The UK government has said it will support its indigenous industries, including those in construction, mining, and quarrying sectors, with funding of $40.2 million (£32.5 million) to reduce their reliance on fossil fuels.

The funding, announced on Friday, will support the development of clean alternatives to oil products to power operations and help industry cut emissions and energy costs, the UK government said.

The funds will be used to develop alternatives to red diesel, or gas oil, such as electrification and green hydrogen, and are the government’s latest step in “driving industrial energy independence and encouraging green investment across the country.”

The funding is expected to move the industries away from using gas oil, which is a type of fossil fuel commonly used for off-road, heavy-duty vehicles and machinery, such as bulldozers and cranes.
The UK government explained further that the funding of the development of clean alternatives is also expected to help to cut industry emissions and energy costs.

Also Read: UK Has Secured Enough Energy Supply For Next Winter – Official

The UK government has a net-zero emissions target by 2050, which is enshrined in law. UK remains the first major economy to pass such as law, in 2019.

On the other hand, energy-intensive industries dependent on natural gas and oil products for operations and production have seen their energy costs soar over the past year after the Russian invasion of Ukraine sparked a rally in energy commodities and power prices.

“These industrial sectors, and the jobs they create, are crucial to our economy, and they also have an important role to play in our shift towards a greener, more secure future,” said UK minister for energy and climate change, Graham Stuart.

Last year, UK industries were recorded as having suffered from soaring energy costs, and despite some government support, they may have to announce further curtailment in production.

Also Read: EU, NATO Launch Task Force To Protect Energy Infrastructure From Sabotage

For example, soaring energy bills threaten to collapse the UK’s ceramics industry. The industrial area around Stoke-on-Trent has seen difficulties over the past year, and some companies have had to close shop due to unbearable costs.

Mr. Ken Okoye

Europe Union is said to be currently discussing the possibility of further lowering the $60 price cap over Russian crude oil to put additional pressure on Putin, but, quoting unnamed sources, Bloomberg said last night that US President, Joe Biden may not be disposed to the proposal.

The G-7 price cap is expected to go through review every two weeks, wherefore the next review comes up next week, at which point market conditions are considered to ensure that the price cap remains at least 5% below average prices.

In a report yesterday, Reuters noted that Poland and Lithuania are still pressing to lower the price cap on Russian oil below $60, and are also asking for sanctions targeting Russia’s nuclear industry. Estonia has also pushed for a lower price cap.

Also Read: Why The Ukraine War Is A Watershed For The Future Of LNG

According the plan by G-7 and their EU allies, by February 5, an additional price cap on Russian refined oil products will come into force, and according to Bloomberg sources, the Biden administration would prefer to wait to see the impact of this before considering any changes to the December 5 price cap, which require unanimity.

Meanwhile, Russian Urals crude is now trading well below international prices. The Center for European Policy Analysis [CEPA) said complications in trading Russian oil, in particular, have now resulted in a large (30%-40%) discount being applied to Russian oil.

“The oil price cap might have been set at $60, but the Urals oil blend is now trading significantly lower than this,” the Center said

The net results, according to CEPA, is that “Russia has lost more than half the physical volume of its former gas sales to Europe, and prices of gas in Europe are now back to pre-February levels. This could potentially see Russia lose $50bn in annual business in 2023”. 

Also Read: John Kerry Says LNG Boom Must Pair With Carbon Capture

This counters initial criticism of the cap scheme by several politicians, including former U.S. Treasury Secretary Steve Mnuchin who described the cap idea as “not only not feasible”, but “the most ridiculous idea I’ve ever heard”.

So far, Russia has responded by placing a ban on the purchase of Russian crude and petroleum products for five months from any country obeying the cap.

Demand from China, India, and Japan is believed to have lifted global oil demand by 1.7 million barrels per day (bpd) in November to the highest level since February 2022.

Latest data from the Joint Organizations Data Initiative (JODI) showed yesterday [Thursday] that China’s oil demand rebounded by almost 1 million bpd in November compared to October, while Chinese crude oil imports surged to a 20-month high.

The JODI data shared by the Riyadh-based International Energy Forum (IEF), showed further that in China, oil demand rose by 985,000 bpd in November to a nine-month high, while crude oil imports rose by 1.22 million bpd to 11.41 million bpd.

