Oxford Institute for Energy Studies

New Oxford Institute for Energy Studies Podcast on the EU Decarbonised Gas & Hydrogen Package, which will enter into force on the 4th of August and will provide rules for decarbonizing the EU gas system. 👉 Link to podcast: https://lnkd.in/dwvJKS3Q 👉 Link to related research paper: https://lnkd.in/e_35hwaq 🎙 In this latest OIES podcast, which is a combined presentation from the Gas and Energy Transition programmes, James Henderson talks to Katja Yafimava and Jonathan Stern about the implications of the latest EU regulation on decarbonising the region’s gas system which aims to manage the shift towards hydrogen and away from natural gas. 🎙 They discuss the overall goals of the latest decarbonised gas and hydrogen package and consider what it means for security of gas supply in Europe. 🎙 They consider the levels of flexibility that it offers, given the uncertainty about future levels of hydrogen demand and the timescale on which they may be achieved, and also look at the questions of financing and co-ordination of the shift from the supply of one gaseous fuel to another. 🎙 They also ask whether the new legislation really addresses some of the key issues concerning hydrogen in Europe, in particular whether it actually encourages the rapid development of a hydrogen market. 🎙 They conclude that although the new rules are a good first step in the process, the regulation may well need to be adapted in the light of real-world practicalities. All of our #podcasts are also available on #applemusic and #spotify #EU #Hydrogen #Naturalgas #Regulation #Securityofsupply

New Oxford Institute for Energy Studies Energy Insight explains the background, scope and likely consequences of the sanctions on Russian LNG with a particular focus on the impact of the EU transshipment ban on LNG contracts 👉 Link to OIES Energy Insight: https://lnkd.in/eirR-4cf 💠 On 24 June 2024, the EU adopted its 14th sanctions package against Russia – in the form of Regulation 2024/1745– which for the first time introduced measures directly targeting Russian liquefied natural gas (LNG) 💠 The following LNG-related measures are part of the package: 1️⃣ prohibition on the transshipment of Russian LNG through EU ports to non-EU countries; 2️⃣ prohibition on the import of Russian LNG through terminals that are not connected to the EU natural gas system; and 3️⃣ prohibition on providing goods, technology or services for the completion of Russian LNG projects 💠 The EU has therefore adopted a combination of measures concerning the selected aspects of the supply of Russian LNG to EU and non-EU countries and the future production of Russian LNG 💠 Main conclusion is that the adopted LNG-related sanctions, while creating legal and logistical complications for several market players, are unlikely to significantly limit the availability of Russian LNG on the European market and could even increase it #lng #russia #sanctions #eu #gasmarkets #lngcontracts

New Oxford Institute for Energy Studies Energy Insight discusses EU sanctions on Russian LNG. 👉 Link to Energy Insight: https://lnkd.in/eirR-4cf Key Points: 💠 In June 2024, the EU adopted its 14th sanctions package against Russia which introduced measures prohibiting: transshipment of Russian LNG through EU ports to non-EU countries; imports of Russian LNG through terminals not connected to the EU natural gas system; and providing goods, technology or services for the completion of Russian LNG projects. 💠 Of the 20.9 bcm exported from Yamal LNG to EU countries in 2023, around 25% was transshipped to destinations outside the EU. In the first half of 2024 the figure was around 23%. If some of these volumes are kept within the EU (instead of being transshipped outside through EU ports), this would increase the imports of Russian LNG to the EU. 💠 Importantly, the EU transshipment ban – likely to be followed by declarations of force majeure – will not automatically invalidate the LNG supply and transshipment contracts concerned, but will create legal complications for the parties to those contracts. 💠 The impact of the measure on off-grid terminals will mainly be felt in Sweden and Finland (which proposed this measure themselves). 💠 The ban on the provision of technology, goods and services for the completion of Russian LNG projects under construction (such as Arctic LNG 2 and Murmansk LNG) could lead to cost increases and delays for these projects and, especially in combination with US sanctions, complicate Russian efforts to create an alternative to transshipment in EU ports. 💠 All these measures reflect the EU’s growing confidence in a future without Russian gas, but they also suggest that such future will not be immediate. #Contracts #EU #LNG #Russia #Sanctions #transshipment

