Category: Nieuws

Days ago we pointed out a report that dove into the unique risks of placing lithium ion batteries all over the world (including in electric vehicles).

And just over the last two months, we’ve written not only about how much driving needs to be done in EVs to make them better for the environment than internal combustion engine vehicles, but we’ve also noted that EV carbon footprints aren’t necessarily as better than ICE vehicles as many people think.

Now, the hits keep on coming: we’re finding out that EVs cost more to service than internal combustion engine vehicles. Like the reduction in environmental harm that we noted last month, however, the gap narrows over time.

Automotive News published a report on Thursday of this week noting that EVs were 2.3 times more expensive to service than ICE vehicles after three months of ownership. Analytics firm We Predict compiled the data by looking at roughly 19 million vehicles between the 2016 and 2021 model years.

That figure drops to just 1.6 times more expensive after one year, the report noted, as a result of a 77% drop in maintenance costs and a decline in repair costs. The data showed that service techs spend about twice as much time diagnosing problems with EVs as they do with regular gas vehicles. They spend about 1.5 times longer fixing them and the labor rate for repairs was about 1.3 times higher.

“It’s an industry in launch. This is the launch factor you’re seeing,” said Renee Stephens, a vice president at We Predict.

EVs had a high rate of wheel problems, the study found. This was attributed to wear and tear associated with carrying bulky batteries.

Ford’s Mach-E scored the best marks in terms of cost of service. After 3 months of ownership, the Mach-E service costs were $93, compared to $366 for the Audi E-Tron and $667 for the Porsche Taycan.

OilPrice, by ZeroHedge, August 10, 2021

Kinder Morgan (NYSE:KMI) just reported excellent Q2 2021 earnings and raised its guidance. The pipeline giant is on its way to generating its highest distributable cash flow (DCF) and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in five years, as oil and natural gas prices remain at solid levels. 

The company just made two key acquisitions that will grow its natural gas business and give it exposure to the emerging renewable natural gas (RNG) industry. These acquisitions, paired with a rich project backlog, give Kinder Morgan plenty of outlets to increase its earnings.

Given this backdrop, is Kinder Morgan finally returning to growth? And if so, is that necessarily a good thing?

Cautious growth

Growth can be risky and capital intensive but can also pay off big time. Debt worked to Kinder Morgan’s advantage in the early 2010s. The company’s top- and bottom-line performances were impressive, and Kinder Morgan stock became a Wall Street darling. However, debt can be a double-edged sword and got the better of Kinder Morgan by bloating its balance sheet and straining its business during the oil downturn of 2014 and 2015.

For the past few years, Kinder Morgan has been pounding the table on capital discipline. To its credit, it has successfully transitioned its business away from high spending toward generating DCF to support a growing dividend. It’s also taken a lot of that excess DCF and used it to pay down debt. Now, it’s safe to say that its balance sheet is in its best shape in five years.

Given management’s conservative bent, investors may be surprised to learn that the company may be returning to growth. And given its rocky past, the last thing investors want to see is Kinder Morgan ramp spending, overexpand, and then implode again.

Funding acquisitions with cash

The good news is that Kinder Morgan seems to be taking a responsible yet purposeful approach to growing its business. Strong DCF generation and a decent existing cash position allowed it to acquire Stagecoach Gas Services for $1.23 billion in cash, not debt. 

Stagecoach plays into Kinder Morgan’s Northeast portfolio of assets by adding 185 miles of pipeline and 41 billion cubic feet (bcf) of storage capacity. Although Kinder Morgan sees most of the growth in U.S. natural gas coming out of Texas and Louisiana, it also views the east coast as an underserved region when it comes to natural gas infrastructure. 

During its 2Q 2021 conference call, Kinder Morgan CEO Steve Kean said that “the Stagecoach assets are well interconnected with our Tennessee Gas Pipeline system, as well as other third-party systems in a part of the country that is constrained from an infrastructure standpoint, and frankly, where it is difficult to get new infrastructure permitted and built.” 

For years, companies have tried and failed to build pipelines in the region. High upfront costs, regulatory hurdles, and environmental opposition have all been major barriers to entry. Therefore, Kinder Morgan is probably better off buying existing assets than building new ones.

Kinder Morgan’s $310 million acquisition of Kinetrex Energy plays into the long-term potential RNG. Landfills generate a substantial amount of methane emissions. Capturing methane from landfills and turning it into useful energy has potential as an ESG-friendly investment for companies like Kinder Morgan.