Also Read: Oil Prices Steady As China Releases Awaited GDP Data

This was the highest volume of crude imports into China in 20 months, according to JODI data. Chinese fuel exports rose by 495,000 bpd to 1.61 million bpd, a 17-month high.

 Data from this week showed that China’s fuel exports jumped in December, with gasoline sales abroad matching an October 2020 record, following a huge export quota the authorities issued to refiners at the end of 2022.

Going forward, analysts and industry professionals expect China’s oil demand to rebound in the coming months from a slump at the end of 2022, as China lifted its Covid restrictions after nearly three years.
Saudi oil giant Aramco expects the Chinese reopening and a pick-up in jet fuel demand to lead to a rebound in global oil demand this year, Amin Nasser, the CEO of the world’s biggest oil firm, told Bloomberg in an interview published on Wednesday.

Also Read: OPEC Sticks To Its 2023 Forecast As China Comes With Impressive Outlook

According to the JODI data released last night, global oil demand was at 100% of pre-COVID levels in November, while crude production was at 97% of pre-pandemic levels.

Crude oil production dropped by 599,000 bpd in November to a four-month low, led by reductions in Saudi Arabia and Iraq as part of the OPEC+ deal that had its members reduce output as of November 2022. 

By Bosco Agba

Last year was a good year for the oil industry. Despite predictions of its looming demise as renewable energy leads to electrification that in turn leads to the death of oil, fossil fuels were the stars of the year, with demand for all, including coal, notably rising.

Meanwhile, opposition to Big Oil grew louder and protests turned more extreme, with activists gluing themselves to streets and buildings, and vandalizing world-famous works of art in order to raise awareness of climate change.

Oblivious to this rise in the amount of activism, Big Oil went on to rake in record profits thanks to higher prices for the commodities it produces.

According to Reuters, Big Oil majors will report combined earnings of close to $200 billion for 2022, with many of the supermajors booking record quarterly profits during the year thanks to the combination of strong demand for energy and limited supply.

The industry also had a chance to reduce debt thanks to the strong performance of its products last year. Per Reuters, the combined debt of Big Oil has fallen to $100 billion, which is the lowest in 15 years and down by more than 50% from 2020, when it reached more than $270 billion as companies borrowed to survive.

Also Read: OPEC’s Output Jumped Last December, But Still Below Target

But it’s not all smooth sailing from here on out. First, there is the windfall profit tax that the EU and the UK decided to impose on energy companies in order to generate some money for its energy aid programs.
Shell said it expected the effect of the UK and EU windfall taxes will cost it $2.4 billion. It also said it may have to reconsider investment plans for the North Sea in light of that hit.

Meanwhile, despite political opposition to developing more oil and gas reserves in the UK, more than 100 bids were submitted this month for new exploration in the basin.

French TotalEnergies also said it would take a substantial hit from windfall taxes in the UK and the EU. According to the supermajor, it would come in at about $2.1 billion. As a result, the company said it will reduce its investments in the North Sea by a quarter, noting that the levy did not provide for any adjustments in case oil and gas prices fell.

Meanwhile, oil and gas prices did fall. Right now, oil is trading at around the same level it was trading a year ago and natural gas prices have fallen substantially in both Europe and the United States—its biggest supplier.

“The energy industry operates in a cyclical market and is subject to volatile commodity prices,” Jean-Luc Guiziou, TotalEnergies’ British head of exploration and production, told the FT this month. “We believe that the government should remain open to reviewing the energy profits levy if prices reduce before 2028.”

Also Read: UK’s Top Oil Producer, Harbour Energy, To Cut Jobs Over Windfall Tax

Exxon took it a step beyond criticism, filing a lawsuit against the European Union to get it to drop the windfall tax. The company argued that the tax is counterproductive, would discourage investments and undermine investor confidence.

Yet Big Oil has some big investment plans, just not for Europe. Exxon and Chevron, per Reuters, plan to spend 10% more this year than they did last year, to the tune of a combined $41 billion.

