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Cop 27: Impasse on fossil fuels despite last hour push

  • : Crude oil, Natural gas
  • 22/11/24

The final text from the UN Cop 27 climate summit fell short on efforts to reduce greenhouse gas (GHG) emissions, with no mention of additional curbs on fossil fuels, the largest contributors to global warming, although the issue was debated until the very last minutes of the conference.

This year's Cop was set against a backdrop of rising energy costs and concerns about energy security, with the summit designed to tackle the climate crisis — the third issue of the energy trilemma.

More than 80 countries supported phasing out unabated fossil fuels, EU executive vice-president and lead negotiator Frans Timmermans said. "Sadly, we don't see this reflected here [in the final text]", Timmermans said in his closing speech as the plenary wrapped up on 20 November.

The call for language around curbing fossil fuels did not seem to be one united effort, and the EU cautioned against including coal and gas in the same group, given how much more polluting coal is.

The inclusion of fossil fuels in the final text remained up for discussion until the final few hours of the conference — which ran over by almost two days, and was the second-longest Cop on record — delegates told Argus on the sidelines. Countries with varying degrees of ambition but supportive of phasing out fossil fuels — including Norway, Denmark, Finland, France, Germany, the UK, Colombia and several vulnerable and small island developing states — made "very strong statements", but they faced a battle even to uphold last year's Glasgow Climate Pact, ministers said. The text was "backsliding" from Glasgow's, even in the final hours of negotiations, Tuvalu's finance minister Seve Paeniu told Argus.

"Those of us who came to Egypt to keep 1.5° alive… have had to fight relentlessly to hold the line", UK lead negotiator and Cop 26 president Alok Sharma said in his closing speech on 20 November, in reference to the Paris Agreement's commitment to limit global warming to 1.5°C.

"Many parties, too many parties, are not ready to make more progress today in the fight against the climate crisis. There were too many attempts to even roll back what we agreed in Glasgow", Timmermans said on 20 November.

The final text treads very lightly on any language around fossil fuels, instead calling on parties "to transition towards low-emission energy systems, including by rapidly scaling up the deployment of clean power generation and energy efficiency measures, including accelerating efforts towards the phase down of unabated coal power and phase out of inefficient fossil fuel subsidies". This is a repeat of the Cop 26 text and represents no increase in ambition on the topic.

Tough sell

Saudia Arabia was one of several countries that pushed against the use of language targeting fossil fuels in the final text, delegates said. "The convention needs to address emissions and not the origin of the emissions", a member of the Saudi delegation, speaking on behalf of the 22 countries in the Arab League, said on 20 November.

The inclusion of broader language on fossil fuels was destined to be tricky in Egypt. The country's oil minister Tarek el-Molla said last month that natural gas will continue to play a key role in the future energy mix, calling it "the cleanest hydrocarbon fuel" at a meeting of the Gas Exporting Countries Forum.

It could be an even tougher sell in the UAE, which will host Cop 28 next year and which holds some of the largest spare reserves of the Opec+ coalition. The country's president Mohammed bin Zayed al-Nahyan, speaking at the opening of Cop 27, said that the UAE will continue to supply oil and gas "for as long as the world needs it", stressing the country's role as a responsible supplier.

The global energy crisis was a clear undercurrent at Cop, largely framed in energy security terms. The final Cop 27 text referenced the "unprecedented global energy crisis" and the "urgency to rapidly transform energy systems to be more secure, reliable, and resilient, including by accelerating clean and just transitions to renewable energy during this critical decade of action". It also said that the "increasingly complex and challenging global geopolitical situation… should not be used as a pretext for backtracking, backsliding or deprioritising climate action".

Energy security pressures

But the energy crisis weakened developed countries' hands this year, as they sought to replace Russian fossil fuel supplies. Many developing countries concentrated on this, setting out their arguments for producing oil and gas, and noting European "hypocrisy" on fossil fuel use.

Germany, seeking to cut its dependency on Russian gas, has signalled its interest in working with Senegal to develop its gas resources. Timmermans, speaking at a Cop side event on 16 November, told economic advisor to the Namibian government James Mnyupe: "I don't want to prevent you from using your fossil fuels, and especially natural gas". But for imports, the EU has been clear that additional gas infrastructure must be pre-fitted so that it can carry hydrogen.

Scrutiny was directed in particular towards the EU — which has of late ramped up coal-fired power generation as it swerves from Russian gas imports — and ministers saw off criticism. The bloc is on track to reduce emissions by 57pc by 2030, from 1990 levels, Timmermans reiterated during Cop. The EU repeatedly said that the only way to bolster energy security and boost energy access in Africa was through renewables.

