‘Hydrogen Wars’ pit Europe vs China for $700 billion business
Niels-Arne Baden has a problem. The factory he’s building for Green Hydrogen Systems is too small. Plans for the Denmark site to be one of the largest for assembling the machines that make hydrogen from electricity were finalized about a year ago. But demand for those electrolyzers is growing so fast that Baden’s now planning to double its size. “When I joined this company in 2014, there was no market,” Baden said. “Then last year, it was ‘Kaboom!’, and we were up to our ears in opportunities.” The Danish company isn’t alone. Governments, energy giants, automobile companies and lobbying groups say hydrogen use is pivotal for cutting greenhouse gas emissions quickly enough to prevent the worst effects of climate change. That’s triggered a global race to stake claims in what could be a $700 billion business by 2050, according to Bloomberg NEF. The European Union aims to push as much as 470 billion euros ($550 billion) toward hydrogen infrastructure; China, Japan and South Korea will all likely use hydrogen to achieve recent pledges to slash emissions; and Saudi Arabia plans a $5 billion hydrogen-based ammonia plant powered by renewable energy. “It’s countries going against countries to lock in market share,” said Gero Farruggio, head of renewables at research firm Rystad Energy. “We call it ‘the hydrogen wars’ because of the way governments are racing to subsidize these projects to be a leader.” Global Game Farruggio and his colleagues tallied up over 60 gigawatts of hydrogen projects globally that would be powered by renewable energy, with the majority of them announced this year. The major players don’t include the US, where President Donald Trump has championed fossil fuels and moved to withdraw the country from the Paris climate accord. The outcome of Tuesday’s presidential election could determine whether the US stays on the sidelines. Using hydrogen as an energy source is a century-old idea. An electric machine to produce the gas was installed in 1927 in Norway to help fertilizer production. Since then, it’s been used in zeppelins, rocket engines and nuclear weapons. Yet it does have drawbacks. Hydrogen is expensive to make without expelling greenhouse gases, difficult to store and, not least, highly combustible. Despite the inconsistent interest over the years, this era seems different, said David Hart, director at the consultancy E4tech in Switzerland. He started studying hydrogen as a graduate student at Imperial College London in the mid-1990s after seeing fuel cells on display at an environmental-technology exhibition in Yokohama, Japan. During the ensuing decades, he watched public interest in hydrogen rise to match his own, only to fall back again into obscurity. The US once touted hydrogen as a “freedom fuel” to break its dependence on imported oil, but that strategy stalled. Hart considers hydrogen the “elegant ultimate solution” — one fuel source with myriad applications. “There were periods when nobody cared about climate change, so there weren’t the right drivers for CO2 and fossil fuel to be pushed out,” Hart said. “But I had a stubborn belief that at some point the conditions would be right. I had no idea if it would be five years or 50 years, but there was a feeling.” That time may be now. Hart’s expertise is in demand by Royal Dutch Shell Plc, BP Plc, Exxon Mobil Corp., the UK government and automakers Toyota Motor Corp. and Hyundai Motor Co. He’s telling clients to be nimble and grab market share quickly. “A lot of the important steps and important positioning will happen before the end of the decade,” Hart said. “It puts you in a much more difficult position and a more expensive position if you’re not moving now.” So far, Europe is moving aggressively. European Commission President Ursula von der Leyen put the bloc’s Green Deal at the center of a 750 billion-euro spending plan to help the economy recover from the pandemic. At its heart is a goal to build 40 gigawatts of capacity to produce hydrogen from renewable sources this decade. Member states are also writing their own blueprints, and the UK plans to release a hydrogen strategy in coming months. When Baden, the Danish executive, joined Green Hydrogen Systems in 2014 as chief executive officer, the company was still testing its machines. For years, its only orders were for small demonstration projects, mostly in Denmark. The company would deliver the electrolyzers, do trial runs and then disassemble them. “There was no market,” Baden said. “There were just plans and a lot of ideas.” That changed last year. At an industry fair in Hanover, Germany, executives from automotive companies and wind turbine manufacturers wanted to learn how electrolyzers could help them store some of their cheap, renewable electricity. Suddenly, orders were flooding in. “There was no chance we could deliver the volumes we were seeing coming,” Baden said. The company raised new capital last year from Danish venture fund Nordic Alpha Partners ApS to help scale up production. “I’ve wondered if all these big projects are for real,” Baden said about his order sheet. “And if we didn’t know who was asking, we wouldn’t believe they would pull through.” There are industries, mainly oil refining and chemicals production, that rely on hydrogen already. But they typically use fossil fuels to make it, producing as much CO2 every year as the economies of the U.K. and Indonesia combined, according to the International Energy Agency. Hydrogen can be made without producing carbon emissions, either by using machines powered by renewable energy or by capturing the pollution. Those methods minimize the carbon footprint because hydrogen mainly produces water vapor when burned. That’s getting attention in boardrooms as shareholders apply pressure on companies to clean up their businesses. Shell plans to produce hydrogen in the Netherlands for its refineries. Airbus SE wants to propel planes with the gas. Steelmaker giant, ArcelorMittal SA, is working on a pilot project to replace fossil fuels in Hamburg. Climate-friendly production methods are costly, however, so their viability likely depends on government policies penalizing emissions.
