Russia seeks to outmuscle U.S. in Arctic
In this newsletter:
1) Russia begins development on Arctic oil project that will produce 25 million tons of oil per year
Gizmodo, 28 May
National Review, 1 June 2021
The Wall Street Journal, 25 May 2021
The Diplomat, 29 March 2020
GWPF Energy, 1 June 2021
8) And finally: Western oil companies not quite dead yet
OilPrice.com, 1 June 2021
1) Russia begins development on Arctic oil project that will produce 25 million tons of oil per year
Gizmodo, 28 May
Russia’s national oil company has begun construction on a massive project in the Arctic that officials say will produce 25 million tons of oil each year by 2024.
The new operation is possible only because the Arctic is now traversable in places and at times it previously wasn’t, due to sea ice levels plummeting as the planet warms.
The Barents Observer reported this week that construction ships have been spotted off the coast of the Taymyr Peninsula in Siberia and have dropped off around 20,000 tons of construction materials to begin building what will be the Arctic’s biggest oil terminal. The project, called Vostok Oil, is owned by Rosneft, which is controlled by the Russian government but has a number of private investors (including BP, which, if you’ll recall, has big plans to be net zero by 2050). The CEO of Rosneft told Vladimir Putin that the company had also started drilling in a new license area this month as part of the project.
The proposed project is dauntingly huge. Rosneft said that it anticipates exporting 25 million tons of oil a year by 2024, 50 million tons by 2027, and 115 million tons by 2030. (The company plans to make 15 entirely new towns for the estimated 400,000 workers needed.)
The International Energy Agency, of course, said earlier this month that all new oil and gas production needs to stop by next year to keep the world on track to meet the targets set by the Paris Agreement. But screw that, apparently! There’s oil to be drilled in one of the most sensitive regions in the world!
National Review, 1 June 2021
The Interior Department is expected to cancel several oil and gas leases in the Arctic National Wildlife Refuge on Tuesday, according to a new report.
The Biden administration aims to unwind nearly a dozen leases in Alaska that has been the subject of an intense battle between Republicans and Democrats for four decades, according to the Washington Post.
The move comes after the Trump administration auctioned off the right to drill in the refuge’s coastal plain during the final weeks of President Trump’s tenure. Sources reportedly told the outlet that the rationale for suspending the leases is that Trump officials rushed the auction and did not follow proper procedures.
In January, the sale of 11 tracts in the refuge on more than 550,000 acres brought in roughly $14 million. Nearly all of the land sold for the minimum price of $25 per acre as only two of the bids were competitive. According to the Post, many major American and Canadian banks said they would not finance any projects on the refuge at the demand of indigenous and environmental activists.
Alaska Industrial Development and Export Authority, a state agency, was the main bidder.
The suspension comes as Biden has paused new federal oil and gas leasing and vowed to dramatically slash the nation’s greenhouse gas emissions. However, he has largely taken a less drastic approach toward most oil and gas operations approved under the Trump administration.
The Wall Street Journal, 25 May 2021
For Moscow it is the last geopolitical battleground where it holds the advantage over Washington and Beijing
The finishing touches to Nagurskoye Airbase, located on a largely ice-locked archipelago in the Arctic Ocean, are turning a once-abandoned staging point for Soviet aircraft into one of Russia’s most advanced military outposts. It is one in a string of new and refurbished bases meant to service the Kremlin’s ambitions in the resource-rich Arctic.
Those bases were combined to form a new military district in January under the command of the Northern Fleet, Russia’s foremost Arctic naval force. The fleet has its headquarters here on the Kola Bay, near the Arctic city of Murmansk, 800 miles south of Nagurskoye.
Russia’s MiG-31 war planes have been landing in Nagurskoye since last year, and the new military district is receiving its own fleet of Su-34 fighter-bombers.
The goal is to project Russian power in a region where Washington is lagging. An aircraft taking off from Nagurskoye could reach the U.S.’s northernmost military base, in Thule, Greenland, in under an hour, and New York in around two hours.
“Russia is working to use the Arctic to regain its great power status and in doing so is becoming much more of a potential threat than it has been in decades,” said Rebecca Pincus, an expert on the Arctic at the U.S. Naval War College in Newport, R.I.
