Tag: hydrogen

The oil and gas industry is shifting towards a new investment cycle that prioritizes decarbonization and sustainability alongside financial performance.

Emission-reduction targets are now a critical part of project development and decision-making processes.

Oil and gas companies must navigate uncertainty while delivering on their commitments to decarbonization, resilience, and diversification.

The upstream oil and gas sector stands on the cusp of entering a new investment cycle — one that Rystad Energy has dubbed the ‘deliver in uncertainty’ cycle — where there is set to be an increased focus among players to deliver on sustainability targets while remaining financially robust.

The previous cycle, which started amid the Covid-19 pandemic in 2020 and is now ending, threw energy markets into turmoil. However, it accelerated the pace of energy transition as oil and gas companies were forced to re-invent themselves, figuring out their value proposition amid an increasing push from investors and governments to do more to lower emissions.

With Russia’s invasion of Ukraine in February 2022, high energy prices, OPEC+ production cuts and a realization that transition may take longer, the pendulum swung towards resilient supply, with the stock prices of major oil players rising, market capitalization surging, and companies paying dividends and undertaking share buybacks like never before.

Oil price cycles typically affect investment levels and force some exploration and production (E&P) players to adopt new strategies and reset priorities to remain competitive and investable in a new market reality. The market is nearing the end of the current investment cycle where, to protect their balance sheets and stabilize returns, E&P players have revised and reshaped their portfolios, prioritizing decarbonization and portfolio resilience. As a result, a wide range of new key-performance indicators and targets were adopted as part of the decision-making process. Emission-reduction targets, emission intensity and carbon prices are no longer a novelty in decision-making and portfolio valuation; they are essential parts of a company’s strategy.

Digitalization has been under the spotlight of the industry and companies for several years, but eventually it became a part of ‘business as usual’. Now, digital initiatives are an essential component of project development as they are beneficial in terms of optimizing cost and time. Decarbonization can be considered in the same way: steadily, it is becoming a part of business strategy, and abatement plans must be included in each project development as, even if a company has an objective of increasing supply, its emission-reduction targets make it accountable for keeping emissions under control.

Decarbonization as a new digitalization strategy is now an essential part of business, with companies, the financial sector and governments sharing accountability for reducing emissions to meet global emissions targets.

For the upcoming ‘deliver in uncertainty’ investment cycle, oil and gas companies must deliver on commitments, targets and goals acquired in the previous cycle associated with decarbonization, resilience and diversification while performing their fiduciary responsibilities. Even under the most conservative energy transition scenario, where hydrocarbon demand aligns with a 2.2 degrees Celsius temperature increase – referring to average global temperature rises above pre-industrial levels – upstream investments are expected to plateau at around $620 billion per year.

By Olga Savenkova,  Rystad Energy / Dec 06, 2024.

Is OPEC Plus getting its acts together? Brent Oil Futures prices are rising on reports that suggest that OPEC-plus will extend of its production cuts until the end of the first quarter of next year. If agreed it would allow the trend of dwindling supply. And unless it falls apart, it will establish what we have seen and that is to the lower the end of the trading rage for the rest of this year and into the new one.

This comes as China reacts to the Biden administration putting export controls on computer chip-making equipment, software and high-bandwidth memory chips to China. China struck back by banning some exports of gallium and germanium, that can be used for military purposes.

Gallium and Germanium are rare metals that are essential in producing semiconductors and other high-tech products like semiconductor wafers for solar cells, LEDs, fiber optics, dentistry, Integrated circuits, airport security scanners, infrared optics, Infrared sensors. China is the world’s largest producer of gallium and germanium, and it would be hard to replace those supplies.

Reuters reported that on Saturday Iraq halted all operations at the Shuaiba refinery in Basra following the overloading of fuel oil storage tanks, according to three refinery officials. The disruption occurred after no ships arrived at the Khor al-Zubair port to load exported fuel oil since mid-last week. The officials, who spoke on condition of anonymity, said the backlog of fuel oil at the refinery led to the suspension of operations.

