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Brazil fossil fuel subsidies outpace renewables: Study

  • Spanish Market: Crude oil, Electricity, Oil products
  • 29/10/24

Brazil's spending on fossil fuels subsidies in 2023 was around 4.5 times larger than its spending on renewables subsidies, according to a study published by the institute of socioeconomic studies Inesc.

The country spent R99.8bn ($17.49bn) in subsidies for both fossil fuels and renewables in 2023, a 3.6pc increase from 2022, the study said. Of the total, R81.74bn were related to fossil fuels — a 0.5pc decrease from a year prior — while R18.06bn went to renewable sources, a near 27pc hike from 2022.

The slight fossil fuel subsidies reduction was due to the return of taxes on gasoline, such as the VAT-like PIS/Confins, the study said. "The government lost the chance of providing greater relief for public coffers as it decided to maintain exemptions for diesel," it added.

But while incentives to fossil fuel consumption decreased, those for exploration and production activities increased by R5.55bn.

Cassio Carvalho, a co-author of the study for Inesc, said the fossil fuels subsidies will harm Brazil's energy transition. "The study indicates that consumers are bearing the subsidies for renewables through electricity bills, while the oil and natural gas industry remains untouched," Carvalho said.

Ending subsidies to fossil fuels is an "unavoidable global commitment" laid out in the UN Cop 28 climate summit in Dubai, said Alessandra Cardoso, the other co-authored of the study.

"What is expected of the Brazilian government is that it recognizes the problem of production subsidies as a domestic problem, the solution to which involves global reform," she said. "Brazil needs to take on this agenda as part of its leading role in the global climate scenario, especially as it will host Cop 30."

Brazil will host Cop 30 in 2025 in Para's state capital Belem, on the edge of the Amazon forest.


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09/12/24

German heating oil demand surges before CO2 tax hike

German heating oil demand surges before CO2 tax hike

Hamburg, 9 December (Argus) — Consumers in Germany stocked up on heating oil during the past week in preparation for the CO2 tax hike in 2025, taking advantage of the recent drop in prices. Traded volumes of heating oil, as reported to Argus, rose by almost half last week on the week. Consumers seized the opportunity of low prices — which had fallen by about €4.50/100l since 22 November — to build up their heating oil inventories again, despite storage levels still being unusually high. Privately-owned heating oil tanks were maintained at an average filling level of 60.6pc on 5 December, two percentage points up from 2023, as shown by data from Argus MDX. The continued stocking up on heating oil is largely because of the anticipated price increase from 1 January. Germany's CO2 tax will increase from €45/tCO2eq in 2024 to €55/tCO2eq in 2025. This would result in a price increase of about €2.70/100l for heating oil, according to Argus calculations. But traders are reporting premiums in the range of €3/100l to €4/100l for heating oil in January. Diesel prices could increase by about €3.50/100l in January, Ar gus calculations show. In addition to the CO2 tax increase, the greenhouse gas (GHG) quota, which will rise from 9.35pc to 10.6pc next year, will also impact diesel prices. Diesel for delivery in January is currently trading at between €4/100l and €7.50/100l higher than for December delivery, traders said. As a result, traders anticipate that diesel demand will also increase before the year ends, but it remains low so far. The fill level of industrial diesel tanks has started to recover after hitting a four-year low at the beginning of November. The level was about 53.6pc on 5 December, less than one percentage point below the same time last year. By Natalie Müller Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Shale M&A to pick up pace in 2025 after hitting pause