Russian oil and gas condensate output up in October: Interfax
Russian oil and gas condensate output rose to 9.98 million barrels per day (bpd) in October from 9.93 million bpd in September, according to Reuters calculations based on an Interfax report, which cited Energy Ministry’s data on Monday. In tonnage for the month, oil and gas condensate production stood at 42.19 million tonnes for October, in comparison with 40.65 million tonnes in September, the news agency reported. Interfax also said natural gas production at Russian gas giant Gazprom rose for the first time this year in October, to 42.7 billion cubic metres (bcm), from 41.9 bcm a year earlier. According to a Reuters survey, OPEC oil output has also risen, for a fourth month in October, as a restart of more Libyan installations and higher Iraqi exports offset full adherence by other members to a supply cut deal. OPEC+ made a record cut of 9.7 million bpd, or 10% of global output, from May as the pandemic destroyed demand. Since August, the group has been pumping more as the cut tapered down to 7.7 million bpd, of which OPEC’s share is 4.868 million bpd. The OPEC+ producer group’s global deal excludes condensate, a type of light oil, which Russia, on average, pumps around 700,000-800,000 bpd. Moscow’s quota is now around 9 million bpd of oil. Another 2 million bpd increase is scheduled in January, although Saudi Arabia and Russia are in favour of continuing with the current cuts amid a second wave of the coronavirus, which has dampened demand, OPEC sources said.
Policy focus on e-mobility, clean fuels: PM Modi
India’s energy policy will focus on greater efforts to move towards a gas-based economy, cleaner fuels, electric mobility and renewable energy, Prime Minister Narendra Modi said on Monday. The policy will be industry friendly and growth oriented but energy should be affordable and reliable so it empowers people and improves their lives, Modi said. “India’s Energy Plan aims to ensure energy justice. That too while fully following our global commitments for sustainable growth,” he said at the India Energy Forum by CERAWeek, where petroleum minister Dharmendra Pradhan, US secretary of energy Dan Brouillette, and Saudi oil minister Prince Abdulaziz bin Salman also spoke. Modi supported the use of domestic, clean fuels, including biofuels and natural gas. “Increasing domestic gas production has been a key government priority. We plan to achieve ‘one nation, one gas grid’, and shift towards a gas-based economy,” Modi said. The Prime Minister called for better market mechanisms and stability in oil and gas. “For too long, the world has seen crude prices on a roller-coaster. We need to move towards responsible pricing. We have to work towards transparent and flexible markets for both oil and gas,” he said. He said India would be a major factor in the global demand for energy. Leading global bodies had projected a contraction in global demand for the next few years, but they also project India to be a leading energy consumer, he added. “There are many areas in which we see this vibrancy. For example, take aviation. India is the third largest and the fastest growing aviation market in terms of domestic aviation. Indian carriers are projected to increase their fleet size from 600 to 1,200 by 2024. This is a big jump!” he said. Policy focus on e-mobility, clean fuels: PM Modi The government aims to increase its domestic refining capacity from 250 million to 400 million metric tonnes per annum by 2025, he said. However, clean energy would be a focus area. “This means more energy to improve the lives of Indians, but with a smaller carbon footprint,” Modi added in context of international accords like the Paris Agreement. The Prime Minister said India remained committed to reduce emissions and combat climate change. “India has one of the lowest carbon emissions than the rest of the industrialised world, yet we will continue to make efforts to fight climate change,” he said. The Prime Minister stressed on the need to make energy an instrument of social transformation, but growth and investment would remain key pillars. “Our energy sector will be growth centric, industry friendly and environment conscious. That is why, India is among the most active nations in furthering renewable sources of energy.”
