Tag: energy transition

Abu Dhabi National Oil Co (ADNOC) and Saudi Aramco are among companies weighing bids for oil major Shell’s downstream assets in South Africa, Bloomberg News reported on Friday, citing people familiar with the matter.

South Africa’s Sasol is also considering an offer for the business, which could be valued at more than $800 million, the report said.

Puma Energy, a unit of Swiss-based Trafigura Group, and Glencore are also some potential suitors that could study the assets ahead of a bid deadline in the coming weeks, the Bloomberg report said.

“We have been approached by several highly credible parties which cannot be disclosed at this stage,” a Shell spokesperson told Reuters.

ADNOC did not immediately respond to a Reuters request for comment. Aramco was not immediately available for comment, while Glencore, Trafigura, Puma Energy and Sasol said they had no comment on the matter.

“We do not comment on confidential M&A or commercial matters and do not respond to market speculation,” a spokesperson for Sasol said in an email response.

Deliberations are in early stages and other bidders for the assets could also emerge, Bloomberg News said.

Earlier this month, Shell said it will divest its majority stake from a local South African downstream unit after a comprehensive review of its businesses across all regions.

Shell Downstream SA (SDSA) was formed after Shell South Africa and Thebe Investment Corp agreed to merge Shell South Africa Marketing and Shell South Refining a decade ago.

By: Reuters / May 27, 2024.

Hess Corp on Tuesday approved the company’s $53 billion merger with the No. 2 U.S. oil company Chevron, according to preliminary results of the vote.

The merger required a majority vote to approve the deal by a majority of Hess’ 308 million shares outstanding to pass. The company did not immediately provide the vote tally.

Chevron offered to acquire Hess last October in a move to gain a foothold in oil-rich Guyana’s lucrative offshore fields. The deal has been stalled by an ongoing review by the U.S. Federal Trade Commission and clouded by an arbitration claim filed by Hess’ partner in Guyana, Exxon Mobil and CNOOC.

The result is a win for Hess CEO John Hess and puts to rest claims by some shareholders who wanted additional compensation for the delay in closing the sale. Exxon’s arbitration could push the deal’s closing into 2025.

“Assuming Chevron wins the arbitration from Exxon or finds a settlement, the transaction is now going to happen,” said Mark Kelly, an analyst with financial firm MKP Advisors.

By: Reuters / May 29, 2024

Despite a production cut extension by OPEC, the oil market remains oversupplied.

The outcome of OPEC’s meeting on June 2 does not obscure our view that it still operates from a position of weakness in an oversupplied oil market.

OPEC extended three production cuts further into 2025, for a total cut of 5.86 million barrels per day. Importantly, OPEC signaled in this announcement that the monthly increases phasing out the production cut can be “paused or reversed subject to market conditions”—in other words, if the market remains oversupplied.

On the gas side, we think the European storage and gas outlook remains strong. European storage levels remain at extremely healthy levels, while gas prices are near levels before the Ukraine/Russia conflict began. The challenge for the EU is now maintaining this relatively healthy status quo.

Much of the work by the EU is now focused on optimizing the cost structure for the EU gas pipeline system, including figuring out what to do with pipelines that formerly moved Russian gas.

3 Key Themes for the Oil & Gas Industries

Oil prices look weak, and we expect more weakness. On a quarterly basis, oil prices look weak, and we expect continued weakness, with $65-$70 a barrel (West Texas Intermediate) a likely possibility in 2024, if not lower. We see the OPEC production cut extensions (most of which now go through the end of 2025) as a sign of weakness, not strength. Further, Saudi Arabia is selling almost $12 billion of stock in state-run Aramco, indicating both its need for cash to fund Vision 2030 efforts and its inability to defend oil prices.

Gas prices spike due to production cuts. We mainly attribute recent strength in gas prices to US producers cutting near-term gas production in response to weak prices. The timing of the production cuts was well-timed. The market’s attention has now shifted to growing 2025 gas demand coming from new US liquefied natural gas terminals and potential US gas growth from artificial intelligence and data center demand by 2030. We estimate incremental gas growth between 7 billion and 16 billion cubic feet per day by 2030.