As polar ice recedes, oil and gas reserves—as well as new sea routes—have become more accessible, and Moscow has moved to consolidate control over a region it sees as vital to Russia’s economic future. For Moscow, it is the last geopolitical battleground where it holds the advantage against Washington and Beijing, both of which are trying to expand there.
Under President Vladimir Putin, the military has become an indispensable tool of foreign policy. In the Arctic, which is fraught with territorial and legal disputes, the armed forces are working to push the boundaries of Russian control. With Russia’s western Siberian oil fields projected to decline in coming years, Moscow is looking to the Arctic as a source of new hydrocarbons.
The Northern Fleet said in 2019 it had discovered five new islands amid melting ice in the Kara Sea, where Moscow has increasingly been exploring for oil, and had claimed them for Russia.
The military has renovated other airfields across Russia’s northern coast and deployed S-400 air defense systems and state-of-the-art radar to complicate potential advances from North Atlantic Treaty Organization countries. In the Kola Bay, the Northern Fleet’s new class of nuclear submarines is meant to ensure that Moscow maintains an advantage underwater. New military icebreakers, potentially armed with cruise missiles, will soon be traversing Arctic waters.
“Competition is growing between the world’s strongest countries for access to resources in the Arctic Ocean and transit routes,” Defense Minister Sergei Shoigu said in April. “Thanks to measures taken, the Northern Fleet is able to effectively withstand the challenges and threats Russia is facing in the Arctic.”
Mr. Shoigu said last year that the armed forces had embarked on expeditions to collect geological evidence to support Moscow’s claims to underwater territory expected to hold oil and gas reserves. It is up to the United Nations to decide whether the underwater structure, the Lomonosov Ridge, is part of Russia, Denmark or Canada.
“Russia clearly sees these reserves as infrastructure critical to their national security,” said retired Gen. Charles Jacoby, former commander of the U.S. Northern Command and North American Aerospace Defense Command.
The U.S. has recalculated its own Arctic strategy, pushing plans to put more fifth-generation fighters in Alaska than anywhere else in the country, in an effort to overwhelm the threat from Russia’s antiaircraft defenses.
Full story ($)
The Wall Street Journal, 1 June 2021
WASHINGTON — Biden administration lawyers are defending oil and mining projects approved under the Trump administration, benefiting ConocoPhillips, Rio Tinto PLC, BHP Group Ltd. and others at the expense of environmental and tribal groups challenging the projects.
In a series of court arguments this spring, the administration has supported the Willow oil project in Alaska, the Resolution Copper Mining project in Arizona and the Dakota Access Pipeline, all of which are on federal land or need federal approval for major water crossings.
The legal filings have helped improve some of President Biden’s shakier relationships with lawmakers from Western states, specifically moderate Democrats and some Republicans whose support Mr. Biden needs to get his nominees and initiatives through Congress.
“I sense there’s a lot more pragmatism there now,” said Sen. Steve Daines (R., Mont.), who has criticized the Biden administration’s pause on federal oil and gas leasing and its decision to kill the Keystone XL pipeline project.
Mr. Daines applauded the administration’s recent federal court filing to defend ConocoPhillips’s Willow project against challenges from environmental groups. And he praised several recent nominations from Mr. Biden to fill out the leadership ranks at the Interior Department, including the former energy industry lawyer Tommy Beaudreau as deputy secretary.
“They have demonstrated an openness and willingness to have an open dialogue on what’s important to the West,” Mr. Daines said.
The actions haven’t gone over as well with Mr. Biden’s typical allies among environmentalists and tribes.
During his campaign, Mr. Biden promised to help spur a move away from fossil fuels, especially oil.
“I would transition away from the oil industry, yes,” Mr. Biden said during the final presidential debate. “The oil industry pollutes, significantly. It has to be replaced by renewable energy over time.”
He also said he would enhance environmental protections for and consultations with poor and minority communities, including Native American tribes. “We cannot turn a blind eye to the way in which environmental burdens and benefits have been and will continue to be distributed unevenly along racial and socioeconomic lines,” reads “The Biden Plan for a Clean Energy Revolution and Environmental Justice.”
Some of the administration’s recent decisions not only advance oil projects, but come in direct opposition to tribes that have been fighting them.
“To the present moment, those are still empty words from the Biden administration, empty words,” said Michael Nixon, a lawyer representing the Apache Stronghold, a nonprofit fighting the Resolution mine.