Consumers may get relief on petrol, diesel prices ahead of Diwali
Consumers can cheer as oil marketing companies (OMC) may actually bring down the retail prices of petrol and diesel in the coming week ahead of Diwali. Oil sector experts said that with global oil prices under pressure from slowing demand in the second wave of Covid-19 pandemic sweeping several western countries, crude price could fall in coming days. If this holds on for a week or so, there could be positive gains for auto fuel consumers in India by way of a fall in retail price of petrol and diesel. Global crude prices are already down over 5 per cent over the week with oil now selling close to $40 a barrel from earlier levels of over $ 42 per barrel. But with lower oil demand and rising inventory, there is fear among oil producing companies that crude prices may start falling again. OMCs in India have been holding on to the retail price of petrol and diesel for close to a month now. Even on Tuesday, the price of two petrol products remained unchanged. With this, petrol prices have now been unchanged for over a month now while diesel prices were same for the 25th straight day across the metros. Price of petrol in the national capital was at Rs 81.06 per litre. In Mumbai, Chennai and Kolkata, the fuel was sold for Rs 87.74, Rs 84.14 and Rs 82.59 per litre, respectively. Diesel prices in Delhi, Mumbai, Chennai and Kolkata were at Rs 70.46, Rs 76.86, Rs 75.95 and Rs 73.99, respectively. But with fresh indications on global oil prices, domestic oil companies could revise the retail price downwards. However, their margins would be protected as oil demand in the country had picked up latterly getting over even the last years numbers. Retail sales have picked up with the gradual reopening of the economic activities. First time since lockdown, diesel sale in the country has crossed over the pre-covid level with the country’s most widely consumed fuel witnessing a nine per cent year-on-year growth in the first 15 days of October. The surge in demand after months of subdued sales is the direct result of an increase in the transport activities ahead of the festival season as consumers move out to make those necessary purchases.
Green gas to fuel kitchens, vehicles in Ayodhya soon
Poised to become a leading tourist destination of the world, Ayodhya will also get natural gas supply for cooking and transportation purposes. The temple town has been included in the ninth round of bidding undertaken by the Petroleum and Natural Gas Regulatory Board earlier this year. The responsibility has been given to service provider Green Gas Limited (GGL) which is already providing eco-friendly fuel to Lucknow and Agra. GGL is operating in four geographical areas, providing piped natural gas to over one lakh consumers and also running 61 CNG stations. “Along with Ayodhya, PNGRB has allowed us to expand base in Sultanpur and Unnao,” said managing director of GGL Sanjeev Medhi. GGL is a joint venture of GAIL and IOCL which working to realize the government’s vision of increasing the share of natural gas in primary energy mix from 6.5% to 15% by 2030. Director, GGL, AK Tewari said, “The company has set an aggressive target for capital expenditure to increase supply of natural gas in Lucknow, Ayodhya, Agra and Unnao for 2020-21. “GGL plans to invest Rs 1,600 crore in the development of city gas distribution network in all its authorized geographical areas in next five years.” “Categorization of Ayodhya as Smart city has become important for GGL. We will act as enabler towards development of Ayodhya. Besides setting up CNG stations, GGL will provide natural gas to domestic, industrial/commercial entities which will not only lead employment generation but will also contribute in clean and green environment and development of the temple town,” he said. He said contracts had been placed and work was going on in full swing taking all Covid-19 precautions.
Government in no hurry for big PSU selloffs over market appetite
The government is going to retain oil, power, coal and banking among strategic sectors with public sector presence, and move in a calibrated way in privatising companies across segments of the economy. Government officials told TOI that the market may not have the appetite for privatisation of several large PSUs in one shot. For instance, after BPCL, there may not be any takers for another oil market company immediately. Besides, the government is wary of a massive private sector role in the economy, fearing it may result in a situation similar to “oligarchic” Russia, where widespread privatisation took place after the collapse of the Soviet Union. Government in no hurry for big PSU selloffs over market appetite In May, as part of the Atmanirbhar Bharat package, finance minister Nirmala Sitharaman had announced the government’s decision to have four public sector companies in strategic sectors, and state-owned firms in other segments will eventually be privatised. The department of investment and public asset management (Dipam) has begun consultations on the classification of sectors. It had originally identified around one-and-a-half dozen sectors, ranging from the resource-rich ones to defence manufacturing and financial sector, comprising insurance and banking, which were to be retained as strategic sectors, with at least four public sector companies in business. But several ministries want the government to retain fewer strategic sectors. A similar exercise had been done during the Atal Bihari Vajpayee regime, where barring sectors such as atomic energy and railways, the government went ahead with aggressive privatisation. The NDA government’s disinvestment plan was unpopular and was seen as one of the reasons for Vajpayee being voted out in 2004. The Narendra Modi government has unveiled a raft of reforms, ranging from the farm sector to PSUs and labour laws, to help prepare the economy for a swift recovery. The PSU reforms are being interpreted by the government as “directional shift” and freeing the economy from the “socialist baggages of the past”. The Cabinet is expected to approve the PSU policy soon.