BP will be spending more on its U.S. shale and Gulf of Mexico operations even though European supermajors as a whole are expected to be more cautious with their money because of the windfall taxes. But they will continue spending heavily on low-carbon projects.

“The European majors appear much more attractively valued than the U.S. majors on our estimates,” HSBC said in a recent note quoted by Reuters. It is among banks that predict stronger share performance for European Big Oil majors after last year U.S. supermajors ruled the stock market.

If investment in low-carbon projects is the guarantee for stronger share performance, then HSBC is right. Indeed, pressure is growing on the oil industry to set itself more stringent emission-reduction targets and make stronger commitments to decarbonize. This pressure is unlikely to let up this year as governments in the EU, the UK, and the U.S. double down on their climate change plans, too.

Also Read: OPEC Sticks To Its 2023 Forecast As China Comes With Impressive Outlook

Chances are that 2023 will be another strong year for the oil industry simply because those companies came in strong into the new year and demand for oil and gas is not expected to fall—on the contrary.
The EU will need to buy more gas to refill its storage and it will continue using oil products that it no longer buys from Russia. China is reopening and most observers expect a rebound in oil and gas demand to come sooner rather than later.

Even the U.S., for all its green ambitions, is unlikely to stop being the biggest consumer of oil in months. The immediate future of Big Oil is certainly bright.

Irina Slav: Irina writes for Oilprice.com

The largest oil and gas producer in Britain’s North Sea, Harbour Energy, will likely cut jobs as a result of the UK’s windfall tax, While the number of cuts coming remains undetermined, Reuters said the company, which employs 1,700 people, had confirmed that cuts would be made at the headquarters in Aberdeen. 

“Following changes to the EPL, we have had to reassess our future activity levels in the UK… As such, we have initiated a review of our UK organization to align with lower future activity levels,” the company said in answer to query from the agency

While the initial news saw shares in Harbour Energy (HBR.L) shed some 0.3% early on Wednesday, those losses had been recouped by 11.00 a.m. EST, with the stock trading up 0.09%.

In November, the new UK government of Prime Minister Rishi Sunak raised the windfall tax on the profits of oil and gas operators in the North Sea.

Also Read: John Kerry Says LNG Boom Must Pair With Carbon Capture

The initial windfall tax was implemented in May last year, when Sunak announced a temporary 25% Energy Profits Levy intended to represent extraordinary profits as oil and gas prices surged.

In November, that levy was increased by 10 percentage points to 35% beginning on January 1, 2023. The levy will extend to March 2028. Sunak’s government said it expected the levy to bring in over £40 billion by 2027-28.

The hike in the levy lifted total oil and gas taxation in the UK to a grand total of 75%, Bloomberg’s energy and commodities columnist Javier Blas noted.

Harbour Energy’s job cut announcement follows last month’s statement that it would be reviewing future spending and would not be taking part in a new North Sea licensing round, saying it would be scaling back exploration investing.

By Ken Okoye

Venezuela’s PDVSA has announced thev suspension of most of its crude oil exports for a review of the contractual terms that will be conducted under the new head of the company.

The review aims to make sure there will be no payment defaults, Reuters reports, noting that since the imposition of U.S. sanctions on the trade in Venezuelan, PDVSA has had to resort to middlemen to market its oil and this has created complications with payments.

Sanctions on Venezuelan oil trade were introduced in 2019 by the Trump administration, and the Biden administration’s decision to ease some of those sanctions came after the resumption of talks last year between the government of Nicolas Maduro and the Venezuelan opposition, which led to the signing of a U.S.-brokered accord between the government and the opposition in order to resolve the country’s political turmoil.

Also Read: OPEC Sticks To Its 2023 Forecast As China Comes With Impressive Outlook

The suspension takes place just weeks after PDVSA restarted deliveries of oil to the United States after Washington gave Chevron the green light to return to its operations in the country provided the oil produced from these operations goes to the U.S.

Meanwhile, Venezuela’s oil industry, crippled as it is by U.S. sanctions, remains a big earner. In fact, Caracas said it expected income from oil exports to finance as much as 65% of the state budget for this year.

More specifically, the Venezuelan government has stipulated a budget of $14.7 billion for this year, of which $9.34 billion should come from PDVSA—up 14% on 2022.