09/12/24
09/12/24

Shale M&A to pick up pace in 2025 after hitting pause

New York, 9 December (Argus) — A slowdown in shale deals in recent months is set to be reversed next year, helped in part by speculation that oil and gas mergers will have an easier time getting anti-trust approval under president-elect Donald Trump. The $12bn in upstream deals recorded in the third quarter was the lowest tally since the first three months of 2023, just before a record-breaking streak that reshaped the shale landscape and was dominated by blockbuster transactions involving ExxonMobil and Chevron. While buyers have been focused on winning approval from a zealous regulator and pushing deals over the finish line, attention is turning to the billions of dollars of unwanted assets they are likely to want to offload, with companies from ExxonMobil to Occidental Petroleum already active on this front. "You do one of these mega-mergers and now you have to pay for it," law firm Hogan Lovells partner Niki Roberts says. "You pay for it by selling off all the stuff you didn't really want to begin with." One potential upside from the Trump administration may be less attention from the Federal Trade Commission, which has paid closer scrutiny to oil deals in recent months as it cracks down on anti-competitive behaviour. Tie-ups have been delayed while the regulator has sought more details, and two high-profile oil executives were barred from the boards of their acquirers as a condition of approving deals. "The antitrust regulators have been viewed by particularly the traditional oil and gas industry of late as not being friendly to that industry," law firm Sidley global leader of energy, transport and infrastructure Cliff Vrielink says. "You're going to see less resistance to consolidation and you're going to see more people pursuing those opportunities." Oil market volatility has hampered mergers and acquisitions in the past, but observers say price swings are less of a factor these days. And more deals are needed to help companies boost their inventory of drilling locations for as long as cash flow remains king and growing through the drillbit is challenged. Lower interest rates, controlled inflation and regulatory reforms all point to a "robust" M&A market, Sidley partner Stephen Boone says. The majority of deal-making has been focused on oil in recent years, but natural gas is "having a bit of a moment", aided by the surge in demand from a boom in energy-hungry US data centres that are developing and supporting artificial intelligence, Boone says. Privates on parade Private equity is also making a gradual comeback, with teams looking to deploy fresh capital in oil and gas. Quantum Capital Group raised over $10bn in October and EnCap Investments has reloaded with about $6.4bn. "We are just now getting back to pre-pandemic levels of commitment," Boone says. "That bodes towards probably more private equity involvement in the oil and gas space." Fierce competition to get a foothold in the prized Permian basin of west Texas and southeastern New Mexico has sent valuations soaring, and prompted some would-be buyers to look further afield to plays such as the Uinta in Utah and North Dakota's Bakken. "The Permian stays of interest to many because of its consistent returns, but the Permian is a crowded place right now, and so I do think we'll see development of other basins," Roberts says. "But it's all going to depend on price." Close to $300bn in upstream deals were signed in the US over the past two years and this has whittled down the list of remaining targets. But the largest producers may not be done when it comes to seeking out potential acquisitions. "We don't stop looking," ConocoPhillips vice-president and treasurer Konnie Haynes-Welsh told the Rice Energy Finance Summit on 15 November. "We're always looking to be opportunistic." By Stephen Cunningham Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Australia’s QPM to buy Moranbah gas-fired power station


09/12/24
09/12/24

Australia’s QPM to buy Moranbah gas-fired power station

Sydney, 9 December (Argus) — Australian independent QPM Energy will buy the 12.8MW gas-fired Moranbah power station (MPS) as the firm pivots from battery materials to being a central Queensland-focused gas developer. Carbon Logica signed an agreement to acquire the power plant from Sustainable Energy Infrastructure, owned by infrastructure management firm Whitehelm Capital, for A$10.5mn ($6.7mn), QPM said on 9 December. QPM will then lease the facility from Australian mining services firm Carbon Logica, before it takes ownership of the plant. The sale will settle over a four-year period, with operations and maintenance to be conducted by QPM, which will also receive all MPS' electricity sales. QPM also owns the 64 TJ/d (1.74mn m³/d) Moranbah gas project. QPM renamed itself from Queensland Pacific Metals last month, and in April announced it would cut spending on its Townsville Energy Chemicals Hub project which aims to produce 16,000 t/yr of nickel and 1,750 t/yr of cobalt sulphates from imported laterite ore, citing the slumping global nickel price. The company is seeking to increase waste gas production from the Bowen basin's coal mines to 35 TJ/d by late 2024, up from October-December 2023's 28 TJ/d. Coal mines captured under Australia's greenhouse emissions reduction laws must reduce methane gas flaring under stricter laws to be imposed from 1 July 2025. QPM signed a revenue-sharing deal for excess power generated from Thai-owned Ratch Australia's Townsville Power Station (TPS) on 4 December. The 10-year agreement begins on 1 July next year and will cover revenue from the plant above QPM gas supply levels of 12 TJ/d, with operating costs for TPS and the 108 TJ/d North Queensland gas pipeline to be recovered first. Gas peaking plants can generate significant profits as Australia's electricity markets transition supply from thermal to renewable generators, particularly during the evening peak when wholesale spot electricity market prices can soar above A$1,000/MWh. QPM wants to develop 300MW of new gas-fired power generation at its Moranbah project, because of the state government's policy for an additional 3GW of new gas-fired generation as it retires coal-fired plants in the coming years. Only 2.2GW of the presently installed 2.9GW of capacity is being dispatched, mainly owing to a lack of domestic gas supply, QPM said on 14 November. By Tom Major Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Republicans weigh two-step plan on energy, taxes