In the short term, Kinetrex also has significant LNG storage assets. In fact, Kinder Morgan estimates that around 40% of Kinetrex’s business is currently tied to LNG, but the RNG business will grow to comprise 90% of the business over time. 

Fewer dividend raises may be a good thing

During its 2Q 2021 conference call, Executive Chairman Rich Kinder stressed that the company remains focused on growing the dividend, preserving the balance sheet, making acquisitions, and buying back shares when the time is right. However, he views all of these opportunities “in concert,” indicating the company may feel less inclined to buy-back shares or significantly raise the dividend if it’s spending money on growing the business, instead.

At the end of 2019, Kinder Morgan announced its intentions to raise its annual dividend from $1 a share to $1.25 a share in 2020. The COVID-19 pandemic threw a wrench in this plan. The company’s most recent dividend raise puts the annual payout at just $1.08 per share.

If Kinder Morgan’s two recent acquisitions have a drawback, it’s that they eat up cash that may have otherwise been used to raise the dividend. But given that Kinder Morgan stock already yields over 6%, compared to just 1.27% for the average stock in the S&P 500, it seems best that the company institutes minor dividend raises and focuses on other ventures, instead.

Fool, by Daniel Foelber, August 10, 2021

Iraq wants another U.S. company to replace Exxon as a shareholder in the West Qurna 1 field, one of the country’s largest after the supermajor leaves the country.

“Exxon Mobil is considering exiting Iraq for reasons that are to do with its internal management practices, decisions, and not because of the particular situation in Iraq,” Prime Minister Mustafa al-Kadhimi told media after a meeting with President Joe Biden, as quoted by Reuters.

Exxon, which holds a $32.7-percent interest in West Qurna 1, has been looking for a buyer with plans to exit the country entirely. The stake was valued last year at up to $500 million. At the time, reports said two Chinese companies were interested in acquiring it, state-owned CNPC and CNOOC.

The plans for the stake sale appear to have been prompted by the impact the pandemic had on Exxon’s finances as it sought to keep its dividend intact and reduce debt. Later reports said that Iraq could end up buying the West Qurna 1 stake itself.

There could be other reasons for Exxon leaving Iraq, too. As Gerald Jansen wrote for Oilprice earlier this month, these have to do with the souring relationship between the company and Baghdad after Exxon ventured into Kurdistan oil, and with the continued political and financial instability in Iraq. This, according to Jansen, may have compromised the profitability of whatever plans Exxon may have had for its Iraqi business earlier.

Just two years ago, Exxon was all set to take part in a $53-billion plan to boost Iraq’s oil production, but it seems the pandemic and the Iraqi situation changed many things, including this ambitious plan.

“When Exxon Mobil departs, we will not accept its replacement to be other than another American company,” Prime Minister Kadhimi told media this week, but an American company has yet to express interest in acquiring Exxon’s holdings in Iraq.

Oilprice, byIrina Slav, August 3, 2021

Leading energy infrastructure company Kinder Morgan’s (KMI) strategic acquisitions to diversify its portfolio of assets have strengthened its position in the energy market. However, because the spread of the COVID-19 Delta variant continues to stoke fears around future energy demand, the stock’s near-term prospects look uncertain.

Let’s discuss.Houston, Tex.,-based energy infrastructure company Kinder Morgan, Inc. (NYSE:) specializes in owning and controlling oil and gas pipelines and terminals in North America. The company owns and operates approximately 83,000 miles of pipelines and 144 terminals. So far this year, the stock has gained 27.1%, driven primarily by higher contributions from all three of its business segments in the second quarter of 2021 relative to the second quarter of 2020.

Also, greater demand for natural gas transportation and storage contracts in Texas has helped the company generate robust sales in the last reported quarter.

However, its stock is down 4% over the past month. This can be attributed primarily to volatility in oil prices as the Organization of the Petroleum Exporting Countries and other producers, including Russia—collectively known as OPEC+—reached an agreement to boost oil supply to cool oil prices and meet rising demand.

Although KMI’s diversified portfolio and its plans to acquire a leading supplier of liquefied natural gas in the Midwest should help it stand out in the energy market, concerns related to the spread of the COVID-19 Delta variant and its potential reduce energy demand could cause KMI’s shares to retreat in the near term.

By Investing, August 3, 2021

Port of Rotterdam Authority, Koole Terminals, Chiyoda Corporation and Mitsubishi Corporation have signed an agreement to a joint study the feasibility of a commercial-scale import of hydrogen from overseas sources to one of Koole’s terminals in the port of Rotterdam utilizing Chiyoda’s proven hydrogen storage and transportation technology SPERA Hydrogen.

