Energy This Week: China-Eurasia gas, Cop28 clash of philosophies, US debt ceiling & oil

Energy markets watch potential US default

Oil prices were up last Wednesday as Saudi Arabia’s Energy Minister again told short sellers to “watch out” and American crude inventories fell. Prices?dropped on Thursday ?as worries persisted over the US?debt ceiling shambles ?and as Russia downplayed the prospect of additional cuts in Opec+ production targets.

S&P Global says the probability of a US default is “exceedingly low” but “it will?likely lead to severe recessions , which again will have an impact on energy consumption and demand”. US President Joe Biden and his Republican adversaries must reach a deal to raise America’s borrowing by mid-June at the very latest. However, progress in negotiations on Friday led to a?second successive weekly gain ?for oil futures, with Brent closing at $76.95 per barrel, having finished the previous week at $75.58.

Prices were up very slightly on Monday after a?provisional budget deal ?was reached on Saturday, but they?dropped on Tuesday ?amid concerns over Republican opposition to the arrangement. Opec+ next meets on June 4 in-person, giving the opportunity for some tough words after doubts rose on Russia’s delivery on its promises to cut output by 500,000 barrels per day.

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China has options on where to get its gas as Europe prices tumble

The war in Ukraine has led to a reordering of Eurasian gas – and it’s China that has the?luxury of options , with Russia now vying against Turkmenistan for sales.

European gas prices have dropped to their?lowest level since mid-2021 , before Russia began to squeeze supplies ahead of its invasion of Ukraine. Household energy bills and inflation are moderating, and gas inventories are well above average for the time of year. But Europe has suffered a contraction of manufacturing and a flight of energy-intensive industries.

Two drones?attacked Russia’s Druzhba oil pipeline ?on Saturday as Ukraine readies a counter-offensive. The line currently supplies Hungary, Slovakia and Czechia after Poland and Germany stopped using it.

Following QatarEnergy’s entry into the Iraqi gas sector in April, Saudi Aramco could make its?first investments in the country . The Iraqi oil ministry says the Saudi state energy company is studying the Akkas gasfield, on the western border, and the Nebras petrochemical project near Basra.

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Cop28 faces a clash of philosophies

A number of members of the EU Parliament and US Congress signed a letter demanding that?Dr Sultan Al Jaber should step down ?as President-designate of the Cop28 climate conference in Dubai this November because of an alleged conflict of interest with his role as chief executive of the Abu Dhabi National Oil Company.

The controversy highlights a clash in philosophies on energy transition and tackling climate change. On the one hand, a European and North American-centric view which feels?entitled to lecture younger countries , sees inadequate progress to date as the fault of “nefarious” influence from the fossil fuel industry, and renewables and electric vehicles as the only climate solution. On the other hand, a perspective which acknowledges the interests of fossil fuel producers and developing countries, and understands the energy transition as embracing carbon capture, nuclear power and other technologies.

The former Indian ambassador to the UAE?criticised the letter ?for ignoring Dr Al Jaber’s work as chairman of Masdar, the responsibility of Europe and the US for 41 per cent of historic greenhouse gas emissions and the shortfall in promised climate finance from developed countries.

The event should be the “finance Cop ” that directs capital to vulnerable countries. Majid Al Suwaidi, the director general and special representative of the UAE for the Cop28 presidency, told the Net Zero Delivery Summit in London last Wednesday that four pillars would address the?need for trillions of dollars in climate finance : Reform of international financial institutions, leveraging private-sector money, establishing well-functioning carbon markets and unlocking innovation finance. The Red Cross has said the event should also help easier climate funding for?conflict-hit Middle Eastern countries ?such as Iraq, Syria and Yemen.

The new director of British think tank Chatham House believes the UAE’s role in Cop28 is a positive – for one thing, as a forum for the US and China to communicate on a key issue, “even if other things are getting really sour ”. And the Italian Foreign Minister?expressed his support ?for the nation’s hosting of the event on Friday.

Gavin Esler writes that the?revival of the Arabian oryx ?from extinction in the wild shows how humans can repair what we have broken in the environment – a message for delegates to Cop28. Razan Al Mubarak, managing director of the Environment Agency Abu Dhabi and president of the International Union for Conservation of Nature, is?optimistic for the event . “For many of us who work in conservation, climate change is the result of nature being mismanage,” she said. “As a practitioner, I also see how nature can respond and heal.” The Environment Agency has placed new controls on?protected areas and national parks ?of Abu Dhabi. Ali Tabrizi, the director of the popular 2021 documentary?Seaspiracy ?about industrial fishing, spoke in Abu Dhabi to urge Cop28 to tackle the damage to the world’s ocean environments.

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Oil and gas licences to be blocked, but clean energy investment must rise

The UK’s Labour Party will reportedly?not issue any new oil and gas licences ?for the North Sea should it win the next election, which must be held no later than January 2025. This would be a foolish policy, which would cost jobs, investment and government revenue, and do nothing to advance the party’s correct net-zero target. Still, it will be helpful to oil and gas-exporting countries such as the Middle East and Russia.

