Biden Administration Plans Zero Offshore Oil And Gas Lease Sales For 2024
The Biden administration will hold no offshore oil and gas lease sales next year and bring the total for the next five-year period to a minimum, Reuters has reported, citing unnamed sources. This means there will be just three lease sales over the four years beginning in 2025, the report also said. Reuters noted that on average, since 1992, five-year lease sale plans have featured at least 11 lease sales, with most holding between 15 and 20. According to some of Reuters’ sources, the reduction in lease sales is linked to the Biden administration’s offshore wind expansion plans. “The administration heard from the offshore wind industry that they need the IRA leasing mandates to be fulfilled to enable the U.S. offshore wind energy to continue to grow,” one of the sources told Reuters. “The number of oil and gas lease sales will be the lowest in history and will enable the rapid expansion of the offshore wind industry,” the same source explained. The link between the two comes from a stipulation in the Inflation Reduction Act, which mandates first holding oil and gas lease sales before being able to hold offshore wind auctions. The information revealed by the Reuters sources is certain to prompt a reaction from the oil industry just weeks after another lease sale-related news made the headlines when a judge ordered the Interior Department to remove the limitations on the Gulf of Mexico acreage that was to be offered in a lease sale on September 27. The ruling came after the American Petroleum Institute, Chevron, and the state of Louisiana filed a lawsuit against the federal government for the reduction in the acreage to be offered in the lease sale. At the same time, environmentalists are also likely to be angered by the latest news as they insist no new lease sales are conducted at all, apparently regardless of what the law says.
Clean Hydrogen Dreams Delayed By Rising Costs
There is currently not enough funding and support for hydrogen projects to roll it out on the scale they require to achieve the net-zero scenario by 2050, according to several energy experts. The widespread rollout of clean hydrogen projects has been restricted due to the high costs involved with producing the clean energy source, which is much more expensive to make than dirtier forms of hydrogen derived from fossil fuels. In addition, while companies worldwide are showing increasing interest in green hydrogen, many are failing to get the government backing required to commence operations. Green hydrogen is being viewed as increasingly critical to the global green transition as it is a versatile energy carrier that can be used in a range of applications from heating to transportation fuel. It provides an alternative to natural gas and fossil fuel-derived fuels and can also be used to power cars and other forms of transport instead of electric batteries. The fuel is produced by using renewable energy sources to power electrolysis. There has been increasing interest in green hydrogen in recent years, with various regions of the world competing to gain sectoral dominance – from the Middle East to Europe. Last year, the Spanish energy firm Compañía Española de Petróleos (Cepsa) partnered with the Port of Rotterdam to establish “the first green hydrogen corridor between southern and northern Europe”. The aim is to develop a green hydrogen supply chain between two of Europe’s main ports – the Port of Algeciras in southern Spain and the Dutch Port of Rotterdam. Meanwhile, several energy companies are investing in developing green hydrogen projects in some of the world’s emerging economies to drive down costs. However, this month, a report from the International Energy Agency (IEA) suggested that rising costs and lagging policy support from governments are limiting clean hydrogen’s potential. There have been several announcements about the launch of green hydrogen projects around the globe over the last couple of years, but the report found that many are being significantly delayed due to a lack of policy government support. The executive director of the IEA, Fatih Birol, said the world had seen “incredible momentum” behind low-emission hydrogen projects in recent years “but a challenging economic environment will now test the resolve of hydrogen developers and policymakers to follow through on planned projects”. Hydrogen produced in a low-carbon process continues to account for less than 1 percent of the world’s total hydrogen production. This is perhaps surprising given the momentum in green hydrogen projects in recent years and the media attention given to the energy source. In addition, green hydrogen has been identified by the IEA and several other energy organisations as one of the most promising fuels for reducing emissions in hard-to-decarbonise industries, such as steel and chemicals. The report found that the annual production of low-carbon hydrogen, including that derived from using captured CO2 if all projects are realised could total 38 million tonnes by 2030. The pipeline includes 27 million tonnes from electrolysis and 10 million tonnes from carbon capture. However, this seems increasingly unlikely as a final investment decision has been made for just 4 percent of the projects. Projects have been further jeopardised by high energy prices, rising inflation and global supply chain disruptions owing to both the Covid pandemic and the Russian invasion of Ukraine. Adrian Odenweller, a scientist at the Potsdam Institute for Climate Impact Research, explained why it’s so difficult to predict the mid-term global hydrogen capacity. He stated, “The hydrogen market ramp-up is characterised by the specific challenge of scaling up supply, demand, and infrastructure at the same time. Our research shows that this leads to short-term scarcity and long-term uncertainty of green hydrogen.” While there are several challenges to ramping up clean hydrogen production, governments worldwide can help encourage private companies to invest in the energy source in a variety of ways. Firstly, the introduction of favourable policies for green hydrogen projects would help reduce the red tape involved with set-up. Secondly, governments should take the U.S. approach by providing climate legislation with financial incentives for companies investing in clean energy sources. And, thirdly, governments must work together to establish clear standards and regulations for hydrogen projects across different regions of the world to develop an international market. The IEA’s chief energy technology officer, Timur Gül, stated, “This is the critical decade to bring down the cost of low-emission hydrogen.” This can be done through greater investment in research and development around the globe to provide the innovations needed to drive down costs. This will also help to establish the market required to drive up both the supply and demand for clean hydrogen. However, without government support for these projects, this may not be achieved.
