Fitch sees Brent crude at $62.5 in 2020 as economic woes bite
A faltering global economy may start eating into demand for oil as early as this year, pushing prices lower, Fitch Ratings’ senior director Dmitry Marinchenko told Reuters in an interview. He said that the rating agency expects global economic growth to slow to 2.8 percent in 2019-2020 from 3.2 percent in 2018. “If the global growth slowdown becomes more pronounced, or even if recession materialises, then demand for oil could fall sharply, which is the main risk for global oil prices.” he said. Fitch Ratings sees 2019 oil prices averaging around $65 per barrel, falling to $62.50 in 2020 and $57.50 by 2022. The price of Brent crude is currently testing $70 per barrel, its highest this year, following cooperation between the Organization of the Petroleum Exporting Countries and other large oil producers led by Russia to cut supply. U.S. sanctions against Iran and political and economic turmoil in Venezuela have also capped output. The OPEC-led group agreed to cut their combined oil production by 1.2 million barrels per day for six months starting from January 1. The next OPEC and non-OPEC meeting is expected to be held in June to discuss an extension of the supply cuts. Marinchenko said the future of the deal would likely hinge on the situation in Venezuela and Iran. He said it was possible the size of the cuts could be adjusted. “Oil production in Venezuela will continue to decline, the quotas will have to be revised.” AZERBAIJAN Marinchenko said Fitch does not expect to change the credit rating of Azerbaijan’s energy company SOCAR from BB+ in the next two years. The rating is in line with Azerbaijan’s sovereign rating, on which Fitch is due to give an update in July. Marinchenko said Fitch expects Azerbaijan’s oil production to rise by 2020 thanks to a boost in gas condensate output at the large Shah Deniz field.
Engie secures 70 per cent financing for purchase of Brazil pipeline
France’s Engie has closed an agreement with a group of banks to finance 70 percent of its gas pipeline acquisition from Brazil’s Petroleo Brasileiro SA, Engie’s Brazilian head told Reuters on Saturday. An Engie-led consortium that includes Canada’s Caisse de Depot e Placement du Quebec on Friday presented the highest bid for Transportadora Associada de Gas SA, known as TAG, valuing the major Brazilian gas pipeline at $8.6 billion. “There is already a firm commitment on the part of the banks, which is very important,” Engie Brasil chief executive Mauricio Bahr said. Organized under a project finance structure with a ten-year term, Engie will repay banks involved in the deal with the cash flow generated by receivables from TAG’s contracts, Bahr said. Three Brazilian and six international banks will be participating in the project finance, Bahr said, declining to name them. Two sources close to the matter told Reuters on Friday that about 60 percent of Engie’s bid for TAG would be financed by Itau Unibanco, Banco Bradesco SA and Banco do Brasil SA. “It is an important strategic move, practically doubling our participation in Brazil,” Bahr said.
NITI Aayog looks at saving in Energy, Oil and Carbon Emissions by 2030
The technical report titled ‘India’s Electric Mobility Transformation: Progress to Date and Future Opportunities’, quantifies the direct oil and carbon savings that the vehicles incentivized under FAME II will deliver. RMI is an Indian and global nonprofit organisation focused on driving the efficient and restorative use of resources. The report also quantifies the catalytic effect that FAME II and other measures could have on the overall Electric Vehicle (EV) market. According to the analysis, if FAME II and other measures – in public and private space – are successful, India could realize EV sales penetration of 30% of private cars, 70% of commercial cars, 40% of buses and 80% of two and three-wheelers by 2030. Extrapolating from the same, the lifetime cumulative oil and carbon savings of all electric vehicles deployed through 2030 could be many-fold larger than the direct savings from FAME II. For example, achieving these levels of market share by 2030 could generate cumulative savings of 846 million tonnes of CO2 over the total deployed vehicles’ lifetime. The FAME II scheme, which was notified by the Union Cabinet in February 2019, aims to further accelerate the government of India’s commitment to a clean mobility future, sees the electrification of transportation as a primary focus area. FAME II intends to catalyze the market for faster adoption of EVs to ensure durable economic growth and global competitiveness for India’s automotive industry. What Are The Key Highlights Of The Report? 1. Effects of FAME II will go beyond the vehicles that are eligible under the FAME II 2. There is considerable energy and CO2 savings associated with the two, three, and four-wheeled vehicles and buses covered by FAME II over their lifetime, as well as the potential savings associated with greater adoption levels by 2030 3. The electric buses covered under FAME II will account for 3.8 billion vehicle kilometers travelled (e-vkt) over their lifetime 4.In order to capture the potential opportunity in 2030, batteries must remain a key focal point as they will continue to be the key cost driver of EVs. 5. Vehicles eligible under FAME II scheme can cumulatively save 5.4 million tonnes of oil equivalent over their lifetime worth Rs 17.2 thousand crores. 6. EVs sold through 2030 could cumulatively save 474 million tonnes of oil equivalent (Mtoe) worth INR 15000 billion and generate net CO2 savings of 846 million tonnes over their operational lifetime. 7. India needs auto industry’s active participation to ease electric mobility transition. The auto and battery industries could collaborate to enhance customer awareness, promote domestic manufacturing, promote new business models, conduct R&D for EVs and components, consider new business models to promote EVs 8. Government should focus on a phased manufacturing plan to promote EVs, provide fiscal and non fiscal incentives for phased manufacturing of EVs and batteries. Different government departments can consider a bouquet of potential policies, such as congestion pricing, ZEV credits, low emission/exclusion zones, parking policies, etc. to drive adoption of EVs. India’s electric vehicle market is poised for growth with a blend of policies, such as FAME II, and the automotive industry’s willingness to provide new mobility solutions to the citizens of the country. Such a transformation will create enormous economic, social and environmental benefits for the citizens of India.