With all the drama around crude oil right now natural gas has moved outside the spotlight but there are some interesting developments there as well, and a lot more positive than what is happening in oil. The natural gas trade is beginning to shape a truly international market.
As LNG trade intensifies, traders are being offered a growing variety of derivative instruments to trade in, Bloomberg’s Mathew Carr, Stephen Stapczynski and Anna Shiryaevskaya wrote this week.
Open interest in the Japan-Korea Marker, or JKM the benchmark for liquefied natural gas delivered in northern Asia, has increased threefold in the past 12 months, Bloomberg’s authors noted, reflecting a boom in the LNG trade but also a flourishing spot market that is driving the internationalization of natural gas trade.
The spot market evolution was a result of the expansion in LNG suppliers. The United States and Australia are perhaps the most prominent but there are also emerging LNG producing and exporting nations in Africa, with Canada also staking a claim in the LNG market. At the same time, more receiving terminals are being built to take in the increased supply, further feeding the evolution of an international gas market.
Almost a third of all LNG trade last year took place on the spot market, Shell said in its latest LNG Outlook. This is encouraging for the internationalization of trade in the commodity, according to analysts who spoke to Bloomberg, and that’s despite the price slump that’s hurt gas producers’ profits and cast a shadow over new liquefaction capacity investment decisions.
What’s even better for the global natural gas trade is that it is separating itself from crude oil. Even though most of the natural gas trade is done under long-term contracts with prices linked to crude oil benchmarks, the emergence of a vibrant spot market has driven a divergence between oil and gas. This was most recently demonstrated by the fact that the JKM remained largely unchanged this week while oil crashed with a bang, Bloomberg’s authors pointed out.
All this doesn’t mean that this nascent natural gas market is without its problems. The growth in paper trading that suggests a maturing commodity market is certainly a good sign. The price depression, however, is not such a good sign because it is also depressing trade.
Here, LNG had the same fate as oil: the coronavirus that effectively closed China for business, as one industry executive said, affected both the oil and gas trade severely.
“China is effectively closed for business as it relates to long-term contracts right now,” says Omar Khayum, chief executive Annova LNG, a project yet to be completed in Texas.
But it is not just China. There is a global glut of natural gas and even though Shell expected the market to rebalance by next year, it couldn’t anticipate the blow the industry will receive from the COVID-19 epidemic.
The JKM dipped in February amid the worst of the epidemic in China. It has since rebounded but, according to Platts Analytics, the spread of the virus to South Korea and Japan, which together account for almost 33 percent of global LNG demand, puts future demand at risk, too.
This is where the relatively new nature of the gas market becomes evident despite all the progress made thus far. There is no gas OPEC to step in and curb production to prop up prices.
There is an organization of gas exporters. It’s called the Gas Exporting Countries Forum and involves a dozen countries, led by Russia, Qatar, and Iran. The list of members also includes Nigeria—Africa’s top LNG producer—Egypt, which has recently staked a claim in the international gas market with several discoveries, and Libya.
However, this organization has so far made no hint that it is interested in acting in concert to control gas prices. The reason: the international gas market is not as developed as the international oil market, according to analysts. Yet as we saw, thanks to LNG, it is developing and maturing. We might someday see the equivalent of OPEC in gas, and this will be perhaps the clearest indication the international gas market has caught up with the oil market and has become a truly mature global market.
Organized by SGO, the June 10-11 event in Nicosia focuses on renewables integration, advanced microgrids, and energy resiliency in the Middle East / Mediterranean
The Middle East and Mediterranean are undergoing important energy transitions. While oil and natural gas continue to be primary resources, there is a growing drive toward embracing renewable and carbon-free energy as climate change and population growth continue at a significant rate. As society begins the transition away from fossil fuels, the Mediterranean and Middle East must lead the way toward more distributed energy infrastructures with hybrid, renewable energy systems and advanced microgrids at the core.
To help stakeholders from across the region meet these challenges effectively, the first Advanced Microgrids, Smart Renewables and Distributed Energy Middle East & Mediterranean Symposium will be held on June 10-11 in Nicosia (www.microgridinnovation.com/Nicosia).
Organized by the Smart Grid Observer, the event will feature in-depth presentations, panel discussions and one-on-one networking sessions providing invaluable opportunities to connect with key players and learn from the leaders who are shaping the future of clean energy and intelligent urbanization across the Middle East and Mediterranean regions.
“This region is beginning to move toward solar and other renewable resources, and the goal of this event is to help decision makers get the most accurate picture,” says Daniel Coran, SGO editor and Symposium manager. “We want to bring people together from across borders – technology borders as well as regional ones – to envision what the future of energy in this area can be, and should be.”
Topics to be covered in the conference will include the challenges and opportunities in moving toward distributed energy resources (DERs), overcoming regulatory and policy hurdles, advances in microgrids and clean energy technologies, and enabling business models and transition strategies. A review of key case studies will highlight the lessons that can be learned from notable implementations and projects to date.
The audience for the Symposium includes renewable energy and electric utility companies; microgrid project developers, owners, and entrepreneurs; finance and investment professionals; Smart City planners, strategists and municipal executives; Government, regulatory and public policy professionals; energy storage providers, technology innovators, VC and investment professionals and more.
Schneider Electric is Gold Sponsor of the event, Brightmerge is a Catalyst Sponsor, and Silver Sponsors include Gommyr Power Networks and iKare Innovation. For information regarding sponsorship, exhibition and speaking opportunities, contact email@example.com
For full details and to register visit www.microgridinnovation.com/Nicosia.
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The coronavirus health crisis may lead to a slump in global carbon emissions this year but the outbreak poses a threat to long-term climate action by undermining investment in clean energy, according to the global energy watchdog.
The International Energy Agency (IEA) expects the economic fallout of Covid-19 to wipe out the world’s oil demand growth for the year ahead, which should cap the fossil fuel emissions that contribute to the climate crisis.
But Fatih Birol, IEA’s executive director, has warned the outbreak could spell a slowdown in the world’s clean energy transition unless governments use green investments to help support economic growth through the global slowdown.
“There is nothing to celebrate in a likely decline in emissions driven by economic crisis because in the absence of the right policies and structural measures this decline will not be sustainable,” he said.
The virus has stoked fears of a global economic recession and helped to ignite one of the sharpest oil price collapses in the last 30 years, wiping billions of dollars from the world’s largest energy companies.
The economic contagion is likely to stall many infrastructure projects, including the multibillion-dollar investments in clean energy needed to avert a climate catastrophe by the end of the decade.
The year ahead could mark the first time the world’s solar power growth falls since the 1980s, according to a report from Bloomberg New Energy Finance. The analysts on Thursday slashed forecasts for new solar power projects by 8%. It expected sales of electric vehicles to stall too.
“We should not allow today’s crisis to compromise the clean energy transition,” Birol said. He said global governments should use the economic stimulus packages which are being planned to help countries weather the downturn to invest in clean energy technologies.
He added: “We have an important window of opportunity. Major economies around the world are preparing stimulus packages. A well designed stimulus package could offer economic benefits and facilitate a turnover of energy capital which have huge benefits for the clean energy transition.”
The IEA’s analysis has shown 70% of the world’s clean energy investments are government-driven, either through direct government finance or in response to policies such as subsidies or taxes. The watchdog has also found government fossil fuel subsidies total $400bn (£300bn) each year.
