Easwaran Kanason

Co - founder of NrgEdge
Last Updated: September 11, 2017
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Business Trends
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The government of Emmanuel Macron was elected on a long-string of promises. One of which was to make France carbon neutral by 2050, which would entail weaning the country off the usage of hydrocarbons. It is a trend that has been replicated across Europe, but Macron wants to go even further. Legislation has been tabled that will end all oil and gas production within France by 2040. The proposal is still a bill at the moment, but given Macron’s comfortable majority in the French National Assembly, it likely to become law.


When it does, it will be less drastic than it sounds.The law is symbolic. France produces only 15,000 b/d across its entire territory, representing less than 1% of its consumption. The current 63 drilling permits will be phased out once they expire, leaving production – which is concentrated in the Paris and Aquitaine basins, led by small-scale producers Vermilion Energy, Lundin Petroleum and Geopetrol – to dwindle down slowly. Some 1,500 employed by the industry and its annual €270 million in revenues will have more than two decades to adjust, with Macron pushing them towards clean energy. However, France’s eight refineries – representing some 1.5 mmb/d of capacity – will continue to operate. Some might scale down or shutter by 2040, which is when France is also planning to ban sales of new gasoline/diesel cars, but imported crude will still continue to flow into France. It will be business as usual, for the most part.


It will have little impact on France’s oil jewel, Total, which has no upstream operations within continental France. However, because France considers its overseas possessions part of the same country, Total may have to give up exploration in sites such as French Guiana’s Guyane Maritime in South America. But that won’t bother Total at all, given that it has been investing heavily into Africa, the Middle East and Asia, which are still energy-hungry areas.


This hollow statement, which is what it is, does indicate the direction that France will be pursuing - the complete abandonment of hydrocarbons. In July, Environment Minister Nicolas Hulot announced that coal would be completely eliminated from France’s power production by 2022. Actual implementation may lag, but the country will get there. The risk to the energy industry is that this drastic stance could spread to other European nations. It will mean little if Germany, Spain or Italy adopt a similar no-drilling stance, but if the trend makes inroads in the UK or Norway, this could fundamentally alter the landscape in Europe. That same stance could extend downstream, upending entire supply chains and distribution networks. It seems unthinkable, but it could happen.


What this means is that European companies will have to hasten their transition from being oil-and-gas producers to being holistic energy producers. Forays in solar, wind and alternative clean energy sources will be on an accelerated path of growth in Europe going forward. That’s where the money is, and the majors and supermajors of old will have to adapt to it.  France has provided a glimpse of what the future holds, with ample time to get there. Everyone involved in Europe’s oil and gas industry had better start preparing for that.

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September, 16 2021
The New Wave of Renewable Fuels

In 2021, the makeup of renewables has also changed drastically. Technologies such as solar and wind are no longer novel, as is the idea of blending vegetable oils into road fuels or switching to electric-based vehicles. Such ideas are now entrenched and are not considered enough to shift the world into a carbon neutral future. The new wave of renewables focus on converting by-products from other carbon-intensive industries into usable fuels. Research into such technologies has been pioneered in universities and start-ups over the past two decades, but the impetus of global climate goals is now seeing an incredible amount of money being poured into them as oil & gas giants seek to rebalance their portfolios away from pure hydrocarbons with a goal of balancing their total carbon emissions in aggregate to zero.

Traditionally, the European players have led this drive. Which is unsurprising, since the EU has been the most driven in this acceleration. But even the US giants are following suit. In the past year, Chevron has poured an incredible amount of cash and effort in pioneering renewables. Its motives might be less than altruistic, shareholders across America have been particularly vocal about driving this transformation but the net results will be positive for all.

Chevron’s recent efforts have focused on biomethane, through a partnership with global waste solutions company Brightmark. The joint venture Brightmark RNG Holdings operations focused on convert cow manure to renewable natural gas, which are then converted into fuel for long-haul trucks, the very kind that criss-cross the vast highways of the US delivering goods from coast to coast. Launched in October 2020, the joint venture was extended and expanded in August, now encompassing 38 biomethane plants in seven US states, with first production set to begin later in 2021. The targeting of livestock waste is particularly crucial: methane emissions from farms is the second-largest contributor to climate change emissions globally. The technology to capture methane from manure (as well as landfills and other waste sites) has existed for years, but has only recently been commercialised to convert methane emissions from decomposition to useful products.