Natural Gas Futures has pulled back hopes for a December warm up but in Europe an energy crisis is developing. Javier Blass from Bloomberg pointed out that, “European natural gas storage withdrawals in November were the 2nd largest since at least 2011 (and about double the long-term average). The reason? Strong gas-fired electricity generation to offset low wind, plus a cold start of the winter season.

In the US cold was the natural gas story last week but hopes for a warmup is pressuring us. Fox Weather reported that, “Winter weather is making its presence known across the U.S. as millions of people deal with the onslaught of a long-duration, lake-effect snowstorm that has paralyzed communities downwind of the Great Lakes. And to make matters worse, rounds of arctic air will continue to invade the country and send temperatures tumbling below freezing in cities as far as the Southeast.

The FOX Forecast Center said the arctic blast from Canada has been sweeping across the central and eastern U.S.. Temperatures in cities in the northern Plains plummeted below zero over the weekend, and wind chills made it feel even colder.

Cheap corn, more Ethanol. DTN reports that US Ethanol production is hot and at an all-time high! DTN Energy says that overall ethanol production in the United States averaged 1.119 million barrels per day (bpd) in the week ended Nov. 22, a fresh record high, up 9,000 bpd week-on-week, the Energy Information Administration reports. Domestic ethanol production for the week was 108,000 bpd, or 9.7%, higher than in the same week last year while four-week average output at 1.112 million bpd was 81,000 bpd above the same four weeks last year. Midwest ethanol production averaged 1.048 million bpd, up 10,000 bpd week-on-week and 98,000 bpd, or 9.4%, higher than in the same week last year.

The fundamental outlook for oil is looking pretty solid here as we get into winter demand. We should start hitting on all cylinders now we’re going to really test the thesis that the market is oversupplied. We’re probably going to find out very shortly whether that’s the case.

By Phil Flynn, Investing / 12. 03. 2024.

Linde has been awarded $10 million (€9 million) by the US Department of Energy (DOE) to lead the demonstration of cost-effective, standardised, and replicable advanced hydrogen fuelling infrastructure for heavy-duty trucks in La Porte, Texas.

The hydrogen refuelling station (HRS) will offer high fuelling throughput with convenient and accessible fuelling options to businesses and transportation fleets in the region, as well as tube trailer filling to enable supply chain development in the Gulf Coast region.

The HRS will be located in the heart of Linde’s robust hydrogen pipeline complex that supplies over 1 billion cubic feet (28 million m3) per day of hydrogen to the area, enabling access to reliable and low-cost feedstock.

The funding is part of DOE’s efforts to advance the National Clean Hydrogen Strategy to accelerate the research, development, demonstration, and deployment of next-generation clean hydrogen technologies.

By: Anamika Talwaria , Tankstorage / December 3, 2024.

ExxonMobil reported a dip in third-quarter profits Friday on lower earnings from its refining business, but the results were strong enough to enable nearly $10 billion in shareholder distributions.

The big US oil company, which saw upstream oil production rise following its acquisition of Pioneer Natural Resources, pointed to the benefits of $11.3 billion in “structural cost savings” as a driver of the results. 

The oil giant returned $9.8 billion to investors in the three-month period, up from $9.5 billion in the second quarter. ExxonMobil lifted the dividend by four percent, in addition to making share repurchases.

Net profits in the third quarter were $8.6 billion, down 5.1 percent from the year-ago period.

While earnings were higher in upstream and chemical products, ExxonMobil saw a big drop in energy products results due to weakened refinery margins.

The company pointed to record oil and natural gas output in Guyana and strong results in the Permian Basin, a shale region in Texas and New Mexico.

Crude oil prices have fallen about 15 percent since the end of the second quarter, a dynamic that Chief Executive Darren Woods said reflected a market imbalance.

“We’re seeing record levels of demand for oil, record levels for demand for products coming out of refinery, petroleum products,” Woods told CNBC.

“But we also see a lot of supply in the world right now, and a lot of that supply is coming out of the US, and the unconventional developments that we have here in the US, and so it’s basically a supply-driven price environment right now.”

At Chevron, profits came in at $4.5 billion, down 31 percent from the year-ago level.

Chevron’s earnings were also dented by lower refining margins, although it also enjoyed record oil and natural gas production from the Permian Basin.