Birol urged global governments to invest in energy efficiency measures, which might not offer good short-term returns while energy prices are low but would prove a lucrative investment in the longer-term.
The IEA head also urged policymakers to use the downturn in global oil prices to phase out or scrap fossil fuels subsidies, which could be used to boost healthcare spending.
“These challenging market conditions will be a clear test for government commitments,” he said. “But the good news is that compared to economic stimulus packages of the past we have much cheaper renewable technologies, have made major progress in electric vehicles, and there is a supportive financial community for the clean energy transition.
“If the right policies are put in place there are opportunities to make the best of this situation,” he added.
Saudi Arabia has stepped up efforts to squeeze Russia’s Urals oil grade out of its main markets by offering its own cheap barrels instead after their long-standing deal to support global oil prices fell apart, seven oil sources said.
Cooperation between Moscow and Riyadh dramatically collapsed last week after Russia refused to support deeper oil output cuts desired by Saudi Arabia to fight falling oil demand as a result of the spread of the coronavirus outbreak.
Market sources told Reuters that state-controlled Saudi Aramco is trying to replace Urals in refiners’ feedstock around the world, from Europe to India.
“They (the Saudis) knock on all doors offering a lot and cheaply…” a source with a Western oil major told Reuters.
Saudi’s national shipping firm, Bahri, provisionally chartered up to 19 supertankers this week, with six of them set to take about 12 million barrels of Saudi crude to the United States, according to data and sources.
Saudi Aramco is in talks with European refiners, including big buyers of Urals oil like Finland’s Neste Oil, Sweden’s Preem, France’s Total, BP, Azerbaijan’s SOCAR, Italy’s Eni, the sources said.
The tactic has already started to pay off, with refiners ordering extra volumes of its crude for loading in April at “very attractive prices”, the sources added.
Saudi Aramco, Neste Oil, Total, BP, Preem, Eni and SOCAR did not immediately respond to requests for comment.
Saudi Arabia will open the taps beginning on 1 April, releasing 12 million barrels of oil per day (bpd) into the markets. Russia’s maximum production capacity is 11.80 million bpd, with Asia and Europe being key export markets.
Russian Energy Minister Alexander Novak said on Wednesday that Saudi plans to raise output was “not the best option”. Novak is meeting Russian oil companies on Thursday in Moscow.
“Riyadh is really mad at Moscow for their move in (the) OPEC meeting, so they target (the) Urals markets first”, a source at a European trading firm involved in Urals trading said.
Market sources said that Saudi Aramco is trying to replace Urals in refiners’ feedstock in an attempt to punish Moscow and get the Russians back to the negotiation table.
On Saturday, the day after the landmark deal between the group known as OPEC+ fell apart, Riyadh slashed prices for its crude to customers worldwide.
Saudi Aramco may send an extra 1.5 million bpd to Europe in April alone, said the third source, who does calculations for a global trading house.
Oil wars between Russia and Saudi Arabia are not new: both were at a standoff before the OPEC+ deal three years ago. But now Riyadh is ready to go to as far as Belarus.
Russia and its ex-soviet neighbour failed to reach a new oil supply deal in January, meaning that Minsk started to look for Urals replacement.
“We’ve been working with Saudi Arabia since last year, there was a meeting in London last week… The prices are just wonderful,” a source at a Belarus oil trader told Reuters.
Belarus said it would keep importing alternative crude oil even if supplies from Moscow are fully restored.
Saudi Arabia is also seeking to replace Urals crude in more unusual markets for the Russian grade such as India and the United States, traders said.
“There were phone calls over the weekend from Aramco to CEOs of majors and big independents about taking an increase in Saudi oil. My understanding is that this would be oil loading in April – reaching US in May and June”, a US market source said.
Indian refiners that had been increasing Russian oil purchases in recent months have also ordered extra Saudi oil.
Azeri state firm SOCAR ordered 3 million barrels from Saudi Arabia for loading in April for its STAR refinery in Turkey, which so far was processing mainly Urals, two sources said.
And France’s Total, one of the top Urals buyers, is in talks with Saudi Aramco to boost intake of Arabian barrels by some 600,000-700,000 bpd next month, another source familiar with the company’s plan said.
Neste Oil, Eni and Preem may also receive extra barrels from Riyadh, ranging from a one to three-four cargoes, traders said.
Russia’s Urals differentials to dated Brent sank after the Saudi move, but are still not at historical lows.
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Plans for an EU-wide hydrogen alliance were confirmed on Tuesday (10 March) when the European Commission unveiled its new industrial strategy.
“The Alliance will build on existing work to identify technology needs, investment opportunities and regulatory barriers and enablers,” the Commission said in a statement today, outlining “a new industrial strategy for Europe“.
Hydrogen is “a clear candidate” for an EU-wide initiative aimed at promoting home-grown production of clean gases in support of the bloc’s objective of becoming the first climate-neutral continent in the world by 2050, an EU official told EURACTIV.
The new “Clean Hydrogen Alliance” is set to see the light in the summer, the official said, explaining the initiative enjoys broad backing from EU member states and companies involved in the hydrogen value chain.
The initiative will be modelled on the European Battery Alliance, which brought together more than 200 companies, national governments and research organisations around battery manufacturing.
“We should be ready before or just after the summer break,” the official told EURACTIV, saying the alliance has generated great interest from many EU member states as well as a wider “community” of industries and research organisations.
Germany and the Netherlands are among the EU countries that have signalled the strongest interest in hydrogen, seen as a potential silver bullet to cut emissions from heavy industries such as steelmaking, cement and chemicals.
Last month, Germany floated a draft hydrogen strategy, announcing plans to promote the clean gas in transportation, and pour millions of euros into research to develop the technology. Berlin is expected to unveil its final strategy on 18 March, just months before it takes over the EU’s six-month rotating presidency, on 1 July.
A novel approach to industrial policy
The European Commission has already tried pushing an industrial policy but previous attempts have failed because of diverging national interests.
While France and Germany are keen to promote national “champions”, smaller countries have resisted those attempts, insisting that strict enforcement of EU competition and state aid rules is crucial to protect smaller players and prevent big companies from taking dominant positions on the EU market.
The EU’s novel approach to industrial policy, already successfully tested with batteries, aims to break the impasse by considering an entire product value chain – from raw materials extraction to manufacturing – in a few strategic sectors.
The hydrogen alliance will be “similar to what we did with batteries,” an EU official told EURACTIV, citing electrolysers as an obvious area of interest for EU manufacturers. “We also need an infrastructure” to produce, transport and store the hydrogen, the official pointed out.
But that doesn’t mean EU competition rules will be thrown out of the window, another official explained, saying strong European champions will not emerge if we protect them from competition.
Rather, the Commission intends to adapt the rules on a case-by-case basis, when the situation requires, looking at the “geostrategic” environment in which European companies operate.
“The single market is key. This is the domestic market that you offer” to big and small companies to expand in some strategic industries, the official said.
Important Projects of Common European Interest (IPCEI)
EU officials pitched a “very practical” approach to industrial policy based on a detailed analysis, “ecosystem by ecosystem”, in order to promote the emergence of European champions in strategic sectors and help them compete on the global stage.
“Each of those ecosystems faces very different challenges,” a senior EU official explained, saying the Commission will mobilise all its regulatory arsenal in support of strategic sectors like hydrogen. “We need to adjust our tools and their use depending on the reality of the specific ecosystem,” he said.
