David Fuller and Eoin Treacy's Comment of the Day
Category - Energy

    How America Took Out The Nord Stream Pipeline

    This article from Seymour Hersh’s Substack may be of interest. Here is a section: 

    In December of 2021, two months before the first Russian tanks rolled into Ukraine, Jake Sullivan convened a meeting of a newly formed task force—men and women from the Joint Chiefs of Staff, the CIA, and the State and Treasury Departments—and asked for recommendations about how to respond to Putin’s impending invasion.

    It would be the first of a series of top-secret meetings, in a secure room on a top floor of the Old Executive Office Building, adjacent to the White House, that was also the home of the President’s Foreign Intelligence Advisory Board (PFIAB). There was the usual back and forth chatter that eventually led to a crucial preliminary question: Would the recommendation forwarded by the group to the President be reversible—such as another layer of sanctions and currency restrictions—or irreversible—that is, kinetic actions, which could not be undone?

    What became clear to participants, according to the source with direct knowledge of the process, is that Sullivan intended for the group to come up with a plan for the destruction of the two Nord Stream pipelines—and that he was delivering on the desires of the President.

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    Baltic Nations Go LNG Hunting as Prices Fall, Terminal Opens

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    Several customers on our different markets, who used alternative fuels in the meantime, are already returning to natural gas,” Margus Kaasik, chief executive officer of Eesti Gaas, said in a statement. 
    While demand in the Baltics is small compared with major consumers such as Germany or France, the increased buying activity may be a sign that the uptick in demand is here to stay. 

    Europe has been lucky with mild weather this winter, which means that gas stockpiles are 68% full, compared with an average of 48% for this time of year. Utilities are now shifting their focus to restocking for the summer season. 

    Eesti Gaas also secured three slots at the Klaipeda LNG terminal in Lithuania, with one cargo delivered in January by Equinor ASA, and two more to follow in March. 

    The company is now preparing a tender for the seven slots it has booked at Inkoo. The floating terminal arrived at the end of last year and by mid-January, the facility was ready to receive shipments. 

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    Dash for $10 Trillion of Metals for Energy Transition Starts Now

    This article from Bloomberg may be of interest. Here is a section: 

    Getting to net zero could require almost $10 trillion of metals between now and 2050, according to BNEF, with annual demand peaking at close to $450 billion in the mid-2030s. While steel and aluminum are expected to see the most demand growth in terms of absolute volume, copper is set to be the most valuable opportunity, with an estimated $3.4 trillion of the red metal needed to avert climate disaster.

    In total, a whopping 5.2 billion metric tons of metals will be necessary to underpin a net-zero transition, with nearly four times as much metal due to be consumed in 2050 versus today.


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    In the Struggle for Big Oil's Soul, the American Vision Wins Out

    This article from Bloomberg may be of interest to subscribers. Here is a section: 

    Shell Plc, BP Plc and TotalEnergies SE have spent the last few years trying to convince investors about the merits of net-zero carbon and investment into renewables. But in 2022 they switched to showering them with tens of billions of dollars earned from pumping oil and gas, just like their US peers. 

    The change of course was triggered by Russia’s invasion of Ukraine, which shifted governments’ focus back to energy security and created a huge gap in Europe’s oil and gas supplies that the majors are well placed to fill. 

    “Oil production will be back above 2019 levels,” said BP Chief Executive Officer Bernard Looney, a change in tone from 2020 when he suggested that peak demand may already have been reached. “Demand for this product is strong.”

    Shell has said it will pause the growth in spending at its renewables unit while expanding gas output. BP slowed the planned decline in its fossil fuel production and scaled back its target for emissions reductions. TotalEnergies is opening new liquefied natural gas import terminals in Europe so it can keep growing a business that expanded by 15% in 2022.

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    Russia Sends More Oil by Sea, But Kremlin's War Chest Pressured

    This article for Bloomberg may be of interest to subscribers. Here is a section: 

    The European Union’s import ban on Russia crude has led to much longer voyages for shipments, with journeys now taking an average of 31 days from Baltic ports to India, compared with just seven days from the same terminals to Rotterdam and about half that to Poland. That’s putting more pressure on the dwindling fleet of ships whose owners are willing to haul Russian cargoes. A similar pattern is expected to emerge in Russia’s refined products trade.

    The country is increasingly reliant on its own tankers and a so-called “ shadow fleet” of usually older ships owned by small, often unknown companies that have sprung up in recent months. European-owned vessels can still carry Russian crude, as long as it is sold at a price below a $60-a-barrel cap, introduced at the same time as the import ban. The level of that cap is due to be reviewed in March. 

    There has also been a resurgence in ship-to-ship transfers of cargoes in the Mediterranean, with loads either being combined onto larger vessels or shifted from ice-class tankers to others in order to free up those ships needed for operations in the Baltic in the winter months.

    Tankers hauling Russian crude are becoming more cagey about their final destinations. Vessels carrying more than 41 million barrels of Russian crude, the equivalent of 1.45 million barrels a day of exports, left port showing no clear final destination in the four weeks to Feb. 3.

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    Shell Isn't Looking for Big Deals as Debt Shrinks, Profits Soar

    This article from Bloomberg may be of interest to subscribers. Here it is in full: 

    Shell Plc isn’t planning to use its growing cash pile to pursue big acquisitions, aiming instead to deliver greater value for shareholders. 