Also Read: John Kerry Says LNG Boom Must Pair With Carbon Capture

This means that PDVSA will either have to boost production or pray for another surge in international oil prices. Last year, production averaged 600,000 bpd to 700,000 bpd, significantly lower than the target of 1 million bpd President Nicolas Maduro had announced.

 Now, the contract review will likely also affect both production and, consequently, exports of crude oil.

By Bosco Agba, with agency reports

Oil prices reportedly moved in different directions yesterday after the announcement of 2022 GDP data from China, eagerly awaited by the oil market.

The data indicated that China’s economy expanded by 3%, which is undoubtedly a positive figure, but was regarded as bad news for some because represents the weakest GDP figure in almost 50 years.
Brent crude was up soon after the release of the data, and West Texas Intermediate was down, both modestly, with more pronounced changes possible later in the day.

The 2022 GDP growth figure was substantially lower than what the Chinese government had aimed for, at 5.5%, but expectations are that the growth engine of Asia will stage a recovery this year.

Also Read: China’s Trade With Russia Hit A Record $190bn In 2022

The growth figure for the last quarter of last year reinforced these expectations. Although modest, at 2.9%, fourth-quarter growth topped expectations, which pegged it at 1.6% because of Beijing’s zero-Covid policy, which hobbled economic activity throughout the year.

“The Chinese economy is at a pivotal point, with disruptions from the protracted zero-Covid policy and its abrupt reversal likely to give way to a resurgence of at least moderate growth by Chinese standards,” Eswar Prasad, an expert on China finance from Cornell University, told the FT.

“Growth momentum coming out of this difficult period will depend on how much and what kind of stimulus the government employs to put the economy back on track,” he added.

Also Read: China, India Buying Up Russia’s Arctic Oil Crude Grades

“Businesses still face many difficulties in production and operation, scientific and technological innovation is not strong enough, and people still have considerable difficulties in employment,” the director of China’s national statistics bureau, Kang Yi, said, as quoted by CNBC.

“We still need to make strenuous efforts to promote overall economic improvement.”
Chinese demand has become the top bullish factor for oil prices lately, as the country is the largest importer of the commodity.

By Ken Okoye with agency report

America’s special presidential envoy for climate, Mr. John Kerry has said that in an interview that gas can help reduce emissions only if it is paired with projects of carbon capture.

According to him, while natural gas is cleaner than coal, it is still a polluting fossil fuel, especially with methane emissions.

Before 2022, countries with net-zero targets, including large economies in the EU, were reluctant to commit to long-term LNG supply deals with the biggest LNG exporters because of the emissions profile of LNG projects.

Most countries shifted focus to energy security and EU member states accelerated efforts to buy more LNG to replace Russian pipeline gas after the Russian invasion of Ukraine.

Also Read: 2023: Exxon, TotalEnergies, Chevron To Up Investments In India.

“Gas is clearly part of the transitional effort,” the U.S. climate envoy said. “But if you’re going to head to net-zero by 2050, you’ve really got to have some serious capacity to be able to reduce emissions,”
He spoke to Bloomberg in Abu Dhabi on the sidelines of the Atlantic Council’s Global Energy Forum held last weekend.

During a panel at the forum, Kerry had said, “If the world goes crazy on gas in the next 10 years, we’re in trouble.”

Last year, global LNG imports hit a record high of 409 million tons, as Europe scrambled to replace Russian pipeline gas supply and outbid Asia to draw the majority of cargo.

While the energy crisis in Europe has strengthened the case for a rush to build new LNG export infrastructure, the EU’s plan to reduce gas consumption, slash emissions, and become a net-zero bloc by 2050, could be a problem for LNG investments that have come too late to the party.

Also Read: Russia Resorts To More Use Of Its Tankers To Avoid EU Sanctions

Rystad Energy research showed last year that investments in new LNG infrastructure are set to surge, reaching $42 billion annually in 2024.

It is believed that 2024 would be the peak new LNG infrastructure investment – “project approvals after 2024 are forecast to fall off a cliff as government’s transition away from fossil fuels and accelerate investments in low-carbon energy infrastructure,” the energy research firm said.

By Ken Okoye