Energy stock performance driven by mergers and acquisition and AI. The US energy space outperformed the market this past quarter. We attribute this outperformance to a string of M&A announcements that have been favorably received by the market, including Diamondback FANG/Endeavor and ConocoPhillips COP/Marathon MRO on the oil side. On the gas side, we think that higher US gas prices and the increasing potential of AI and data center demand has contributed to strong performance for both US gas producers and gas-oriented US midstream firms.

Our Forecasts: Oil & Gas Industries

We remain more bearish on US oil rig count and oilfield drilling activity in the near to medium term.

Rig count has been a bit stronger than expected since our last forecast. Producers have been keeping oil drilling activity higher than expected to recover from lower-than-expected production during the winter caused by severe weather. We expect this strength will continue for at least another quarter until producers make up lost production.

Over the medium term, we expect ongoing drilling and rig count efficiencies amid continuing industry consolidation, particularly as private operators can no longer pursue growth under public ownership. ExxonMobil XOM and APA APA each closed deals for Pioneer and Callon, while Chevron CVX and Diamondback are working to close Hess HES and Endeavor. Of course, the recent Marathon/ConocoPhillips deal could add further production efficiencies.

By; Morningstar , Stephen Ellis / Jun 11, 2024

Bullish sentiment appears to be building in oil markets as summer demand for fuel kicks in, pushing Brent back above the $81 per barrel mark.

Supply disruptions have ratcheted up pressure on gas prices globally, with prices across Europe, Asia and the United States simultaneously edging higher to their highest in 2024 so far.

European TTF gas futures soared 13% in one day after cracks were found in Equinor’s Sleipner platform and even though the repairs concluded already, the regional benchmark continues to hover around €35 per MWh ($11 per mmBtu).

A string of Australian force majeure events, the latest of them coming from Chevron’s Wheatstone facility which was forced to halt production after an outage this Monday, has pushed the regional LNG prices to $12 per mmBtu already.

Sentiment around natural gas in the US has improved markedly, too, with Henry Hub closing above $3 per mmBtu for the first time since early January 2024 and hedge funds’ positioning turning sustainably net long after two years of suffering. 

Market Movers

Global trading major Glencore (LON:GLEN) has won a crude supply tender to Prax’s 113,000 b/d Lindsay refinery in the UK, dealing a painful blow to trading competitor Trafigura which used to be Prax’s main supplier. 

Warren Buffett’s Berkshire Hathaway (NYSE:BRK) bought some 2.57 million shares of common stock in Occidental Petroleum (NYSE:OXY), further increasing its ownership of the oil majors from the 28% stake it had up until now. 

French major TotalEnergies (NYSE:TTE) agreed to purchase the UK power generator West Burton Energy from EIG for a total of $576 million, boosting its gas capacity by 1.3 GW and renewables by 1.1 GW. 

Following weeks of lukewarm demand statistics, we might finally be on the brink of seeing summer demand kicking in. A reported jet fuel shortage in Japan, Goldman Sachs’ relatively bullish view on transportation fuel demand over the summer, and the prospect of a US SPR replenishment boost have lifted Brent futures above the $81 per barrel mark. 

Return of OPEC+ Barrels Triggers Huge Sell-Off. Portfolio investors exited a record amount of long positions in the week ending June 4 as the prospect of OPEC+ bringing back production into 2025 soured the bullish sentiment, selling a total of 194 million barrels in the six leading futures contracts. 

Iraq Eyes Restart of Idled Kurdish Pipeline. Iraq’s oil minister Hayan Abdel-Ghani noted progress in negotiations with Kurdistan regional officials on a potential deal to resume oil exports via the idled 450,000 b/d capacity Kirkuk-Ceyhan oil pipeline, halted since March 2023. 