Administration officials say the president remains committed to an agenda aimed at curbing greenhouse gas emissions and arresting climate change. But they note Mr. Biden had also promised his administration would honor the government’s legal obligations toward oil, gas and other industries—and never called for halting oil and mineral production under federal oversight.
Full story ($)
5) Dan Eberhart: Climate activists are setting up oil prices for new boom
Forbes, 1 June 2021
Climate activists celebrated landmark victories over Big Oil at the end of May, but investors should be wary of their environmental goals and the likely impact on demand for oil.
It may not be the outcome activists are hoping for.
Calls for oil companies to speed up the transition from fossil fuels to zero-carbon energy reached a crescendo at the end of May as a Dutch court ordered Royal Dutch Shell to increase its greenhouse emission cuts, Exxon Mobil, meanwhile, lost a battle – as well as seats on its board – with activist investors over its record on climate change.
Chevron’s shareholders demanded an explaination how it plans to deal with Scope 3 emissions, the emissions generated by the consumers of its products.
Activist investors are turning up the heat on the oil industry after the International Energy Agency (IEA) released a bombshell report that said the world must stop investing in new oil and gas development immediately if it wants to achieve its net-zero goals.
The inherent flaw in the strategy to force the oil industry to commit suicide is that companies like Exxon, Chevron and Shell will just sell their assets to other players not subject to shareholder pressures.
It doesn’t mean the end of oil and gas production.
Indeed, national oil companies and sovereign wealth funds from Asia, the Middle East and Russia, as well as global private equity firms, would likely be the top suitors for oil and gas assets. Even banning production in the United States would only increase the value of other global deposits, including many in places with far worse environmental records than here.
Even Norway, one of the most progressive nations in Europe on climate change, understands this broader reality.
Norway has a huge renewable energy sector and is a world leader in offshore wind, but it has no plans to stop investing in its large oil and gas reserves. Oslo sees the environmental benefit of ensuring that new oil production should come from areas with sustainable practices and strong regulatory oversight, rather than countries that score poorly in these areas, including some OPEC producers like Iraq, Iran, Venezuela, Nigeria and Algeria.
And while the world doesn’t appear headed for a supply crunch in near-term, the outlook a few years from now changes dramatically if the world’s largest oil companies pull the plug on exploring for oil and gas.
The world is rapidly returning to pre-pandemic demand levels for oil thanks to aggressive vaccination programs. International benchmark Brent crude prices topped $70 a barrel for the first time since the pandemic took hold and U.S. retail gasoline prices over $3 a gallon are at a seven-year high.
If resources stay in the ground due to climate activism, there is a serious risk of a spike in energy prices unless there is a corresponding reduction in demand.
A substantive reduction in demand is unlikely.
The Diplomat, 29 March 2020
In late February, a Russian icebreaker, Kapitan Dranitsyn, successfully carried out a record supply run for the MOSAiC international research expedition representing 20 countries, including the United States, China, and Russia. As the operator of the world’s largest fleet of major icebreakers, Russia’s monopoly on icebreaker operations has largely gone unchallenged. However, China’s new icebreaker, Xuelong 2, which is due to return home in April from its maiden journey, has also been slated to assist with the MOSAiC expedition. While Russia has long enjoyed dominance in the Arctic, the expanding presence and influence of other countries — most notably, China — suggest a tidal shift is on the horizon, one that does not necessarily include the United States.
The Competing Strategic Visions of Russia and China in the Arctic
As the thawing of the Arctic has increased its geopolitical prominence and potential economic viability, Russia and China have emerged as major players in the future of the region. Their partnership on Arctic affairs, both formally and informally, represents an important component of understanding the long-term strategic balance in the Arctic.
Russia’s involvement in the region is to be expected, as one of the eight countries with territory above the Arctic Circle — and vast territory at that, with thousands of miles of coastline. Moscow’s involvement has been significant and long-lasting, with Russia advocating for the development of the Northern Sea Route along its Siberian coast as an alternative to southern routes through the Suez Canal and investing in the construction of the only icebreakers capable of operating in the Arctic Ocean.
