated 95,710.9 trillion Btus – nearly one fourth of it was generated by Texas.

But COVID-related lockdowns and less demand for gasoline forced U.S. crude oil production to drop by 8% in 2020, the largest annual decrease on record, the EIA reported, hitting Texas hard.

By March 2020, the industry experienced a “bloodbath.” By April, the WTI was negative $40 a barrel for the first time in history. Prices at the pump reached historic lows as U.S. crude oil production saw the largest annual decrease on record in 2020.

To stop the hemorrhaging, crude oil operators shut in wells and limited the number of wells brought online. They laid off large numbers of workers, all of which resulted in significantly lower output. Texas oil and natural gas companies soon led the nation in number of bankruptcies filed, The Center Square reported in 2020.

Since then, industry job gains have helped Texas lead the nation in job growth and its workers continue to produce more oil and natural gas than any other state.

“Texas oil and natural gas producers are steadily adding jobs as our state’s economy continues to strengthen even amidst high inflation, a testament to our state’s free-market principles and the oil and natural gas industry’s commitment to producing the fuel and products that power modern life,” Todd Staples, president of the Texas Oil & Gas Association, said. “Even as global unrest persists, this industry’s focus on providing energy security and economic strength for our state and nation remains steadfast.”

Despite Texas’ resilience in continuing to lead U.S. energy production, the Biden administration, United Nations and others are pushing for energy production to transition to “clean, renewable energy.” It’s a misguided approach, Oil & Gas Workers Association board member Richard Welch told The Center Square.

“Texas oil and natural gas workers pulled the U.S. out of a diesel shortage and our natural gas is what’s lighting and heating European homes this winter after their politicians’ socialist and so-called green energy policies failed,” he said. “Fossil fuels make possible every aspect of our lives. The world relies on and runs on diesel, not windmill juice.

“When Europe’s energy crisis hit, where did countries turn for help? Texas,” he added. “And we delivered, and we’ll keep delivering. Texas oil and gas workers proudly produce the cleanest energy in the world. We already comply with strong regulations to ensure our workers and environment are safe. As Texans, we’re proud to maintain our heritage as the powerhouse that fuels America and the world.”

In the first half of 2022, the U.S. became the world’s largest LNG exporter, the EIA reports, led by Texas.

As Europe faced an energy crisis due to several factors and reduced reliance on Russia, fuel needs were met “largely thanks to Texas energy production and export infrastructure,” and because of the Port of Corpus Christi, Texans for Natural Gas explains.

“Texas energy – from our wells in West Texas to our ports along the Gulf of Mexico – enabled America to meet European gas needs in a time of crisis,” TIPRO president and TNG spokesperson Ed Longanecker said. “Without American natural gas, Europe would have been at the mercy of aggressive foreign powers.”

If Texas were its own country, it would be the world’s third largest producer of natural gas and fourth largest producer of oil.

In 2019, total U.S. annual energy production was greater than total annual consumption for the first time since 1957, led in part by Texas production. Production also exceeded consumption in 2020 and in 2021, according to the EIA.

By Santa Barbara News-Press, December 27, 2022

Despite its significant oil, gas, and renewable energy potential, South Africa is in the midst of an energy crisis due to its economic woes and mismanagement of its state-owned utility.

Despite interest from majors in exploring offshore South Africa, there is uncertainty over the future of fossil fuels after a court prohibited offshore exploration by Shell earlier this year.

There are high hopes for the country’s renewable energy industry, with the government recently approving an $8.5 billion energy transition investment plan.

South Africa is in the midst of an energy crisis, despite its significant oil, gas, and renewable energy potential. This is mainly due to a prolonged economic crisis and poor management of the state-owned utility. Instability in the country’s energy industry has meant that new developments have been shrouded in uncertainty, with the hope that they will eventually boost South Africa’s energy security. An array of economic reforms has been released by the South African government in a bid to improve the country’s declining economy, and some seem to be working. President Cyril Ramaphosa’s Economic Reconstruction and Recovery Plan was originally proposed in 2018 but has seen several delays due to political opposition. The reforms are aimed at boosting energy security, infrastructure development, food security, job creation, and the green transition. The government says it is aiming for a “sustainable, resilient and inclusive economy.”