Chevron returned $7.7 billion to shareholders during the quarter, which the company said was a record.

By: Easternprogress / December 03, 2024 

Brazil’s fuel retailer Ultra UGPA3.SA has asked the country’s antitrust body for approval to build and operate a liquefied petroleum gas (LPG) terminal in the Port of Pecem, in the state of Ceara, together with Supergasbras, it said on Friday.

The facility, with storage capacity of some 62,000 tons, would cost a total of 1.2 billion reais ($200.90 million) to be split between Ultra’s subsidiary Ultragaz and Supergasbras, Ultra said in the filing, adding that building works are expected to be completed in 2028.

($1 = 5.9730 reais)

By: Isabel Teles, Reuters / Dic 3, 2024.

Aramco’s journey reflects not just the shift in Saudi energy policy but a broader reimagining of what national oil companies can achieve on the global stage.

Saudi Aramco is not only the largest oil producer globally but also the most profitable business, surpassing tech giants like Apple and Microsoft. Aramco is evolving far beyond its traditional role, now positioning itself at the forefront of economic diversification, technological innovation, and sustainability, aligning with the broader vision set forth by Crown Prince Mohammed bin Salman to transform the Saudi economy and reduce its dependence on oil. This shift has turned Aramco into a key player in reshaping the kingdom’s energy landscape and broader strategic interests.

Driving Vision 2030

Aramco, Saudi Arabia’s economic crown jewel, is central to the ambitions of Vision 2030, which aims to diversify the economy and prepare for a post-oil future. As the primary source of funding for the Public Investment Fund, Aramco’s recent financial activities, including its record-breaking initial public offering in 2019 and a secondary share offering in 2023, are crucial in channeling resources into non-oil sectors. Funds raised through these offerings are being reinvested to support an array of domestic and international projects that are expected to reduce the kingdom’s reliance on oil and build a more resilient, diversified economy.

In a strategic move in March, Saudi Arabia transferred 8% of Aramco’s shares to the PIF – valued at around $163.6 billion, reflecting Aramco’s market worth – aiming to bolster the fund as the kingdom prepares for a possible IPO of the company. This transaction could provide additional financing for Vision 2030. The transaction raised the combined stake of the PIF and its affiliates in Saudi Aramco to 16%, equating to $327 billion in value.

New Discoveries and a Renewed Gas Focus

Aramco recently announced the discovery of two unconventional oil fields, an Arabian light crude reservoir, two natural gas fields, and two gas reservoirs in the Eastern Province and Empty Quarter. Aramco is set to invest between $48 billion and $58 billion in 2024, prioritizing exploration efforts even as it holds off on further expanding its oil production capacity.

Complementing these exploration efforts, the company is advancing its natural gas ambitions through strategic investments and contracts. Aramco has secured contracts exceeding $25 billion for the expansion of the Jafurah gas field and the third phase of its main gas network upgrade. In 2023, Aramco made its initial venture into the global liquefied natural gas market by acquiring a minority share in MidOcean Energy, recently expanding its stake to 49%. Aramco signed a nonbinding deal in June 2024 to purchase LNG from Sempra’s Port Arthur project in Texas, with the potential to acquire a 25% stake in Phase 2. Additionally, Aramco is negotiating with Tellurian to acquire a stake in its Driftwood LNG plant in Louisiana and reached a preliminary agreement with NextDecade Corporation for a 20-year LNG offtake from the Rio Grande export facility in Texas. Aramco’s potential LNG trading expansion comes at a time of growing demand, with Europe moving away from Russian gas and Asia transitioning from coal.

Decarbonizing Energy Production

Aramco has committed to reduce its operational emissions to net zero by 2050. At the sixth Future Investment Initiative in 2022, Aramco introduced what it said was “one of the world’s largest sustainability-focused venture capital funds” to drive lower-emission energy solutions. Aramco Ventures, the corporate venture arm of Aramco, is leading this effort.

