Energy This Week: Adipec, oil slips, war in the Caucasus, & carbon trading

https://www.thenationalnews.com/newsletters/energy-this-week

Adipec, one of the world’s leading energy conferences, is running in Abu Dhabi this week, with the key theme of accelerating the energy transition. Dr Sultan Al Jaber, Minister of Industry and Advanced Technology, chief executive of Adnoc and President-designate of Cop28, told the event that the oil and gas industry has a “critical” role in solving energy challenges. He encouraged energy leaders, including representatives from high-emitting industries, to “collaborate to accelerate decarbonisation”. He asked them to make a more active contribution, saying, “For years, the energy industry has been without a seat at the climate change table. But you can’t just ask for it. You need to earn it. And candidly, I don’t think the industry has yet done enough to earn that seat.”

Five global energy executives, the chiefs of Occidental, Shell, TotalEnergies, BP and Eni, pushed for a “multi-energy” transition and more spending on technologies to reduce emissions from fossil fuels at their panel.

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Worry over an undersupplied oil market despite price drop

Crude prices saw a fourth consecutive day of losses on Tuesday, with Brent dipping below the psychological level of $90 per barrel before a slight rebound. The US Federal Reserve's commentary on higher interest rates weighed on sentiment, while the potential reopening of Iraq’s pipeline to Turkey could restore some supply.

Oil prices were also down last week, with Brent crude closing at $92.20 and traders not yet ready to test the $100 per barrel level. The drop was despite rises on Wednesday and Thursday supported by a big drop in US crude stocks. American oil production has reached its highest since November 2019, after a strong price rally through the third quarter. UAE petrol and diesel prices will rise in October, but only slightly for petrol. High oil prices support the economy of Oman, and S&P has raised the sultanate’s credit rating to BB+ from BB.

Suhail Al Mazrouei, the Minister of Energy and Infrastructure, told Adipec that the Opec+ group was seeking a healthy supply-demand balance and that he worries about an undersupplied market in the longer term. India’s petroleum minister said at the event that his country would be able to “manage” oil prices at $100 per barrel, but that this would harm other developing countries.

Turkey plays a critical energy role in both South Caucasus and Iraq

Azerbaijan has taken back control of the long-disputed territory of Nagorno-Karabakh from Armenia, marking a defeat for Russian and Iranian policy, and a victory for Turkey in the South Caucasus. The conflict raises critical questions for energy transit through the region.

Turkey is also a key neighbour to Iraq. Constitutional expert Zaid Al-Ali points to the need for the countries to work together on energy and water. The two parties’ approach to the dispute over the shutdown of a critical oil export pipeline betrays incoherence on both sides. Speaking at the Adipec conference in Abu Dhabi on Monday, Turkish energy minister Alparslan Bayraktar said the pipeline would restart “within this week”. Iraq plans to award 30 new oil and gas projects in two licensing rounds, with interested companies to send a formal letter of intent by January 2024.

The chief executive of Austrian oil company OMV, Alfred Stern, says it can meet its gas supply commitments to customers even if Russian gas is completely cut off. Since Austria was the first European country outside the Communist bloc to receive Soviet or Russian gas, this marks a major shift. European gas prices have fallen to barely a tenth of last year’s record levels and storage is almost full. RAK Gas, Ras Al Khaimah’s national gas company, has agreed with Sharjah National Oil Company to use its new complex to store gas to give greater flexibility in balancing supply and demand. Executives speaking at Adipec expected the energy transition to drive higher demand for gas, with Mansoor Al Hamed, chief executive of Mubadala Energy, saying $4.9 trillion of gas investment would be needed by 2030.

Uganda is pressing ahead with the construction of an oil pipeline with 240,000 barrels per day of capacity, to bring oil from new fields through Tanzania for export. The project, in partnership with TotalEnergies and China National Offshore Oil Corporation, could double the national GDP in a country where people earn an average of $1,000 per year. However, environmentalists and some local communities and campaigners worry about the greenhouse gas emissions and disruption to farmers and landscapes. The East African state is replacing its boda boda motorcycles with electric bikes to improve air quality.

China petrochemical and Australian gas deals continue Saudi Aramco's international push

Saudi Aramco is continuing its expansion in China’s downstream, with talks to acquire 10 per cent of Jiangsu-based refiner Shenghong’s petrochemical subsidiary, after it did a similar deal with Rongsheng Petrochemical in July. It made an entry into the global gas business, buying a $500 million stake in MidOcean Energy, which in turn is acquiring stakes in four Australian liquefied natural gas projects.

Dana Gas, a private gas company based in Sharjah, has named Richard Hall as its new chief executive, to replace the retiring Patrick Allman-Ward.