According to an S&P Global Ratings analysis, South Africa’s economic outlook is positive thanks to the successful implementation of recent government reforms. It suggested that government measures to increase private sector activity and reform some key government-related organizations could help boost growth outcomes over the next two to three years.

However, some challenges to stability remain. There continue to be deep divisions in the ruling African National Congress (ANC) and Ramaphosa’s cabinet. In addition, the state-owned utility, Eskom, continues to face difficulties. An Africa analyst at the risk consultancy Verisk Maplecroft, Aleix Montana, explained a “perfect storm of inflation, electricity cuts and corruption accusations that will continue to deteriorate South Africa’s profile and to pose risk for investments in the country.”

There have been regular power cuts in recent months as Eskom has seen electricity generation shortfalls, mainly due to equipment failures and fuel shortages. The blackouts are set to continue for the next six to 12 months unless the funds are found to provide Eskom with the diesel needed to run its power plants. South Africa has long faced energy problems, with Ramaphosa blaming the situation on Eskom, which, he says, was already underperforming under previous administrations. 

Despite major challenges to South Africa’s energy provision, it is attracting high levels of foreign investment in its oil and gas industry. French oil major TotalEnergies submitted an applicated for approval to drill five wells for oil and gas in the region between Cape Town and Cape Agulhas in November. This follows several other application submissions for exploration along the South African coast. 

Since the Russian invasion of Ukraine earlier this year, energy companies worldwide have been racing to develop other oil and gas resources, to reduce the global reliance on Russian energy. In addition, oil and gas firms have identified Africa as a strategic region for the development of low-carbon assets, moving away from existing projects in other parts of the world as they dry up. Several international firms have favored largely untapped locations across Africa, seeing the potential to keep developing their oil and gas assets while also reducing emissions, in a bid to appease state governments and international organizations pushing for a green transition. 

Despite opposition from environmental groups, TotalEnergies is pushing forward with its plan to develop its South African oil assets. The company plans to explore the deep-water Orange basin, offshore between Port Nolloth and Hondeklip Bay, at a depth of 3,000 metres. 

However, South Africa has been responding to calls to curb oil and gas exploration in recent months, as it looks to break into the world of renewables. A South African court banned offshore oil and gas exploration by Shell earlier this year, following a proposal from the oil major to explore the Eastern Cape province. 

Despite uncertainty around South Africa’s future in fossil fuels, there are high hopes for its renewable energy potential. In October, the government approved an $8.5 billion energy transition investment plan to accelerate South Africa’s shift away from fossil fuels to renewable alternatives. The Cabinet stated that the plan “outlines the investments required to achieve the decarbonisation commitments made by the government of South Africa while promoting sustainable development, and ensuring a just transition for affected workers and communities”.

The UK, EU, US, France, and Germany are backing the plan and investing in South Africa’s energy transition. At present, South Africa depends on coal for 80 percent of its power. The plan focuses on the electricity sector, electric vehicle manufacturing, and the development of a green hydrogen industry. It also sees a transition away from coal to renewable alternatives. But experts say that it is vital that donor countries deliver on their financing pledges for South Africa to progress in its transition. 

As South Africa slowly sees the light at the end of the tunnel from its economic crisis, the focus has shifted to attaining energy security. With strong potential in both fossil fuels and renewable energy, the Government of South Africa will have to exploit these opportunities to ensure the future of the country’s energy. However, inefficiencies in the state utility have meant failures in power provision, with immediate funding required to alleviate the current energy crisis.

OilPrice by Felicity Bradstock, December 27, 2022