Time to right fossil fuel firms’ historical wrongs
In the face of an unfolding climate apocalypse in the Caribbean and elsewhere, the publication of a peer-reviewed study that establishes the legal and moral grounds for the top 21 polluting companies to pay trillions of dollars in climate reparations should compel governments to act, writes André Wright in The Guardian.
Baptism of fire as Philippines makes LNG switch
Even with Asian LNG prices going through a temporary lull, Manila couldn’t have chosen a worse time to go big on LNG, with seven import terminals approved for development and customers bracing for price rises, write Enrico Dela Cruz and Emily Chow in Reuters.
What now for the oil and gas sector after one of its biggest bankers pulls back?
The recent announcement by French bank BNP Paribas to end its direct financing for new oil and gas fields may not pose immediate problems for well capitalized majors, but it reflects a growing trend among traditional fossil financiers that is causing disruption for smaller industry players, writes Davide Ghilotti in Upstream.
Norway’s ‘middle finger’ to the Paris Agreement as it backs more Arctic hydrocarbon plunder
Cynical exploitation of Russia’s war in Ukraine is behind Oslo’s new invitation to energy firms to ramp up oil and gas exploration projects in remote regions like the Arctic Barents Sea, writes Sam Meredith in CNBC International.
Mozambique LNG restart remains unclear following publication of humanitarian report: TotalEnergies’ ambitions to bring its stalled US$20 billion Cabo Delgado liquefaction plant online by 2027 remain up in the air following the publication of a report, commissioned by the company, on humanitarian and socio-economic issues. The 76-page report from Jean-Christophe Ruffin, a former French ambassador to Senegal, was delivered to TotalEnergies last month and released only this week in the run-up to its annual meeting on May 26. Ruffin’s report was broadly positive about the French company’s hoped-for resumption of construction activities after it declared force majeure in April 2021 but raised various concerns, including the Mozambique LNG consortium’s approach to compensation for resettled communities, its relationship with local armed forces, and the fact that armed conflict is not over in the region though not currently happening in the immediate vicinity of the project site. For TotalEnergies CEO Patrick Pouyanne, renowned for being extremely cost-sensitive, an additional hurdle continues to be the reported efforts of the project’s already contracted service companies to secure an upward revaluation of their costs by as much as 20%. Further, the U.S. Export-Import Bank (Exim) has commented that a restart of the project would trigger a review of its US$4.7 billion loan agreement with the consortium. Signed off by Exim’s board in 2020 during the Trump presidency, no loan disbursements have been made to date, according to a senior Exim official. (Reuters, Total Energies [Pdf], EnergyVoice, Bloomberg)
ExxonMobil settles human rights abuses case with Indonesian villagers after 22 years: ExxonMobil has agreed to pay a confidential financial settlement to eleven villagers from Aceh who say they were subjected to violence, torture, and sexual assault by Indonesian soldiers contracted by the energy giant more than 20 years ago. The alleged human rights abuses took place in and around Exxon’s operations in the Arun gas field in north Sumatra, once one of the world’s largest fields and referred to as “the jewel in the company's crown.” A trial to decide whether Exxon was negligent in contracting the Indonesian soldiers had been scheduled to start this week in Washington, DC, but will no longer proceed due to the settlement. Michel Paradis, a lecturer at Columbia Law School, commented: “Exxon and its lawyers threw everything they could at them, and they overcame it. That is a testament not simply to their perseverance, but to the justness of their cause.” ExxonMobil said it condemns human rights abuses “including those asserted in this case against the Indonesian military.” (BBC)
G7 backslides with ‘temporary’ boost for gas: In an outcome widely seen as a victory for Japan and Germany, the G7 leaders agreed at their summit meeting in Hiroshima that public investment in the gas sector can be appropriate as a “temporary response” to the fossil-fuel dependency crisis exacerbated by Russia’s war in Ukraine. The final communiqué also stressed “the important role that increased deliveries of LNG can play.” No details were provided as to how temporary such investment backing might be, but it should be “implemented in a manner consistent with our climate objectives without creating lock-in effects, for example by ensuring that projects are integrated into national strategies for the development of low-carbon and renewable hydrogen.” This supportive language for gas expansion was widely criticized by environmental groups. Pointing out the G7’s backsliding on last year’s newly forged commitment to end international public finance for fossil fuels by the end of 2022, E3G said public investment in clean energy should have been the top priority with the immediate energy crisis provoked by the early phase of the war in Ukraine now over. (Ministry of Foreign Affairs of Japan [Pdf], Reuters, E3G)
