Energy This Week: Big oil leadership diversity, oil prices up on supply deficit, hydrogen's green wave

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Looming crude deficit pushes up prices

Prices on Monday closed in on $95 per barrel, as China’s National Bureau of Statistics reported higher industrial output and retail sales, then passed $95 on Tuesday ahead of the US Federal Reserve meeting that continues on Wednesday.

The International Energy Agency (IEA) expects a “substantial” crude oil deficit in the fourth quarter following the continuing Opec+ cuts. The group’s output has dropped two million barrels a day this year, with cuts partly offset by higher production from Iran. Non-Opec+ supply has risen 1.9 million bpd to a record 50.5 million bpd, but this is not enough to meet demand growth anticipated at 2.2 million bpd for the year. Three-quarters of that growth comes from China, despite its slow economy.

Concerns of a higher supply deficit drove oil prices higher last week, a third consecutive weekly gain, with Brent closing at $93.93 per barrel and the $100 per barrel mark in sight.

Opec anticipates a 3.3 million bpd deficit over the last quarter of the year, while the US Energy Information Administration has raised its Brent crude price forecast for this period to $93 from $88 per barrel.

Haitham Al Ghais, Opec secretary general, said that calls to eliminate hydrocarbons “set the global energy system up to fail spectacularly”. He was responding to the view of IEA executive director Fatih Birol that demand for oil, gas and coal may reach a peak this decade.

Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman told the World Petroleum Congress in Canada’s oil hub of Calgary that the Opec+ alliance aims to reduce market volatility rather than control prices. At the same event, Saudi Aramco chief executive Amin Nasser said that the idea of peak oil demand was “wilting under scrutiny because it is mostly being driven by policies, rather than the proven combination of markets, competitive economics and technology”.

Oil industry needs leadership diversity to tackle its performance and vision problems

BP chief executive Bernard Looney has had to step down after misleading the company’s board over disclosure of relationships with colleagues. But Big Oil chiefs rarely seem to pay the price for failures in the normal run of business. Lack of diversity at the top is increasingly a liability as the industry struggles to articulate its future in a world tackling climate change. Just two major oil companies are run by women, Meg O’Neill of Woodside and Vicki Hollub of Occidental.

Fertiglobe, a joint venture of Adnoc and OCI, intends to explore opportunities with AD Ports for storage and shipping of urea and ammonia in the UAE and Egypt. Saudi Aramco is to buy Esmax Distribucion, a Chilean fuel and lubricants retailer, its first downstream investment in South America. Oman’s OQ Gas Networks may raise up to $771 million from its initial public offering of 49 per cent of its shares in October.

The Iraqi cabinet has approved release of some funds to the semi-autonomous Kurdistan region, whose oil exports have been cut off since March by Turkey’s closure of the pipeline from Iraq.

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Last barrel of oil cause for celebration rather than a crisis

A UN technical report on the “global stocktake” is an “important reminder” of the work needed to be done to tackle climate change, said Adnan Amin, chief executive of Cop28. “A transformational course correction” is required. Abu Dhabi Sustainability Week will hold a special edition at the event. The day the UAE uses its last barrel of oil will be a celebration, according to Mariam Al Mheiri, the UAE’s Minister of Climate Change and Environment. And, speaking at the UN General Assembly, US President Joe Biden pointed to climatic disasters, saying: “These snapshots tell an urgent story of what awaits us if we fail to reduce our dependence on fossil fuels and begin to climate-proof our world.”

Dr Sultan Al Jaber, President-designate of Cop28, has pointed to the importance of health: “The connection between health and climate change is evident, yet it has not been a specific focus of the Cop process – until now. This must change”. The climate conference will include indigenous people, climate and youth advocates, local leaders and start-ups. “It is these partnerships that will contribute to our efforts to save the planet”, says Nickolay Mladenov, director general of the Anwar Gargash Diplomatic Academy, which launched a centre for climate diplomacy in Abu Dhabi last week. Britain’s King Charles III, known to favour environmental causes for many years, will use his state visit to France next week to work together on protecting the environment and tackling climate change.