Saudi Aramco SPO Exceeds Expectations. The shares of Saudi national oil company Saudi Aramco (TADAWUL:2222) gained this week after the company raised $11.2 billion in its secondary share offering, with at least half of sales reportedly going towards international investors. 

New Zealand Makes U-Turn on Oil Exploration. The government of New Zealand vowed to introduce legislation that would remove a disputed ban on offshore oil exploration, in place since 2018, by the end of this year, reversing the oil policy of the previous center-left Labour government. 

Niger-Benin Spat Turns Ugly Again. Having just loaded the first-ever Meleck cargo last month, exports could halt again as the Benin-Niger geopolitical spat took another turn this week, with the former arresting 5 people it believes to be Nigerien soldiers working undercover at the port of Seme. 

Japan to Fund New Nuclear Plants with Bonds. Japan’s Kansai Electric Power is planning to issue transition bonds to finance future nuclear power projects, aiming for some ¥30 billion ($190 million), the second Japanese firm in two months to turn to bonds as a nuclear financing tool. 

Russia Seeks Iran Corridor to India. Russia has announced it plans to export coal to India via Iran’s railway network system as Moscow seeks to ramp up supplies to the world’s second-largest coal consumer, to be ultimately shipped from the Iranian port of Bandar Abbas. 

Houthis Strike Two Western-Owned Container Ships. Houthi militias have targeted two container ships this week, the Swiss-owned Tavvish and the German-owned Norderney, damaging both with anti-ship ballistic missiles some 70 nautical miles southwest of Aden. 

Suncor Triggers the Ire of Environmentalists. Environmentalist groups sued Canada’s leading oil firm Suncor Energy (TSO:SU) for alleged air pollution violations at its 98,000 b/d Commerce City refinery in Colorado, claiming they’ve recorded more than 1,000 emission violations in 2019-2023. 

IEA Sees Upstream Investment Growth Slowing Down. The International Energy Agency forecasts that global upstream spending would increase by 7% this year to $570 billion, slightly lower than the 9% year-on-year pace of 2023, insisting that it’s much more than is needed. 

Chinese Demand for Saudi Crude Weakens. Saudi crude exports to China are expected to bottom out in July as Chinese refiners nominated only 36 million barrels for next month, opting for other sources of crude as Middle Eastern barrels get more expensive as margins flatten out. 

Port of Baltimore Fully Reopens After Tanker Crash. Less than three months after the Dali tanker crashed into the Francis Scott Key Bridge the port of Baltimore has fully reopened as the operating dimensions of the navigation channel were lifted to 700 feet wide and 50 feet deep. 

Oil Sands Producers Riot Against Emissions Cap. Canada’s leading oil producers have objected to the government’s plan to cap emissions, saying that a carbon tax would be the preferred way of climate impact mitigation, as limiting emissions would also impact future production growth.

By Oilprice, Michael Kern / Jun 11, 2024

JGC Holdings Corporation’s representative director, chairman and CEO, Masayuki Sato, announced that JGC Corporation, under the leadership of representative director and president Farhan Mujib, will introduce verified 3D printing technology at the Zuluf AH Oil Increment Central Processing Facilities in Saudi Arabia. JGC Corporation manages the overseas engineering, procurement, and construction business for the JGC Group.

Aramco, one of the world’s largest integrated energy and chemicals companies, aims to support energy security and affordability while promoting sustainable practices in all its operations and projects. The incorporation of 3D printing technology aligns with Aramco’s objectives by reducing the environmental impact of manufacturing, lowering waste and energy usage, and improving construction productivity.

Since October 2021, JGC has been verifying the application of a gantry-style concrete construction 3D printer, purchased from COBOD International A/S of Denmark, for the piping support structures (foundation formwork) of a biomass power generation project in Ishinomaki City, Miyagi Prefecture. This project is executed by JGC Japan Corporation, the domestic EPC company of the JGC Group.