Northwest-Europe will have to import hydrogen on a large scale to become net zero CO2 emission. The Port of Rotterdam Authority is therefore looking at ways to set up new hydrogen supply chains from countries where hydrogen can be produced and supplied cost-effectively.

Several companies in Rotterdam, such as Koole Terminals, are highly interested in this rapidly developing new business and are making plans to innovate their existing facilities and/or build new ones. The Port of Rotterdam Authority is supporting such activities.

Shipping hydrogen is more challenging than shipping oil or coal. One option is for it to be made liquid by cryogenic process to minus 253 degrees, another is to transform it into a carrier, like ammonia or methanol or lastly it could be chemically combined in a so called liquid organic hydrogen carrier (LOHC).

Methylcyclohexane (MCH) is a LOHC. It maintains a stable liquid state under ambient temperature and pressure. As a means of storage and transportation of hydrogen, MCH is comparable with petroleum and petrochemical production in terms of the risks involved. Chiyoda Corporation has developed the SPERA Hydrogen technology to release hydrogen from MCH. MCH is produced from toluene through hydrogenation process. When hydrogen is generated from MCH, toluene produced simultaneously, which can be shipped back to be used as material of MCH again.

In 2020 Chiyoda Corporation, Mitsubishi Corporation and MITSUI & CO., LTD. and Nippon Yusen Kabushiki Kaisha successfully completed the demonstration project of the long distance transportation (5000km) and storage of hydrogen using Chiyoda Corporation’s SPERA Hydrogen technology by producing MCH in Brunei, shipping it to Japan and shipping toluene back to Brunei. This was the world’s very first global hydrogen supply chain project proving the technical readiness for commercial use.

SPERA Hydrogen is expected to play an important role in the realization of commercial scale hydrogen supply chains globally and contribute to global carbon neutrality in 2050. One of the major advantages of MCH over liquid hydrogen and ammonia as a hydrogen carrier is that it makes use of existing infrastructure and vessels, and is easier to handle.

Now Port of Rotterdam Authority, Koole Terminals, Chiyoda Corporation and Mitsubishi Corporation, are conducting a joint-study on the large scale import of hydrogen. The Port of Rotterdam Authority will provide a matchmaking role for major hydrogen end-users in Northwest Europe and competitive oversea hydrogen suppliers and support for materializing the project. Koole Terminals will pursue ways to innovate its terminal facilities and support development of onward transport to their end-users.

Chiyoda Corporation will be the technology provider for the project and Mitsubishi Corporation, as one of Japan’s top trading and investment company in the field of energy industry, will lead the commercial development of the project to make the overall hydrogen supply chain commercially viable.

The feasibility study is expected to take one year. It is the ambition of the companies to import 100 to 200 ktpa hydrogen in 2025 and 300 to 400 ktpa in 2030.

By Ajot, August 4, 2021

It’s an eternal dispute – the need to meet consumer energy needs through oil and gas production versus the battle of climate change activists and green policy.

When President Biden came into office in January his stance on green policy was in stark contrast with his predecessor Donald Trump. Biden promises a Green New Deal under which he will pave the way for the banning of oil and gas drilling on public lands, protect a third of America’s land and ocean, introduce a government electric vehicle (EV) fleet, and move away from traditional fuel towards EV for the mail and military.

Biden immediately re-joined the Paris Agreement in an effort to show the country and the world that he meant business, thereby leaving America’s oil and gas industry in a state of uncertainty about the future of the country’s black gold. 

Earlier this year, Biden imposed a temporary ban on new oil and gas leases on public lands and offshore waters, while the Interior Department carried out a “comprehensive review” of the leasing program. The idea was to reconsider the industry’s impact on the environment and global warming. 

This lease ban was overturned by a federal judge in June after 13 states filed a legal challenge in Louisiana to end it. This means many jobs remain safe and production levels can resume, but at what cost to the environment? 

There’s no getting away from it, America runs on oil. Fuelling the nation, forming a major part of its export economy, and providing thousands of jobs across the country, the ongoing need for the oil industry in the U.S. is evident. 

And despite the show from Biden to make America green, he continues to invest in the country’s oil industry, knowing that it is still needed to maintain stability until an alternative is viable. 

To this end, early in 2021 he approved the new Willow project by ConocoPhillips’ in the National Petroleum Reserve-Alaska (NPR-A), as well as arguing against the shutting down of the Dakota Access pipeline that carries around half-million bpd of oil between South Dakota and Illinois. 