China is a less obvious player in the Arctic, with its closest territory some 5,000 miles by sea from the Bering Strait. Even so, China has in recent years pressed for a greater role in Arctic affairs, becoming one of the 13 observer states of the Arctic Council in 2013. In 2018, China released an official white paper entitled “China’s Arctic Policy” — a step that in and of itself signals the country’s intent to play a larger role in the region — in which it outlines its priorities in the Arctic and describes itself as a “near-Arctic state.”
The cooperation between China and Russia in recent years adds an intriguing complexity to Arctic geopolitics. Experts are divided on whether the warming of Sino-Russian relations is a true strategic alliance or merely a marriage of convenience. Proponents of the former point to the numerous agreements signed between the two countries — punctuated by the personal friendship of the two nations’ leaders — and the two sides’ common voting record on the United Nations Security Council. Skeptics reason that Russia and China often have diverging goals despite mutual interests and remain distrustful of each others’ intentions. In this paper, we focus on the long-term outlook for the Sino-Russian relationship regarding the Arctic.
The Sino-Russian State of Play in the Arctic
Russia’s involvement in the Arctic and interest in the Northern Sea Route (NSR) perhaps goes without saying, with over 24,000 miles of coastline above the Arctic circle, and a centuries-long history in the region. Russia has two primary economic interests in the Arctic. First, Russia is in a prime position to exploit the region’s oil and natural gas. Some 70 percent of Russia’s reserves are on the continental shelf off its coast (primarily in the Arctic) and its status as the world’s largest supplier of oil and natural gas makes it a leading player in exploiting further reserves in international waters.
Second, Russia is well-positioned both geographically and logistically to be a critical player in the development of shipping routes through the Arctic as retreating sea ice permanently opens those routes. This primarily represents a shipping connection between East Asia and Western Europe, with Russia operating ports and support facilities along the route.
However, it could also represent a boon to development in Siberia. Historically, Russia has bemoaned the fact that all major rivers in Siberia flow north into the Arctic Ocean rather than south to irrigate the deserts of Central Asia. During the Soviet years, mega-engineering projects using nuclear weapons to redirect the rivers were in the planning stages for decades before eventually being abandoned in the 1980s. While low levels of shipping on these rivers do exist today, aided by a fleet of river-based icebreakers, the retreat of Arctic ice in conjunction with the development of modern ports and shipping lanes to support the NSR could provide a lucrative outlet for the vast trove of undeveloped resources in Siberia.
From China’s perspective, the Arctic represents one of several regions within which it is attempting to build influence and refine its image as a global power. China has dubbed itself a “near-Arctic state,” arguing that given its relatively close proximity to the Arctic, changes in the Arctic have clear downstream impacts on China and “in turn, on its economic interests in agriculture, forestry, fishery, marine industry and other sectors.” In 2017, China introduced the Polar Silk Road, a component of its global Belt and Road Initiative, as a framework to collaborate with other parties to jointly develop Arctic shipping routes.
Beijing has taken both unilateral and cooperative measures to pursue its ambitions and legitimize its role in the Arctic. On its own, China has committed significant resources to conduct numerous scientific research expeditions. In mid-October, Beijing’s first indigenous icebreaker, Xuelong 2, set off on its maiden voyage to take part in Beijing’s 36th Antarctic expedition and will make a port call in South Africa before turning homeward. The Xuelong 2 serves as a research platform, equipped with state-of-the-art oceanographic and monitoring systems to conduct seafloor and resource surveys, which will further bolster China’s scientific diplomacy in the Arctic and Antarctic regions. China is an active participant in the Arctic Council and has invested in bilateral relationships with individual Arctic states and other stakeholders to build support for its initiatives.
In recent years, a notable increase in Sino-Russian cooperation in the Arctic has caught the attention of observers. A convergence in economic interests to develop Arctic trade is certainly a factor in their warming relationship, but does not fully explain the relatively sudden shift from competition to cooperation in this area.
The Road From Competition to Cooperation
Russia has long been particularly concerned with exercising control over a broadly defined physical sphere of influence. Classically (and perhaps overly simplistically) explained as a response to centuries of invasion, this has manifested recently with adventures from the Donbass to the Kuril Islands. A particular soft spot exists for Siberia and the Arctic territories due to Russia’s unique and long history in those regions.
As such, Russia views China’s economic ambitions in the region with suspicion. In 2012, Russia blocked Chinese vessels from operating in the NSR, causing China to suspend its research activities during its fifth Arctic expedition. The following year, despite initial resistance from Russia, the Arctic Council granted observer status to six countries including China but also notably including Japan, which may serve as a counterweight to China.