This initiative has garnered significant attention from various clients. Following discussions with Aramco, JGC received an order to introduce a 3D printer to print the exterior wall, approximately 340 square metres, of chemical storage buildings. This is part of Aramco’s Zuluf AH Oil Increment Central Processing Facilities project, for which JGC was awarded the contract in May 2022. By transitioning to on-site 3D printing instead of using on-site precast formwork, JGC aims to establish a new approach to overseas printing work. The company is collaborating with local partners in Saudi Arabia, including one that owns COBOD’s large-scale 3D printer, with plans to commence 3D printing work in the summer of 2024.

JGC will continue to actively promote the integration of advanced technology in plant construction projects across the Group’s companies. The goal is to adopt 3D printing technology during the construction phase to enhance efficiency and address the issue of construction labour shortages.

By: Storage Terminals Magazine / June 10, 2024

The sale of 1.5 billion shares in Saudi Aramco, which launched on Sunday, has drawn demand that exceeded the supply of stock, Reuters has reported, noting demand overtook supply just hours after the sale began.

The news of the secondary stock offering broke last week when the government of Saudi Arabia announced it would sell 1.545 billion shares in Aramco, at a price of between 26.70 and 29 riyals apiece.

To cover potential short positions resulting from any over-allotments, the government has granted Merrill Lynch, which acted as the stabilizing manager of the offering an option, known as a “greenshoe,” to purchase up to 10% of the number of offered shares at the final offer price.

The banks involved in the share sale will continue taking orders from institutional buyers until Thursday, Reuters reported, after which, on Friday, they will announce the final price of the stock sale.

If demand continues as strong, that price is going to be in the upper end of the announced range. That would mean some $12 billion in proceeds unless the banks managing the offering do not add more stock to it. In that case, per Reuters, the total proceeds from the offering could reach $13.1 billion.

However, skeptics note that even the maximum proceeds from the secondary offering would fail to go a very long way towards fulfilling the Kingdom’s Visions 2030—a comprehensive economic diversification scheme spearheaded by the de facto ruler of Saudi Arabia, Crown Prince Mohammed.

The Vision 2030 program has a price tag of about a trillion, compared to which the $13.1 billion that could be raised from the share sale indeed looks like a small change. The diversification challenge for Saudi Arabia becomes even more marked in the context of OPEC+’s latest meeting that yielded a decision to extend production cuts. Despite this decision, oil prices slid lower, compromising the cartel’s effort to put a floor under benchmarks.

By oilprice.com / Irina Slav, 06.06.2024

US policymakers must pursue stability and predictability for the energy system if the US hopes to reap the benefits of global investment dollars expected to come in droves to support LNG and renewable energy projects, Shell CEO Wael Sawan said June 4.

As the British multinational oil and natural gas major focuses its strategic decision making on value and emissions reductions, it plans to hold oil production flat with expectations that oil growth will plateau in the 2030s, Sawan said at an event hosted by the Center for Strategic and International Studies.

However, “we see a big growth opportunity for LNG, which straddles both more value and less emissions” as Asia presents massive growth potential and LNG typically replaces coal, he said. “And then at the heart of our transformation is what I would call our downstream renewables business. There we are fundamentally rewiring the entire infrastructure we have to be able to serve what [we believe] will be lower-carbon demand … from our customers.”

He warned that the US risks missing out on this opportunity if it cannot demonstrate that it can be a reliable and dependable energy supplier, regardless of administration or who controls Congress.

For instance, the current pause on LNG export authorizations realistically will not impact today’s or next year’s supply of LNG, he said, but “it continues to undermine confidence in US LNG at a time when US allies around the world want dependable and reliable supplies so that they can actually anchor that as part of their overall energy system.”

‘Unique role’

Joseph Majkut, director of the CSIS Energy Security and Climate Change Program, chimed in that CSIS has heard similar warnings from other companies and foreign officials.

“My view is that the US is still growing into its role as a large exporter and energy security player globally,” Majkut said. “Washington is not quite ready to deal with both the advantages that can come from that or the responsibilities.”