In addition, Big Oil holds all the cards thanks to the ongoing lucrative business of fuelling the world. Oil supermajors such as Royal Dutch Shell have long been donating to political lobby groups, including the American Petroleum Institute, to stall and weaken legislation threatening big oil’s position of power in America. ExxonMobil, Chevron, and BP, all make similar contributions to ensure their place in the U.S. 

However, with plans to achieve net-zero carbon emissions by 2050, while oil is very much set to stay in the U.S. over the next decade, many companies are looking to modernize, increase their renewable energy portfolios, and cut carbon in line with international expectations. This comes following months of pressure from the government and the International Energy Agency (IEA). 

“The signs are unmistakable, the science is undeniable, and the cost of inaction keeps mounting,” Biden stated on Earth Day. “The countries that take decisive actions now will be the ones that reap the clean-energy benefits of the boom that’s coming.”

Little is happening to slow production, as companies fight to produce as much as possible before demand wanes later this decade, however companies are looking to improve environmental policies through new technologies such as carbon capture and storage and wastewater recycling for use in other industries.

The IEA strongly supports the introduction of CCS programs, believing they add “significant strategic value” in the transition to net-zero. Samantha McCulloch, head of CCUS technology at the IEA, stated “CCUS is a really important part of this portfolio of technologies that we consider.” 

So, while the fight against climate change continues and pressure is being put on governments to introduce a green policy that would significantly hinder oil and gas production, the more likely expectation is for oil and gas to stay in place while global demand remains high, changing practices to meet international expectations and new carbon emissions norms.

OilPrice, by Felicity Bradstock, August 3, 2021

Pressure is mounting on the oil and gas sector to clean up its act and reduce emissions from operations, the so-called Scope 1 and Scope 2 emissions.

Many of Europe’s largest oil corporations, including Shell, BP, Eni, Repsol, and Total, have imposed their own targets to cut carbon intensity from their upstream operations as they have pledged to become net-zero emission businesses by 2050 or sooner. 

The pressure from investors and shareholders is also growing, including on the oil industry to reduce the so-called Scope 3 emissions—those emissions generated by the use of their products. 

Low-carbon power would be a key to cutting emissions, says Wood Mackenzie, which estimates that around two-thirds of emissions come from power consumption – production, processing, and liquefaction. 

Between 2021 and 2025, the region with the highest carbon intensity will be Oceania, mostly due to the large emissions from liquefaction, according to the Wood Mackenzie Emissions Benchmarking Tool. Africa comes next, also because of the large share of flaring in upstream operations, followed by Asia with high production and liquefaction emissions, and North America, where production and methane losses account for much of the carbon intensity.  

There are projects to mitigate emissions. 

“But technical, logistical and commercial challenges need to be overcome,” 

Jessica Brewer, Principal Analyst, North Sea Upstream Oil and Gas at WoodMac, notes. 

Africa, for example, hosts some of the most polluting assets because of a lack of infrastructure to solve the gas flaring problem, Wood Mackenzie said last month. 

“Reducing emissions and considering new energy diversification is really unavoidable,” WoodMac said in a report.

As investors want proof of solid efforts for emission reduction, international oil majors should work to address the problem in Africa, where new liquefied natural gas (LNG) projects are being planned.

The oil industry has proposed ways to slash emissions from operations, not only in Africa, especially after shareholders and courts delivered a warning, the starkest yet, about Big Oil’s license to operate. 

Oil firms have started to address investor concerns about emissions. Some are accelerating the electrification of oilfields with renewable sources of energy, others—most actually—are looking at carbon capture, storage, and utilization (CCSU) technologies to remove the carbon dioxide during operations. 

Norway’s Equinor, for example, is electrifying operations, replacing a fossil-based power supply, mostly from gas turbines, with renewable energy. 

“Electrification in the North Sea is one of the main measures to reach our climate ambitions for the next decades,” the Norwegian energy giant says. 

U.S. supermajors Exxon and Chevron, who—unlike Europe’s giants are not investing in solar or wind energy—are betting on carbon capture and storage. So are many European oil firms in hopes of reducing their carbon footprint and helping whole industrial clusters to decarbonize. 

In the United States, Exxon created earlier this year a new business, ExxonMobil Low Carbon Solutions, to commercialize its low-carbon technology portfolio, focusing first on CCS. Chevron also bets on CCS as one area in which it would invest in the coming decades. 

