Energy This Week: Russia, Oman hydrogen, climate cash for Africa

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Russia turmoil will not fire up oil prices

The short-lived armed revolt by the Wagner mercenary group?should not affect oil prices much, analysts say. Prices gained a little when opening on Monday, but it probably helped that the crisis came to an end at the weekend – at least for now. However, with the showdown between Wagner leader Yevgeny Prigozhin and President Vladimir Putin far from settled, internal politics in Russia could threaten its oil and gas exports.

Oil prices?dropped steeply?last week, as they were hit by further expectations of tighter monetary policy. Japanese bank MUFG has?cut its forecasts, seeing Brent crude averaging $81 per barrel this year, down from $88, and $84 next year, down from $98. But prices are?expected to be supported?next month by Opec+ production cuts and rising Chinese demand. Saxo Bank says prices could be supported by a?lower risk of recessions?in Europe and the US, driven by strong government green spending. “Most energy analysts envision $80 oil at some point this year, so any bullish headline could get us there,” says Edward Moya, senior market analyst at Oanda.

Those bullish headlines apparently don’t include a military advance on Moscow. Russia has not yet lived up to its promised curbs on output, while easing sanctions enforcement on Venezuela and Iran has allowed their exports to increase. Imports by China have been strong, but much appears to be going into storage, while drops in inflation levels have made crude oil less attractive as a hedge.?Prices dropped again on Tuesday?as markets awaited data on US crude stocks, although China’s Prime Minister expressed optimism on stronger growth in the second quarter.

Qatar has concluded its?second major agreement?to sell liquefied natural gas to a Chinese state company. The deal will see China National Petroleum Corporation buy four million tonnes of LNG annually for 27 years and take a 5 per cent stake in one train of the North Field expansion project. The terms are near-identical to those secured by another Chinese company, Sinopec, in November.

Abu Dhabi utility Taqa has agreed to?acquire Sustainable Water Solutions Holding?for Dh1.7 billion ($460 million), expanding its business into water treatment. TotalEnergies and Saudi Aramco have?awarded contracts?for their $11 billion Amiral petrochemicals complex in Jubail, intended to be the GCC’s largest mixed-load steam cracker, producing ethylene and other polymer feedstocks. Downstream integration is a key part of Aramco’s strategy, both at home and in projects in major customers such as China. Two of the contracts,?worth $2 billion, went to Italy’s Maire Tecnimont.

Adnoc has agreed with Hindustan Petroleum to?expand their lubricants businesses?in the UAE, India and elsewhere. Its drilling division has been?awarded 10-year contracts?for five hybrid-electric offshore rigs to support its parent’s production expansion.

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Iraq electricity on and off 'like disco lights'

A hot summer is already bringing electricity problems to Iraq and Syria. Hasanain Ahmed, a dentist in Baghdad,?spends a quarter of his income, about $1,000 a month, to run a generator that powers the air-conditioning and lights at his home and clinic. The Ministry of Electricity says generation has increased to 24,000 megawatts, 22 per cent higher than last year, but this still falls well short of 34,000 megawatts of demand.

Meanwhile, retired horticulturalist Sahar Salam in Damascus relies on a car battery to keep the power on. Fuel shortages have limited the use of generators, and?war-ravaged Syria produces just 2,000 megawatts, down from 5,800 megawatts in 2010.

Heatwaves in Asia are?challenging the region’s surging renewable capacity, requiring coal and gas-fired plants to remain on standby as demand for air conditioning soars. Grids need to be modernised to accommodate more wind and solar power across India, China and other countries. Malaysia, Pakistan, Bangladesh and Vietnam have all experienced power cuts during recent hot weather.

European?emissions rose 9 per cent?from 2020 to 2022, as the continent recovered from the pandemic, and switched from gas to coal in the wake of Russia’s invasion of Ukraine. But emissions should decline again from this year, as renewable deployment and efficiency improvements continue, with drops further from 2025 as additional LNG becomes available to replace coal. Sweden has signed an agreement with the US to?work on nuclear power, after changing its clean power target from “100 per cent renewable” to “100 per cent fossil-free”.

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Oman to be hydrogen leader

Oman has made striking progress in its hydrogen industry, and received positive coverage in the latest International Energy Agency (IEA) report. On Thursday, the sultanate signed agreements with two consortia for?$10 billion worth?of projects. But how can?Mena countries generate value?from this emerging fuel amid strong global competition? The Hydrogen Council, a Belgium-based international organisation, has teamed up with the One Planet Sovereign Wealth Funds Network to?speed up the deployment?of clean hydrogen.