However, Russia’s calculus shifted significantly between 2013 and 2014. A Russian company, Novatek, and China National Petroleum Corporation (CNPC) partnered on a joint venture in 2013 to fund the Yamal liquified natural gas (LNG) project, of which CNPC purchased a 20 percent stake. China expected to receive at least 3 million metric tons of LNG a year from the Yamal plant, which would be transported through the NSR to Chinese markets. In 2014, when international sanctions were enacted against Russia over its Crimea annexation, Moscow pivoted sharply toward Beijing as other partners in the Yamal project such as ExxonMobil and Eni suspended cooperation. China’s Silk Road Fund stepped in to purchase a 9.9 percent stake in the Yamal project, bringing the total stake of Chinese ownership to 29.9 percent.
Friendly ties between Russia and China have also been buoyed by the friendship between the two countries’ leaders. Since 2013, Vladimir Putin and Xi Jinping have met more than 30 times. During a visit in June, the two presidents signed more than $20 billion in deals to boost economic ties, including in the Arctic, with plans to increase the annual volume of trade between the two countries to $200 billion in the coming years.
In 2018, China introduced the Polar Silk Road, bringing it under the broader Belt and Road Initiative umbrella, as a framework to facilitate joint development of the Arctic. Beijing envisions using the NSR to diversify its shipping route options and cut down transport time between certain destinations. For Russia, the NSR represents a chance to become a major maritime trading power for the first time in history, as the melting ice caps transform its Arctic coastline into an asset. The Polar Silk Road is expected to serve as a vehicle for increased Sino-Russian investment and cooperation in building out Arctic infrastructure to support commercial transit and resource exploration along the NSR.
GWPF Energy, 1 June 2021
With Asia and Africa defiant in their pursuit of coal while the US and Russia continuing to feed the growing global appetite for coal, the end of coal is nowhere near. Instead, we might witness a renewed global demand for coal.
Russia aims to double coal exports to China
The head of the United Nation’s 2021 Climate Summit, Alok Sharma, has demanded that countries must abandon coal and the pathway for the same must be laid out at the Conference of Parties (COP) 26 meeting that is scheduled to happen at Glasgow in November this year.
Last month, Sharma said, “The days of coal providing the cheapest form of power are in the past. And in the past they must remain. The coal business is, as the UN secretary general [António Guterres] has said, going up in smoke. It’s old technology.” Sharma’s call for global coal-use ban echoes that of Joe Biden, Boris Johnson, and other anti-fossil administrations, all of whom are determined to unethically force developing countries into submitting to their anti-fossil policies.
Even the International Energy Agency (IEA), which is supposed to represent the energy needs of those who are in dire need of energy access, has aligned itself with the anti-fossil fuel party. In its recent report titled “Net Zero by 2050”, the IEA has asked for “investors to stop funding new oil, gas and coal projects beyond this year” in order to meet the goals of the Paris climate agreement.
However, the energy demand reality and the market scenario on ground indicates that these calls to abandon coal are nothing short of fantasy. Asia and Africa are showing no signs of reducing their coal appetite and are in fact on track to increase their coal dependency.
Asia’s energy superpowers determined to burn more coal
Surprisingly, the initial pushback to IEA’s call for fossil disinvestment came from Japan, a nation that recently promised to push back against coal. Reacting to IEA’s call for ban on coal funding, Japan stated, “The report provides one suggestion as to how the world can reduce greenhouse gas emissions to net zero by 2050, but it is not necessarily in line with the Japanese government’s policy.” Japan is the third largest consumer of fossil fuels in Asia. The Asian market is dominated by China and India.
China, especially, is the global leader in coal consumption. More than 25% of global carbon emissions is from China. Despite promising that it would achieve net-zero by 2060, Beijing continues to increase coal consumption and export of coal-technology. Anti-coal campaigners say that China’s latest 5-year plan falls well short its tall claims to reduce coal consumption. “China’s five-year plan is underwhelming and shows little sign of a concerted switch away from a future coal lock-in,” said Swithin Lui, of NewClimate Institute.
