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03/12/24

Treasury eyes 45Z guidance before Biden exit

Treasury eyes 45Z guidance before Biden exit

New York, 3 December (Argus) — The US Department of Treasury said it still plans to issue guidance before president Joe Biden leaves office next year clarifying how refiners can qualify for a new tax credit for clean fuels. The agency "anticipates issuing guidance" around the Inflation Reduction Act's 45Z credit before 20 January to "enable producers to claim the 45Z credit for 2025", disputing a report today that the Biden administration planned on punting implementation to president-elect Donald Trump. The credit, set to kick off regardless on 1 January, will differ from some prior federal incentives by offering greater subsidies to fuels that produce fewer greenhouse gas emissions. Treasury did not commit to any definitive timeline for releasing guidance, and it did not immediately clarify how thorough any eventual rule would be. Companies in the biofuel supply chain say the current lack of clarity from Treasury — particularly on how it will calculate carbon intensities for various fuels and feedstocks — has slowed first quarter dealmaking. Government guidance could make or break the economics of certain plants, particularly for relatively higher-carbon fuels like soy biodiesel or jet fuel derived from corn ethanol. The US Department of Agriculture's timing for releasing a complementary rule to quantify the climate benefits of certain agricultural practices, envisioned as a way to reward refineries sourcing feedstocks from farms taking steps to reduce their emissions, is unclear. The agency said today that a "rulemaking process" in response to its request for information on climate-smart farm practices is "under consideration" but did not elaborate. Agriculture secretary Tom Vilsack had insisted earlier this year that his department would release some package before the end of Biden's term. Some industry groups remain pessimistic that the Biden administration will answer all of the thorny questions still lingering around the 45Z credit, especially given signals earlier this year that other Inflation Reduction Act programs would take priority. The Renewable Fuels Association, which represents ethanol producers, says final regulations around 45Z "seem highly unlikely" before the end of Biden's term but that it hopes Treasury releases at least some "basic information" or safe harbor provisions. Delays getting credit guidance could prod Congress to extend expiring biofuel incentives for another year, including a $1/USG credit for blenders of biomass-based diesel. Some formerly skeptical lobbying groups have recently come on board in support of an extension, fearing that biofuel production could slump next year given the lack of 45Z guidance and uncertainty about how Trump will implement clean energy tax credits. But four lobbyists speaking on background told Argus today that the proposal still faces long odds. Congress has various other priorities for its relatively brief lame duck session, including government funding and disaster aid, that take precedence over biofuels. A staffer with the Democratic-controlled US Senate Finance Committee said last month that Republicans have been reluctant to negotiate tax policy in a divided Congress this year when they are planning a far-reaching tax package under unified Republican control next year. By Cole Martin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Industry wary of Trump tariffs on Canada, Mexico


03/12/24
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03/12/24

Industry wary of Trump tariffs on Canada, Mexico

Washington, 3 December (Argus) — US president-elect Donald Trump's plan to impose 25pc tariffs on all imports from Canada and Mexico could have a profound impact on the US oil and gas industry and the US' diplomatic efforts, energy industry representatives said at an industry conference on Tuesday. Cenovus Energy, the second-largest oil and gas producer in Canada, is paying close attention to Trump's rhetoric on trade, and trying to "educate" policymakers in the incoming Trump administration on how tariffs on Canada could impact North America's deeply integrated energy system, Cenovus director of US government affairs Steve Higley said at the North American Gas Forum in Washington, DC. The US in 2023 imported 3.9mn b/d of crude oil from Canada and 730,000 b/d from Mexico, accounting for 60pc and 11pc of US crude imports, respectively, according to US Energy Information Administration (EIA) data. Refineries in the US Midwest's PADD 2 region also process about 2.5mn b/d of Canadian crude, Higley said. The US also exports a significant amount of natural gas to Mexico — 6.2 Bcf/d (176mn m³/d) in 2023, according to the EIA — which is another "reminder of how integrated the North American energy system is," said Dustin Meyer, senior vice president of policy at the influential trade group American Petroleum Institute (API). Retaliatory tariffs by Mexico, threatened by Mexican president Claudia Sheinbaum last week in response to Trump's initial threat of tariffs, would likely impact that gas trade. Sheinbaum and Trump have since taken on a more conciliatory tone toward the subject after the two had what Trump called a "wonderful" conversation. API repeatedly called on Trump in his first administration to de-escalate his trade dispute with China, which it said threatened investment in US LNG. A section of API's website on trade titled "The Truth about Tariffs" reads: "Tariffs are taxes on imported goods that increase costs for consumers." Aside from the threat of tariffs causing "alarm" in Canada, it is not clear how US consumers would benefit from a tariff on all Canadian products, including oil and gas, said Robert Johnston, senior director of research at Columbia University's think tank Center on Global Energy Policy. On the diplomatic front, there is a "tension" between the incoming Trump administration's argument that US oil and gas production must be increased to support American allies, when it is also threatening tariffs to support American industry over that of its trade partners, Johnston said. The initiation of new trade disputes could also erode the US' ability to compete with China, said Jason Grumet, chief executive of trade group American Clean Power Association. "Are we trying to take China on alone, or are we trying to build a global economy of the democratic nations who have been our allies for 50 years?" Grumet asked. Whether the incoming Trump administration will actually go ahead with tariffs on Canada and Mexico is far from certain. From its rhetoric, the administration appears to care deeply about narrowing the US' trade deficit, leveraging its massive energy production on the global stage, and keeping energy prices low for US consumers, Meyer said. But "if that's the vision, what is the form that specific policies take?" he asked. By Julian Hast Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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RLG production forecasts fraught with uncertainty


