Explaining India’s Tellurian connection
A state-owned gas importer’s relationship with the controversial U.S. LNG company may have been terminated but it could be a guide to the lengths the Indian government is prepared to go to increase import dependency even when prices are hugely disadvantageous, writes M Rajshekhar in CarbonCopy.
Germany’s hydrogen turn — more programmatic mood music than strategy
The Kraftwerksstrategie, Berlin’s recently announced multi-billion euro plan for new power plants that will ultimately run on hydrogen, bears all the hallmarks of a unilateral decision born more out of political compromise than a joined-up transition strategy, write Ben McWilliams and Georg Zachmann for Bruegel.
The Scope 3 emissions “conundrum” is a fading myth
The elephant in the room when it comes to corporate carbon accounting, global regulators are pushing big emitters to disclose emissions from supply chains and customer product use, just as an increasing number of multinationals are starting to report these Scope 3 emissions voluntarily, writes Rev. Kirsten Snow Spalding in The Energy Mix.
Suez disruption not hitting LNG markets so far
The effective closure of the Suez Canal since mid-December has forced longer shipping times, but muted demand in well-stocked European and Asian markets has kept a lid on LNG spot prices, writes Fraser Carson for Wood Mackenzie.
Russia’s gas export strategy: Adapting to the new reality
Moscow is facing headwinds and uncertainties aplenty as it tries to pivot to non-EU markets such as Türkiye, China, and the former Soviet republics, write Anne-Sophie Corbeau and Tatiana Mitrova for the Center on Global Energy Policy at Columbia University.
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Analyses confirm that Europe is massively overreaching on gas: A new report from Europe-based groups has provided modeling to spell out what should already be obvious to the continent’s policymakers, namely that as EU climate targets require decreased demand for oil and gas, there is no need to increase supply from new production or infrastructure. With a particular focus on Norway and its radical extraction expansion agenda, the ‘On Thin Ice’ report highlights the high emissions and stranded assets risks that continue to build up as the EU’s gas demand is expected to drop by 32% by 2030 and, by 2035, supply from existing projects and contracts exceeds demand with no need for additional LNG or pipeline imports. The analysis comes as the latest findings from the Institute for Energy Economics and Financial Analysis (IEEFA) show that Europe’s gas consumption last year fell to its lowest level in 10 years — down 19% since 2021 — as countries scaled up energy-saving measures and increasingly switched to renewable energy. While LNG imports continue to dominate the continent’s gas dependency, IEEFA forecasts that the new regasification capacity being built and planned is on course to result in a staggering capacity overshoot of 265–270 billion cubic meters (bcm) per year by 2030. (Oil Change International et al [pdf], IEEFA, Montel News)
Groups challenge legality of Israel’s exploration license awards offshore Gaza: Representing three Palestinian human rights groups, the U.S. law firm Foley Hoag has issued legal warnings to three energy companies that were awarded licenses by the Israeli government in October last year to explore for gas off the coast of Gaza. Italy’s Eni, UK-based Dana Energy, and Israel’s Ratio Petroleum have been asked not to start exploration activities under a tender award that the groups say covers extensive areas lying within Palestine’s maritime boundaries as established by the UN Convention on the Law of the Sea (UNCLOS), to which Palestine became a signatory in 2015. An Eni representative said that since the awarding of the license on October 29, the company had neither signed a contract nor commenced any activity in the disputed area. Israel is not a signatory to UNCLOS and has challenged the validity of Palestine’s boundary rights under the convention. A senior counsel at Foley Hoag commented that, as Palestine is a territory recognised by the international community, “it should have the rights to claim sovereign rights and jurisdiction over maritime resources to the same extent as any other state.” Meanwhile, Chevron and its partners have taken a US$24 million final investment decision to expand production at the offshore Tamar field in the Mediterranean that will boost domestic supplies to Israel and exports to Egypt. (Middle East Eye, Offshore Technology)
Australian government to review controversial public money handouts for fracking companies: Following a Senate hearing in Canberra, the federal government has said it will investigate the validity and legality of public funds awarded to at least three fracking companies under a federal scheme that explicitly excludes fossil fuel exploration. Empire Energy, which is currently exploring for gas in the Northern Territory’s Beetaloo Basin, Blue Energy, and Galilee Energy are the companies in the frame after tapping upwards of A$35 million (US$23 million) from the Research and Development Tax Incentive Scheme, the guidelines of which stipulate that its funds cannot be used to subsidize “prospecting, exploring or drilling for minerals.” The taxpayer-funded R&D money is also not permitted to go to activities aimed at determining the location of gas deposits or the size or quality of deposits. According to Alex Underwood, Empire’s chief executive, the company’s activity in the Beetaloo “is not exploration to discover gas, but rather undertaking R and D activities with the purpose to generate new knowledge to determine how that gas can be extracted.” (ABC)
