Energy This Week: Saudi cuts oil capacity target, US pauses LNG approvals, Suez transit down 42%, renewables to overtake coal
Saudi Aramco drops plans for 13 million bpd capacity, casts shadow over demand outlook
Oil registered its biggest weekly gain since October, buoyed by worsening threats in the Middle East and Red Sea – but more by positive economic news, including hopes of Chinese stimulus, rate cuts in Europe and better-than-expected US data. US crude stocks fell , probably mostly due to freezing weather in key producing areas. Brent crude closed at $83.55 a barrel on Friday.
Nevertheless, the world’s biggest oil-producing company, Saudi Aramco, announced it will drop its plans to reach 13 million barrels per day of sustainable capacity by 2027, instead holding at the current 12 million bpd.
The change will save on capital expenditure in the near-term, but may represent a view that demand growth will be weaker and supply expansion from outside the Opec+ group stronger than previously thought.
Current production is already about three million bpd below existing capacity, suggesting it is not necessary to make further additions promptly.
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Suez transits down 42% as Red Sea strikes continue
The Red Sea area has continued to suffer attacks on shipping from Yemen's Houthi rebels. A fuel tanker in the Gulf of Aden was set on fire by a missile on Friday, but the blaze was extinguished.
On Sunday, Iran seized a vessel it accused of carrying “smuggled fuel” in the Gulf. QatarEnergy has said some of its liquefied natural gas deliveries may be delayed as cargoes are rerouted. Italy and Poland are the most dependent countries in Europe on Middle East LNG, each getting about 40 per cent of their supplies of the fuel from the region.
Shipping transits through the Suez Canal have dropped 42 per cent in the last two months, because of the attacks on vessels transiting the southern Red Sea area. Twelve per cent of world traffic usually passes through the canal, and the fall is a blow to consumers and the Egyptian government, for whom tolls are an important source of income. The security of shipments of food and LNG are now in question.
Those shipping lines continuing to brave the route are paying more in insurance and offering double pay to crew, as well as giving seafarers the option to disembark rather than sail through the dangerous area. Ships may turn off their transponders to avoid broadcasting their location and identity.
A suspected drone hit a liquid storage tank at the Khor Mor gasfield in the Kurdistan Region of Iraq, operated by Sharjah-based Dana Gas. The field is the largest supplier of gas to the semi-autonomous region, but was attacked several times over the last two years without suffering damage or casualties.
Politics drive US LNG export review
The US government has paused approval of new liquefied natural gas export projects while it introduces new environmental reviews.
The move, mostly politically motivated, does not have an immediate impact on the LNG market, as several large American projects are still under construction and not affected by the rethink. But if it signals a longer-term halt in exports from the US, which has rapidly become the world’s biggest supplier, this would tarnish the country’s reputation as a secure source, and damage both energy security and environmental goals .
LNG is important for replacing coal in fast-growing Asian economies, and on Tuesday, Adnoc agreed to a 10-year deal for the supply of half a million tonnes year of LNG to India’s state gas utility Gail.
British energy company Octopus is in talks with Ukrainian utility DTEK to see how they could repair Ukraine’s electricity infrastructure , which has come under heavy air attack by Russia.
Borouge, the petrochemical joint venture between Adnoc and Austria’s Borealis, has finished more than half of its Borouge-4 expansion in Abu Dhabi, which will raise its production capacity of polyolefins such as polythene and polypropylene to 6.4 million tonnes per year.
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Renewables to surpass coal next year
Friday was the inaugural International Day of Clean Energy , declared by the UN to mark the founding of the Abu Dhabi-based International Renewable Energy Agency (Irena).
This day marks the advantages of renewable energy in terms of low costs and greenhouse gas emissions, as well as how it supports sustainable development. The International Energy Agency says that renewables will overtake coal and provide a third of world electricity by next year. With nuclear power also expanding, the share of fossil fuels will fall below 60 per cent for the first time in more than five decades.
Daimler Truck of Germany and Abu Dhabi’s clean energy company Masdar have agreed to study liquid hydrogen exports to Europe by 2030, to reduce emissions from heavy goods transport on roads. Daimler Truck wants its entire range of lorries and buses to be carbon-neutral in driving by 2039, using both hydrogen and battery methods. Masdar also signed an agreement with shipping group CMA CGM to supply green alternative fuels , derived from hydrogen.
A sharp drop in Tesla’s shares has taken the net worth of chief executive Elon Musk below $200 billion. The electric car-maker warned on Thursday that its sales will slow this year, and it has now fallen behind China’s BYD as the world’s leading EV seller. Mr Musk owns about 13 per cent of the company.
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Azerbaijan focuses on water at Cop29
Azerbaijan is preparing to host the next UN climate conference, Cop29, in November. Pollution, water shortages and how to bring clean technology to poor countries will be key focus areas.
Groundwater is declining rapidly around the world, with more than two thirds of aquifers surveyed globally dropping. Iran is particularly badly hit while aquifers in Saudi Arabia, Spain and around Thailand's capital Bangkok appear to be recovering following policy changes.
The Environment Agency Abu Dhabi has completed a genetic survey of the national tree, the ghaf tree, to understand how it survives the arid environment.
Education is critical to empower families to tackle climate change, says Amna Al Shamsi, newly appointed UAE Minister of Climate Change and Environment.
In Paris, protesters threw soup on the Mona Lisa – which is protected by a glass panel – in a protest about climate and farming.
Nationwide French protests by farmers highlight the concern of Irena secretary general Francisco La Camera that major elections around the world this year could slow the pace of the energy transition.
India, the EU, the US, South Africa, Mexico, Venezuela, Indonesia, probably the UK and others go to the polls this year, with climate policy often a divisive issue.