Aramco Ventures’ investments focus on supporting the company’s decarbonization efforts, developing lower-carbon fuel businesses, and driving digital transformation. Through the Sustainability Fund, Aramco Ventures targets companies, such as Xpansiv, that are aligned with Aramco’s 2050 net-zero goal for Scope 1 and Scope 2 emissions (emissions related to a company’s operations) across its fully owned and operated assets. In January, Aramco announced it would inject an additional $4 billion into Aramco Ventures, bringing its total capital to $7 billion over the next four years.

Over the past two years, Aramco has signed several memorandums of understanding to explore potential lower-carbon energy solutions. In July 2023, Aramco entered into an agreement with Aker Carbon Capture, headquartered in Oslo, Norway, to explore collaboration on carbon capture, utilization, and storage as well as industrial modularization in Saudi Arabia. In May 2024, Aramco Ventures signed an agreement with U.S. climate tech company Spiritus to explore opportunities in direct air capture and revealed that Aramco Ventures had made an equity investment in November 2023. Aramco is one of several investors, including Amazon’s Climate Pledge Fund and Siemens Financial Services, to have together recently injected a total $80 million into the Los Angeles-based CarbonCapture, Inc. Aramco also entered into an agreement with Rondo Energy, which specializes in lower-carbon industrial heat and power.

Aramco has shown a commitment to continued growth in these areas. In January, the company revealed plans to inject $4 billion into its venture capital division, aiming to diversify Saudi Arabia’s economy away from oil. This funding will raise Aramco Ventures’ total capital to more than $7 billion, with venture capital fund Wa’ed Ventures receiving another $500 million to invest in local startups.

As Aramco ramps up gas production and carbon capture and storage initiatives, it also intends to focus on producing blue hydrogen and ammonia. In September 2020, Aramco, in collaboration with Japan’s Institute of Energy Economics and the Saudi Basic Industries Corporation, for the first time successfully produced a shipment of blue ammonia in Saudi Arabia and delivered it to Japan, with support from the Japanese Ministry of Economy, Trade and Industry. Aramco signed final agreements in July to acquire a 50% interest in Jubail-based Blue Hydrogen Industrial Gases Company, a division of Air Products Qudra, with provisions for purchasing hydrogen and nitrogen.

Strengthening Global Ties: Aramco’s Downstream Expansion

Aramco’s international reach has continued to expand, especially in downstream refining and petrochemical projects with the acquisition in 2020 of majority ownership of the Saudi Basic Industries Corporation and successful pursuit of new downstream opportunities.

The Aramco-SABIC merger has delivered key strategic benefits. By acquiring a 70% stake in SABIC, Aramco expanded its global petrochemical footprint to over 50 countries and strengthened its integration across the hydrocarbon value chain. This has strengthened Aramco’s position in the chemicals sector, diversifying its operations beyond crude oil and boosting resilience to market fluctuations. The merger has also leveraged SABIC’s expertise in innovation and materials, enhancing synergies in research and development.

Aramco is working to secure downstream deals in Asia, particularly bolstering its presence in China, as it aims to lock in long-term crude demand and tap into the growing petrochemicals market. After a September visit to Saudi Arabia by Chinese Premier Li Qiang, Aramco announced new agreements with key Chinese partners. The Development Framework Agreement with Rongsheng Petrochemical explores joint expansion of Saudi Aramco Jubail Refinery Company facilities and potential equity stakes in each other’s downstream projects, while the Strategic Cooperation Agreement with Hengli Group advances discussions on Aramco’s potential 10% stake in Hengli Petrochemical. In another downstream project in China, in May 2023, Aramco and its partners began construction of a refinery and petrochemical complex in Panjin, Liaoning province, where Aramco holds a 30% stake and the right to supply crude feedstock.

Investing in Innovation and Growth

Aramco is expanding beyond energy, embracing advanced technologies to optimize its operations and drive Saudi Arabia’s digital transformation, through its subsidiary, Aramco Ventures. Over the past couple of years, Aramco Ventures has shifted its focus; while earlier investments were centered around core oil and gas technologies, recent efforts have focused on fourth industrial revolution, digital, sustainability, and artificial intelligence technologies. The firm sees generative AI as a key tool in helping Aramco achieve its 2050 net-zero goal.