03/12/24
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03/12/24

RLG production forecasts fraught with uncertainty

Government backing and co-operation between competitors are needed to align with the targets for RLG output, writes Matt Scotland London, 3 December (Argus) — The production of renewable LPG and dimethyl ether (DME) is projected to rise to 60mn-120mn t/yr by 2050 under a supportive policy scenario, consultants told attendees of this year's LPG Week conference in Cape Town, South Africa, over 18-22 November. But such forecasts continue to be laced with uncertainty given the enormous challenges involved in reaching commercial-scale output. Output of both fuels, often pooled together under the umbrella term renewable liquid gas (RLG), could grow to 4mn-9mn t/yr by 2030 and 8mn-27mn t/yr by 2040 under the same scenario, according to the findings from a soon-to-be-released report from consultancies NNFCC and Frazer-Nash. But under a situation where no policy support is forthcoming, volumes are about a quarter of these projections, NNFCC managing director Adrian Higson told the audience. RLG production could then exceed 100mn t/yr by 2050-55 and 200mn t/yr by 2060-65, Frazer-Nash consultant Jeremy Revell said, adding the caveat that greater uncertainty exists over a long timeframe. Biogas to LPG "offers the best potential route to renewable LPG beyond 2050", while gasification to DME does likewise for rDME. "One of the main surprises was just how much liquid gas we could produce by 2050, especially the role rDME could play from the gasification pathway," Revell said. "It has high potential yields and a lot of feedstock to support it." Speakers at the event were keen to emphasise the high level of uncertainty involved in RLG development, and just how much rests on the degree of government backing when it comes to projecting growth. And even assuming a supportive policy scenario does not necessarily equate to clear-cut support for RLG, bearing in mind it will be competing with other technologies, BioLPG LLC chairman Kimball Chen told delegates. "I don't know yet what supportive policies we want and for which solutions," he said. More co-operation between competitors in the LPG industry is needed to ease uncertainty, while allowing for competition between individual firms or partnerships, Chen said. "SHV and DCC [through their recently announced RLG collaboration] and my consortium [bioLPG LLC] with 12 European and American companies share the same technical challenges and will be competing for the same feedstocks, so the way we think about competition and increasing our chances for success as an industry and individually need to be further delineated," he said. Cost calculation Feedstock availability in many of the study's pathways is not a concern, with the possible exception of bioLPG from hydrotreated vegetable oil and hydroprocessed esters and fatty acids, something not unexpected, DCC's director of sustainable gas, Emmanuel Mannooretonil, said. The issue is having feedstock at the right price. "Now we see that technically it's possible and the feedstock exists, the next question is can we make a product good enough from an environmental and affordability standpoint for policy makers to support?" he said. The maturity of the technology is a challenge for the LPG industry, with "decisions of large financial magnitudes" required to get there, Chen added. "We have a race against time." Cost will remain a problem over the medium and long term because of the technological limits, Chen said. But perhaps the biggest challenge is the reluctance to build a first-of-a-kind plant, SHV Energy's head of sustainable fuels policy, Goher Ur Rehman Mir, said. SHV is testing a number of production routes for RLG, including converting ethanol to butane. But pilot plants and then demonstration facilities are required first, necessitating more investment and collaboration, he said. "We need to join forces, which is why we have signed [an initial agreement] with DCC Energy," he said. "But we are open to collaborating with other stakeholders to develop a consortium to progress this process fraught with difficulties." Production pathways Source Product Alcohol Renewable LPG Biogas Renewable LPG CO2 and H2 Renewable LPG and DME Gasififcation with Fischer-Tropsch Renewable LPG Gasification Renewable DME HVO and Hefa Renewable LPG Pyrolosis Renewable LPG — NNFCC, Frazer-Nash Renewable LPG, DME output forecast averages* Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Mexico central bank flags 2025 growth uncertainty