OPEC chief says rising infections may delay oil recovery
OPEC’s secretary general said on Monday an oil market recovery may take longer than hoped as coronavirus inflections rise around the world, and OPEC and its allies would “stay the course” in balancing the market. The Organization of the Petroleum Exporting Countries and allies including Russia made a record oil output cut in April as the pandemic hit demand. They are scheduled to increase output in January as part of a gradual easing of supply curbs. OPEC’s Mohammad Barkindo, asked at the virtual India Energy Forum by CERAWeek if the second wave of the virus required any changes to OPEC+ strategy, said hopes earlier this year of a demand rebound had been disappointed. “We were hopeful the second half of 2020 would begin to see a recovery,” Barkindo said. “Unfortunately, both the economic growth and demand recovery remain anaemic at the moment due largely to the virus.” “We remain cautiously optimistic that the recovery will continue. It may take longer, maybe at lower levels, but we are determined to stay the course,” Barkindo added. Russian President Vladimir Putin, speaking last Thursday, did not rule out extending the oil cuts for longer if market conditions warranted. Barkindo said producers did not expect a renewed oil-price collapse as seen in the second quarter, when oil hit historic lows with U.S. crude briefly trading in negative territory. OPEC+ producers had met an average of 100% of their supply cut commitments and would continue to implement the curbs so that inventories fall further, Barkindo said. “We are determined to assist the market to restore stability by ensuring that the stock drawdowns continue.”
Lower prices drive Asia’s demand for LNG as ship fuel
The use of liquefied natural gas (LNG) to fuel ships is gaining traction in Asia amid a global push to use cleaner fuels in the sector and as abundant supplies are making the super-chilled fuel more affordable than oil. The move could draw billions of dollars in investments from suppliers and buyers in gas storage, LNG-fuelled vessels and barges that will enable ships to meet stringent emission standards set by the International Maritime Organization, analysts and industry officials say. These measures are expected to boost Asia’s share of the global LNG marine fuel market to between a quarter and a third by 2030, up from a “tiny fraction”, Andrew Buckland, analyst at consultancy Wood Mackenzie, said. Globally, LNG is expected to account for 10 per cent of overall marine fuel mix by 2030, up from less than 0.1 per cent last year, he added. Rashpal Bhatti, vice president for maritime and supply chain excellence at BHP Group, said: “Today, the industry is a homogenous fuel, which is fuel oil. “Going forward, some percentage will use fuel oil, some percentage will use LNG, some will use ammonia, some hydrogen and other sources of fuel as well.” BHP is in talks with three companies to supply LNG to fuel five ships it plans to use to transport iron ore between Western Australia and China. The company analyzed supply and demand of gas and fuel oil and estimates that LNG is now cost competitive as shipping fuel. LNG spot prices have averaged about $131 per tonne less than those for very low sulphur fuel oil so far in 2020, data from Refinitiv Eikon showed. While the gap has narrowed recently due to an uptick in LNG prices, they are expected to widen again when more supply hits the market over the next few years, analysts said. To tap this potential growth, Singapore’s Pavilion Energy is working with potential partners to develop a global bunker supply network. It signed a memorandum of understanding with Finnish state-owned gas company Gasum earlier this month and is currently in “advanced stage of negotiations” with parties in China, said Alan Heng, managing director of its Asia office. Singapore’s FueLNG, a joint venture between Keppel Offshore & Marine and Shell Eastern Petroleum, will operate a LNG bunkering vessel while more such vessels are on order from countries like Singapore, Malaysia, Japan, South Korea and China. As more facilities are built, Asia’s LNG bunkering will grow faster to nearly 10 million tonnes by 2025, or about 4 per cent of global marine fuels market, IHS Markit’s director of southeast Asia gas and LNG division Chong Zhi Xin said. “Once these LNG bunkering vessels are introduced, it will allow more contracts to be signed and vessel owners will be more comfortable making the switch to LNG,” he said.