    That was the message delivered by new Chief Executive Officer Wael Sawan and Chief Financial Officer Sinead Gorman at a meeting with analysts on Friday morning, following their announcement the day before of record profits of nearly $40 billion in 2022 and the lowest level of indebtedness since 2015.

    The company’s management is trying to boost Shell’s value, which has lagged American peers that stuck more closely to their fossil-fuel core instead of diversifying into cleaner energy.

    Shell’s shrinking debt could give investors “some nervousness around the potential for large-scale M&A,” Biraj Borkhataria, an analyst at RBC Capital Markets, wrote in a note on Friday about the meeting earlier in the day. “Wael clearly stated this was not on the agenda, with focus more on performance of the asset base and driving higher returns.”

    Shell said at the meeting that big acquisitions of around $10 billion are unlikely in low-carbon energy because there aren’t good opportunities, according to analysts at Barclays Plc led by Lydia Rainforth. 

    There could be smaller-scale investments in that area, particularly in hydrogen. Last year Shell spent $2 billion to buy Danish company Nature Energy Biogas A/S and reached final investment decision on Europe’s largest green hydrogen production site.

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    Oil's Pipe Dream

    This article for Javier Blas for Bloomberg may be of interest. Here it is full: 

    For years, energy experts modeling the impact of 2050 net zero targets on oil demand had the advantage that the deadline, and the incremental steps to getting there, were a long way off. If time proved their scenarios wrong, they’d be long forgotten anyway. 

    But now, those first intermediate waymarks are around the corner, and they look increasingly farfetched.

    Earlier this week, BP Plc published its annual Energy Outlook, presenting three scenarios — not forecasts — for how oil demand may evolve. The Net Zero path, broadly in line with the goals of the Paris Agreement, is difficult to reconcile with current trends.

    In such a narrative, BP’s model shows global oil consumption collapsing to 21 million barrels a day by midcentury, down from about 98 million today.

    Ignore 2050 and focus instead on the intervening milestones, starting with 2025. In just two years’ time, BP’s Net Zero scenario sees oil demand 4 million barrels a day lower than it is now. That would mean removing the equivalent of Germany’s entire consumption in 2024 and repeating that feat again the following year. 

    Every oil forecast I’ve seen shows demand rising in 2023, and the few 2024 projections already published — including one from the US government — see growth continuing.

    Looking further ahead, BP’s Net Zero readout suggests demand would need to plunge a further 9 million barrels a day from 2026 to 2030, falling to 85 million a day by the end of the decade. That equates to eliminating the consumption of France each year and, on the final year, striking out Italy as well.

    Then the really difficult period starts. The scenario sees the world using just 70 million barrels a day in 2035, requiring the annual removal of 3 million a day. That equals the demand of Japan, currently the world’s fourth-largest consumer.

    Net zero models look increasingly at odds with short-term trends. It’s possible oil demand can sink by 2050, but is it going to plummet in a matter of months and keep falling precipitously every year for the next decade? No.

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    Made-in-China Cars Are Primed to Conquer the Global Market

    This article by may be of interest to subscribers. Here is a section: 

    “To fight the Chinese, we will have to have comparable cost structures,” Stellantis NV CEO Carlos Tavares said on Dec. 19, speaking to reporters at a powertrain plant in Tremery in northern France. “Alternatively, Europe will have to decide to close its borders at least partially to Chinese rivals. If Europe doesn’t want to put itself in this position, we need to work harder on the competitiveness of what we do.”


    The growth in the supply chain in China has also kept pace with car manufacturing. Domestic companies now make almost all parts, including those they used to import until about a decade ago, such as high-strength steel and reinforced fiberglass. As a result, China ran a trade surplus in vehicles and vehicle parts for the first time in 2021. The assembly lines still depend on advanced machines from Japan and Germany, though.

    “There seems to have been a step change,” Dyer says. “The long-term trend is for increasing sales of Chinese brands around the world.”

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    The Future of Uncertainty

    Thanks to a subscriber for this transcript of 3rd Atal Bihari Vajpayee Memorial Lecture delivered by Ambassador Bilahari Kausikan of Singapore in New Delhi yesterday. Here is a section: 

    First, no country can avoid engaging with both the US and China. Dealing with both simultaneously is a necessary condition for dealing effectively with either. Without the US there can be no balance to China anywhere; without engagement with China, the US may well take us for granted. The latter possibility may be less in the case of a big country like India, but it is not non-existent.

    Second, I know of no country that is without concerns about some aspect or another of both American and Chinese behaviour. The concerns are not the same, nor are they held with equal intensity, and they are not always articulated – indeed, they are often publicly denied -- but they exist even in the closest of American allies and in states deeply dependent on China.

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    Giant Fund Buys Up Tesla and Plug Power Stock, Sells GM

    This article from Barron’s may be of interest to subscribers. Here is a section: 

    DNB Asset Management materially increased investments in EV maker Tesla (ticker: TSLA) and Plug Power (PLUG), a hydrogen fuel-cell technology company, while slashing its stake in General Motors (GM) in the fourth quarter. The unit of Norway's largest financial-services firm, DNB, disclosed the stock trades, among others, in a form it filed with the Securities and Exchange Commission.

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