This is an arena that another supermajor – BP – has also made a recent significant investment in. BP signed a 15-year agreement with CleanBay Renewables to purchase the latter’s renewable natural gas (RNG) to be mixed and sold into select US state markets. Beginning with California, which has one of the strictest fuel standards in the US and provides incentives under the Low Carbon Fuel Standard to reduce carbon intensity – CleanBay’s RNG is derived not from cows, but from poultry. Chicken manure, feathers and bedding are all converted into RNG using anaerobic digesters, providing a carbon intensity that is said to be 95% less than the lifecycle greenhouse gas emissions of pure fossil fuels and non-conversion of poultry waste matter. BP also has an agreement with Gevo Inc in Iowa to purchase RNG produced from cow manure, also for sale in California.

But road fuels aren’t the only avenue for large-scale embracing of renewables. It could take to the air, literally. After all, the global commercial airline fleet currently stands at over 25,000 aircraft and is expected to grow to over 35,000 by 2030. All those planes will burn a lot of fuel. With the airline industry embracing the idea of AAF (or Alternative Aviation Fuels), developments into renewable jet fuels have been striking, from traditional bio-sources such as palm or soybean oil to advanced organic matter conversion from agricultural waste and manure. Chevron, again, has signed a landmark deal to advance the commercialisation. Together with Delta Airlines and Google, Chevron will be producing a batch of sustainable aviation fuel at its El Segundo refinery in California. Delta will then use the fuel, with Google providing a cloud-based framework to analyse the data. That data will then allow for a transparent analysis into carbon emissions from the use of sustainable aviation fuel, as benchmark for others to follow. The analysis should be able to confirm whether or not the International Air Transport Association (IATA)’s estimates that renewable jet fuel can reduce lifecycle carbon intensity by up to 80%. And to strengthen the measure, Delta has pledged to replace 10% of its jet fuel with sustainable aviation fuel by 2030.

In a parallel, but no less pioneering lane, France’s TotalEnergies has announced that it is developing a 100% renewable fuel for use in motorsports, using bioethanol sourced from residues produced by the French wine industry (among others) at its Feyzin refinery in Lyon. This, it believes, will reduce the racing sports’ carbon emissions by an immediate 65%. The fuel, named Excellium Racing 100, is set to debut at the next season of the FIA World Endurance Championship, which includes the iconic 24 Hours of Le Mans 2022 race.

But Chevron isn’t done yet. It is also falling back on the long-standing use of vegetable oils blended into US transport fuels by signing a wide-ranging agreement with commodity giant Bunge. Called a ‘farmer-to-fuelling station’ solution, Bunge’s soybean processing facilities in Louisiana and Illinois will be the source of meal and oil that will be converted by Chevron into diesel and jet fuel. With an investment of US$600 million, Chevron will assist Bunge in doubling the combined capacity of both plants by 2024, in line with anticipated increases in the US biofuels blending mandates.

Even ExxonMobil, one of the most reticent of the supermajors to embrace renewables wholesale, is getting in on the action. Its Imperial Oil subsidiary in Canada has announced plans to commercialise renewable diesel at a new facility near Edmonton using plant-based feedstock and hydrogen. The venture does only target the Canadian market – where political will to drive renewable adoption is far higher than in the US – but similar moves have already been adopted by other refiners for the US market, including major investments by Phillips 66 and Valero.

Ultimately, these recent moves are driven out of necessity. This is the way the industry is moving and anyone stubborn enough to ignore it will be left behind. Combined with other major investments driven by European supermajors over the past five years, this wider and wider adoption of renewable can only be better for the planet and, eventually, individual bottom lines. The renewables ball is rolling fast and is only gaining momentum.

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Market Outlook:

  • Crude price trading range: Brent – US$71-73/b, WTI – US$68-70/b
  • Global crude benchmarks have stayed steady, even as OPEC+ sticks to its plans to ease supply quotas against the uncertainty of rising Covid-19 cases worldwide
  • However, the success of vaccination drives has kindled hope that the effect of lockdowns – if any – will be mild, with pockets of demand resurgence in Europe; in China, where there has been a zero-tolerance drive to stamp out Covid outbreaks, fuel consumption is strengthening again, possibly tightening fuel balances in Q4
  • Meanwhile, much of the US Gulf of Mexico crude production remains hampered by the effects of Hurricane Ida, providing a counter-balance on the supply side

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