"Low-emission" fuels

But even the mention of enhancing a clean energy mix through renewable energy proved difficult to push through, which led to the last-minute addition of "low-emission" energy.

The elasticity of the language potentially keeps the door open for significant amounts of technology — nuclear, biomass, biofuels, carbon capture and storage (CCS), and even gas. The language is even pliable enough to keep the use of carbon offsets on the table — an option that factors heavily in corporate decarbonisation plans. UN secretary-general Antonio Guterres has cautioned against the lack of "rigour" in voluntary carbon market credits, while biomass and biofuels often attract concerns over indirect land use change and deforestation, and CCS remains an emerging technology.


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24/10/11

Opec+ cuts hit 4mn b/d

Opec+ cuts hit 4mn b/d

London, 11 October (Argus) — Opec+ has reduced its crude production by 4mn b/d since it started cutting output almost two years ago, Argus' latest output survey shows. Crude output by members subject to cuts fell by 220,000 b/d in September to 33.52mn b/d, driven by reductions in Iraq and Nigeria (see table). This compares with 37.52mn b/d in October 2022, when the alliance announced what would prove to be the in a series of production cuts. September output was not only the lowest since April 2021, but also 330,000 b/d below the group's collective production target. But even with the removal of such a vast amount of crude from the market, oil prices remain $11-15/bl below where they were when Opec+ announced its October 2022 cut. This is partly because production from non-Opec members such as the US, Guyana and Brazil has surged. The US alone has boosted production by 830,000 b/d over the past two years. The lower prices are also partly down to lower-than-expected oil demand, particularly in China. The IEA has made and sees global oil demand growing by under 1mn b/d this year and next, well below the 2.1mn b/d increase seen in 2023. Despite the gloomy demand picture, eight Opec+ members are scheduled to start unwinding 2.2mn b/d of production cuts from December — two months later than initially planned. This is not a foregone conclusion — the group has said this could change depending on market conditions — but a decision to push ahead would only widen an expected supply surplus next year. The eight members are expected to decide on whether to start returning production in early November. Opec+ will be keenly watching how the conflict between Israel and Iran plays out over the coming days and weeks. Rising tensions propelled Atlantic basin benchmark North Sea Dated above $81/bl on 7 October. There are fears that Israel could strike Iran's oil infrastructure in retaliation for . This would put Iranian production — which rose to 3.37mn b/d in September — at risk. Any attack on Iran's oil sector could conceivably see Tehran disrupt regional oil flows through the strait of Hormuz , through which more than 15mn b/d of crude and products are exported. Compensation questions Another factor that could influence Opec+ policy in the coming weeks is the extent to which serial overproducers Iraq, Kazakhstan and Russia can show they are for exceeding their targets. In an effort to start complying with its commitments, Iraq reduced its production by 130,000 b/d in September, Argus estimates. But this was still 70,000 b/d above its Opec+ target of 4mn b/d, and 170,000 b/d above its effective target in September under its compensation plan. Kazakhstan's output rose by 40,000 b/d to 1.48mn b/d in September, 10,000 b/d above its Opec+ quota and 40,000 b/d above the effective target in its compensation plan. All eyes are now on the country's October output, when it is due to deliver the largest chunk of its compensation commitment, which has been designed to coincide with maintenance at its Kashagan field . Russia's production edged down by 10,000 b/d to 8.97mn b/d, in line with its target. Libya's output fell by a hefty 370,000 b/d to 550,000 b/d in September as an oil blockade declared in late August took its toll. But with the blockade lifted in early October, production has already returned close to the country's normal level of about 1.2mn b/d. Venezuela's production rose by 20,000 b/d to 900,000 b/d — the highest since February 2019. Both Venezuela and Libya are exempt from production targets. Opec+ crude production mn b/d Sep Aug* Target† ± target Opec 9 21.18 21.45 21.23 -0.05 Non-Opec 9 12.34 12.29 12.62 -0.28 Total 33.52 33.74 33.85 -0.33 *revised †includes additional cuts where applicable Opec wellhead production mn b/d Sep Aug* Target† ± target Saudi Arabia 8.92 8.96 8.98 -0.06 Iraq 4.07 4.20 4.00 +0.07 Kuwait 2.46 2.40 2.41 +0.05 UAE 2.95 2.98 2.91 +0.04 Algeria 0.91 0.91 0.91 0.00 Nigeria 1.36 1.45 1.50 -0.14 Congo (Brazzaville) 0.24 0.26 0.28 -0.04 Gabon 0.21 0.23 0.17 +0.04 Equatorial Guinea 0.06 0.06 0.07 -0.01 Opec 9 21.18 21.45 21.23 -0.05 Iran 3.37 3.33 na na Libya 0.55 0.92 na na Venezuela 0.90 0.88 na na Total Opec 12^ 26.00 26.58 na na *revised †includes additional cuts where applicable ^Iran, Libya and Venezuela are exempt from production targets Non-Opec crude production mn b/d Sep Aug* Target† ± target Russia 8.97 8.98 8.98 -0.01 Oman 0.76 0.76 0.76 +0.00 Azerbaijan 0.49 0.48 0.55 -0.06 Kazakhstan 1.48 1.44 1.47 +0.01 Malaysia 0.32 0.31 0.40 -0.08 Bahrain 0.16 0.15 0.20 -0.04 Brunei 0.09 0.09 0.08 0.01 Sudan 0.02 0.02 0.06 -0.04 South Sudan 0.05 0.06 0.12 -0.07 Total non-Opec 12.34 12.29 12.62 -0.28 *revised †includes additional cuts where applicable Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Pemex Deer Park refinery H2S leak kills 2: Update