Yet, the “US plays a very unique role in the global gas system by having free onboard cargoes, destination flexibility, and now we’re seeing a lot of traders, including Shell, be offtakers ready to enter a much more commoditized market than even we had eight to 10 years ago,” he contended.

Sawan concurred, stressing the importance of the US’ role as a global energy supplier, particularly as Europe continues to contend with Russia’s invasion of Ukraine and the shakeup in energy trade flows that caused.

Shell is contemplating not only what technologies to invest in but where is the best location to deploy capital, Sawan said. “The US ranks highly in that regard on the back of multiple different elements, including the support of the [bipartisan infrastructure law] as well as the Inflation Reduction Act.”

With all eyes on the upcoming US presidential election in November, Sawan said he hopes that whoever sits at the helm of power sees the value in those laws and “continues to encourage companies like ours to continue to invest in what I think can be a huge advantage for the US looking into the next 10, 15 years.”

Sawan asserted that “capitalism is at the essence of how you’re going to be able to allow the markets to create the appropriate incentives for the outcomes to materialize, but you might need to be able to nudge it with things like the Inflation Reduction Act or the EU Fit for 55.”

The IRA in the US provides climate change funding and tax credits over the next decade to spur innovation in clean energy and transportation manufacturing and drive down greenhouse gas emissions. The European Commission’s Fit for 55 climate change package aims to cut EU emissions by 55% by 2030 compared with 1990 levels.

“You’re competing against what is a very strong incumbency for coal, oil and gas,” Sawan said, describing those resources as energy dense, easy to transport, high value molecules. “So to be able to counter the forces of gravity, you’re going to have to create new forces, and that’s where some of the support that governments are putting in place hopefully will catalyze some of those movements and over time as you build up the scale, as we’ve seen in solar and wind, you will be able to establish value pools that are investable for companies all around the world.”

Election impacts

Asked more directly about the potential for a 180-degree shift in US energy and environmental policy come January and the impact an easing or rollback of methane and other regulations could have on Shell’s LNG export business, Sawan responded that he’ll be looking for “concrete action” to determine what moves the company will make.

Shell will pivot as needed while also continuing “to drive what we think is a uniquely positioned US LNG market for offtake to the rest of the world,” he said.

Sawan declined to further speculate about what a change in the White House could mean. But regarding methane regulation in particular, he expressed that Shell “fundamentally believes that every single molecule of methane should be captured and should be used constructively and not just allowed to go into the environment.”

“We hold ourselves to a very high bar,” he said. “If the bar in the country [Shell is operating in] is lower than the bar that we hold, then we will meet our own bar.” He added that he doubted that “good stewards of capital and good business people [would] simply let the methane emissions happen.”

By: SP Global / June 06, 2024

In a significant move towards sustainable energy development, Vopak has entered into a strategic cooperation agreement with the delegation led by the vice mayor of Tianjin.

This collaboration is aimed at repurposing the infrastructure of Vopak Tianjin to accommodate new energy sources, such as green methanol, sustainable aviation fuel, and potentially ammonia and Liquid Organic hydrogen carriers. In conjunction with this effort, the Tianjin Port Group is set to join forces with Vopak to create a pioneering green methanol bunkering service solution.
 
Situated in the economic heart of Bohai Bay, Tianjin boasts the title of the largest port in Northern China. With the burgeoning number of new energy projects in the region, Tianjin’s role as a critical logistics hub for these initiatives is becoming ever more pronounced.
 
Vopak is propelling the world towards progress by hastening its investment in new energies and sustainable feedstocks. Following its announcement in June 2022, the company has dedicated a substantial investment of EUR 1 billion towards these sectors, aiming for completion by 2030. Vopak’s strategic focus is centred on developing infrastructure solutions for low-carbon and renewable hydrogen, ammonia, CO2, long-duration energy storage, and sustainable feedstocks. This forward-thinking approach not only shapes the trajectory of Vopak’s future but also makes a meaningful impact on the transition of key industrial clusters and the formation of the energy hubs of tomorrow.