The arsenal is wide-ranging, officials continued, citing regulations, competition rules, standards, intellectual property rights, EU funds, and screening of foreign direct investments as elements of the EU “toolbox”.
Among the key new instruments in the Commission’s “toolbox” are so-called Important Projects of Common European Interest (IPCEI). Normal EU state aid rules won’t apply to projects benefiting from IPCEI status, meaning national governments will be able to subsidise them without having to observe strict state aid limits.
“The Commission will put in place revised state aid rules for IPCEIs,” the Commission confirmed in a statement, saying they will “allow member states to fund large-scale innovation projects across borders which could otherwise not be funded because of market failure”.
The revised state aid rules are expected to be in place in 2021, the Commission said in its industrial policy communication.
Hydrogen and energy-intensive industries
Hydrogen is among the strategic industries expected to benefit from the new IPCEI status.
In November, an EU Commission expert group made recommendations on how to develop IPCEIs in six strategic and future-oriented industrial sectors: Connected, clean and autonomous vehicles; Hydrogen technologies and systems; Smart health; Industrial Internet of Things; Low-carbon industry; and Cybersecurity.
“We have made a good start in areas such as batteries, plastic recycling and high-performance computing,” said Elżbieta Bieńkowska, the EU Commissioner in charge of the internal market, industry, entrepreneurship and SMEs. “And we can do more,” she added in a statement back in November, citing hydrogen as one of the industries set to benefit from IPCEI status.
The Commission sees hydrogen as key to cut emissions from process industries such as steelmaking, cement or chemicals, which are considered “hard-to-abate” because they require high-temperature heat and cannot easily be electrified.
The Commission’s principal adviser on energy, Tudor Constantinescu, says “hydrogen may be a missing link in the energy transition” because it can help decarbonise process industries and heavy-duty transport: aviation, maritime and long-haul trucking.
But trade unions say it will take time before hydrogen can be rolled out on a commercial scale.
“The technologies will be ready for commercialisation only after 2030, for example on low-carbon steel, which is only at pilot stage,” said Luc Triangle, secretary-general of IndustriaAll, a trade union federation.
And before these technologies become competitive, they will need support, he said. “In order to help them develop viable business models, you could loosen state aid rules in order to allow direct subsidies for these kinds of products or by subsidising the consumers of these products,” Triangle said in reference to the steel sector.
“The European Commission has already done this with the Battery Alliance and will now do it for hydrogen,” Triangle told EURACTIV. “And the same model could be replicated in other areas as well under the IPCEI label. There is huge potential there.”
Industry groups enthusiastic
Industry associations were enthusiastic about the Commission’s announcement.
“One of the most strategic technologies in the field of hydrogen are electrolysers” which split water into oxygen and hydrogen using renewable electricity, said Hydrogen Europe, a group representing more than 200 companies and research institutions involved in the technology.
“We are still leading as Europeans. But especially China is challenging that position. A Hydrogen Alliance would definitely help to boost the European industries,” said Jorgo Chatimarakis, the Secretary General of Hydrogen Europe, announcing the forthcoming launch of a “2×40 Gigawatt Green Hydrogen Initiative” to underpin this target until 2030.
Eurogas, a trade group, also welcomed the Commission’s initiative, saying the EU hydrogen strategy is “a great opportunity to deliver Europe’s commitment to developing renewable and decarbonised gas”.
“The launch of an alliance on clean hydrogen should be the catalyst for the needed investment in hydrogen technology and its manufacturing, which Europe leads on today,” said James Watson, secretary-general of Eurogas.
“The hydrogen alliance must be about maintaining EU leadership in clean technologies as we are the pioneers in manufacturing electrolysers, CCS equipment and pyrolysis,” Watson said.
Oil and gas companies on board
The oil and gas industry is among the most fervent supporters of hydrogen because it offers oil and gas firms a segway into cleaner fuels, while drawing on their existing gas production, transport and storage facilities.
“Today, 70% of hydrogen production comes from natural gas. If we decarbonise it with CCS, we can create hydrogen value chains and a market that will reduce costs and help integrate hydrogen from renewable electricity,” said François-Régis Mouton, Europe director at the International Association of Oil and Gas Producers (IOGP).
“Hydrogen and CCUS are the two faces the same coin,” Mouton continued. “This is why we co-signed a call for the recognition of CCS in the EU’s Industrial Strategy, and why we commissioned along with 17 other organisations the ‘Hydrogen for Europe’ study which will identify the potential, costs, barriers, and necessary policies to scale up hydrogen in Europe”.
The results of the study are expected by the end of 2020, and will inform the debate across Europe, Mouton said.
The big challenge now will be to ramp up production, in order to create a market for hydrogen, which is currently almost entirely produced from natural gas, a fossil fuel.
“This is what the platform should focus on: supporting the deployment of such processes with the aim to increase the volumes of hydrogen,” said GasNaturally, an industry campaign group.
Some concrete projects are already underway. Last month, oil and gas major Royal Dutch Shell and gas company Gasunie revealed plans to build a massive green hydrogen plant in the northern Netherlands in the next decade.
Fuelled by a large new wind farm off the coast of Groningen province, the plant would ultimately be able to produce 800,000 tonnes of hydrogen by 2040, the companies said, cutting the Netherlands’ CO2 emissions by about 7 megatons per year.
“Wind is the playmaker of the Green Deal,” said Giles Dickson, the CEO of WindEurope, a trade association. “It’ll power the decarbonisation of the energy system. It’ll drive delivery of strategic EU initiatives such as hydrogen production and smart mobility.
“So wind has to be recognised as one of Europe’s top strategic value chains.”
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On 11 March 2020, the World Health Organisation officially classed Covid-19 (coronavirus) as a pandemic and energy companies are feeling the strain.
Both renewable power projects and conventional energy operations have felt the constriction of global supply chains, which are currently being limited in a global effort to fight and contain the spread of the virus.
Many manufacturers of wind turbines and their critical components are based in Asia, such as Goldwind in China, as well as producers of photovoltaic panels and batteries (particularly lithium).
Market reticence about bringing in products from affected areas has seen significant constriction in the importation of these materials and parts – the price of batteries has dropped by 60%, owing to the industry’s concentration in Asia.
Restricting the global supply chain
The virus may, in fact, be having a deleterious effect on the progress of renewables as a whole. Industry leader GE Renewable Energy reportedly confirmed that Covid-19 has struck off US$200mn to $300mn in profits across its business in Q1.
CEO Jérôme Pécresse was optimistic that the company could recover, although he conceded that the issue could firmly be called a ‘global issue’. “As of today, we are on track to our quarterly forecasts. We continue the positive recovery of our supply chain in China.”
Meanwhile, solar projects in the US are being slowed to a crawl, with some considering cancellation as the only viable economic stance in the wake of such unforeseeable circumstances.
“I think you’re going to see a lot of force majeure claims under the coronavirus, up and down the supply chain,” said Sheldon Kimber, CEO and co-founder of Intersect Power.
Taking steps to mitigate the issue
With the end of the virus presently far out of sight, energy companies will need to take decisive measures to ensure they are able to meet targets and continue operations as close to ‘normal’ as possible.
Legal analytics publication JD Supra recommends the following actions:
Maintain communications with critical suppliers and strategically plan contingencies.
Comb through purchase and supply contracts to determine when ‘force majeure’ rights apply.
Always bear in mind the specific restrictions of the jurisdiction you are operating in.
Keep close tabs on customer demands.
Be willing to reallocate quantities of scarce materials.