24/10/11
24/10/11

Pemex Deer Park refinery H2S leak kills 2: Update

Adds comment from Mexican energy minister, context from regulatory filings. Houston, 11 October (Argus) — A hydrogen sulfide (H2S) leak at Pemex's 312,500 b/d Deer Park, Texas, refinery on 10 October killed two workers and injured 35 more. The leak occurred accidentally during maintenance, according to a regulatory filing submitted by Pemex this morning. Several units, including an amine unit, an alkylation unit, a hydrocracker and a sulphur recovery unit were promptly shut and flaring was initiated so the leak could secured. Mexican energy minister Luz Elena Gonzalez said in a press conference in Mexico City Friday morning that the refinery was expected to restart operations later today. Deadly accidents at US refineries usually require extensive regulatory investigations by federal agencies, however, which require facilities or certain units at a plant to remain shut down. H2S is an extremely hazardous gas commonly produced as a byproduct of refining, which can be processed into pure sulphur in a sulphur recovery unit (SRU) or removed by hydrotreating. Shell's Deer Park petrochemical facility, located adjacent to Pemex's refinery, said it was doing a "controlled slowdown" of its operations as of 8:52pm yesterday in response to the accident as a precaution. A flaring event was initially reported by a Deer Park Office of Emergency Management (OEM) social media account at 6:23pm ET on 10 October. A shelter in place advisory was issued for all Deer Park residents in a follow-up notice and Texas State Highway 225 running adjacent to the refinery was also closed to traffic. Areas of nearby Pasadena were also placed under a shelter in place advisory. The Deer Park shelter in place was lifted at 10pm ET. The Pemex refinery had previously reported an aromatic concentration unit (ACU) leak on 6 October. Amine units strip H2S from methane gas generated by hydrotreaters. Alkylation units produce high-octane blendstocks used in gasoline. Hydrocrackers use hydrogen, pressure, and catalyst to produce distillates and gasoline low in contaminants like sulphur. SRUs help to remove sulphur and other impurities from refinery products and gas streams. By Gordon Pollock Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Iran slows oil exports as it braces for Israeli attack


24/10/11
24/10/11

Iran slows oil exports as it braces for Israeli attack

Dubai, 11 October (Argus) — Iran's crude exports have slowed down dramatically this month as the country braces for a possible strike on its oil facilities in retaliation for its large-scale missile attack against Israel on 1 October. Although US president Joe Biden has suggested Israel should think about an alternative response , potential strikes on Iranian oil facilities have been up for discussion and the Israeli government appears to be still weighing up its options. In the meantime, there has been a noticeable drop off in Iranian exports. Crude loadings from Iran only averaged about 600,000 b/d in the first 10 days of October, around a third of the amount it has exported in the past few months, according to Armen Azizian, senior oil risk analyst at trade analytics firm Vortexa. "The first 10 days has been very slow compared to what we usually see," Azizian said. "Normally, over this period, we see an average of 5-8 tankers load ꟷ a mix of VLCCs and Suezmaxes. But so far, we have only seen just 3-4 load." A VLCC typically carries 1.9mn-2.2mn bl, while a Suezmax can carry 800,000-1mn bl. Of the three VLCCs that have loaded this month, two did so at Iran's Kharg Island terminal in the Mideast Gulf and the third co-loaded between Kharg Island and the Soroush terminal, also in the Mideast Gulf. An Aframax also loaded at Kharg this month but it is a tanker that typically engages in domestic trade. The Kharg terminal is Iran's largest and most important by some distance, handling more than 90pc of Iranian crude and condensate exports. All of the vessels that have loaded at Iranian terminals this month have been sanctioned. "It seems like the operators of the non-sanctioned tankers are being more cautious," Azizan said. "The thinking being that the value of the sanctioned tankers is so low anyway, that they are more worth taking a risk with." The slowdown in exports coincides with Iran moving many of its empty tankers away from Kharg Island. "It was likely done as a precaution, in the event of an Israeli retaliation," said Homayoun Falakshahi, senior oil analyst at trade analytics firm Kpler. Iran's crude exports have been rising in recent years, notably since the start of 2023. Vortexa puts them s at 1.7mn b/d in July-September, while Kpler's estimate is slightly higher at 1.75mn b/d. September was a particularly strong month — 1.83mn b/d according to Kpler and 1.75mn b/d according to Vortexa. Kpler's September estimate is the highest since the fourth quarter of 2018 and Vortexa's is just 50,000 b/d short of a six-year high of 1.8mn b/d in June. This month's exports will be much lower. Even if Iran's loading activities were to return to normal for the rest of October, it would struggle to breach the 1.35mn b/d mark for the full month, a level it has surpassed consistently since the fourth quarter of last year. By Nader Itayim Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Mexico’s Sep inflation slows with energy prices