Oxford Institute for Energy Studies new Quarterly Gas Market Review analyses the latest trends in gas and LNG markets 👉 Link to OIES Quarterly Gas Review: https://lnkd.in/e4yJ4ASA Key points on European gas demand: 💠 European gas demand remains well below pre-crisis level and is even on its way for another, albeit small, year-on-year decline in 2024 💠 Signs of rebound (it’s probably too soon to talk about recovery just yet) are clearly visible in the industrial sector, but any growth there will be washed out by a continuous decline in the power sector. 💠 Observed gas demand in EU-27 plus UK dropped to an annualized 387 Bcm at the end of H1 2024, roughly 100 Bcm lower than pre-crisis gas demand in 2021 💠 Gas consumption declined by 6.4 per cent in Q2 2024 (-5 Bcm) year-on-year, after already losing 1.2 per cent year-on-year in Q1 (-1.6 Bcm), despite lower year-on-year gas prices (at least until May) 💠 Gas consumption is influenced by country-specific factors and as such, the picture was uneven around Europe; among the seven largest gas markets, which together cover about 75 per cent of regional demand, Poland for instance has been a good example of deviation from the trend with higher gas demand growth in H2 2023 and Q1 2024 💠 Reduced gas for power generation was the main driver for the gloomy evolution in Q2 across all these markets 💠 Gas for power was down by 25 per cent year-on-year in Q2 2024, driven by improved renewables availability (hydro, wind and solar) and the progressive return of the French nuclear fleet in line with EDF’s target and roughly back to 2021 levels #gas #lng #europe #gasdemand #power #renewables #gasprices

New Oxford Institute for Energy Studies Quarterly Gas Review: Prices Defy European Fundamentals. 👉 Link to Quarterly Gas Review - Issue 25: https://lnkd.in/e4yJ4ASA Key points: 💠 Q2 2024 saw a continuation of the European price rally that began in late February and lasted until early June, when prices stabilised. The monthly average TTF front-month price rose from 8.14 USD/MMBtu in February to 10.12 USD/MMBtu in May and 10.87 USD/MMBtu in June. 💠 This price rally and stabilisation occurred despite higher European production and pipeline imports, lower net storage injections, lower consumption, and lower import and sendout of LNG, which acted as the balancing element. 💠 However, this decline in LNG sendout was only sufficient to bring the volume of sendout in Q2 2024 (28 Bcm) back to the levels seen in Q2 2019-2021 (26-28 Bcm), thus unwinding the growth seen in 2022 and 2023 but keeping LNG as a major source of European supply. 💠 At the same time, the limited growth in LNG supply from new projects was not sufficient to offset a year-on-year decline in supply from existing projects, resulting in total global LNG exports declining by 0.5 per cent year-on-year in Q2 2024. 💠 This occurred in parallel with an increase in non-European LNG demand, especially across all Asian sub-regions, which pushed up Asian benchmark LNG prices. This led to a tighter global LNG market overall, and upward pressure on European prices. This situation is unlikely to change until the impact of the wave of new LNG supply is felt, from 2025 into 2026. 💠 On the demand side, European gas consumption remains well below pre-crisis level and is even on track for another year-on-year decline in 2024. 💠 Gas consumption declined by 6.4 per cent (-5 Bcm) year-on-year in Q2 2024, after already losing 1.2 per cent (-1.6 Bcm) year-on-year in Q1, despite monthly average European gas prices (TTF front-month) being lower year-on-year until May and stable year-on-year in June. 💠 Signs of rebound are clearly visible in the industrial sector, but any growth there is expected to be washed out by a continuous decline in the power sector. #Asia #Demand #Europe #GasPrices #JKM #LNG #Naturalgas #Supply #TTF