Take out corporate insurance policies.
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Climate change commitments by banks, pension funds and asset managers face their first major test as markets reel from the twin shocks of coronavirus and a sliding oil price.
The challenge looks formidable. When the 2008 financial crisis tipped the world into recession, carbon emissions fell. But as economies grew again, governments proved unable to halt an emissions rebound.
The issue now is that at a crucial moment for international negotiations, the latest global economic blow could put paid to costly ideas for slowing climate change from political leaders and the private sector alike.
“When things are more difficult then people are really going to be focused on financial performance,” Hester Peirce, a Republican member of the U.S. Securities and Exchange Commission (SEC) said Monday as world markets dived.
This time around, money managers interviewed by Reuters say a growing recognition of the prospect of massive disruption, underscored by Australia’s bushfires, has permanently shifted the dial and put environmental, social and governance (ESG) issues front and center.
“People look at ESG as a luxury and when recession hits it gets thrown out of the window,” said Michael Lewis, who heads research into environmental issues at German asset manager DWS.
“There’s still going to be significant pressure on policymakers not to take their eye off the ball, because of the financial materiality of climate change,” he added.
Climate of fear
The initial stages of the epidemic in China have already had a dramatic impact on the world’s biggest emitter of carbon dioxide, as Beijing locked down whole areas, shutting down factories and preventing travel.
Finland’s Centre for Research on Energy and Clean Air says Chinese CO2 emissions fell by a quarter, or an estimated 200 million tonnes in the four weeks to March 1.
Satellite data also showed a sharp fall in Chinese emissions of nitrogen dioxide, a noxious gas emitted by power plants, cars and factories, starting in Wuhan and then spreading over other cities, including the capital, noticeable over a fortnight in mid-February.
“There is evidence that the change is at least partly related to the economic slowdown following the outbreak of coronavirus,” NASA’s Goddard Space Flight Center said in a report.
But China has since began to resume business as usual and globally scientists say it is too early to estimate what the coronavirus outbreak’s economic impact may mean for emissions.
In 2009, global carbon emissions fell to 31.5 gigatons from 32 gigatons, the Global Carbon Project said. But as the global economy recovered, emissions jumped to 33.2 Gt in 2010 and to a projected 36.8 Gt in 2019, a record high.
The post For richer or poorer: coronavirus, cheap oil test climate vows appeared first on EnergyWorld Magazine.
This week’s oil price rout had become inevitable and cutting output has ceased to make sense because it is unclear how deep the impact of the coronavirus on demand will be, Russia’s deputy energy minister said in an interview with Reuters on Wednesday (11 March).
Last week, Saudi Arabia failed to secure Moscow’s support for deeper output cuts at a meeting of the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+.
Following the disagreement, Saudi Arabia has threatened to flood the market with oil. Oil prices LCOc1 dropped by as much as a third on Monday and fell again on Wednesday to around $36 a barrel.
OPEC had proposed to deepen cuts by 1.5 million barrels per day (bpd) and Russia was asked to cut an extra 300,000 bpd.
Pavel Sorokin, Russia’s deputy energy minister, described that task, which would have doubled Moscow’s commitment to 600,000 bpd, as technically challenging.
He said there was no point in cutting until after everyone understood how sharply demand could fall.
“We cannot fight a falling demand situation when there is no clarity about where the bottom (of demand) is,” Sorokin said. He attends all joint meetings with OPEC with his boss Alexander Novak and gave Reuters his first interview since last week’s meeting.
“It is very easy to get caught in a circle when, by cutting once, you get into an even… worse situation in say two weeks: oil prices would shortly bounce back before falling again as demand continued to fall.”
Russia had proposed extending existing OPEC+ combined cuts of 1.7 million bpd for at least one more quarter to try to assess the real impact on demand from the coronavirus, but OPEC refused. From 1 April all OPEC+ producers can now pump oil freely.
“We see the (current) market situation as predictable yet unpleasant… Market and market forces will regulate it fairly quickly,” Sorokin said, adding he expected to see the first signs of lower oil production activity at costly projects worldwide in 4-6 months.
‘Not at war’
Sorokin said Russia was open to talking to OPEC again if the situation arises and was not engaging in a price war.
“All communication channels are open, but I cannot predict when we will meet again – this largely depends on our partners,” he said.
Russia’s oil producers, who price their crude in dollars on world markets, would be sheltered by the dollar-rouble exchange rate.
“We are not in a price war with anyone… We are competitive. We watch the market and understand that such a situation will help the market to recover. High-cost projects will disappear,” Sorokin said.
Russia can quickly add 200,000-300,000 bpd to its production, raising it further to 500,000 bpd in the next couple of months, which would take Moscow’s oil and gas condensate output to around 11.80 million barrels of oil equivalent per day (boepd).
That would be a post-Soviet high but still below the more than 12 million bpd the Saudi energy ministry has said it will produce in April.
Last week’s split between Russia and OPEC ended nearly three years of coordination, during which time the market accepted the idea producers would prevent a market collapse.
Sorokin said that meant companies began to invest in high-cost oil again, reducing the impact of more output cuts by producer countries.
A fresh cut last week would have boosted prices and in turn brought on new projects that would flood the market in three-to-four years’ time, he said.
“Sooner or later, we would have faced an oil price fall to $40 and lower, with the exit (from the deal) in six months or a year,” Sorokin said.
The deputy minister sees oil market equilibrium at $45-55 per barrel, which is comfortable for producers and low enough for the global economy to recover from the coronavirus impact.
Provided there are no further shocks, Sorokin said he saw prices rising to $40-45 per barrel in the second half of this year and to $45-50 – in 2021.
The Bulgarian government has decided to reserve deliveries of natural gas that Bulgargaz would buy through the LNG terminal in Alexandroupolis, Greece for the next ten years. Bulgartransgaz has become a shareholder in Gaztrade, which is building the new LNG terminal at Alexandroupolis.
Bulgaria’s participation in the project is in pursuance of the policy of diversification of sources and routes for the supply of natural gas, in order to guarantee energy security and to achieve competitive prices for Bulgarian consumers, the decision states. More than 500 million cubic meters of gas will be purchased each year from Alexandroupolis, or about 1/6 of the country’s annual consumption.
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Transgaz has committed to make available to the market significant firm capacities for natural gas exports from Romania to neighbouring Member States, in particular Hungary and Bulgaria, the European Commission said.
“Transgaz has committed to make available capacities at interconnection points for increased natural gas exports from Romania to Hungary and Bulgaria,” Commission Executive Vice-President in Charge of Competition Policy Margrethe Vestager said, adding that this will promote the free flow of gas at competitive prices in South Eastern Europe and is a further step towards a single European energy market. “Consumers across the region will benefit from greater security of supply of a key transition fuel towards the ultimate objective of an emissions free energy mix, in line with the European Green Deal,” she added.
The Commission announced a formal investigation in June 2017 to assess whether Transgaz, the state-controlled natural gas transmission system operator in Romania, infringed EU antitrust rules by restricting exports of natural gas from Romania. In particular, the Commission was concerned that Transgaz may have carried out such restrictions by underinvesting in or delaying construction of infrastructure for gas exports and interconnection tariffs for gas exports that made exports commercially unviable,
using unfounded technical arguments as a pretext for restricting exports.
These restrictions may have maintained or created barriers to the cross-border flow of natural gas from Romania, one of the EU’s largest natural gas producers, to Hungary and Bulgaria, contrary to the objective of an integrated Energy Union where energy flows freely across borders directed by competitive forces and based on the best possible use of resources, the Commission said.