24/10/10
24/10/10

Mexico’s Sep inflation slows with energy prices

Mexico City, 10 October (Argus) — Lower energy prices supported an easing in Mexico's consumer price index (CPI) in September for a second consecutive month. The CPI slowed to an annual 4.58pc in September, down from 4.99pc in August, Mexico's statistics agency Inegi said on 9 October. This was lower than both Mexican bank Banorte's own 4.59pc estimate and its analysts' consensus estimate of 4.61pc. Energy inflation eased for a second month, dropping to 6.9pc from 7.9pc in August and 9.2pc in July, with LPG prices — the largest component — slowing to 14.7pc in September from 16.8pc in August and 25.6pc in July. Seasonal rains, now ending, have largely reversed the price spikes in farm goods caused by extreme drought earlier this year, with fruit and vegetable inflation slowing to 7.65pc in September from 12.6pc in August, making it the first single-digit rate since November 2023. "Despite the positive performance of agricultural items since August, lingering risks could turn them negative again," Banorte said in a note, emphasizing that above-normal rainfall will be needed in the coming months to avoid a return to drought and price spikes next year. For now, Mexican weather agency Conagua still estimates relatively heavy rains in October, but "more adverse" conditions for November and December, with no state forecast to exceed the upper range of historical rainfall. Core inflation, which strips out volatile food and energy, eased in September to 3.9pc from 4pc, moving within the central bank's 2pc to 4pc target range for the first time since February 2021. Inside core, said Banorte, packaged and manufactured goods continue to improve, standing at 2.9pc from 3pc in August. Services also moderated, adjusting to 5.1pc from 5.2pc. "A downward trend in the latter is needed to corroborate additional gains for the core," Banorte said. "This will still take some time, especially given that the margin for additional declines in goods may be running out." The Mexican bank added that within this context, it maintains its estimate for full-year 2024 core inflation to hold to 3.9pc. Though less weighted than core inflation, the bulk of September's easing in the headline was due to non-core inflation, including prices on more volatile items such as fuels and farm goods. Inegi reported non-core moving to 6.5pc in September from 8pc in August. Despite two months of better-than-expected price improvements, Banorte warned that "risks remain," with energy prices susceptible to gains amid "geopolitical tensions in the Middle East and economic stimulus in China." Still, there is "room to adjust gasoline subsidies" to cushion these effects, it added. By James Young Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Hurricane Milton leaves 3.4mn in the dark


24/10/10
24/10/10

Hurricane Milton leaves 3.4mn in the dark

New York, 10 October (Argus) — About 3.4mn customers in Florida were without power this morning after Hurricane Milton pummeled the state with heavy rainfall and strong winds. Utility crews began the process of assessing and repairing the damage caused by the hurricane which tore down trees and downed power lines after slamming into Florida's west coast as a powerful Category 3 hurricane late Wednesday. Florida Power & Light had about 1.2mn homes and businesses without electricity, Duke Energy reported about 875,000 outages, while about 592,000 customers of Tampa Electric were affected, according to independent tracker Poweroutage.us. Milton, which has since weakened to a category 1 storm with maximum sustained winds of 85mph, is now moving off the east coast of Florida. "On the forecast track, the center of Milton will continue to move away from Florida and pass to the north of the Bahamas today," according to the National Hurricane Center. The risk of life-threatening storm surge remains on the eastern coast of Florida, while hurricane-force winds are expected to linger for a few more hours. Major flooding as a result of heavy rainfall also continues to pose a threat. A recovery in road fuel supplies, which were strained by the pre-storm evacuation of hundreds of thousands of residents, will depend on the extent of power, roadway and port outages. The state has waived statutes regulating the sale, storage and distribution of liquid fuels . By Stephen Cunningham Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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