The Japan Times reports that Jera, Japan's biggest power generator, said that it had concluded a three-month trial of co-firing 20% of ammonia with coal at its Hekinan thermal power station with positive results. 👉  Link to article: https://lnkd.in/esfgS4pc A recent Oxford Institute for Energy Studies paper looks at co-firing ammonia with coal as one potential pathway to reduce emissions from coal power plants in Asia. 👉 Link to OIES paper: https://lnkd.in/ddX95m_q Some key points: 💠 The decarbonisation of coal power plants is a complex and multifaceted challenge that cannot be resolved by any single technology. Each alternative presents its own set of advantages and disadvantages, and the selection of a suitable technology must consider a range of local factors. As such, there is no universal solution that can be employed across all scenarios. 💠 Co-firing ammonia presents an option for decarbonising coal power plants, provided that certain conditions are met. Specifically, the cost of ammonia utilised in the co-firing process must be low, and renewable resources must not be available at a reasonable cost due to limitations in space and high integration expenses. 💠 The potential for co-firing ammonia to reduce carbon emissions from coal power plants is significant. However, this approach requires careful consideration of various factors that can impact its feasibility, such as the cost of RE production, the cost of supplied ammonia and the availability of infrastructure 💠 A target of 100% ammonia firing be established to reduce emissions, as utilising up to 40% ammonia results in emissions comparable to those of natural gas power plants 💠 But achieving this target would necessitate a significant quantity of ammonia, which may result in a substantial increase in the levelized costs. To facilitate the co-firing of ammonia, blue ammonia may serve as a less expensive source of ammonia until green ammonia attains cost competitiveness #ammonia #greenammonia #cofiring #coalpowerplants #renewables

New Oxford Institute for Energy Studies Energy Insight discusses decarbonising China's steel sector. 👉 Link to Energy Insight: https://lnkd.in/et9NwT-X Key points: 💠 China’s steel sector is pivotal in the global fight against climate change, given its substantial carbon footprint. Steel production accounts for 7% of global emissions and more than half of the world’s steel is produced in China. 💠 This report delves into the challenges and opportunities in decarbonising China’s steel industry as well as the impact of global trade and standard-setting. 💠 The report finds that overcapacity, coal dependence, and economic uncertainty are central hurdles in achieving China’s climate targets and will require stricter regulatory approaches to shift towards greener production. 💠 However, innovation in new technologies such as green hydrogen steel production driven by state-owned enterprises, government green procurement policies, and enhanced recycling efforts illustrate opportunities for decarbonisation. 💠 International initiatives like the EU’s carbon border adjustment mechanism have led to efforts in China to improve emission reporting and engage in the discussion on global green standards. 💠 For China’s steel sector to successfully decarbonise, it must overcome challenges from overcapacity, coal reliance, and economic uncertainty through technological innovation, material efficiency, and green procurement, with international actors supporting through trade incentives, global green steel standards, and ongoing engagement with China. #CarbonBorderAdjustmentMechanism #China #emissiontrading #greenhydrogen #industrialdecarbonisation #steel

New Oxford Institute for Energy Studies Energy Insight discusses lessons learned from Norway’s experience with CCS 👉 Link to Energy Insight: https://lnkd.in/egi8x_gr Key points: 🔹 Norway is widely considered a global leader in carbon capture and storage (#CCS) with decades of experience in technology development and project implementation 🔹 As competition in the #hydrocarbon industry broadened to include areas such as #sustainability and emissions reduction from oil and gas activities, CCS can play a key role in sustaining and increasing global competitiveness of Norwegian oil & gas 🔹 Several factors contributed to country’s relative success in CCS to date including availability of rich offshore CO2 storage resources and a robust #carbontax which has been in place since 1991 🔹 Norway’s focus on developing international CCS policy also resulted in first global full-chain CCS project, the Longship project, providing a flexible solution to capture CO2 from various emitters nationally and across borders to be transported and stored under the Norwegian Continental Shelf 🔹 Government’s substantial ownership and participation in CCS projects played a key role, particularly through its establishment of Gassnova which took on the project integrator’s role and bore some of the #integration risks inherent in CCS projects. This enabled emission source owners to advance projects without needing to establish their own #transport and #storage solutions 🔹 In 2014, the EU CCS Directive was implemented into Norwegian law and since then government has worked with the EU Commission to resolve issues pertinent to the capture of CO2 from both fossil and biogenic sources and from sectors covered under EU-ETS and others not, in addition to #crossborder CO2 transport 🔹 Government also provided generous funding for CCS projects through state aid agreements which supplemented the #EUETS price as well as a recently-implemented national combustion tax 🔹 These state aid agreements provide cost assurances for both capital and operational expenditure up to a defined limit, thus reducing project and interface risks for industrial partners 🔹 Amendment to Article 6 of #LondonProtocol further allows Norway to enter into #bilateral agreements with neighbouring countries for transport of CO2 across borders, resulting in such agreements with Netherlands, Belgium, Sweden, Denmark and Switzerland 🔹 Compared with other countries studies show relatively high #publicacceptance of CCS as a decarbonization solution in Norway, which further enabled its development #carboncapture #energytransition #carbonmanagement #industrialdecarbonization With thanks to Cathrine Ringstad at Bellona Europa for her insightful feedback and review of this paper. ------------------------------------------------------------------- Visit OIES Carbon Management Programme 👉 https://lnkd.in/e92AsGkz