Following the opening of the formal investigation, Transgaz offered commitments to address the Commission’s concerns. The Commission then consulted market participants to verify whether the proposed commitments would remove the competition concerns identified by the Commission.
In light of the market test, Transgaz has made some amendments to its proposed commitments, the Commission said, adding that the final commitments will ensure that market participants can access significant volumes of export capacities via the interconnection points between Romania and neighbouring Member States. More specifically, Transgaz has committed to make available minimum export capacities of 1.75 billion cubic metres per year at the interconnection point between Romania and Hungary (Csanádpalota). This capacity is equivalent to around one sixth of Hungary’s annual gas consumption. It has also committed to make available minimum export capacities totalling 3.7 billion cubic metres per year at two interconnection points between Romania and Bulgaria (Giurgiu/Ruse and Negru Vodă I/Kardam). This capacity covers more than half of Bulgaria and Greece’s annual gas consumption.
Moreover, Transgaz also committed to ensure that its tariff proposals to the Romanian national energy regulator (ANRE) will not discriminate between export and domestic tariffs in order to avoid interconnection tariffs that would make exports commercially unviable.
Finally, the Romanian company committed to refrain from using any other means of hindering exports.
The final commitments provide for significant additional capacity compared to the market-tested commitments, in particular to Hungary, by including capacities envisaged for the Romanian section of the first phase of the Bulgaria-Romania-Hungary-Austria (BRUA) gas pipeline project, the Commission said, stressing that, as a result, Transgaz’s participation in this project will also be subject to legally binding deadlines.
According to the Commission, the commitments will remain in force until 31 December 2026. A trustee will be in charge of monitoring the implementation and compliance with the commitments.
The Commission said the amended commitments address the identified competition concerns and therefore has made them legally binding on Transgaz.
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Russia’s Energy Ministry will meet with the country’s oil companies on Wednesday (11 March) to discuss future cooperation with the Organization of the Petroleum Exporting Countries, among other issues, two sources familiar with the plan told Reuters.
The meeting was convened following the collapse of talks with OPEC and other oil producers last week which spelled the end of three years of coordinated output cuts aimed at supporting prices and reducing stockpiles.
The failure to agree on further action triggered a 25% plunge in oil prices on Monday towards $30 per barrel, a four-year low.
Russian Energy Minister Alexander Novak has said curbs on output should be lifted from 1 April once the current deal between OPEC and other producers – a grouping known as OPEC+ – expires.
The meeting may provoke debate about whether to return to cooperation with OPEC. However, President Vladimir Putin would still have the last word on how Russia decides to proceed.
Russia’s largest oil producer, Rosneft, has been the most vociferous opponent of the deal, arguing that the production cuts have allowed the United States, which is not part of OPEC+, to boost its market share.
Rosneft, headed by Igor Sechin, a close ally of Putin, and its managers were targeted by sanctions imposed by the United States for Moscow’s role in Ukraine and oil trading with Venezuela.
Other producers, notably Russia’s second-largest oil producer Lukoil, have been positive towards cooperation with OPEC.
“We plan to discuss whether to return to (cooperation with) OPEC or not,” one of the sources said. The Energy Ministry did not immediately reply to a Reuters request for a comment.
Novak said on Tuesday that Russia had not ruled out further joint action with OPEC to stabilise the oil market, a stance later repeated by the Kremlin.
At the same time, Saudi Arabia said it would increase its crude oil supply to a record high, raising the stakes in its standoff with Russia and effectively rejecting Moscow’s overtures for new talks.
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Albania’s Ministry of Infrastructure and Energy has invited bids from the companies and financial institutions interested in becoming shareholders of the joint stock company which would operate the power exchange.
Albania’s transmission system operator OST will control 35% of the shares of the new company – the Albanian Power Exchange (APEX), which will be financially and legally separated from the OST, the ministry’s notice reads.
65% of the shares is available for TSOs, power exchange operators, power market participants, and international financial institutions
The remaining stake is available for four categories: other TSOs, power exchange operators with international experience, power market participants, and international financial institutions.
TSOs may get up to 20.5% of shares, power exchanges are eligible for up to 24.5%, while energy companies and financial institutions can own a maximum of 10%.
The initial capital of the company will be ALL 250 million (EUR 2 million), according to the announcement on the ministry’s website.
The application deadline is April 27
According to the notice on the competitive procedure for the selection of participants in the market operator’s share capital, the application deadline is April 27.
The move is the follow-up of the decision on the establishment of a power exchange adopted last year in May by the Government of Albania.
Serbia is the only contracting party of the Energy Community Treaty that has an operational power exchange – SEEPEX.
After it selected Nord Pool as a partner, Montenegro announced the power exchange established by Berza električne energije (BELEN) would be operational this year.
North Macedonia is also working to establish its own power exchange, while Bosnia and Herzegovina is still far from setting up such a market.
By Ken Silverstein / forbes.com
General Motors has its electric vehicle marketing program in overdrive. This week it is unveiling its gradual plans to release several all-electric models. It is an effort to show that the legacy automaker can go head-to-head with Tesla and lead a new movement in the car market.
GM, of course, introduced drivers to EVs in 2010 with its Chevy Volt. Now it has as many as 20 different models on the drawing board to not just meet what it thinks will be future demand but to also achieve its net-zero emissions goals.
GM is joined by several automakers that are banking on reduced battery costs — now the most expensive part of buying an EV. But it remains a question as to whether the industry can deploy a charging infrastructure that corresponds with the expansion of EVs. The good news is that there is a concerted effort to do so, including from Volkswagen’s Electrify America that is investing $2 billion to install fast-charging stations — part of a legal settlement tied to VW’s 2015 emission’s cheating scandal.
“Even though we expect GM to lay out a solid strategy at its EV day, we believe the ultimate proof-point of success in GM’s EV strategy is if the volumes materialize,” says Credit Suisse’s Dan Levy, in a note, per CNBC. GM must also “be able to challenge Tesla for share in the US EV market, as Tesla has been until now the only game in town in the US EV market.”
About 5.1 million EVs are on the road globally. By 2040, EVs could make up 40% of sales; dozens of EV models could come to market in the next five years. Their fate is directly linked to the cost of batteries, which has dropped from $2,500 a kilowatt-hour to $400. It may fall to $100. In five years, the price of EVs may be on par with traditional cars that run on the internal combustion engine.
In 2020, Audi, BMW, Chevrolet, Honda, Hyundai, Jaguar, Kia, Mini Cooper, Nissan, Porsche, Tesla and VW will have EVs on the market, says CNET.
Given the trajectory, Electrify America and ChargePoint are expanding the number of charging stations and especially in the Northwest corridor, along the California coastline and throughout the Northeast. Those are heavily traveled areas that have stringent air quality standards and where there is a multitude of EV owners. Globally, it is a $50 billion pursuit, says consulting firm McKinsey & Co.
ChargePoint and NATSO, which represents travel plazas and truck stops, will invest $1 billion in capital to build 4,000 charging stations. They will go in travel plazas and fuel stops that serve highway travelers and rural communities.
“Volkswagen’s investment in this expansive public EV charging project sets the blueprint for future EV charging infrastructure in the United States,” says Hendrik Muth, senior vice president of strategy for Volkswagen of America, which along with BMW is part of ChargePoint’s effort.”These charging corridors will add greater flexibility and convenience for current e-Golf and other EV drivers, and reduces one more barrier to increased EV ownership.”