The biggest oil firms believe that CCS is one of the ways to help carbon-intensive industries to reduce their emissions, as a growing number of companies in various sectors are committing to net-zero operations within the next two to three decades. 

Oil majors are already working on several large-scale CCS projects aimed at decarbonizing industrial clusters in parts of Europe. 

Even in Canada, home to the oil sands—one of the most emission-intensive crude resources in the world—the biggest producers announced a net-zero collaboration initiative to achieve net-zero emissions from oil sands operations by 2050. The initiative includes companies that operate some 90 percent of Canada’s oil sands production: Canadian Natural Resources, Cenovus Energy, Imperial, MEG Energy, and Suncor Energy. 

The initiative is ambitious and “will require significant investment on the part of both industry and government to advance the research and development of new and emerging technologies,” the group said.

The warning from the Canadian groups is valid for all technologies emerging to save the day and reduce emissions from upstream operations—those technologies need a lot of investment, and not just from Big Oil

OilPrice, by Tsvetana Paraskova, August 3, 2021

GCC countries are selling prime assets to fund economic transition.

Over the last few months, most Gulf Cooperation Council (GCC) countries have been cutting themselves multimillion-dollar deals selling energy assets or issuing bonds off the back of them.

Saudi Arabia and the United Arab Emirates (UAE) are leading the trend. In April, Saudi Aramco agreed to sell 49% of its pipeline network to a US-led consortium for $12.4 billion. In June 2020, Abu Dhabi’s national oil company, Adnoc, raised $10 billion selling gas pipeline leasing rights. The company is currently considering an IPO for its drilling and fertilizer businesses—for $1 billion each, sources close to the deal say.

In other Gulf states, national oil companies are eying the bond market. Qatar Petroleum sold $12.5 billion in bonds to help fund the North Field expansion, a megaproject that should allow the tiny Gulf state to become the world’s largest liquified natural gas producer by 2030. In April, Oman’s oil company sold $750 million in bonds; and, according to Bloomberg, Kuwait Petroleum plans to borrow up to $20 billion on international debt markets to maintain production levels. Experts expect more deals in the energy sector as pandemic-driven stimulus packages run out.

Funding Diversification

GCC countries sit on almost 30% of the world’s oil and more than 20% of its natural gas. For a few years now, governments have been trying to break free from the oil rent.

“Gulf countries appear to be taking their money out of the oil and gas market and, we hope, will invest it wisely,” says London-based David Manley, senior economic analyst at the Natural Resource Governance Institute.

Saudi Arabia and the UAE started privatizing before Covid-19. In late 2019, Saudi Aramco made the headlines by raising $25.6 billion in a record IPO. In 2017, Adnoc sold part of its fuel distribution network for $851 million in a similar deal.

A lot of the money raised by national oil and gas companies is used to fund the petro monarchies’ economic transition. In the past, Gulf states would have paid for these projects out of pocket; but governments are now forced to watch public spending, due to the steep decline in hydrocarbon revenue.

“It’s not a knee-jerk reaction. A lot of thinking has gone into this,” says Adnan Fazli, Transaction Services partner at global professional-services firm Deloitte. “This is part of a monetization initiative. The desire is to create liquidity to invest in the transformation of economies, without necessarily having to take on debt.”

Foreign investors—who have rarely been allowed to come near the Arab world’s crown jewels—are a bit more welcome now. “We are talking about some of the largest private equity and infrastructure investors globally,” says Fazli. “For them it’s a financial investment, a tool to generate quality returns for their shareholders; and the way these investments are structured precisely caters to that. The operators continue to have control over these businesses, as they had before, and investors get a return over the duration of their investment.”

If Gulf countries are allowing foreign investors in, they are also careful to structure transactions that leave themselves in control. In the upcoming Aramco pipeline deal, for instance, the Saudi giant remains the majority shareholder and keeps operational control of the pipelines. “If you look closely at what they are selling, it’s not the core business but assets that are adjacent,” says Dubai-based Bart Cornelissen, a partner at Deloitte and its Energy Resources and Industrials leader. “They would sell the pipeline, for example, but keep the oil field.”

Behind all this, the bigger worry for Gulf states is how to remain relevant in a context of the global energy transition. “The question is, which country or which company will be able to produce oil until the end?” says Cornelissen. “The only way you can ensure that is by producing as cheaply as possible, and what we are seeing now in the Middle East is a further drive down the cost curve.”

Global Finance by Chloe Domat, July 26, 2021