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CERAWEEK-‘Houston, we have a problem’-Energy industry grapples with climate fight



CERAWEEK-'Houston, we have a problem'-Energy industry grapples with climate fight
© Reuters. Top energy executives and officials from around the world gather during the CERAWeek 2023 energy conference in Houston, Texas, U.S., March 6, 2023. REUTERS/Callaghan O’Hare

By Stephanie Kelly and Sabrina Valle

HOUSTON (Reuters) – Top global energy executives and officials on Monday grappled with how to transition the global economy from fossil fuels to renewables quickly enough to prevent climate disaster without disrupting strategic oil and gas supplies.

“Houston, we have a problem,” two top executives told some of the most powerful figures in global energy in the capital of the U.S. oil industry, using the same famous line from an astronaut in the damaged 1970 Apollo 13 spacecraft.

Sultan al-Jaber, chief executive of Abu Dhabi National Oil Company and president-designate of the COP28 climate summit, used the line to urge conference participants to do more faster to limit global warming, which the fuel produced by most of energy companies present had accelerated.

Earlier, Petronas CEO Tengku Muhammad Taufik used the same phrase in a panel discussion on the challenge of balancing the need for energy security and affordability.

Jaber’s call for energy companies to work toward the transition was an unusual moment at an event that has long been a mainstay for fossil fuel producers, who have previously viewed such calls as a threat to their business.

Last year, many climate activists balked at Jaber’s appointment as COP28 president, saying Big Oil was hijacking the world’s response to global warming. Others welcomed it as a sign the energy industry would get involved in the transition.

Russia’s invasion of Ukraine sparked an energy crunch that disrupted fossil fuel supplies to industry and consumers. Rising fuel prices fueled decades-high global inflation in 2022.

Many in the industry viewed the disruptions to Russian supply as a reminder to avoid policies that cut off or drive up prices for fossil fuels. Chevron (NYSE:) Chief Executive Mike Wirth told attendees that maintaining secure and affordable supplies while managing the energy transition to the low-carbon economy was “one of the greatest challenges of all time.”

A disorderly energy transition could be “painful and chaotic”, Wirth said.

“We have to be very careful about turning system A off prematurely and depending on a system that doesn’t yet exist and hasn’t been proven,” he said.

Disruptions of gas supply to Europe, which has hurt the largest economy on the continent in Germany, have accelerated the transition, said German state secretary in the economy ministry, Patrick Graichen.

“If you are used to cheap Russian gas and you wake up in this world, there are some fundamental questions that need to be answered,” he said. Germany needed to fast forward electrification and build a green hydrogen supply, he said.

“If we can speed that up and fit it together – it’s not about securing the old world but speeding up the transition to the new world.”

Top U.S. oil firm Exxon (NYSE:) said each country would take a different path to energy transition, depending on the resources available. In some countries, gas would be a transition fuel, said Liam Mallon, the president upstream oil and gas at Exxon.

Mallon called on policymakers and international and national oil companies to map out the transition together.

“We cannot do this alone,” he said. “This takes policymakers regulators, innovators, NOC these IOC is all working together to create the right incentives to progress through this energy transition”

U.S. energy envoy Amos Hochstein said the hardest part of the energy transition was coordinating the timeline for change.

“I think if you’re going to go through the greatest transformation that the world has seen in over 100 years, of unplugging from one energy system and creating a whole other one, you can’t just do it without planning it out,” Hochstein said.

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French climate investments to drive up national debt burden – think-tank




French climate investments to drive up national debt burden - think-tank
© Reuters. FILE PHOTO: French President Emmanuel Macron visits Institut Curie laboratory ahead of announcements on biomedical research in Saint-Cloud, France, May 16, 2023. REUTERS/Benoit Tessier/Pool

PARIS (Reuters) – Investments that France needs to finance its transition to a low-carbon economy are set to add 25 percentage points to its debt burden by 2040, a report from the government-funded France Strategie think-tank said on Monday.

France will need to make additional annual investments of about 67 billion euros ($74 billion) – more than 2% of economic output – by 2030 to meet its objectives for reducing its dependence on fossil fuels, France Strategie calculated.

The think-tank, which is part of the prime minister’s office, said the financial effort would weigh heavily on public finances partly because the investments imply lower potential growth, which would cut tax revenues.

As a result, the debt burden would rise by 10 percentage points by 2030 and 25 percentage points by 2040, which France Strategie suggested might need to be financed in part by a temporary tax on wealthy households.