Clean energy spending will overtake ?that of fossil fuels this year, says the International Energy Agency. Funding worth $1.7 trillion will go to renewables, electric vehicles, nuclear, heat pumps and other low-carbon technologies, while $1.1 trillion will be invested in oil, gas and solar. Investment in solar power alone will outweigh that in oil.

However, 90 per cent of the increased clean energy spending is in developed economies and China, worsening the disparity with developing countries. Renewable spending must reach about $5 trillion annually to reach the Paris Agreement’s goal of keeping warming below 1.5°C. TotalEnergies, the leading French oil company, Electricite de France and Sumitomo have been chosen to?build a $4.5 billion hydroelectric dam ?in Mozambique, which is also an emerging liquefied natural gas exporter.

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Tracking global climate from space

The UAE Space Agency will work with Earth imaging company Planet Labs to compile an atlas to?map and monitor ?loss and damage from climate change and extreme weather events globally.

Concentrations of methane, a powerful greenhouse gas, are?increasing over the UAE , as revealed by a new study from Khalifa University based on satellite surveys. High levels are found around landfills, coastal sabkhas and in the Hajar Mountains, possibly related to farms and microbes living in wadis.

The UAE’s next space mission will launch a probe in 2028 which will fly past six asteroids and then deploy a lander to a seventh, 269 Justitia. This could be a step in?obtaining resources ?such as metals or water ice from the asteroid belt for future missions.

In contrast to the general global warming, this April was the?coolest in the UAE ?for 25 years. This may be linked to pressure systems bringing cooler air and cloud cover from northern Saudi Arabia and the Mediterranean. Afghanistan, though, is?struggling with drought ?and three people were killed in border clashes with Iran, as Tehran complains the Taliban government is not sending the agreed quantities of Helmand River water. Britain’s Kenton Cool, who has climbed Everest 17 times, more than any other foreigner, says the mountain is?losing snow .

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Dubai plans net-zero public transport by 2050

The emirate’s Road and Transport Authority’s strategy will?save 10 million tonnes ?of carbon dioxide emissions and Dh3.3 billion of costs. It plans to convert 10 per cent of buses and 30 per cent of taxis and limousines to electric or hydrogen by 2030, and all by 2050. It will also install solar panels and water-saving measures on its own buildings.

Electric vehicles now make up?more than 1 per cent of the UAE car market , the Minister of Energy and Infrastructure told the Electric Vehicle Innovation Summit in Abu Dhabi on Monday. Abu Dhabi waste management company Tadweer has revealed its first?all-electric waste collection lorry . Ports operator DP World?reduced its global emissions by 5 per cent ?last year as it pursues carbon neutrality by 2040.

Battery mobility is now a key part of every serious transport company’s strategy. Toyota, which despite its?iconic Prius ?has been slow to embrace the electric revolution, is looking at transition financing to?support hybrid vehicle sales . Attractive incentives are luring car makers to the US: Hyundai Motor and LG of South Korea are partnering to?build a $4.3 billion battery factory ?in the state of Georgia. Subsidies also appear to have swayed Jaguar Land Rover, owned by India’s Tata, to?construct a battery plant ?in the English county of Somerset instead of Spain.

Hybrid electric aircraft maker Odys Aviation will?open a factory ?in Abu Dhabi. Its aircraft, intended to launch in 2027, have an all-electric range of 320km and a hybrid range of 1,200km, potentially offering zero-carbon flying within the UAE and a 76 per cent reduction in emissions on GCC flights.

France opened its?first electric car battery factory ?on Tuesday, in the “electric valley” of Billy-Berclau in its north-east. The chief executive of Paris-based hydrogen fund Hy24 says “hydrogen is the next place for Mena and Mena is the next place for hydrogen ". Hy24 raised $2.14 billion last year.

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Aramco dividends boost Saudi finances

Saudi Arabia’s medium-term?fiscal outlook has been boosted ?by the performance-based dividend of Saudi Aramco. The state oil company may pay additional dividends worth 2 per cent of GDP from 2024.

The IPO of 19 per cent of Adnoc Logistics & Services on the Abu Dhabi Securities Exchange has proved to be the?most oversubscribed ?of all recent listings, 163 times, valuing the company at $4.05 billion. The Middle East has been the global hot-spot for new listings amid lacklustre activity elsewhere, with Abu Dhabi accounting for 14 per cent of all offerings worldwide in this year’s first quarter.

Another listed company, Adnoc Drilling, has?ordered six new hybrid-powered land rigs ?for $75 million, which use a battery to save on greenhouse gas emissions. Adnoc and utility Taqa have agreed to develop a?$2.4 billion system ?to provide treated seawater to the oil company’s onshore operations, which will be entirely powered by clean sources and will reduce the energy required for water injection by 30 per cent. And Dubai-based Tabreed is looking at?acquiring district cooling infrastructure ?in a Gurugram information technology hub near New Delhi.