China funds more than 70% of all new coal plants being built globally. It is reported that, “Nearly all of the 60 new coal plants planned across Eurasia, South America and Africa –70 gigawatts of coal power in all – are financed almost exclusively by Chinese banks.” Among the most recent of its coal investment is the $3 Billion coal plant in Zimbabwe. With its “Belt and Road initiative”, China is helping around 150 countries with fossil fuel production and coal technology. Beijing is unlikely to compromise on its Belt and Road Initiative, especially when most of the countries relying on its help are developing countries that desperately seek fossil fuel driven energy growth.
China’s neighbour India is the second largest coal consumer in the world. Unlike China, India’s coal investment outside its borders is very limited. Nevertheless, it is one of the largest coal markets in the world and is fully committed to increasing coal capacity, the fuel that supplies more than 70% of its annual electricity consumption each year.
Signs of a healthy coal demand are very visible in India, where the economy is looking to recover from the first and second wave of COVID-19. Coal India Ltd (CIL), the state coal producer and the World’s largest coal miner, is expecting stock prices to rebound in 2021 after renewed demand from for coal intensive commodities such as steel, aluminium, cement and others. One of CIL’s arm has registered a growth of 112 percent in coal production (4.84 Million Tonnes) in April 2021.
In order to enhance coal production further, the country has allowed increased participation of private miners. Miners like EMIL, VFR and Adani – all have contributed to the increase in production. The Indian government is also in the process of selling mining rights and the second leg of auction process began in March this year, with 67 mines for sale. The Coal Ministry has now reported that there has been “tremendous response to second tranche of commercial coal mines auction.” It added that “more prospective bidders are in the process of registration and purchase of tender documents from the auction portal.”
Indian government officials have gone on record to reiterate the importance of coal to the country’s future energy prospects and continue to announce major investments to boost production. Coal ministry’s additional secretary M Nagaraju said that India must make more coal-investment in “research and applications of AI and IoT for mining as these technologies will be cost-saving leading to more profits; high levels of productivity, improved quality and bring efficiency in the system.”
India has also defended its coal sector as “harmless” and that the impact from coal producers is insignificant in terms of the country’s emissions. Coal India Ltd accounted for only 0.65% of the country’s total carbon dioxide emissions of 2,616 million tonnes (MT) during the year 2019-20. In contrast to the usual narrative, CIL claims that it actually improves the country’s environment through planting trees. CIL has “planted around 78 lakh saplings with a survival rate of 85 per cent spread over 3,212 hectares, under afforestation programme.” CIL has so far planted over 40,000 hectares of saplings and aims to add another 10,000 hectares by 2030, some of which they believe will offset the emissions.
Emerging coal hubs in Africa
Like Asia, Africa too is expected to increase its dependency on coal and decrease it.
For Africa, coal is not an option, but a necessity. Energy access is the foundation of any economy and much of Africa is nowhere close to alleviating the rampant energy poverty in the continent. Homes in dark, hospitals without electricity for medical equipment, and industries struggling to get uninterrupted supply of electricity – the story remains the same in most of sub-saharan Africa. Fossil fuels are the only energy source that can bring immediate change to the energy scenario in Africa. Scientific American reported that, “more than 60 percent of Africans are without basic energy services and coal, oil and natural gas may be a necessary bridge.”
Sharma and Biden’s call to immediately end coal funding does not bode well with Africa. Dmitry Bokarev, New Eastern Outlook, notes that the “development of coal power in Africa may cause protests from Western environmentalists, who haven’t experienced hunger, poverty, and lack of electricity for a long time.” He also points out that Africa’s upcoming coal plants should not be compared to the polluting old coal plants of the 20th century, “A number of coal technologies have already been developed and are being implemented under the HELE (high efficiency, low emission) principle. These technologies include so-called supercritical coal plants, coal gasification, and other methods that produce noticeably more electricity while burning the same or even less coal, resulting in less harmful emissions into the atmosphere.”
Even a reasonably developed African nation like South Africa needs undisrupted supply of coal. Coal accounts for 90% of South Africa’s energy and is set to remain South Africa’s leading source of electricity in 2030. 19 of Africa’s 34 coal plants are in South Africa. The country has also seen increased fossil fuel trade with China. China is involved in the “construction of a complete energy and metallurgy industrial chain” at the Musina Makhado SEZ in South Africa. The unit will “include a coal washery, a coking plant, a ferrochrome plant, a ferromanganese plant, a high manganese steel plant, a stainless steel plant and a cement plant, alongside a coal-fired power plant.”