Power crisis drives drastic gas announcements from South African government: As state power utility Eskom warns that load shedding will be on the rise until the end of the year amidst South Africa’s worst-ever power crisis, the government is lurching towards environmentally damaging and financially dubious gas projects. According to government sources, plans are underway for the auctioning of at least ten new onshore blocks for shale gas exploration in the Karoo Basin, a vast, water-stressed region of significant ecological and agricultural value. The prospect of opening up the basin to fracking has already sparked warnings from farmers and activists whose previous resistance saw the destructive technique shelved ten years ago. Nor would the plans help to alleviate the immediate crisis, with the country’s first competitive auction for oil and gas resources expected in 2024 or 2025. More immediately, and after months of uncertainty and setbacks for the company, the Department of Transport has granted Turkey's Karpowership access to site its gas-to-power vessels at the ports of Ngqura, Durban, and Saldanha Bay for a period of 20 years, far longer than the five-year maximum contract periods that the government had mooted in recent weeks. Karpowership still requires other government approvals, including from the Department of Environmental Affairs. (Reuters, Reuters)
Climate risk requirement glossed over as major Australian fracking development gets green light: The Northern Territory (NT) government’s recent greenlighting of new gas production using fracking in the Beetaloo Basin was based on deception, say critics. This follows the release of documents that reveal the corner-cutting and obfuscation behind efforts to unleash a “carbon bomb” from the basin’s vast shale reserves 500 kilometers south of Darwin. At issue is the conformity of the NT decision with one key recommendation out of 135 in total that were established by an official inquiry after the NT government lifted its fracking moratorium in 2018. New documents released to The Guardian under freedom of information laws show that the territory government turned to the federal government for help in late 2022 when it realized that recommendation 9.8 — requiring no net increase in life-cycle greenhouse gas emissions in Australia from any unconventional gas projects in the NT — could not be adhered to. Emails between the two governments reveal a still ongoing inability to meet the key climate risk condition for Beetaloo development that, analysis suggests, would release roughly 70 times the NT’s current annual emissions if fully exploited. While these question marks hang over the Beetaloo sanctioning earlier this month, there are doubts too over whether prospective Beetaloo companies will be prepared to make investment decisions due to regulatory hurdles and the basin’s remoteness. (The Guardian)
HGA in sight for US$42 billion Tanzania LNG terminal: A long sought after host government agreement (HGA) for the Tanzania LNG export terminal project is said to be weeks away following a deal signed between the government of Tanzania and Equinor, Shell, and ExxonMobil. The announcement of the deal was preceded by fresh Tanzanian technical analysis estimates that the costs for the long-delayed project have soared to US$42 billion from earlier estimates of US$30 billion. The investment aims to market and export Tanzania’s offshore gas resources, with lead partners Equinor and Shell operating blocks that are estimated to hold 20 trillion cubic feet (tcf) and 15 tcf of gas respectively. Doubts persist over the project’s prospects as it is scheduled to come online by end of decade amidst a projected glut in global LNG supplies and declining demand. Energy Minister January Makamba has said, however, that Kenya and Uganda have already each signed a memorandum of understanding to buy Tanzania’s LNG. (Reuters, EnergyVoice, Business Insider Africa)
China: After a sharp decline in January, LNG imports rose for the third month in a row in April to 4.77 million tonnes, an increase of 10.3% on import volumes last April.
Hungary: Prime Minister Viktor Orban has said that talks are ongoing with Qatar for the purchase of gas supplies by 2026.
India: Following an expression of interest released by state gas utility GAIL in February to acquire as much as 26% equity in an operating or proposed U.S. LNG export facility, the company said it is considering six offers received.
Italy: ClientEarth and WWF Italy have launched legal action over Rome’s approval for a gas-fired power plant in Brindisi that Enel wants to develop as a replacement for the Federico II coal power plant that is due to be shut down by 2025.
Russia: Filling the technology gap left by the exit of western companies, China’s Harbin Guanghan Gas Turbine Company has been contracted to provide turbines essential to the completion of the first two production trains at Novatek’s Arctic 2 LNG export terminal.
United Arab Emirates: More than 130 EU and U.S. lawmakers sent a letter to the leaders of their countries and the UN seeking the replacement of Sultan Al Jaber, who runs the state-owned Abu Dhabi National Oil Company, as president of this year’s COP28 climate conference.
U.S.: A hydrogen plant under development in Arkansas, which is aiming to produce 500 megawatts of “emission-free electricity” when completed, will run on gas until affordable, clean hydrogen becomes available.
Vietnam: PetroVietnam Gas has signed a contract with Shell Eastern Trading to buy the country’s first LNG cargo for test-running purposes at the Thi Vai import terminal.