06/12/24
06/12/24

Republicans weigh two-step plan on energy, taxes

Washington, 6 December (Argus) — Republicans in the US Congress are considering trying to pass president-elect Donald Trump's legislative agenda by voting first on a filibuster-proof budget package that revises energy policy, then taking up a separate tax cut bill later in 2025. The two-part strategy, floated by incoming US Senate majority leader John Thune (R-South Dakota), could deliver Trump an early win by putting immigration, border security and energy policy changes into a single budget bill that could pass early next year without Democratic support. Republicans would then have more time to debate a separate — and likely more complex — budget package that would focus on extending a tax package expected to cost more than $4 trillion over 10 years. The legislative strategy is a "possibility" floated among Senate Republicans for achieving Trump's legislative goals on "energy dominance," the border, national security and extending tax cuts, Thune said in an interview with Fox News this week. Thune said he was still having conversations with House Republicans and Trump's team on what strategy to pursue. Republicans plan to use a process called budget reconciliation to advance most of Trump's legislative goals, which would avoid a Democratic filibuster but restrict the scope of policy changes to those that directly affect the budget. But some Republicans worry the potential two-part strategy could fracture the caucus and cause some key policies getting dropped, spurring a debate among Republicans over how to move forward. "We have a menu of options in front of us," US House speaker Mike Johnson (R-Louisiana) said this week in an interview with Fox News. "Leader Thune and I were talking as recently as within the last hour about the priority of how we do it and in what sequence." Republicans have yet to decide what changes they will make to the Inflation Reduction Act, which includes hundreds of billions of dollars of tax credits for wind, solar, electric vehicles, battery manufacturing, carbon capture and clean hydrogen. A group of 18 House Republicans in August said they opposed a "full repeal" of the 2022 law. Republicans next year will start with only a 220-215 majority in the House, which will then drop to 217-215 once two Republicans join the Trump administration and representative Matt Gaetz (R-Florida) resigns. By Chris Knight Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Denmark's wind tender flop linked to H2 network doubts


06/12/24
06/12/24

Denmark's wind tender flop linked to H2 network doubts

London, 6 December (Argus) — Denmark's failure to attract bids in an offshore wind tender was partly caused by the country's lack of firm commitment to a hydrogen pipeline network, according to Danish and European hydrogen associations. For Denmark's hydrogen industry the failed tender is raising concerns that Copenhagen might resort to state aid for offshore wind, which could jeopardise renewable hydrogen production that is compliant with EU rules. Denmark unsuccessfully offered three areas totalling 3GW in a first part of the auction that ended on 5 December, and will offer another 3GW in a second part ending in April 2025. The "very disappointing" result will now be investigated by the Danish Energy Agency to discover why market participants failed to bid, energy minister Lars Aagaard said. Wind project developers may have worried that low electricity prices in an increasingly saturated power market and inadequate export routes — either via power cables or as hydrogen via pipeline — would deny a return on investments, industry participants said. Ample offshore wind potential could allow Denmark to generate power far in excess of its own needs. But in order to capitalise on this the country would need to find a way of getting the energy to demand markets. Turning offshore wind into renewable hydrogen for export was "a very attractive solution" for developers, Hydrogen Europe chief policy officer Daniel Fraile said, but would rely on timely construction of a network "all the way from the coast to Germany's hydrogen-hungry industry." Denmark's hydrogen network was recently pushed back to 2031-32 from an initial 2028, partly because of an impasse over funding that provoked anger from industry. The government has said it will only help fund the hydrogen transport network if there are sufficient capacity bookings guaranteeing its use. But this approach increases risks for developers, according to Fraile. "You need to handle the risk of winning the offshore tender, finding a hydrogen offtaker in Germany and commit to inject a large amount of hydrogen over several years. Then deliver the project on time and on cost," he said. "This is a hell of an undertaking." Industry association Hydrogen Denmark's chief executive Tejs Laustsen Jensen agreed, calling the failed tender "a gigantic setback". "The uncertainty about the hydrogen infrastructure has simply made the investment too uncertain for offshore wind developers," he said. "Now the task for politicians is to untie this Gordian knot." "Of course, the tender must now be re-run, but if the state does not guarantee in that process the establishment of hydrogen infrastructure, we risk ending up in the same place again," he said. The booking requirement as a prerequisite for funding the network "must be completely removed," Jensen said. Green energy association Green Power Denmark said "there is still considerable uncertainty about the feasibility of selling electricity in the form of hydrogen," but pointed to other factors that may have led to the tender failing to attract bids. Wind turbines and raw materials have become more expensive because of inflation while interest rates have risen sharply, reducing the viability of such projects, the group's chief executive Kristian Jensen said. Unlike some other countries, Denmark does not intend to fund grid connections or provide other subsidies, he said. Unwanted help Hydrogen Denmark's Jensen warned against the government resorting to subsidies to help get offshore wind farms built. "State support for offshore wind would be the death knell" for the hydrogen sector and would "de facto kill all possibilities for a green hydrogen adventure in Denmark," he said. Granting state support for offshore wind farms would mean these assets would not comply with the additionality requirement of the EU's definition for renewable fuels of non-biological origin (RFNBO), which are effectively renewable hydrogen and derivatives. EU rules state renewable assets are only considered 'additional' if they have "not received support in the form of operating aid or investment aid," although financial support for grid connections is exempt from this. "If state aid is provided for the offshore wind that is to be used to produce the hydrogen, we will lose the RFNBO stamp, and the Danish hydrogen cannot be used to meet the green EU ambitions for, among other things, industry and transport, and the business case is thus destroyed," Jensen said. By Aidan Lea and Stefan Krumpelmann Geographical divisions of Denmark's H2 network plan Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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