A recent Oxford Institute for Energy Studies paper looks at Hedging and Tail Risk in Electricity Markets 👉 Link to Publication: https://lnkd.in/esNGu4NK Key points: 💠  A concern persistent in scarcity-based market designs for electricity over many years has been the illiquidity of markets for long-term contracts to hedge away volatile price exposures between generators and consumers 💠   These missing markets have been attributed to a range of factors including retailer creditworthiness, market structure and the lack of demand side interest from consumers 💠  Paper demonstrates the inherent challenges of hedging a legacy thermal portfolio that is dominated by volatile fat-tailed commodities with significant tail dependence 💠  Under such conditions the price required for generators to provide such hedges can be multiples of the expected value of prices 💠  The key insight is that when the real-world constraints of credit and financing are considered, the volatility of thermal fuels and their co-dependence under extremes may be a key reason as to why electricity markets have been incomplete in terms of long-term hedging contracts 💠  Counterintuitively, in the context of the energy transition, our results show that, ceteris paribus, increasing the penetration of low carbon resources like wind, solar and energy storage, can add tail-diversity and improve contractability 💠 The results point to further considerations for policy and research inquiry in market design as electricity systems progress further down the path of decarbonisation. 1️⃣ The relevance of credit worthiness and solvency in long-term risk contracting. 2️⃣ The need for tail risk assessment of systems and markets to expand in breadth towards the integration of financial, physical, and digital systems. 3️⃣ Consumers' perception of risks. 4️⃣ The critical role of energy storage in enabling effective hedging strategies, especially in grids with high renewable penetration 5️⃣ The degree of decentralization of decision making in electricity market design #electricity #electricitymarkets #tailrisks #hedging #renewables #decarbonization #decentralisation #energytransition

The new issue of Oxford Institute for Energy Studies Oil Monthly, including our latest short-term oil market #outlook to 2025, is now available. 👉 Link: https://lnkd.in/da9U6d3Z 🔹 Our #Brent #price #forecast is unchanged at $85.4/b in 2024 and $78.6/b in 2025. Brent is currently testing the upper bound of this year’s $75/b and $85/b range on signs of tightening markets ahead of expectations of strengthening summer demand, as OPEC supply cuts help draw down stocks. Tempering expectations of tighter balances are concerns over cooling demand in China and slow progress in drawing down product stocks, which have pressured refining margins. This has prompted us to maintain our Brent price outlook unchanged from last month, with H2 prices forecast to average near $87/b, although #uncertainty over global oil demand has skewed the balance of price risks to the downside near $83/b. For 2025, the balance of risks is dictated by #OPEC delaying, pausing or reversing its planned production hikes should market weaknesses prevail. 🔹 The #oil #market is forecast at 700 kb/d deficit in 2024 and a 730 kb/d surplus in 2025, assuming OPEC output returns as planned. We continue to forecast the market deficit deepening in the second half of the year to average -1.4 mb/d, unchanged from last month. The market is expected to shift into sustained surpluses from 2Q25 onwards averaging 930 kb/d (2Q25-4Q25), assuming OPEC output returns as planned. 🔹 Our global #demand #growth forecast is maintained at 1.4 mb/d in both 2024 and 2025. We have revised slightly lower non-OECD demand growth to 1.35 mb/d in 2024, on weak Q2 data particularly in #China, as #OECD demand growth remained resilient. But despite the Q2 slowdown, we still expect global oil demand growth to gain pace in the second half of the year and average 1.9 mb/d. For 2025, the pace of global oil demand growth is now expected to marginally surpass 2024 at 1.45 mb/d. 🔹 Global oil #supply is forecast to grow 270 kb/d in 2024, 100 kb/d lower than last month’s forecast, and by 2.9 mb/d in 2025. The 2024 downgrade reflects strong OPEC output compliance in the first half of the year with total OPEC output in June falling to a 3-year low and producers potentially cutting further in Q3 to meet their pledged targets and/or compensate for overproduction. Total non-OPEC #crude and global liquids are forecast to grow 880 kb/d in 2024 and 1.5 mb/d in 2025.    #energy #energypolicy #oott