Saudi Arabia is rapidly emerging as the fastest-growing data center market in the Middle East, with its economy and public utilities quickly adopting new technologies to drive a sweeping digital transformation. According to Mordor Intelligence, the country’s “big data” and AI market is poised for significant growth.

The “KSA Cloud First Policy,” introduced in 2020, mandates that civilian government entities prioritize cloud solutions for any new information technology investments, propelling further expansion of cloud technology across the kingdom. This strategic shift marks a key milestone in Saudi Arabia’s journey toward becoming a global leader in AI and cloud computing.

Aramco Digital, the company’s tech subsidiary, plays a pivotal role in these initiatives, forming strategic partnerships to advance AI-driven innovation across Saudi Arabia. Aramco has signed multiple agreements to enhance the company’s supercomputing and AI capabilities. Aramco aims to use an AI supercomputer powered by advanced NVIDIA chips to optimize drilling and geological analysis. The company’s partnership with South Korean chipmaker Rebellions, Inc. is focused on exploring the use of AI neural processing unit chips in its data centers. Additionally, Aramco signed a memorandum of understanding with SambaNova Systems, an industry-leading South Korean firm that designs AI semiconductors, to drive digital innovation across the kingdom.

Aramco plans to deploy Cerebras CS-3 systems to enhance its cloud computing capabilities. Aramco Digital also launched the world’s first 5G processors in partnership with Qualcomm. According to Qualcomm, these chips are engineered to “transform 5G connectivity and coverage within a single processor.” Alongside the chip launch, the two companies are collaborating with Saudi Arabia’s Research, Development, and Innovation Authority to introduce the startup incubator program Design in Saudi Arabia. This initiative aims to support AI, wireless technology, and Internet of Things startups by offering technical assistance, business mentoring, and intellectual property training.

Aramco has established a partnership with Groq Inc., an AI startup specializing in inference technology, to construct a massive data center in Saudi Arabia. The center is projected to become a key hub for companies utilizing AI systems across the Middle East, Africa, and India. AI inference, which involves processing live data to make predictions or solve tasks, will be central to the data center’s operations. Aramco Digital has also teamed up with Accenture to propel generative AI advancements and strengthen the digital skillset of Saudi Arabia’s workforce.

These initiatives build upon the launch of the Saudi Accelerated Innovation Laboratory, a national hub designed to turn innovative ideas into market-ready products, alongside its Global AI Corridor ecosystem. The hub is expanding with two new centers in Riyadh to provide support for domestic technology innovation, in collaboration with the Saudi Authority for Research and Innovation Development and King Abdulaziz City for Science and Technology, among others.

Through these ventures, Aramco is not only modernizing its core business but also positioning itself as a leader in the global digital economy.

Challenges and Opportunities

While Aramco’s aggressive diversification strategy opens new doors, it also brings challenges. The company’s expansion into the LNG market exposes it to fluctuations in global gas prices and the complexities of managing international partnerships. Moreover, aligning the interests of various stakeholders in joint ventures is essential for ensuring the long-term success of these projects.

Saudi Aramco and other companies face challenges in scaling carbon capture, utilization, and storage. Additionally, the high costs associated with blue hydrogen production could make it difficult for Aramco to attract potential customers.

However, by harnessing its vast financial resources, expertise in energy production, and advanced technology, Aramco appears well positioned to navigate these challenges. Its evolving role as a national energy leader – encompassing oil, gas, petrochemicals, and digital technology – underscores its transformation from an oil producer into a diversified energy and investment powerhouse, central to Saudi Arabia’s future.

Aramco’s journey reflects not just the shift in Saudi energy policy but a broader reimagining of what national oil companies can achieve on the global stage. By broadening its portfolio and embracing innovation, Aramco is laying the groundwork for a sustainable and diversified future.

By: John Calabrese / Dec 3, 2024.

Enbridge Inc. raised its quarterly dividend for next year as it released its financial guidance for 2025.

The pipeline company says it will pay a quarterly dividend of 94.25 cents per share, up from 91.5 cents per share, effective March 1.

The increased payment to shareholders amounts to an annualized dividend of $3.77 per share to give it an annual yield of about 6.2 per cent based on the company’s share price Monday.