Development bank set to back “Paris aligned” project to ramp up gas supply in North Macedonia: A regional gasification project in North Macedonia will, states a newly published document from the European Bank for Reconstruction and Development (EBRD), “improve the competitiveness of private sector businesses and reduce gas prices, through increasing gas supply by 2.5 times (from existing 0.8 bcm to 3.6 bcm) and thereby further support the decarbonisation of the energy sector at lower cost of supply.” Ahead of a final financing decision by the bank’s board of directors scheduled for April 24, and involving a sovereign-guaranteed loan from the multilateral lender of almost €100 million (US$108 million), the EBRD’s management has signed off on the project and assessed it to be “Paris aligned.” Final project approvals from the EBRD’s board in these circumstances tend to be little more than rubber-stamping occasions. The loan is expected to go to NOMAGAS, North Macedonia’s state-owned gas distribution company, to help cover the construction costs of a 66-kilometer section of a gas interconnector with Greece and sections of two other pipelines within the country. (EBRD)
Enhanced scrutiny for high-emitting projects in Southeast Asia: A new emissions database published by the Malaysian climate watchdog RimbaWatch estimates that if the oil and gas reserves from 70 planned extraction projects across Malaysia, Singapore, and Brunei are fully exploited, the equivalent of 9% of the carbon budget for keeping global warming within safe levels will be used up. This first iteration of the Future Emissions Database, which is to be expanded to cover other Southeast Asian countries, relies on annual and lifespan scope 1, 2, and 3 emissions from public company data and tracks the emissions from planned carbon-intensive activity such as fossil fuel extraction and infrastructure, power plants, transportation, and steel and cement plants. The emissions tracker, the first of its kind to assess the carbon implications of proposed projects in Southeast Asia, is aimed at scrutinizing net zero by 2050 targets set by companies such as Petronas, Malaysia’s state-owned oil and gas company. (RimbaWatch, Eco-Business)
Kazakh authorities fine company responsible for major methane leak: As picked up by satellite readings, a blowout in June last year during drilling at an exploration well in the southwestern Mangistau region, which resulted in a six-month fire, caused what is thought to be the second worst man-made methane leak ever recorded. Kazakhstan’s Department of Ecology has confirmed the leak and a fine of US$780,000 has been imposed on the Kazakh company responsible, Buzachi Neft. While work is being carried out to seal the well with cement, an estimated 127,000 tonnes of methane escaped into the atmosphere between June and December, a figure eclipsed only by the 230,000 tonne leak following the sabotage of the Nord Stream pipelines in September 2022. Buzachi Neft’s negligence is estimated to have produced an environmental toll equivalent to driving 717,000 petrol-fuelled cars for a year. (BBC, BBC)
“To be honest, I think this project is rather outdated. It’s a bit like installing a fixed-line telephone while everyone around is using smartphones,”
said a resident from a settlement in North Macedonia located along the proposed route of a gas interconnector planned to run to Greece.
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India: A Japanese-Indian shipping consortium is considering the conversion of two LNG tankers into floating storage units for deployment on the country’s east coast.
Iran: Citing two unnamed Western officials and an Iranian military strategist, The New York Times reported that Israel carried out recent covert attacks on two major gas pipelines.
Iraq: Ongoing security issues are delaying Indian state-run companies’ hopes of advancing a plan to liquefy and transport gas flared in Iraq to India via a new export terminal.
Philippines: Quezon Power Philippines has announced a US$1.3 billion plan to build a 1,200-megawatt LNG power plant and an onshore regasification and storage facility in Mauban, 150 kilometers southeast of Manila.
Poland: GAZ-SYSTEM has received environmental approval from the Regional Directorate for Environmental Protection in Gdańsk for its proposed 6.1 bcm per year LNG import facility that is scheduled to come online in 2028.
UK: Divestment campaigners have welcomed an announcement from the West Yorkshire Pension Fund, one of the country’s biggest local authority funds, that it is halting all new investments in oil and gas companies.
U.S.: Equitrans Midstream Corporation has further pushed back completion of the Mountain Valley Pipeline to the second quarter of 2024. The estimated cost of the controversial project has also increased again from US$7.2 billion to over US$7.5 billion.
The Gas Graph
Via analysis by ProPublica and Capital & Main showing the pending cost shortfall for cleaning up over two million unplugged oil and gas wells in the U.S.
