Energy This Week: Red Sea attacks widen, Angola going, & UAE decarbonising industry
Area of Red Sea ship attacks widens, as oil prices gain
Oil prices recorded a second straight weekly gain last week, and their biggest advance since October, although slipping on Thursday and Friday. The announcement of a US-led naval coalition to protect Red Sea transit steadied oil prices last Wednesday, but the zone of operations widened when on Sunday, a drone possibly launched from Iran hit a Japanese-owned chemical tanker off the Indian coast.
The promise of US rate cuts next year, and interruptions to transit through the Red Sea, helped boost prices modestly earlier in the week, as two of the world’s largest shipping companies, Maersk and CGM, announced surcharges to cover the costs of rerouting away from the route, though Maersk now plans to return. The re-emergence of Somali piracy, with the seizure of two boats in the Indian Ocean, further raises the complexity of the problem.
Houthi attacks on shipping could affect liquefied natural gas shipments to Europe, but for now, European gas stocks are high and prices have kept falling. Drought in the Panama Canal has also limited LNG sailings. Not just shipping, but flight costs are also likely to remain high in the years ahead, because of bottlenecks, geopolitical disruptions, higher operating costs, the premium for jet fuel, and the growing requirements to blend greater levels of more costly sustainable aviation fuels.
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Angola going
Angola has decided to leave Opec. The south-west African country declared it does not gain anything from remaining in the organisation. It was upset that its quota was reduced in November, even though it has not been able to produce up to its target levels.
With global economic growth expected to slow further next year, MUFG bank sees “the year 2024 for the energy complex as one of balance with bearish skews”, although warning of the potential for geopolitical shocks.
Adnoc has signed a 15-year deal to supply liquefied natural gas to ENN of China. The LNG would come from its planned new export facility at Ruwais, which is expected to start operations in 2028, subject to taking a final investment decision.
Iraq hopes to reach an agreement with Turkey on equitable sharing of water resources, with the two countries dealing with other bilateral issues, including the reopening of the Iraq-Turkey oil pipeline, closed since March, and the presence on Iraqi soil of the PKK, the Kurdish organisation widely designated a “terrorist group”.
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UAE industry sets a path for decarbonisation
The UAE Ministry of Industry and Advanced Technology’s new decarbonisation strategy, announced at Cop28, offers a path to low-carbon industry, not just for the UAE, but for the entire region.
Low-carbon steel, aluminium, cement and chemicals can be produced with a blend of techniques, including higher energy efficiency, low-carbon electricity from renewables and nuclear power, hydrogen, carbon capture and storage, and heat from solar thermal, geothermal and heat pumps.
The Abu Dhabi Department of Economic Development and Siemens Energy of Germany have partnered to decarbonise the emirate’s industries.
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Key new low-carbon systems on their way
A key part of the UAE’s low-carbon power system has been completed, with the finalisation of the fourth reactor of the Barakah nuclear plant. After a round of tests, it should start generating early next year.
Dubai Electricity and Water Authority has awarded a contract to build a water pipe, part of its pumped hydroelectric storage facility at Hatta, whose completion is slightly delayed to the start of 2025.
And Saudi Arabia has launched a new carbon capture project in the Red Sea industrial site of Rabigh, which will avoid 100,000 tonnes of carbon dioxide emissions per year from Petro Rabigh’s mono-ethylene glycol plant.
The Dubai Roads and Transportation Authority plans to encourage the use of electric delivery bikes, which should save on both costs and pollution. An Abu Dhabi investment in Chinese electric car-maker Nio has helped take its shares up 21 per cent, and the UK and EU have reached an agreement on extending trade rules to the end of 2026, avoiding tariffs on electric cars.
The UAE has sent 1,640 household power generators to Ukraine to help it through winter, after extensive Russian attacks on electricity systems.
Saudi-owned Acwa Power has agreed to develop a $4 billion, 600,000 tonne per year green hydrogen-ammonia plant in Egypt. Oman’s green hydrogen plans could support its economy over the long term, says Fitch Ratings. Hydrogen will help reduce the Sultanate’s fossil-fuel dependency and could diversify its exports, but the direct government revenue will only be modest.
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Latest climate modelling cuts Middle East warming estimates
The latest research, co-written by Diana Francis from Khalifa University, indicates that warming of the Middle East may not be as extreme as some forecasts. The concentration of carbon dioxide over the region is lower than previously thought, as shown by new satellite data. Nevertheless, high temperatures and drought still threaten the region.