Separately, Volkswagen is allocating $2 billion through 2027. It’s part of Electrify America that has installed 2,000 fast-chargers at 500 locations in 42 states. It just announced that it is investing $2 million in solar-powered EV charging stations in rural California. Specifically, it is sourcing the chargers from Envision Solar.
Beyond the cost of batteries and the expansion of the fueling infrastructure, there may be other twists in the road for EVs. It’s a global market place. To compete, companies need access to growing economies and they need to be able to create a single platform to mass-produce vehicles. To that end, China has 400 million middle-class consumers and automakers want access — all at a time when the country is ensconced in a trade war with the United States.
Meantime, the federal income tax credit is expiring: The $7,500 federal tax credit is available to the first 200,000 cars sold from each company. Once a company hits that threshold, the credit disappears. Both Tesla and GM have exhausted their full credit, although their buyers will get smaller credits in the coming months. The automakers say that they are preparing to lobby Congress for an extension, saying that EVs are still a more expensive proposition than traditional cars. And if the goal is to reduce emissions, the investment will reap a positive return.
“There are multiple elements that go into the price of an EV, including battery cost, leveraging the China market to achieve global scale on a common architecture and gaining manufacturing efficiency with less complexity, ” Doug Parks, GM’s vice president of autonomous and electric vehicle programs, told CNBC. “We are focused on all these items to drive profitability.“
Tesla’s Elon Musk has always said that reducing CO2 emissions is paramount. He is, therefore, pleased with the onslaught of new EVs coming to market, notably from GM that is an American staple and from VW that is investing in chargers and atoning for previous mistakes. The combined effort is building economies of scale, expanding infrastructure and adding political clout — dynamics that may alter the course of the car market and help automakers clean their act.
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Oil prices bounced back 7% on Tuesday from the biggest one-day rout in nearly 30 years, as investors eyed the possibility of economic stimulus despite a price war between top producers Saudi Arabia and Russia.
President Donald Trump on Monday said he will be taking “major” steps to gird the U.S. economy against the impact of the spreading coronavirus outbreak and will discuss a payroll tax cut with congressional Republicans on Tuesday.
Brent crude futures rose $2.51, or 7.3%, to $36.87 a barrel by 0418 GMT, while U.S. West Texas Intermediate (WTI) crude gained $2.15, or 6.9%, to $33.28 a barrel.
Both benchmarks plunged 25% on Monday, dropping to their lowest since February 2016 and recording their biggest one-day percentage declines since Jan. 17, 1991, when oil prices fell at the outset of the U.S. Gulf War.
Trading volumes in the front-month for both contracts hit record highs in the previous session after a three-year pact between Saudi Arabia and Russia and other major oil producers to limit supply fell apart on Friday.
“In times of turmoil, nothing is more important in restoring confidence than the government appearing calm and in control of the situation, how tenuous that control may be,” said Jeffrey Halley, senior market analyst at broker OANDA in a note.
Asian shares bounced and bond yields rose from historic lows as speculation of coordinated stimulus from global central banks and governments calmed panic selling.
Crude was also supported by hopes for a settlement and potential U.S. output cuts, although gains could be temporary as oil demand continues to be hit by the economic impact of the coronavirus outbreak, analysts said.
“Oil’s rally right now will likely be short-lived as the drivers for both the supply and demand side will remain bearish for now,” said Edward Moya, senior market analyst at OANDA.
Saudi Arabia plans to boost its crude output above 10 million barrels per day (bpd) in April from 9.7 million bpd in recent months, and has slashed its export prices to encourage refiners to buy more.
Russia, one of the world’s top producers alongside Saudi Arabia and the United States, also said it could lift output and that it could cope with low oil prices for six to 10 years.
U.S. shale producers rushed to deepen spending cuts and could reduce production after OPEC’s decision to pump full bore into a global market hit by shrinking demand due to the coronavirus outbreak.
“When you look at the leverage the industry is in, at prices of around $30, it’s not profitable,” said Jonathan Barratt, chief investment officer Probis Group.
“Saudis and other Middle Eastern producers have their budgetary constraints, Russia is starved for cash and the breakeven for .. shale has to be around $50 a barrel. So the dynamics of all those put together will mean they will come to an agreement somewhere.”
On the demand side, the International Energy Agency said oil demand was set to contract in 2020 for the first time since 2009.
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The Netherlands wrapped up testing on its first foray into hydrogen train technology at the weekend, as the European Commission readies a strategy for the clean fuel that debut on Tuesday, 10 March.
French train maker Alstom completed 10 days of testing in the north of the country – between the cities of Groningen and Leeuwarden – as Dutch railways aim to follow its German counterpart in operating an all-hydrogen train service.
In September 2018, the world’s first purely hydrogen-powered passenger locomotive left the station in Lower Saxony and has served the Buxtehude-Cuxhaven line ever since. Alstom has been contracted to provide more trains as a result.
Successful night tests in the Netherlands have moved the Dutch ambitions closer to fruition. Trains have been run at speed but without passengers, while refuelling was made possible by French energy firm Engie, which provided the green hydrogen.
“Groningen is the Netherlands’ testing ground for mobility. After the first self-driving train, now also the first hydrogen train!” Dutch environment minister Stientje v Veldhoven said at a public open day on Sunday (8 March).
Alstom’s Coradia iLint train is specifically designed for train lines that have not been or cannot be electrified. Fuel cells combine hydrogen and oxygen to generate electricity and the only byproduct is water.
The Coradia has a range of about 1,000km – which is the same distance a diesel train can go between fill-ups – and, as v Veldhoven pointed out, refuelling time is actually shorter for hydrogen when compared to diesel.
“The tests in the Netherlands demonstrate how our hydrogen train is mature in terms of availability and reliability, providing the same performance as traditional regional trains, but with the benefit of low noise and zero emissions,” said Alstom’s Bernard Belvaux.
Hydrogen could become a popular choice for branch line services – given the costs of installing overhead electrified lines – and next year’s proposed ‘Year of the Rail’ might be the perfect shop window for Alstom’s offering.
Fill ‘er up
One of the main obstacles hydrogen power has to overcome is the cost of the fuel though. Green hydrogen is made by using renewable energy – like solar or wind – and prices are currently higher than ‘grey hydrogen’, which is produced using fossil fuels.
Plans are underway in Belgium and the Netherlands to utilise surplus offshore wind power to produce green hydrogen at scale but the projects are currently in the pilot phase.
That is why the EU will reveal its strategy for a “clean hydrogen alliance” on Tuesday alongside its long-awaited industrial roadmap.
A previous leak of the strategy – obtained by EURACTIV – showed that the European Commission wants private-public partnerships to focus on using hydrogen in problem areas like steel production.
The EU executive wants to replicate the success of the European Battery Alliance, which has unlocked millions in investments since debuting in 2017, and hydrogen could benefit from a Brussels-approved framework that relaxes strict state aid rules.
Commissioners Frans Timmermans and Thierry Breton – who oversee climate and industrial policy, respectively – have both extolled the virtues of hydrogen during their first months in their new roles.
Ursula von der Leyen’s Commission’s interest in hydrogen is closely linked to its commitment to the EU’s climate-neutrality by 2050 objective, which will require major changes in the industrial and transport sectors.