By: Storage Terminals Magazine / June 04, 2024

The International Air Transport Association (IATA) said its projections for a tripling of sustainable aviation fuel (SAF) production in 2024 to 1.9 billion litres (1.5 million tonnes) are on track.

This would account for 0.53% of aviation’s fuel need this year. To accelerate SAF use, there are several policy measures that governments could take.

“SAF will provide about 65% of the mitigation needed for airlines to achieve net zero carbon emissions by 2050. So the expected tripling of SAF production in 2024 from 2023 is encouraging. We still have a long way to go, but the direction of exponential increases is starting to come into focus,” said Willie Walsh, IATA’s Director General.

Renewable fuel production is shared by many industries and SAF is a part of renewable fuel production. That is why increasing the production of renewable fuel is key to increasing the potential of SAF.

Some 140 renewable fuel projects with the capability to produce SAF have been announced to be in production by 2030. If all of these proceed to production as announced, total renewable fuel production capacity could reach 51 million tonnes by 2030, with production capacity spread across almost all regions.

Renewable fuel production potential could exceed this estimate as investor interest in SAF grows.

With a typical three-to-five-year time lag from planning to production, investment announcements as late as 2027 could be in production by 2030. At the same time, it is also clear that not all announcements reach final investment decisions.

Through the International Civil Aviation Organisation (ICAO), governments set an ambition to achieve a 5% CO2 emissions reduction for international aviation from SAF by 2030. To achieve that ambition, around 27% of all expected renewable fuel production capacity available in 2030 would need to be SAF. Currently, SAF accounts for just 3% of all renewable fuel production.

“The interest in SAF is growing and there is plenty of potential. But the concrete plans that we have seen so far are far from sufficient. Governments have set clear expectations for aviation to achieve a 5% CO2 emissions reduction through SAF by 2030 and to be net zero carbon emissions by 2050. They now need to implement policies to ensure that airlines can actually purchase SAF in the required quantities,” said Walsh.

By: Biofuels International / June 03, 2024

Tank storage company Vopak VOPA.AS on Wednesday raised its full-year profit target, as it beat quarterly earnings expectations on the back of strong demand for energy storage.

Disruptions in energy supply chains due to the war in Ukraine have benefited Vopak, as the West invests in import terminals, floating storage and regasification to reduce its reliance on Russian supplies.

The group could now get a similar boost from the war in the Middle East.

“It could be positive, although you don’t want to benefit from a crisis,” Chief Financial Officer (CFO) Michiel Gilsing said on a call.

Supply disruptions mean gas is “coming from larger distances, and that means it’s not flowing via a pipeline, meaning it has to be stored in tanks,” Kepler Cheuvreux analyst Andre Mulder explained.

Vopak now sees earnings before interest, tax, depreciation and amortisation (EBITDA) of around 970 million euros ($1 billion) in 2023, compared with a previous forecast of more than 950 million.

Its shares were up nearly 4% at 0809 GMT, heading for their best day in about 7 months.

The new guidance factors in the contribution from three chemical terminals in Rotterdam which Vopak is selling, it said in a statement. Gilsing added that sale would “definitely” close in the fourth quarter.

Asked why Vopak is selling chemicals assets rather than oil infrastructure as part of its goal to shift towards greener energy infrastructure, the CFO said: “Oil is effectively still very strong and a growing market.”

Over time, the group will work to re-purpose oil facilities for greener energy, he added.

The company posted EBITDA of 240.5 million euros in the third quarter, exceeding analysts’ average forecast of 238 million.

Vopak also amended its guidance for several other metrics including consolidated growth capital expenditure (CAPEX), now seen at around 275 million euros, compared with around 300 million previously.

($1 = 0.9437 euros)

By xm, Olivier Sorgho / 24.05.2024