Leaders in Africa are likely to persist with coal in the coming decades. A recent study reported that around 1250 new coal and gas plants are being planned in Africa alone. The continent would count on the abundant availability of coal, the cost of generation, the improvement in coal burning technologies, and the moral quotient of being the continent with the least per capita CO2 emitters. Emission from Africa accounts for only 1 – 1.5% of global greenhouse emissions. “Many plans for new coal-fired power plants have not even been implemented yet and even if they were realised, the impact on global climate change will not be noticeable,” says Stephen Karekezi, from Africa Energy Policy Research.
Despite the looming uncertainty surrounding fossil fuel funding from the West, the countries in Africa are upbeat about coal powered economies and the thirst for coal is already visible in countries like Botswana, Tanzania, and Mozambique. Even big banks continue to be indirect funders of coal projects. HSBC is now confirmed to be indirectly aiding the development of more than 70 new coal plants in Asian and African countries, including Bangladesh, China, India, Indonesia, Japan, Madagascar, Pakistan, the Philippines, South Africa, South Korea and Vietnam.
Resilient international coal trade
In the international coal market, the Australia-China episode of 2020 resulted in halt of Australian coal export to China and a subsequent shake up of import-export equations. Regardless, the coal trade continues in these two countries, thanks to international demand, especially from Asia and South Africa.
China now makes up for the lost Australian coal imports from countries like South Africa and Indonesia. South Africa started its coal export to China in December 2020, and has maintained an average export of 760,000 tonnes a month. Meanwhile, Australia has secured a significant coal export deal with India, which saw a 67% increase in the shipment of Australian coal to India. Increased exports to South Korea and Japan further minimized the negative impact of the loss of Chinese market.
The continued coal demand in Asia-Pacific countries has also kindled prospects of increase in exports from Russia and the U.S. During the past two decades Russia has registered a 2.9% increase in coal production and 9.6% increase in coal export. It is estimated that if Russia continues to produce coal at 440 million tonnes a year (the current rate), its coal reserves will last for the next 370 years. The reserves are the second largest in the world, next to those in the U.S. Despite claiming to be the climate saviour, the Biden administration exported around 9.4 million mt of U.S. thermal coal in the first quarter of 2021, “up from 7.5 million mt in the same period last year.”
With Asia and Africa defiant in their pursuit of coal, and the likes of US and Russia continuing to feed the growing global appetite for coal, the end of coal is nowhere near. Instead, we might witness a renewed global demand for coal as the new power plants go online and developing economies transition into developed ones. COP26, in spite of the media build-up and bold statements, will not usher in the end of coal.
8) And finally: Western oil companies not quite dead yet
OilPrice.com, 1 June 2021
Norway’s Equinor and U.S. supermajor ExxonMobil have reached the final investment decision to develop the Bacalhau oilfield in Brazil’s prolific pre-salt area with a US$8-billion investment in phase one, the Norwegian major said on Tuesday.
Equinor and Exxon hold 40 percent each in the Bacalhau oilfield, with Equinor as operator. The field was discovered by Brazilian state oil giant Petrobras in 2012, while Equinor has been operator since 2016.
Under the development plan, Phase 1 will see 19 subsea wells tied back to a floating production, storage and offloading unit (FPSO) located at the field. This will be one of the largest FPSOs in Brazil, with a production capacity of 220,000 barrels per day (bpd) and two million barrels in storage capacity, Equinor said.
First oil from the Bacalhau oilfield is planned for 2024.
The partners in the field, which also include Petrogal Brasil and Pré-sal Petróleo SA (PPSA), have already awarded the main Front End Engineering and Design (FEED) and engineering, procurement, construction and installation (EPCI) contracts.
“Bacalhau is a globally competitive project with a break even below USD 35 in a key energy region. Estimated recoverable reserves for the first phase are more than one billion barrels of oil,” Arne Sigve Nylund, Equinor’s executive vice president for Projects, Drilling and Procurement, said in a statement.
“The development of the Bacalhau field is a strategic investment in our global portfolio and has the potential to bring high returns for ExxonMobil, our partners and the Brazilian people,” said Juan Lessmann, Lead Country Manager for ExxonMobil in Brazil.