The floods in Libya caused by Storm Daniel have highlighted the dangers of higher evaporation and precipitation in the Mediterranean. Climate change made the disaster 50 times more likely, exacerbated by poor infrastructure planning and lack of preparedness after decades of erratic rule and years of civil conflict. Cities around the sea have often not prepared to reduce flooding, and could be at risk from more Medicanes (Mediterranean hurricanes). The Iranian city of Astara, on the Caspian Sea, suffered its worst floods for a century, even as much of the country struggles with persistent drought. And Jordan, one of the world's most water-scarce countries, has cut subsidies on municipal water, trying to reduce waste and expenses. A warming climate is also making aircraft turbulence worse.

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$2.7 trillion a year for net-zero

The cost of achieving net zero: $2.7 trillion per year, more than a billion electric cars, half a billion tonnes of hydrogen, seven billion tonnes of carbon capture, and wind and solar power sufficient for two-thirds of global energy needs. So say analysts from consultancy Wood Mackenzie. The International Energy Agency says we are moving faster than expected, but not fast enough, in a report with the International Renewable Energy Agency and the UN Climate Change High-Level Champions.

Irena says renewables must add 1,000 gigawatts annually by 2030, after growing 300 gigawatts last year. S&P Global notes that most renewable energy funding is going to the US, China and EU, with a shortfall in emerging markets, and focuses on wind and solar to the neglect of electricity transmission and storage. The EU may need four times as many workers in solar and wind by 2030 as compared to 2020.

The cost of not tackling climate change adequately, though, will be far larger, and go well beyond monetary damage.

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Hydrogen’s “green wave” is coming

A “green wave is coming”, says Andreas Bieringer, direct of business development and commercial for Masdar, seeing growing momentum for green hydrogen produced with renewable energy.

Hydrogen can be used to make steel, which is today produced almost exclusively with coal and gas, causing heavy pollution. Last week, Sweden’s H2 Green Steel raised $1.6 billion to fund a hydrogen-based steel plant, and Boston Metal secured $262 million of funding to advance its process using electricity to make the metal. One or both of these methods, or the carbon capture used by the UAE’s Emirates Steel at Musaffah, could finally make green steel a reality.

Solar power and hydrogen have been prominent in the UAE’s road-map towards net-zero. Emirates Water and Electricity Company is calling for expressions of interest in its 1,500 megawatt Khazna solar photovoltaic power plant, the latest in a string of huge facilities. It plans to commission at least two more of this size by 2030 to reach 7.3 gigawatts of solar capacity. Saudi utility developer Acwa Power was one of four to bid for Ewec’s Al Ajban project in July.

Acwa has signed agreements to co-operate on green hydrogen, ammonia and renewable energy with China Southern Power Grid International and MingYang Smart Energy Group. China’s solar capacity will double over the next three years, exceeding 1,000 gigawatts or 1 terawatt, by far the largest in the world. This is supported by government initiatives and the growth of “rooftop” or distributed solar.

UAE businesses are trying to improve their sustainability ahead of Cop28, with ventures including biodegradable abayas, recycling plastic bottles into clothing, and generating distilled water using solar power. Saudi Aramco’s venture capital arm Wa’ed has invested in Mighty Buildings, which makes 3D-printed, environmentally-friendly homes.

India aims to increase its output of biofuels to reduce emissions and oil imports. It is part of the Global Biofuel Alliance, launched on the sidelines of the G20 in New Delhi this month. Chinese electric vehicle exports are surging, but the country’s auto brands need European dealers to help sell their wares to motorists who do not know them.

Vertical farming has become more important because of climate change and global political crises, said experts at the Global Vertical Farming Show in Dubai on Thursday. The technique can save on land, water, and fertilisers, and help shield biodiversity.