California’s taxpayers exposed to industry’s staggering cleanup liabilities — report: The estimated US$6.3 billion in future profits that oil and gas producers in California are expected to earn come nowhere close to the US$21.5 billion in cleanup costs for nearly a quarter of a million wells that scar the state’s landscape. That’s the stark conclusion of a report commissioned by financial think tank Carbon Tracker, which becomes more stark on consideration of California state data that the industry has allocated only about US$106 million to state regulators for plugging and decommissioning wells when a company liquidates or walks away from its responsibilities. In response to the findings, Rock Zierman, CEO of the California Independent Petroleum Association, said that companies spent more than US$400 million in 2022 to plug and clean up thousands of oil and gas wells in the state. However, with production drying up in the state, well capitalized companies are increasingly selling off their declining assets to smaller players far less able to cope with such heavy cleanup costs. In the absence of action from the state’s regulatory agencies, California’s taxpayers remain on the hook for the industry’s polluting practices. (ProPublica)
Activists raise hell at Shell’s annual general meeting: A shareholder revolt against Shell’s energy transition strategy and its progress over the last 12 months saw a 20.2% vote in favor of a resolution filed by activist investor group Follow This, in line with the outcome of a similar Follow This resolution lodged at the energy firm’s AGM last year. Shell, which reported a record annual profit of US$40 billion in 2022, continues to trumpet its net-zero emissions by 2050 target while some big pension funds and responsible investors are instead demanding more meaningful climate action and the setting of absolute carbon emission reduction targets for 2030. The stormy annual meeting saw disruption from climate activists for more than an hour, including a protest choir singing “Go to hell Shell and don't you come back no more” to the tune of ‘Hit The Road Jack’. (The Guardian, Fossil Free London [Video])
A sweet price spot brings calm to Asian LNG markets for now: Asian LNG markets have been enjoying a reprieve as weak demand and high inventories have sent spot LNG prices tumbling to a two-year low, with few signs of imminent disruptive factors. The price for LNG delivered to north Asia dropped to US$9.80 per million British thermal units (mmBtu) in the week to May 19, the first time it dipped below the US$10 level since May 2021. Such a price level for Asia “is in the sweet spot of being low enough to boost buying interest,” reckons Reuters commodities columnist Clyde Russell, “but not so low that it sparks a surge in demand.” China’s market influence remains key, and “it has the greatest potential to absorb a global glut of LNG, but has rebounded only modestly year-to-date,” according to Leo Kabouche, LNG market analyst at Energy Aspects. A sub-US$10 per mmBtu spot price is believed to be the level at which LNG becomes competitive for Chinese utilities, so current pricing may lead to increased Chinese demand. (Reuters, Reuters)
Study finds big polluters face financial risk from climate lawsuits: The dramatic rise in climate litigation against fossil fuel firms in recent years is having a negative impact on their stock market value, a new study by the London School of Economics’ Grantham Research Institute has shown. The research, which looked at 108 legal cases against U.S. and European-listed companies filed between 2005 and 2021, found the strongest stock market response when the biggest carbon polluters were involved: the value of these companies fell by an average of 0.57% after the filing of a case and by 1.5% after an unfavorable judgment. By contrast, the study found, non-carbon majors saw no statistically significant impact when litigated against. Moreover, a 2019 action brought by the Dutch NGO Milieudefensie against Shell appears to have been a watershed moment. The research found consistently larger effects on corporate share prices after the Shell case was launched “suggesting capital markets are increasingly responding to climate litigation.” (The London School of Economics’ Grantham Research Institute, The Guardian)
Billions starting to flow for the CCS challenge in the UK and the U.S.: Oil and gas companies feature among the winners of the UK’s first carbon capture and storage licensing round for North Sea sites with the aim of sequestering up to 10% of total UK annual emissions by 2030. Twenty licenses have been offered by the offshore regulator to twelve, so far mostly undisclosed, companies, though the exploration and production company Neptune Energy and the independent producer Perenco UK disclosed that they had been successful. With billions of dollars of public money now being mobilized by the UK and the U.S. to scale up CCS and CO2 removal (CDR) projects, the two nations have agreed to partner in the U.S.-led Carbon Management Challenge initiative. Other partnering countries are being sought for the initiative ahead of the COP28 climate summit in November. (Upstream, Upstream)
Mega Africa-to-Europe hydrogen corridor advances: With the backing of their respective governments, Italy’s Snam, Trans Austria Gasleitung, Gas Connect Austria, and bayernets in Germany have formed a partnership to develop the SoutH2 Corridor to bring renewable hydrogen produced in North Africa to the heart of Europe. The 3,300-kilometer corridor, whose constituent sections in the three countries are in the running for major EU grant money, is planned to be fully operational by 2030 and would become part of the so-called European Hydrogen Backbone. The project concept involves the use of some new dedicated infrastructure alongside mostly repurposed pipelines. The latter will comprise more than 70% of the corridor and will, claims the project’s website, “enable cost-effective transportation of hydrogen.” (SoutH2 Corridor, Offshore Energy)
“I think most probably we are cannibalising our own business … But, you know, if we don’t cannibalise it then somebody else will,”
said Markus Brokhof, chief operating officer of AGL on the impact of the Australian energy generator’s big battery investments on its incumbent gas power generation business.
Papua LNG project — Financiers taking the risk, Institute for Energy Economics and Financial Analysis, May 23, 2023. (Pdf)
This 24-page report presents the risks involved — for potential project financiers and the debt-laden, environmentally fragile Pacific nation alike — in the US$13 billion Papua LNG export project that TotalEnergies and its partners are looking to sanction by the end of 2023.
Ensuring Disaster — How insurance companies are accomplices in climate crime, Greenpeace Nordic, May 24, 2023. (Pdf)
This 23-page report reveals 69 insurance companies that are underwriting insurance for the 21 companies planning 38 new offshore extraction projects in Norway’s massive expansion drive for oil and gas.