USD 75 million investment so far in four OALP bid rounds, according to DGH
Having committed USD 2.3 billion investment, energy firms such as Cairn Oil & Gas spent USD 75 million (about Rs 550 crore) in oil and gas hunt in the first two years of India’s maiden open acreage licensing policy, according to the Directorate General of Hydrocarbons (DGH). In a bid to expedite oil and gas exploration and raise domestic production, the government had in 2018 launched the first bid round under the Open Acreage Licensing Policy (OALP) that allowed explorers to carve out desired areas for exploration and offered liberal terms. Five rounds have been concluded so far, with winners of the fifth bid round announced on Thursday. In the first four rounds, USD 2.317 billion investment was committed by firms such as Vedanta Group firm Cairn Oil & Gas, state-owned Oil and Natural Gas Corp (ONGC) and Oil India Ltd in 99 blocks awarded for exploration and production of oil and gas, according to the latest data put out by the DGH. Of this, USD 75 million has so far been invested till March 31, 2020, DGH, the upstream nodal authority of the Oil Ministry, said. OALP offers revenue sharing contracts where operators bid for a share of oil and gas they would share with the government, with the one offering the highest share winning the block. OALP replaced the New Exploration Licensing Policy (NELP) under which contracts were awarded to firms that committed to investing most in exploration of oil and gas. While OALP offers complete pricing and marketing freedom, the government had a role in deciding pricing as well as customers of gas in NELP rounds. The 1.38 lakh square kilometre of area offered for finding oil and gas in the first four rounds of OALP was double the acreage of the 254 blocks awarded in nine rounds of NELP between 1999 and 2010. The biggest chunk of USD 815 million was committed in the OALP-I round that saw Cairn Vedanta walking away with 41 out of the 55 oil and gas blocks on offer. Of this, only USD 46 million has been invested so far, DGH said. In 14 blocks of OALP-II, USD 452 million investment was committed, but only USD 2 million has been invested so far in exploration. The third round of OALP saw USD 709 million commitment in 23 blocks, of which USD 21 million has been invested. Only USD 6 million out of the USD 341 million committed in seven OALP-IV blocks have been invested so far. NELP attracted USD 29.15 billion investment since its launch in 1999 against the committed spending of USD 11.7 billion. Against the USD 11.728 billion committed for exploration in the 254 blocks awarded in nine rounds of NELP, USD 17.09 billion was invested. Another USD 12.061 billion was invested in developing discoveries made in those blocks. While no discovery has so far been made in the OALP blocks, 1,163.50 million tonnes of oil and oil equivalent gas reserves were established in NELP blocks. DGH had on October 22 announced the winners of the OALP-V round, with ONGC walking away with 7 out of the 11 blocks on offer. OIL won the remaining 4 blocks. The round attracted just 12 bids for the 11 blocks on offer. The previous bid round, OALP-IV, had also seen just eight bids coming in for seven blocks on offer. ONGC had walked away with all the seven oil and gas blocks on offer.
LNG tanker rates soar ahead of expected cold Asian winter
Shipping rates for liquefied natural gas (LNG) tankers have soared to their highest in a year ahead as demand for cargoes rose on expectations of a colder than expected winter in North Asia, shipping and trade sources said on Monday. The daily charter rate for shipping LNG on a 160,000 cubic metres tanker in Pacific and Atlantic basins are currently estimated to be about $85,000 to $105,000 a day, four shipbrokers told Reuters. Rates rose by $23,750 a day on Friday, the biggest daily rise since last October, said Tim Mendelssohn, managing director at Spark Commodities. Mendlessohn listed severeal reasons for what would have been an increase of around 29 per cent. “Strengthening cargo prices, an increasing arbitrage, no planned U.S. Gulf Coast cargo cancellations and a more bullish winter sentiment are driving charterers to secure LNG tonnage across both basins,” he said. “This is translating into significant increases in spot and front month freight rates in both the Atlantic and Pacific.” Asian spot LNG cargo prices rose to their highest since January on Friday on the back of firm demand from North Asian buyers ahead of a colder than expected winter, traders said. Monthly LNG shipments into North Asia are set to rise to their highest since January, primarily driven by a jump in demand from South Korea, shiptracking data from Refinitiv Eikon showed. There are also expected to be no cargo cancellations from the United States, after dozens of cancellations earlier this year, shipbrokers said. “Everyone’s holding on to their ships and are not sub-letting,” one of them said. LNG shipping rates are expected to improve further next year as demand recovers in the region once recovery from the coronavirus pandemic takes hold, said analysts from Jefferies Shipping Weekly. “We believe the LNG shipping market will improve in 2021 relative to a weak 2020 as global demand for LNG recovers post-COVID, especially in Northeast Asian markets,” they said in a note on Monday.