Will We See $100 Oil In October?
After rallying to more than $97 per barrel on Wednesday, Brent crude took a breather on Thursday as traders started to take profits and the macro-focus in the markets turned to rising interest rates. The bulls can thank a sustained fundamental tightening for helping offset concerns about a higher-for-longer rates cycle. Last week, the U.S. central bank left interest rates unchanged but bolstered its hawkish stance with a further rate increase projected by the end of the year. Higher interest rates have historically been bearish for oil prices because they usually translate to less demand for oil as activity declines with higher costs. Interestingly, commodity analysts at Standard Chartered have suggested that a hawkish Fed could turn out to be a blessing in disguise this time around since it’s likely to cause OPEC producers to be more cautious for longer. Meanwhile, the U.S. dollar has strengthened considerably over the past three months after the U.S. economy proved more resilient than expected thus fuelling appetite for American financial assets. StanChart has predicted a further 1.3 million barrels per day (mb/d) fall in global crude inventories in Q4, following 2.1mb/d of draws in Q3. The analysts have noted that while slow to join the rally, speculative funds have now moved to the long side of the oil futures market. StanChart’s proprietary crude oil money-manager positioning index is now at a 44-month high of +16.7. Even better for the bulls: the oil price rally still has legs to run. StanChart has launched SCORPIO (Standard Chartered Oil Research Price Indicator), a machine learning model for oil price forecasting. SCORPIO is a proprietary tree-based model designed to generate a forecast for Brent crude spot prices on a one-week timeframe using parameters such as U.S. fundamental data, positioning data, physical global oil stocks, refinery margins/product pricing, financial indicators, technical indicators and non-oil-specific indicators. SCORPIO has forecast a w/w price increase of USD 2.1/bbl for front-month Brent to settlement on 2 October. StanChart says the upward forecast would have been greater were it not for speculative positioning with the money-manager positioning index sewn as a pivot point indicator. SCORPIO also sees USD strength as weighing on the oil price rally. StanChart is not the only bull here. J. P. Morgan says it will stick to its strategy of “staying defensive and trimming portfolio duration.” JPM rates the Energy sector overweight despite a stronger dollar, a hawkish Fed and geopolitical developments and believes that the Fed will hold higher rates through Q3 2024. “In the current environment, the assumption is that having additional immaculate disinflation would allow rate cutting without having to have growth risk be the driver for the disinversion of the yield curve,’’ J.P. Morgan economists said in the report. Overall, Wall Street remains bullish on the energy sector despite oil stocks lagging oil prices FactSet has reported that overall, Wall Street has 11,062 ratings on stocks in the S&P 500, of which 54.4% are Buy ratings, 40.0% are Hold ratings, and 5.6% are Sell ratings. Interestingly, at the sector level, the Energy (64%) sector has the highest percentage of Buy ratings, while the Consumer Staples (45%) sector has the lowest percentage of Buy ratings. The majority of analysts expect oil prices to remain high or go even higher. “The energy stocks will obviously beat because of higher energy costs right now. The world cannot have a disruption in energy right now because the supply-demand imbalance in the world is very fragile,” Louis Navellier, chief investment officer at Navellier & Associates Inc., has said in a note. As long as Saudi Arabia and OPEC+ maintain production discipline and markets remain tight, oil prices might remain unfazed by a brawny dollar or a hawkish fed.