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Barossa worker accidents and financing problems hit Santos alongside big cut in profits: A 42% drop in annual profits for 2023 and a flagging share price are not gas producer Santos’ only concerns. It has emerged that a serious accident earlier this month, on board a pipe-laying vessel working on the Adelaide-based company’s flagship — and one-year-delayed — US$4.3 billion Barossa gas project off northern Australia, resulted in the hospitalization of a worker. The safety incident, now under investigation by the national offshore regulator, is reported to be at least the third serious accident this year on the Audacia vessel, owned by Dutch company Allseas. A spokesman for an alliance of unions representing offshore workers questioned the regulator’s scrutiny of the first incident in January, claiming that its role could be “to just lightly moderate the unacceptable behavior of cowboy operators that are hellbent on maximizing profit,” rather than to ensure the safety of oil and gas workers. In a further blow for Santos and the Barossa project, K-SURE, South Korea’s export credit agency, has taken the rare step of withdrawing insurance needed to underwrite SK E&S’s sizeable investment in the Timor Sea project. (Reuters, WAtoday, Financial Times)
More drilling in sensitive Equatorial Margin as Petrobras awaits decision on key permit: The state-owned company has embarked on a second exploration campaign in the deepwater Potiguar basin, located in Brazil’s environmentally sensitive Northern Equatorial Margin, after initial drilling in the basin discovered “inconclusive” amounts of oil and gas. Petrobras opted to explore in Potiguar last year following the blocking of its plans by Brazil’s environmental agency, Ibama, to begin drilling in the neighboring Foz do Amazonas basin, close to the mouth of the Amazon river in the northeast of the country. Controversial permitting for Foz do Amazonas is again being weighed by Ibama, with a decision likely to come this year. Petrobras is betting that the Equatorial Margin could be one of Brazil’s last major oil and gas plays, potentially holding reserves similar to the multibillion-barrel discoveries that Exxon is developing to the north in Guyana. (Upstream [paywall])
Asian LNG hype faces tough policy and economic realities: Two new analyses from the Institute for Energy Economics and Financial Analysis (IEEFA) lay out a host of “economic realities” that are already posing significant headwinds for the LNG industry’s prized final destination — developing Asian markets. Despite noises from South Korea that the Biden administration’s pause on new LNG export approvals will interfere with decarbonization goals and energy security, these complaints don’t stack up with the country’s target of decreasing LNG’s share in the power mix from 26.82% in 2023 to 9.3% by 2036. LNG import dependency has contributed to crippling debt issues for Korea Electric Power Corporation in recent years, and 2023 saw increased nuclear and renewable energy generation — a trend that is likely to continue given enhanced decarbonization targets — as LNG imports dropped by 4.9% for the year. Addressing Shell’s 2024 Outlook for LNG, which contains projections showing that the post-2040 investment case for the fuel is fading, IEEFA’s analysts zero in on the major’s refocusing towards rapid demand growth in emerging markets and China’s industrial sector that, they say, “may never materialize.” They point to high costs and contractual issues already seriously impeding LNG-to-power projects in Vietnam and the Philippines. As for Chinese LNG demand, the key component in Shell’s vision, rampant solar and wind generation is set to continue alongside entrenched thermal coal usage where utilization is expected to fall over time. “Shell’s view,” the analysis states, “overlooks Chinese policies designed to limit gas dependence and mistakenly attributes energy efficiency gains and electrification to gas adoption.” (IEEFA, IEEFA)
More Mozambique project dilemmas for Total: As concerns grow over the deteriorating security situation in northeast Mozambique, it’s emerged that TotalEnergies missed an interim, end-of-January investment deadline for 17 newbuild LNG carriers essential to its massive export facility in Cabo Delgado Province. Industry sources said that July is now the cutoff date for project investors to decide on commissioning the vessels with South Korean shipbuilders. Due to the US$20 billion project’s freezing under force majeure, this latest extension to the commissioning of the carriers is said to be the sixth in almost three years. Alarmingly for Total’s cost-conscious CEO, Patrick Pouyanné, the ongoing delay has resulted in an almost 50% price hike for the carriers. Originally, in 2020, the cost per vessel was roughly US$180 million, whereas it’s believed the new figure will amount to US$260 million. While the drumbeats from Total and its partners about lifting force majeure have been increasing in recent months, this market intelligence is the clearest indication to date that restarting Mozambique LNG’s construction, with a string of international project financiers back on board, is far from a done deal. (Upstream [paywall])
“H2-no” concerns grown in the UK as major investors plot to cut their stakes in gas network operator: In what is being widely interpreted as a telling indication that UK gas industry ambitions to replace gas for building heating with hydrogen are on shaky ground, Australian investment manager Macquarie and US-based Federated Hermes have disclosed that they are looking to sell a combined 13.4% stake in Cadent, the UK’s biggest gas network operator. Alongside other investors including Qatar and Chinese sovereign wealth funds, the two shareholders currently own around 40% of the business, which provides gas to 11 million homes and businesses across England. The UK government has been aiming to take a decision on home heating with hydrogen in 2026. However, two potential trials in English villages were canceled last year due to local opposition and low availability of hydrogen, while a trial in the Scottish region of Fife is set to start this year amid controversy that the project promoter suppressed parts of an explosion risk assessment report following trials in 2018. Despite the news of their attempted £1.3 billion (US$1.64 billion) share sell-off, both Macquarie and Federated Hermes said they remained committed to Cadent in the long term. (Financial Times, Reuters, The Courier)
“I think there are some real benefits to [blue hydrogen], but I’m not convinced the economics are winning the day at the moment, and so I’m not sure how fast it’s going to grow … The regulatory support for carbon capture is sketchy at best … which makes it very hard to form capital around it,”
said Nick Dell’Osso, CEO of Chesapeake Energy, as lobbying intensifies over the U.S. government’s proposed rules for clean hydrogen production tax incentives.
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