President Emmanuel Macron’s government has hoped to chip away in the coming years at France’s national debt, which currently stands at slightly more that 111% of gross domestic product after surging during the COVID crisis.

The report said the financial burden of investing in Europe’s energy transition also posed a risk in terms of international economic competition, as other major economies such as the United States and China were less concerned about budgetary constraints.

About 100 experts in French and European research groups as well as public French institutions participated in the report, which was led by economist Jean Pisani-Ferry, who previously helped Macron draft his economic programme.

($1 = 0.9084 euros)

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Crude oil largely flat; Caution ahead of debt ceiling meeting




Crude oil largely flat; Caution ahead of debt ceiling meeting
© Reuters — Oil prices traded largely unchanged Monday, with traders cautious ahead of the resumption of U.S. debt ceiling negotiations while supply concerns add support. 

By 09:30 ET (13:30 GMT), futures traded 0.1% lower at $71.59 a barrel, while the contract fell 0.1% to $75.52 a barrel.

U.S. President Joe Biden and Republican House Speaker Kevin McCarthy are set to meet later this session to try and agree on a deal to raise the more than $31 trillion debt ceiling.

Concerns that a failure to come up with an acceptable compromise have weighed heavily on the market over the recent weeks, as this would result in the U.S. defaulting on its debt obligations, likely plunging the global economy into recession.

The U.S. Treasury has warned that the government could run out of money to pay its bills as soon as June 1.

That said, both crude benchmarks managed to post gains last week, ending four straight weeks of heavy declines, helped by the U.S. starting to refill its Strategic Petroleum Reserve as well as the supply disruptions in Canada, due to early wildfires in the crude-rich Alberta province. 

Additionally, the latest data from showed the U.S. oil rig count fell by 11 over the last week, to its lowest count since June 2022.

“A slowdown in U.S. drilling activity is a concern for the oil market, which is expected to see a sizable deficit over the second half of the year,” said analysts at ING, in a note. 

“Producers appear to be responding to the weaker price environment, rather than expectations for a tighter market later in the year.”

This brings the Organization of Petroleum Exporting Countries and allies, known as OPEC+, firmly into focus, with its next meeting in early July. 

The cartel surprised the market with an output cut at the last meeting, which came into effect at the start of this month. However, this has done little to support crude prices, implying the members may be looking at a further reduction in production.

The fact U.S. producers are not increasing in number will be good news for OPEC+, ING added, “as it suggests that they will be able to continue supporting prices without the risk of losing market share to U.S. producers.”

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California grid operator signs off on $7.3 billion of power lines




California grid operator signs off on $7.3 billion of power lines
© Reuters. FILE PHOTO: A woman jogs by power lines, as California’s grid operator urged the state’s 40 million people to ratchet down the use of electricity in homes and businesses as a wave of extreme heat settled over much of the state, in Mountain View, Californi

(Reuters) – California’s electric grid operator has approved a plan expected to cost $7.3 billion for 45 new power transmission projects over the next decade and made it easier for new power plants in high-priority areas to connect to the grid.

The projects will support the development of more than 40 gigawatts (GW) of new generation resources, the California Independent System Operator (CAISO) said on Thursday.

“With electrification increasing in other sectors of the economy, most notably transportation and the building industry, even more new power will be required in the years ahead,” the CAISO said.

The vast majority of the transmission projects will be built in California, with some in neighboring Arizona, it said.

The power lines recommended by CAISO’s 2022-2023 Transmission Plan will allow the state’s grid to add more than 17 GW of solar resources, 8 GW of wind generation, 1 GW of geothermal development, and battery storage projects.

CAISO will prioritize connecting power plants to the grid in specific geographical zones identified by its plan where developing new power lines and plants “make the most economic and operational sense.”

The grid operator also approved proposed reforms to account for “increasing levels of net load forecast uncertainty between day-ahead and real-time markets … as the generation fleet evolves towards a cleaner, but more variable, resource mix.”

It projected that its transmission plan next year could include the need to add 70 GW of new power to the grid by 2033, rising to 120 GW as the state seeks to meet its goal of a carbon-free power system by 2045.

Power supply in the U.S. West is vulnerable to extreme heat as it relies on regional energy transfers to meet demand at peak or when solar output is diminished, the North American Electric Reliability Corp (NERC) said in its summer outlook on Wednesday.

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