Aemetis Increases India Biodiesel Production To 60 Million Gallons
Aemetis Inc. (Aemetis), a renewable natural gas (RNG) and renewable fuels company focused on negative carbon intensity products, announced that the company’s Universal Biofuels subsidiary has completed an expansion of its India biodiesel plant annual production capacity to 60 million gallons (227 million liters) more than one year ahead of schedule, supplying the expanding demand for biodiesel by India government-owned oil marketing companies (OMCs). The Aemetis Five Year Plan describes an increase from 50 million gallons (189 million liters) per year to 100 million gallons (379 million liters) per year of biodiesel production capacity at the India plant to be completed by 2025. Additional capital projects to increase the production capacity to 80 million gallons (303 million liters) per year at the Kakinada, India-biodiesel plant are in process for completion in the first half of 2024, also ahead of schedule. “The market for biodiesel in India continues to expand as OMCs increase the number of blending locations and the percentage of biofuel blended into diesel,” said Sanjeev Gupta, president of Aemetis International. “The Kakinada plant has expanded production by completing upgrades to de-bottleneck the plant, and the next phase will add additional process equipment to increase capacity. When production capacity reaches 100 million gallons per year, the India business will be able to generate more than US$500 million per year of revenues.”
India withdraws new import duty on private-sector LPG importers as regional prices mount
Oil ministry officials confirmed the withdrawal when contacted by S&P Global Commodity Insights. The funds collected under the Agriculture Infrastructure and Development, or AIDC, cess are aimed at improving the agricultural sector and were passed by the parliament around end-June/early-July. But the private sector deemed it an additional levy and not a part of the government revenue program. The private sector made a representation to the government that the duty affects 100% of their import volume, but only 5% of the imports by national oil companies and public sector undertakings, and was, therefore, discriminatory, an industry source familiar with the matter said. A finance ministry amendment July 1, stated that “nothing contained in S.No 10AA shall apply to imports of Liquefied Propane and Liquefied Butane mixture, Liquefied Propane and Liquefied Butane by the Indian Oil Corp. Ltd., Hindustan Petroleum Corp. Ltd. or Bharat Petroleum Corp. Ltd. for supply to household domestic consumers or to Non-Domestic Exempted Category (NDEC) customers.” The AIDC cess was withdrawn officially via a Finance Ministry notification dated Aug. 31 and came into effect Sept. 1. “The withdrawal move has been a balancing act between the expectation of high global crude prices and ease in domestic inflation,” said an oil ministry official who declined to be identified. The full exemption of LPG, liquefied propane and liquefied butane would give relief to importers of these products, the official added. Analysts said the decision to exempt these imports from the AIDC would help cut the burden on importers and ensure that the cost implications of the farm cess were not passed on to consumers down the line. The farm cess, spread across 29 items, including gold, silver and imported apples, alcohol (except beer), was conceived to improve agricultural infrastructure, including facilities such as cold storage units, warehouses and market yards. This cess fund was crucial for raising farm production and ensuring better post-harvest management. “It’s difficult to say whether it (the withdrawal) was due to the representation by the private sector,” the source familiar with the matter said. “However, as the (Saudi) CPs started rising, the government removed the AIDC probably not to burden the end-industry too much.” Escalating prices Saudi Aramco set the October propane contract price at $600/mt, up $50/mt from the September term CP, and the October butane CP at $615/mt, up $55/mt on the month, the company said Sept. 28. The monthly increase was the third in a row after the drop in July CPs, underscoring strong heating demand ahead of the North Asian winter, healthy demand for cooking fuel in India and Indonesia for year-end holidays, and latent feedstock demand among Chinese propane dehydrogenation plants. FOB Middle East propane and butane premiums to the CPs were assessed as high as $43/mt in the past week, according to S&P Global data, as trading firms have also been bidding for evenly split cargoes, even as supply is limited by lagging spot offers from Aramco Trading Co. In the face of mounting regional prices, India on Aug. 29 slashed LPG prices by 18% for domestic households, in an attempt to curb food price-led inflation that hit its highest rate in 15 months in July. India has stopped subsidizing LPG usage for 230 million customers since June 2020 to help ease the subsidy burden on the budget, but gives Rupee 200 each via direct benefit transfer to some 95 million low income users .