In its outlook, Enbridge says it expects adjusted earnings before interest, income taxes and depreciation between $19.4 billion and $20.0 billion for 2025, a nine per cent increase from the midpoint of its 2024 guidance.

Distributable cash flow per share is expected to be $5.50 to $5.90 next year.

The company says the guidance is based on expected strong utilization across its businesses and contributions from acquisitions and growth projects that entered service in 2024 as well as partial-year earnings from projects that are expected to begin service in 2025.

This report by The Canadian Press was first published Dec. 3, 2024.

By: CALGARY , Canadian Press / December 3, 2024.

The release of the October broad measure of consumer prices in the United States, the PCE deflator, showed inflation that was unsurprising and broadly stable. The numbers are distorted by fantasy housing price measures, but measuring prices that actually exist in the real economy are rising less than 2% y/y.

The price data is not especially alarming. However, a note of caution is struck in the detail. Currently, supply issues are more important than demand issues in driving inflation.

The San Francisco Federal Reserve breaks down price data into supply and demand driven price changes. Essentially, if prices and consumption both rise in an unexpected manner, demand is likely to be driving inflation. If prices rise, but consumption falls in an unexpected manner, supply constraints are likely to be driving inflation. Since June last year, supply constraints have been more important than strong demand in pushing up prices.

That today’s inflation is driven more by supply than demand is relevant as the US enters 2025. Several possible US policy measures have supply chain implications—notably the threatened tax on consumers of imports (including companies using imports in their supply chains), and large-scale deportations of workers. The extent of future supply chain disruption will assume greater importance for future inflation.

by: Paul Donovan / December 3 , 2024.

Gas withdrawals from EU underground storage tanks have accelerated as Europe suffers from the first cold snap of winter. Gas tanks were 85.5% full as of December 1, having peaked at 95.3% full on October 29, according to Gas Infrastructure Europe (GIE). (chart)

The current level of gas storage on December 1 is slightly down on the 94.8% and 92.3% full the tanks were on the same day in 2023 and 2022 respectively, but well ahead of the 68.2% full they were in 2021, a very cold winter.

Typically, the heating season officially kicks off on November 1, when EU rules say the tanks have to be at least 90% full. But uncertainty over the weather has already driven up gas prices by 45% since the start of this year, as the tanks are being emptied at a faster rate than in the previous two years.

Additional uncertainty has been added to the mix this year because Ukraine’s gas transit deal, which accounts for 15bn cubic metres of gas supplies to the EU from Russia, is due to expire on December 31 and Kyiv has promised not to renew it. Russia’s state-owned Gazprom has just released its investment plans for 2025 and those also assume the Ukraine transit deal will not be renewed.

The International Energy Agency (IEA) has already issued a warning that Europe could be facing a “new energy crisis” due to the end of the Ukrainian deal and the faster than normal drain on stored gas.

Higher energy costs will only exacerbate high cost-of-living conditions on consumers and make Europe’s looming recession worse, say economists. Europe is already facing a crisis after the report from former Italian Prime Minister and ex-European Central Bank boss Mario Draghi warned that Europe has lost its competitive edge. Germany is particularly vulnerable,  as its energy costs are already the highest in Europe.

Ukraine ready for a tough winter

Ukraine’s tanks are only 22.6% full and hold 6.5 bcm of gas, which authorities say is enough to get the country through the winter. Before the war Ukraine’s natural gas consumption varied depending on the weather and industrial activity, but in 2023 the country’s total annual gas consumption was approximately 18.7 bcm of which 8-10 bcm is needed for the heating season. A particularly cold winter can typically add demand for an additional 1.5 bcm.

But demand in Ukraine for gas has been greatly reduced after Russia destroyed half the country’s non-nuclear heating and power plants; the lack of generating capacity, not the lack of fuel, is the challenge for Ukraine this winter.

Ukraine’s storage facilities are the largest in Europe, with a total volume of more than 30 bcm, with 15 bcm still available for European partners. Last year foreign speculative traders stored some 3.2 bcm in Ukrainian tanks, but this year with the Russian attacks on Ukraine’s energy assets, the foreign traders have remained away.

By: bne IntelliNews / December 3, 2024