Oil & Energy

Date Issued – 2nd April 2024

Courtesy of?Steve Alain Lawrence, Chief Investment Officer

Janis Urste, Chief Market Strategist

Global Refining Capacity Faces Closure Risks

Over a fifth of the world's refinery capacity, totaling 20.2 million barrels per day, is at risk of closure by 2030 due to diminishing margins, declining demand, and carbon taxation impacts, says Wood Mackenzie. Particularly in Europe and China, refineries face shutdown threats from regulatory shifts and an expected downturn in fuel demand. Europe’s refining margins are forecasted to drop as carbon allowances expire and demand decreases, while China anticipates a decline post-2027 due to electrification efforts.

The global dip in fuel demand will also affect non-OECD regions, despite their continued growth beyond 2030. The Dangote Refinery’s start-up could disrupt Europe’s fuel exports to Nigeria, risking a $17 billion annual trade. Simultaneously, several European refineries are pivoting to biofuel production, reflecting a shift towards greener energy sources.

UK's Liberty Steel Wins Key Energy Infrastructure Contract

Liberty Steel has clinched a pivotal contract to provide pipelines for key UK energy and carbon capture ventures from its Hartlepool site, aligning with the Northern Endurance Partnership and Net Zero Teesside Power projects aimed at CO2 management and innovative carbon capture power generation. Awaiting regulatory and investment decision approvals, with expectations set for a start in early 2025, the specifics of the contract, including financial terms and supply volume, are yet undisclosed.

This agreement signifies a strategic advancement in UK steel production, with Hartlepool's facility, acquired from Tata Steel in 2017, positioned to annually roll out 250,000 metric tons of pipeline products. Furthermore, the plant has distinguished itself as the UK's inaugural producer of hydrogen-safe pipelines, marking a notable step in supporting the nation's energy transition initiatives.

Fisker’s Recent Strategy

Fisker is cutting prices on its Ocean SUV by 39% to $37,499 for the "Extreme" model, a move to stay competitive in the tough EV market and avoid bankruptcy amid financial struggles. This drastic price reduction reflects Fisker's effort to navigate through liquidity challenges and a broader industry trend of EV price wars initiated by Tesla. With increased competition and automakers like Nissan, Ford, and GM reconsidering their EV strategies, the sector faces hurdles in meeting ambitious EV adoption goals. Concerns over the reliability and cost-effectiveness of EVs compared to traditional vehicles add to the industry's challenges, highlighting the complexities of transitioning to electric mobility.

India Expands Ocean Mining for Green Transition Metals

India has sought two additional licenses from the International Seabed Authority (ISA) to explore the Indian Ocean seabed for minerals vital to the green energy transition, potentially bringing its total to four and making it second only to China in deep sea mining exploration contracts. China leads with five contracts. Out of the ISA's 31 contracts, 30 are active, spanning 15 years each, involving both government entities and private companies.

The contracts cover three types of mineral explorations: polymetallic nodules, polymetallic sulfides, and cobalt-rich ferromanganese crusts. India's new applications aim at the latter two, targeting specific areas in the Central Indian Ocean. The endeavor reflects a broader debate: proponents see deep sea mining as essential for the green transition, while opponents call for more environmental impact studies before proceeding with extraction in Earth's "final frontier."

Innovative Biodiesel Method Revolutionizes Metal Recycling

Researchers at Chalmers University have developed a sustainable method to recycle and purify metals using bio-based solvents, a significant shift from the reliance on fossil fuels. This method, leveraging biodiesel from forestry by-products for purifying gold and other metals, presents a greener alternative crucial for various industries, from electronics to green technology.

Notably, this approach is applicable to a range of metals, including copper, platinum, and rare earth elements essential for modern technology and energy solutions. With the metal industry requiring significant investments for recycling and refining, this advancement could foster interest in adopting more sustainable practices.

Olympics Aim for Historic Environmental Standards

The French government aims to set a new standard with the 2024 Paris Olympics, aspiring to halve the event's carbon emissions compared to previous games. Embracing renewable energy, repurposing existing structures, and planning for post-games community use of newly built facilities, Paris's green strategy is a bold step away from traditional event hosting practices. This initiative is part of a broader effort to transform Paris into a sustainable city, featuring expanded bike lanes and increased green spaces.

Amidst global attention, Paris is determined to showcase how major sporting events can significantly reduce their environmental impact, learning from past events like the Qatar World Cup, which faced criticism for not fulfilling its "carbon neutral" promises.

U.S. Drilling Declines

Last week, U.S. drilling rigs for oil and gas declined by 3 to 621 this week, down from 755 a year ago, with oil rigs decreasing to 506 and gas rigs holding at 112. U.S. crude production stayed at 13.1 million bpd. The Frac Spread Count, indicating well completion activity, dropped by 4 to 265. The Permian Basin saw a slight increase of 1 rig, while the Eagle Ford's count remained unchanged.

Global Water Stress to Affect a Third of Humanity

By 2050, global water stress is projected to escalate significantly, with 2.4 billion people already living in areas of extreme water stress. Projections indicate that 51 out of 164 countries will face high to extremely high water stress, affecting about 31% of the global population.

This scenario predicts substantial temperature rises and highlights regions such as the Arabian Peninsula, Iran, India, and parts of North Africa as areas of concern, with these regions expected to consume at least 80% of their available water resources. Southern Europe and countries like France and Poland are also anticipated to experience varying degrees of water stress, underscoring a global trend towards increasing water scarcity.

[Disclaimer: This article provides financial insights & developments for informational purposes only. It does not constitute financial advice or recommendations for investment decisions.]

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