The Statistical Review of World Energy, formerly issued by BP and released yesterday for the first time by the Energy Institute, found renewables had their?biggest ever expansion?last year, reaching 12 per cent of global power generation and meeting 84 per cent of demand growth. But, as nuclear dropped, fossil fuels still made up nearly 82 per cent of total energy, barely changed from 2021.

The IEA’s scenario for net-zero emissions by 2050 would require $75 billion of investment by 2030 to?cut methane leaks?from the energy sector by 75 per cent. Methane is a short-lived but powerful global warming gas.

The International Renewable Energy Agency, which has its headquarters in Abu Dhabi, says that?1,000 gigawatts of renewable energy?must be added each year by 2030 to meet climate goals – a record 300 gigawatts were installed last year. A joint report by the IEA and the International Finance Corporation finds that emerging and developing economies need to?boost clean energy spending?to $2.8 trillion annually by the early 2030s, from $770 billion in 2022. But one prominent player, Siemens Energy’s wind division, is struggling with faulty components that could?cost it more than €1 billion?($1.10 billion). Progress in wind energy has stalled recently with rising costs and supply chain problems.

Northvolt, a Swedish battery maker, aims to produce “the world’s greenest battery”, and could be a key player in Europe’s electric vehicle (EV) transformation. CYVN Holdings, an Abu Dhabi-backed investment company, will take a?7 per cent stake in Nio, a Chinese EV maker, for $738.5 million, and Saudi Arabia has granted a?licence to Ceer, the country’s first domestic EV brand. But EV manufacturers are having to?rush to secure graphite, a key component of their batteries as demand soars. They are trying to cut reliance on China and turning to new suppliers such as Mozambique and Madagascar. Plans to reuse electric car batteries for grid storage?may not be straightforward?as drivers keep their cars for longer or the batteries are recycled for materials.

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'A lot of money in the world' to tackle climate change at Paris summit

The?New Global Financial Pact Summit?in Paris drew world leaders from countries and global organisations including France, Saudi Arabia, Egypt, the World Bank, IMF and the UN. “No decision maker or country should ever have to choose between reducing the problem of poverty and?protecting our planet,” said French President Emmanuel Macron. “There's a lot of money in the world … I think we can make our system work much better if this cash was used to serve progress for the planet.”

Dr Sultan Al Jaber, President-designate of Cop28,?met Brazil’s President Luiz Inacio Lula da Silva?in Paris to discuss his country’s hosting of Cop30. Dr Al Jaber also spoke to support delivery of financial pledges, noting it is important to “simplify, speed up and standardise access to climate funds across international financial institutions and specialised funds”. Middle East investors have a crucial role to play in?closing the $30 trillion gap?in financing the UN’s Sustainable Development Goals by 2030.

The Abu Dhabi International Petroleum Exhibition and Conference (Adipec), running from October 2 to 5 this year, has chosen the theme “Decarbonising. Faster. Together”. Razan Al Mubarak, UN Climate Change High-Level Champion for Cop28, has emphasised the need for a hopeful atmosphere in building on the first three years of the?Race to Zero campaign, which aims to bring businesses and cities together in climate action. The UAE has appointed two Emiratis as?sustainability ambassadors?ahead of Cop28.

Ecosystems affected by climate change are?vulnerable to sudden collapse, finds research from a British agricultural institute.?Drones could make cloud-seeding more effective?in promoting rainfall, a UAE-supported study has shown. Environment Agency Abu Dhabi has brought together a group of leading UAE-based universities to co-operate on?researching the most pressing climate problems.

Ethiopia is preparing for the?fourth filling?of its Grand Ethiopian Renaissance Dam on the Blue Nile, a move that is likely to worry Egypt downstream. The?civil war in Sudan?robs Cairo of a supportive neighbour in the dispute. Nigeria’s “Happy City” is one place on the front line of encroaching seas. As Africa loses up to 15 per cent of its gross domestic product to climate-related problems, the continent is holding the?Africa Climate Summit?in Kenya in September, as a springboard to engagement at Cop28. The summit sees Africa’s potential in renewables, clean energy minerals and carbon sinks.