Argus Live: Clean energy faces investment challenges

  • Market: Crude oil, Hydrogen
  • 28/01/21

The shift to a lower-carbon future risks "de-commoditising" the energy market, which could discourage investment in the clean energy sector, the Argus Crude Live virtual conference heard today.

Over the past 40 years, centralised liquidity in a few core benchmarks has grown, resulting in the price discovery of major contracts, such as gasoline and crude, exchange operator CME's managing director and global head of research and product development Owain Johnson told the conference.

There are few concerns surrounding the operation of these core benchmarks as they are underpinned by strong liquidity, and they have established financial instruments and forward curves. The absence of these for clean energy products, such as hydrogen and cobalt, will make it difficult to lock in forward prices and for banks to secure their investments. Cobalt can be used to split water for hydrogen production.

"You're never going to get a seven-year curve on hydrogen or cobalt, you cannot lock in those prices. So if I'm a bank going to a cobalt producer or to fund a hydrogen project, how do I know I'm going to get paid in three years' time?" Johnson said.

This has raised questions whether banks take the more "dangerous" route of avoiding hedging or using an instrument that may be inappropriate, the conference heard.

"Do we need hydrogen instruments, or will people lock it in versus natural gas where there is more of a forward curve? Are liquidity and transparency better than an active hedge that really reflects what I need?" Johnson said. Fragmentation and multiple fuel sources in different regions do not lead to core price discovery, particularly on the forward curve that will attract finance into the sector, he added.

It is also important for the trading community to develop benchmarks and certification for clean and sustainable forms of oil, the IEA's chief economist Laszlo Varro told Argus Crude Live delegates.

"[CME] is trying to respond with products that support the energy transition, so you've seen us in ethanol for many years, we launched used cooking oil with Argus this summer as a risk management tool, and we've seen cobalt start trading just in the last few weeks," Johnson said. And there has been a shift from coal trading towards natural gas trading.

But early stages of the energy transition have had limited impact on crude and products trading, with the market still developing new contracts, oil benchmarks and risk management tools.

Investment in upstream oil and gas will still need to continue throughout the energy transition, Laszlo said. Under the IEA's sustainable development scenario, in which the world achieves net zero emissions by 2070, oil demand falls to 66.2mn b/d by 2040, from around 97.9mn b/d in 2019.

The Covid-19 pandemic resulted in oil and gas companies cutting upstream investment by around a third last year to around $300bn.

"[This is] broadly speaking the same volume of investment that you need year after year during the energy transition to supply this gently declining demand," Laszlo said. "The projects at the companies [which] survived the baptism of fire [in 2020] are actually quite well positioned for the transition."


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Long-term contracts needed to stabilise gas prices: MET

Long-term contracts needed to stabilise gas prices: MET

London, 28 March (Argus) — Germany and Europe need more LNG and business-to-business long-term contracts to even out supply shocks and stabilise gas prices, even as demand is unlikely to reach historical heights again, chief executive of Swiss trading firm MET's German subsidiary Joerg Selbach-Roentgen told Argus . Long-term LNG contracts have a "stabilising effect" on prices when "all market participants know there is enough coming", Selbach-Roentgen said. He is not satisfied with the amount of long-term LNG supply contracted into Germany, arguing that stabilisation remains important even now that the market has "cooled down" after the price shocks of 2022. Long-term contracts are important for the standing of German industry, Selbach-Roentgen said — not to be reliant on spot cargoes is a matter of global competitiveness for the industrial gas market, he said. The chief executive called for more long-term contracts in other areas as well, such as for industrial offtakers, either fixed price or index-driven. Since long-term LNG contracts are concluded between wholesalers and producers, the latter need long-term planning security for their projects, which usually leads to terms of about 20 years. But long-term LNG contracts in general do not represent a major risk for MET nor for industrial offtakers in Europe, Selbach-Roentgen said. LNG is a more flexibly-structured "solution" to expected demand drops in regard to the energy transition as the tail end can be shipped to companies on other continents such as Asia if European demand wanes, he said. Gas demand is not likely to recover to "historical heights" again, mostly driven by industrials "jumping ship", Selbach-Roentgen said. When talking to large industrial companies, the discussion is often about the option that they might divert investments away from the German market as the price environment is "not attractive enough" for them any longer in terms of planning security, the chief executive said. This trend started out of necessity in reaction to the price spikes but may now be connected to longer-term "strategic" considerations, he said. In addition, industrial decarbonisation — as well as industrial offtakers' risk aversion because of the volatile gas market following Russian gas supply curtailments — leads companies to invest less into longer-term gas dependencies in Germany, Selbach-Roentgen said. In addition, MET advocates for a green gas blending obligation of 1-2pc green gas or hydrogen, in line with legislative drafts under discussion by the German government. This has already met with interest by offtakers, despite uncertainties around availability and prices, and would provide a regulatory framework that allows firms to prepare for the energy transition, Selbach-Roentgen said. By Till Stehr and Rhys Talbot Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Baltimore bridge collapse to raise retail fuel prices


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27/03/24

Baltimore bridge collapse to raise retail fuel prices

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27/03/24

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27/03/24
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Inversiones en gas En el sector del gas, Carso Energy también opera el gasoducto de gas natural Sasabe-Samalayuca de 472mn cf/d y es socio en las líneas estadounidenses de interconexión Waha-Presidio y Waha-San Elizario. Pero mientras que la mayoría de las empresas del sector de la energía han visto un colapso de las oportunidades de inversión durante la administración de López Obrador, el Grupo Carso parece ser una de las pocas empresas del sector privado con las que el presidente permitirá que las empresas estatales Pemex y CFE hagan negocios. CFE adjudicó directamente un nuevo contrato de gasoducto al operador en diciembre del año pasado, con un acuerdo para ampliar la línea de gas Sasabe-Samalayuca de 416km y 472mn cf/d de Sasabe, Sonora a Mexicali, Baja California. López Obrador, a menudo crítico de las empresas del sector privado dentro del sector de la energía, incluso ha elogiado el papel creciente de Slim en el mercado del petróleo y el gas, celebrando su adquisición del contrato Petrobal por permitirle "permanecer en manos mexicanas." Mirando hacia el futuro, los profundos bolsillos del Grupo Carso podrían convertirlo en un socio potencial para desarrollar el campo de gas de aguas profundas de Lakach tras la decisión de New Fortress Energy de retirarse el pasado mes de noviembre. Pero el entorno de bajos precios del gas podría complicar el proyecto en el que Pemex ya ha invertido $1.4 mil millones, mientras que la falta de experiencia de Carso en aguas profundas plantea preguntas sobre su viabilidad como socio. Carso Energy representó sólo 1.6pc de los Ps55.4 mil millones ($3.29 mil millones) totales de ventas del Grupo Carso durante el cuarto trimestre del año pasado, pero la estrategia de adquisición del grupo y el estatus favorecido frente a la administración podrían ver esa cuota aumentar en los próximos años. Por Rebecca Conan Proyectos de energía de Carso Proyecto Tipo de proyecto Tamaño/capacidad Bloque 12 E&P en tierra Fase de exploración Bloque 13 E&P en tierra Fase de exploración Zama E&P en aguas someras 180,000 b/d crudo en 2026 Bloque 4 E&P en aguas someras 11,784 b/d crudo en enero Sasabe-Samalayuca Gasoducto 472mn cf/d Waha-Presidio Gasoducto 1.4 Bcf/d Waha-San Elizario Gasoducto 1.1 Bcf/d Grupo Carso Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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