The latter is responsible for about a quarter of the bloc’s greenhouse gas emissions but, unlike other areas like energy production, its carbon footprint continues to grow.
Hydrogen has been identified as a potential silver bullet particularly in the heavy transport industry, for trucks, construction equipment and shipping, where electric battery power could struggle to provide a solution.
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Exxon Mobil Corporation XOM has provided a glimpse into its aggressive capital spending plans.
Capital Budget & Growth Projects
The integrated energy giant reaffirmed its plan of spending capital annually in the range of $30 billion to $35 billion through 2025. Notably, the company intends to spend up to $33 billion in 2020, up from last year’s $31.2 billion. However, ExxonMobil added that this year’s capital budget is subject to progress in key projects. In comparison, Chevron Corporation CVX, another energy giant, is planning for a narrower range of $19 to $22 billion through 2024.
The aggressive capital budget reflects ExxonMobil’s strong focus on growth projects, which the company believes will help to persistently improve value for shareholders. The growth developments include the Stabroek Block, located off the coast of Guyana. In the block, the company estimates gross recoverable resource of more than 8 billion oil-equivalent barrels. Moreover, the firm projects daily Guyana oil production volumes of more than 750,000 gross barrels by 2025.
Exploiting resources in Permian, the most prolific basin in the United States, is another growth strategy of the energy major. The company continues to increase production from the shale play and expects daily oil equivalent production volumes to surpass 1 million barrels by 2024. ExxonMobil also has an aggressive plan for exploratory activities in Brazil from 2020 to 2021.
What Concerns the Market?
Many investors raised questions on the integrated energy firm’s strong focus on oil projects, as globally shareholders are urging energy companies to lower emissions that will help tackle climate change. Among the oil companies that are finding ways to lower emissions are BP plc BP and Royal Dutch Shell plc RDS.A.
Moreover, the wide-spread coronavirus fear and slowing global economy are disrupting the market and lowering global energy demand. Also, investors are constantly pressing companies to focus more on returns rather than solely on production, leading many explorers to lower capital budget. Thus, many investors believe ExxonMobil’s aggressive capital spending plan is not suitable for the prevailing business environment.
While ExxonMobil intends to invest heavily in the coming years, this might require the company to divest assets and rely more on debt funding. This could weaken ExxonMobil’s balance sheet and lower the company’s free cashflow that will be available for dividend payments.
But There Lies Optimism
ExxonMobil, on the contrary, believes that it has enough financial flexibility to support its massive capital spending plans and hence will be able to continue to return capital to shareholders. The firm highlighted that the costs of availability of debt capital are historically low.
Moreover, the company expects global crude demand to increase, since the standard of living of people is improving over time. This highlights the company’s strong focus on oil projects. The integrated company added that its $15-billion strategic divestment program will remain in place, helping it to upgrade portfolio.
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The European Green Deal risks deepening economic and social divisions between east and western EU countries, trade unions say, warning the 27-member bloc risks imploding before it reaches its 2050 climate neutrality goal.
Trade unions have stepped up warnings that the Green Deal put forward by the European Commission in December last year will put millions of jobs at risk, without any assurances that workers in affected industries will have a future.
“We are talking about almost 11 million jobs directly affected in extractive industries, energy intensive industries and in the automotive industry,” said Luc Triangle, secretary general of IndustriAll, a federation of trade unions.
“Those jobs won’t necessarily disappear,” Triangle told EURACTIV in an interview. “But there needs to be a future perspective for jobs in these industries,” which is currently not clear, he said.
Last week, the European Commission tabled a groundbreaking EU Climate Law, aimed at putting into hard legislation the EU’s goal of becoming the first climate-neutral continent in the world by 2050.
The EU executive is now expected to follow-up with an industrial strategy on Tuesday (10 March), outlining new growth areas for Europe as it moves towards a greener and more connected future.
But while the draft strategy places great focus on digitalisation, it contains little for traditional manufacturing sectors like steelmaking, automotive and chemicals, which are expected to be hit hardest by the transition to a net-zero emissions.
“It’s easy to say we need to reach ambitious climate targets by 2050 and 2030,” Triangle said. “But the industrial strategy should give the answer on the ‘how’ we will get there. And at the moment, we don’t have those answers yet”.
A new migration wave from Eastern Europe
Trade unions are particularly worried about the social and economic divisions that the green agenda risks creating between poorer eastern EU countries and their richer western neighbours.
According to Triangle, the green transformation “will be much easier in Nordic or western European countries” than in poorer EU member states like Poland, Bulgaria and Romania, where employment in some regions can be entirely dependent on a single, heavily-polluting industry.
“This could have a major impact on internal migration inside the European Union,” Triangle pointed out, saying “close to 22 million people” have already left Eastern Europe to find work in richer western and Nordic countries over the last 20 years.
“Well, this will only increase if we don’t manage this transition right,” he warned.
Politicians in Eastern EU member states have stepped up warnings that the green transition risks deepening divisions inside the EU. Traian Băsescu, a former Romanian President, said the European Green Deal “will definitely create tensions” between east and western EU countries, which have other economic priorities than the green transition.
Such economic and social discrepancies “are likely to generate huge tensions inside the EU, which could lead to some countries considering the possibility of leaving the Union altogether,” he told EURACTIV in a recent interview.
EU risks disintegrating before reaching climate goals
Triangle echoed those warnings, saying the Green Deal risked putting the entire EU project in jeopardy if it ignores the social aspect of the transition.
“The divisions within Europe are already such that if the European Green Deal neglects the social dimension, there is a serious risk to see the EU disintegrate before it is decarbonised,” he warned.
According to trade unions, there is a genuine risk that the Green Deal ends up putting entire industrial sectors on their knees, and discredit EU climate policies in the eyes of the general public.
“Climate policies will only fly if you can sell them to the public opinion, if you can do that without social disruption in the industries and in the regions concerned,” Triangle said. “The social dimension is hugely important in order to make this whole climate policy sellable,” he said.
The European Commission is highly aware of the social aspects of the Green Deal, and insisted repeatedly that the transition to a climate-neutral economy should leave no-one behind.
But it is also convinced that a green industrial revolution is underway and that future growth lies in low-carbon industries. Last year, the executive calculated that the EU’s GDP will increase by 2% by 2050 if the bloc slashes its emissions to a net-zero level.
“The European Green Deal is our new growth strategy,” said Commission President Ursula von der Leyen after winning a confirmation vote in the European Parliament last November. “Our commitment is that no-one will be left behind,” said Commission vice-president Frans Timmermans when asked about worries over the costs of the transition in Eastern EU countries.
Where is the money?
However, those promises are insufficient for trade unions who say the EU also needs to put money where its mouth is.
“It’s clear that our industries want to make the step to net-zero emissions. But there is a need for financial support. Without financial support and real investments, we will not be able to make that leap forward,” Triangle said.
According to estimates, European industries need to invest €250 billion on an annual basis for the next ten years if in order to stay on track with the 2050 climate neutrality objective.
“Where is the money for those investments?” Triangle asked. True, the European Investment Bank will be turned into a climate bank, with 50% of lending dedicated to climate objectives as of 2025. And there is a reshuffling of the EU budget, with 25% dedicated to the climate, trade unions admit.
But there is hardly any new funding to support the green transition, Triangle said, pointing to the “discrepancy between the high level of ambition on climate targets” and discussions over the EU’s next long-term budget, which some countries want to cap at 1% of their Gross National Income.