02/12/24
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02/12/24

Mexico central bank flags 2025 growth uncertainty

Mexico City, 2 December (Argus) — Mexico's central bank (Banxico) maintained its base-case 2025 GDP growth estimate at 1.2pc, with a range of 0.4pc to 2pc, citing heightened global uncertainty fueled by geopolitical conflicts and potential shifts in international economic policies. Central bank governor Victoria Rodriguez last week addressed US president-elect Donald Trump's proposed 25pc tariffs on Mexican goods, urging caution until the trade situation clarifies. Mexican president Claudia Shienbaum initially responded with a firm stance, saying Mexico could apply counter-tariffs. Later, Sheinbaum and Trump had a "friendly" phone call to discuss issues surrounding the proposed 25pc tariff on Mexican and Canadian imports, Sheinbaum said. Banxico raised its 2024 GDP growth forecast to 1.8pc from 1.5pc in its previous quarterly report in August, driven by stronger-than-expected third-quarter performance. Still, Banxico noted that the additional growth is driven by increased spending on imported goods rather than domestic production, particularly in investment and private consumption. Inflation dynamics remain mixed. While headline inflation rose to an annualized 4.76pc in October, core inflation eased to 3.58pc, its lowest level since mid-2020. Rodriguez emphasized progress on inflation despite external uncertainties, signaling room for further monetary easing. Banxico cut its target interest rate by 25 basis points to 10.25pc on 14 November and is widely expected to lower it again to 10pc at its 19 December meeting. Projections from Mexican finance executives institution (IMEF) suggest the rate could drop to 8.25pc by the end of 2025. Banxico also revised its 2024 inflation forecast to 4.7pc from 4.4pc in the August report but expects inflation to return to its 2–4pc target range by early 2025, with a 3pc rate projected by the fourth quarter. Other adjustments include a downgraded forecast for formal job creation in 2024 and 2025, with the range estimate for full-year job creation in 2024 dropping to 250,000–350,000 from 410,000-550,000 in August. The 2025 estimate came down to 340,000–540,000 from 430,000–630,000.The 2025 trade deficit outlook was also tightened to $14.9bn–$22.1bn, compared to a previous range of $13.7bn–$23.7bn. By James Young Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Lower prices support German fuel demand


02/12/24
News
02/12/24

Lower prices support German fuel demand

Hamburg, 2 December (Argus) — German demand for heating oil, diesel and E5 gasoline increased in the week to 29 November, supported by a fall in domestic prices. The switch to winter grades and low stocks further boosted fuel demand. Middle distillates traded at lower prices nationwide last week, with heating oil and diesel prices falling by around €0.60/100 litres compared with the previous week. The drop was in line with a decline in the value of Ice gasoil futures, which came under pressure from the prospect of US tariffs against Canada, China and Mexico indicated by president-elect Donald Trump. Oversupply from refineries in the south and west of Germany put further downward pressure on domestic prices last week. Suppliers offered heating oil, diesel and gasoline from Bayernoil's 215,000 b/d Neustadt-Vohburg complex, Miro's 310,000 b/d Karlsruhe refinery and Shell's 334,000 b/d Rhineland complex at lower prices than surrounding loading locations in order to fulfil their contractual offtake volumes by the end of the month. The switch to winter grades supported German fuel demand last week. Consumers ordered smaller quantities of diesel in recent weeks as they waited for the switch to winter specification grades before replenishing their stocks. Since the switch, traded diesel spot volumes reported to Argus have steadily risen. An anticipated €10/t rise in Germany's CO2 tax next year will likely lead to increased stockpiling of product from mid-December, according to traders. End-consumer tank levels for diesel were at just 52pc at the end of last week. The extent to which the increase in the CO2 tax will put pressure on diesel imports depends on whether German refineries can maintain current high throughput levels. For the time being, imports into Germany via the country's northern ports or along the Rhine are not feasible because of the comparatively low domestic prices. By Johannes Guhlke Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.