TechnipFMC has opened a manufacturing plant in Abu Dhabi which will make drilling equipment for Adnoc.

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Carbon pricing and trading needed to push green transition

Carbon trading is essential to provide an economic rationale for low-carbon investments. First Abu Dhabi Bank has signed agreements with Masdar and Dubai-based Blue Carbon to supply carbon credits. The EU’s climate chief nominee, Netherlands politician Wopke Hoekstra, says he wants international taxes on fossil fuels and carbon emissions. His confirmation has been postponed while a European Parliament committee grills the nominee for EU Green Deal chief, Maros Sefcovic of Slovakia, after a pro-Russian candidate won his country’s elections.

Sheikh Khaled bin Mohamed, Crown Prince of Abu Dhabi, met the chief executive of Japanese oil major Inpex on the sidelines of Adipec to discuss energy security and lower-carbon solutions. Sheikh Khaled has reviewed Adnoc’s carbon management strategy. The company has the ambition to double its carbon capture target to 10 million tonnes per year by 2030. It has agreed with US oil company Occidental to look into building the first large-scale plant outside the US to capture carbon dioxide directly from the air. The technology is expensive today but is seen as a critical part of tackling historic and unavoidable remaining emissions.

Adnoc Gas has advanced its Habshan carbon capture project by awarding a $615 million contract to Petrofac for facilities, pipelines and wells. The project will capture 1.5 million tonnes of carbon dioxide per year and is expected to start operations in 2026.

UAE’s first steps in sustainable aviation fuel

Shell will supply more than 300,000 gallons of sustainable aviation fuel to Emirates at Dubai International Airport, the first time the low-carbon fuel will be available there. An Airbus A380 burns about 4,600 gallons per hour of flight. Adnoc’s Ruwais refinery has been certified to produce SAF, using used cooking oil blended with jet fuel, which will be available at Abu Dhabi airport.

Renewable energy employment grew strongly last year, rising almost 8 per cent to 13.7 million people worldwide. Most of these jobs are concentrated in China along with the US, EU, India, and Brazil. Solar photovoltaics was the biggest employer, with a workforce of 4.9 million.

Dubai Electricity and Water Authority has commissioned the second part of its fourth phase of the Mohammed bin Rashid Solar Park, distinguished from the other phases by using solar thermal rather than photovoltaic generation, including 15 hours of storage. Taqa will start operations from the Al Dhafra solar plant, one of the world’s largest, “in a couple of weeks”, says the company’s chief executive.

The UK has designated a cable to carry renewable energy from Morocco as a project of “national significance”. The $26.9 billion project would support the UK grid at times when its renewable output is insufficient. With Prime Minister Rishi Sunak under pressure to turn around a big deficit in the polls, watering down net-zero plans is expected. While some developed countries are seeing their renewable sectors struggling, emerging markets such as Indonesia may fill the gap. Masdar has agreed to look into building 500 megawatts of renewables in the central Asian country of Tajikistan.

A Swedish start-up, Modvion, is cutting the carbon footprint of wind turbines by building them out of wood. Lucid Group, a luxury electric car maker, has opened its first international factory in Saudi Arabia, to build 155,000 cars annually, but flagship brand Tesla saw vehicle deliveries down in the third quarter because of downtime while upgrading its factories.

Batteries and other low-carbon systems need a variety of critical minerals, and India will auction about 20 blocks to look for the materials in the next week, after finding large lithium resources in Jammu and Kashmir earlier this year. Car makers are looking for green (low-carbon) steel, but there are debates on how clean new steelmaking technologies are.

Expo City makeover as politicians back Cop28

Expo City Dubai is being transformed with Emirati heritage to prepare for the Cop28 climate conference starting on 30 November. The event is divided into the blue zone, for official delegates, and the green, for the general public.

Dr Sultan Al Jaber has said the UAE will be guided by a “deep sense of urgency” in limiting global warming to no more than 1.5°C, which is “our North Star”.

Dutch Prime Minister Mark Rutte, who will retire after November’s elections, has pledged to work with the host nation to mobilise the $100 billion of promised climate funding for developing countries. The Netherlands also wants to build up the green hydrogen supply chain from the UAE. The EU’s environment commissioner, Virginijus Sinkevicius, told The National that it was important to see a fossil fuel-rich country such as the UAE pushing for climate action.

China’s Foreign Minister has backed the UAE in holding the conference. Sheikh Abdullah bin Zayed, Minister of Foreign Affairs, discussed climate action with Paraguay’s President Santiago Pena during a visit to Asuncion. Thailand’s ambassador to the UAE has said his country would work on carbon neutrality, reducing forest fires and air pollution.

Doha will host the Greener Desert, Better Environment event from Monday to next March.