According to Triangle, the investment funding issue is particularly acute for energy-intensive industries, like steel and chemicals, which are hardest to decarbonise.
“That’s the problem for us with the 2030 targets: If we want to increase the objective to a 55% reduction in greenhouse gas emissions, I can assure you that energy-intensive industries will not be able to deliver. The technologies will be ready for commercialisation only after 2030, for example on low-carbon steel, which is only at pilot stage,” Triangle said.
This is where the industrial strategy could help, trade unions believes.
“For us it is important to keep an integrated industrial value chain in Europe. In the future, we will continue to need steel and chemicals produced in Europe,” Triangle said.
“We are expecting a lot from this industrial strategy”.
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In line with its sustainability strategy to help reduce the impact of climate change, HEINEKEN México and Enel Energía México (EEM), a retail subsidiary of the Enel Group (“Enel”), announced an agreement in which for the next 10 years, the latter will provide the Dutch firm with 100% clean energy from the wind and solar portfolio of Enel’s renewable energy subsidiary Enel Green Power. The power provided will be used for the operations of the brewery located in Meoqui, Chihuahua.
The agreement establishes that each year the plant will be supplied with 28.8 GWh of renewable energy, equivalent to planting more than 405,000 trees annually; withdrawing almost 3,200 vehicles from circulation; or avoiding the emission of 16,100 tons of CO2.
In this regard, Marco Antonio Mascarúa Galindo, Vice President of Corporate Affairs of HEINEKEN Mexico, said that “this alliance is historic and something to be proud, as it represents a firm step towards the goal of making this year’s operations of the company 66% renewable in terms of energy consumption, with the aim to achieve 100% in 2030.”
He recalled that Heineken México uses renewable electricity in some of its production plants, distribution centers and in “SIX” stores located at different states of the country and said that through all actions in this area, Heineken México ratifies its commitment to socio-environmental responsibility reflected in results such as the 10% decrease in CO2 emissions in production, thanks to the use of biogas and renewable energy, as well as a reduction to 2.8 liters of water to produce a liter of beer.
He added that with the agreement signed, the Meoqui facility, will consolidate its position as the first brewery in Latin America that functions under an ecosystem of circular economy, since it also shares waste from production with other nearby companies as materials for reuse, hence reducing waste to zero and reducing environmental impact.
Paolo Romanacci, Enel Country Manager in Mexico, said that the agreement signed with HEINEKEN México is a major milestone for the company in the country. “With this agreement, we become a strategic ally of one of the most sustainable and innovative companies, not only in Mexico, but in the world. In addition to sharing these values in our operations, we strengthen our commitment to reduce the impact of climate change.”
With this strategic partnership, Enel consolidates its position as a competitive qualified supplier for any industry, as well as its role of key player in strengthening the Mexican electricity market by offering the best energy solutions with clean and sustainable electricity at competitive prices.
Romanacci emphasized that Enel is one of the largest private operators of renewable energy in the country, with a managed capacity of over 2,660 MW and around 320 MW of projects under construction.
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By Frédéric Simon | EURACTIV.com
The European Union will need to “re-orient most, if not all” of its policies in order to protect vulnerable regions and workers in industries affected by the transition to a green economy, the EU Commission’s vice-president Frans Timmermans has said.
The European Commission tabled its much-awaited Climate Law on Wednesday (4 March), promising “predictability and transparency to industry and investors” as Europe embarks on a journey to cut global warming emissions to net-zero by 2050.
While some investor groups hailed the Commission’s move, Eastern EU countries and trade unions have expressed concerns about the costs of the transition, and the lack of finance to support the move to a net-zero economy.
Responding to those concerns, Frans Timmermans, the Commission’s executive vice-president in charge of the European Green Deal, again emphasised the EU’s commitment to a fair and just transition.
“Our commitment is that no-one will be left behind,” Timmermans insisted when asked about worries over the costs of the transition in countries like Poland, which relies on coal for almost 80% of its electricity.
The Commission is also committed to using its proposed €7.5 billion Just Transition Fund to support vulnerable regions, Timmermans added, referring to a wider Just Transition Mechanism aimed at leveraging €100 billion every year for the green transition, using private finance.
“But we will have to re-orient most if not all the instruments we use in Europe” towards the net-zero emission objective, Timmermans added, calling the shift “tectonic”.
Sustainable Europe Investment Plan
Overall, the Commission estimates that an extra €260 billion in investments is needed per year to finance the switch to clean energy and reduced emissions.
In January, the EU executive published a Sustainable Europe Investment Plan, aimed at mobilising investment of €1 trillion over 10 years, using public and private money to help finance its flagship project – the European Green Deal.
But critics say there is hardly any fresh money on the table and that the sums are too small in relation to the scale of the challenge.
At a summit last month, EU leaders failed to agree on the bloc’s long-term budget, as Austria, Denmark, the Netherlands and Sweden – the so-called ‘frugal four’ – insisted on capping national contributions to 1% of their country’s gross national income.
Timmermans did not deny that the effort will be huge. “Let there be no misunderstanding: it will be a Herculean effort to get there. Yes, we’re under budget constraint. But we’ve made that commitment and we want to show the rest of the world that we can do this.”
The former Dutch foreign minister also pointed to the costs of non-action, saying poor people will suffer most from the rise in temperatures.
“So yes, we will make sure that our policies will be fair and leave no-one behind. But let’s also be clear about the cost of non-action,” Timmermans stressed.
Poland in the spotlight
In Poland, the transition to net-zero by 2050 will require an investment in the range of €179-206 billion for the power sector alone, according to PKEE, the Polish electricity sector association.
And new climate targets for 2030 – to be discussed later this year – will require a rapid transition away from coal and a massive replacement of Poland’s power generation capacity in a very short time period, it says.
“This is simply not doable for us from a technical, economic and social point of view,” said Wojciech Dąbrowski, CEO of PGE, Poland’s largest electricity utility.
According to the Polish electricity sector, additional measures should be considered when the EU reviews its carbon market, in order to cushion the anticipated increase in CO2 prices resulting from the 2050 net-zero target.
“The Climate Law establishing the framework for achieving climate neutrality should directly stipulate that the compensatory measures should be amended proportionally with additional costs that the new 2030 reduction targets generate,” PGE said in a statement.
11 million jobs on the line
While the energy sector is particularly exposed to the clean energy transition, other carbon-industries are also expected to take a hit.
“We are talking about almost 11 million jobs directly affected in extractive industries, energy-intensive industries and in the automotive industry,” said Luc Triangle, secretary-general of IndustriAll, a European trade union.
According to IndustriAll, European industries will need to invest €250 billion on an annual basis for the next ten years in order to stay on track with the 2050 climate neutrality objective.
“Where is the money for those investments?” Triangle asked, pointing to the “inconsistency” between Europe’s high level of ambition on climate and the lack of additional finance EU member states are willing to put on the table.
State aid to the rescue
In Brussels, the European Commission pointed to an upcoming revision of the bloc’s state aid rules, suggesting those will give national governments more leeway to support industries in the transition to net-zero.
“State aid rules are a vital part of the green transition,” said Margrethe Vestager, the EU’s antitrust chief. “And it’s important that we keep them up to date, so they can support the investments we need,” she added in a recent speech.
The EU executive is also considering revising state aid guidelines to help energy-intensive industries cope with higher electricity costs resulting from the EU’s emissions trading system.
The EU’s updated state aid rules should be in place by the end of 2021, Vestager said.
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