Author: Ricardo Perez

In the 1950s the oil market was in the gift of the “Seven Sisters”. These giant Western firms controlled 85% of global crude reserves, as well as the entire production process, from the well to the pump. They fixed prices and divvied up markets between themselves. Trading oil outside of the clan was virtually impossible.

By the 1970s that dominance was cracked wide open. Arab oil embargoes, nationalisation of oil production in the Persian Gulf and the arrival of buccaneering trading houses such as Glencore, Vitol and Trafigura saw the Sisters lose their sway. By 1979, the independent traders were responsible for trading two-fifths of the world’s oil.

The world is in turmoil again—and not only because the conflict between Israel and Hamas is at risk of escalating dangerously. Russia’s war in Ukraine, geopolitical tensions between the West and China, and fitful global efforts to arrest climate change are all injecting volatility into oil markets (see chart 1). Gross profits of commodity traders, which thrive in uncertain times, increased 60% in 2022, to $115bn, according to Oliver Wyman, a consultancy. Yet this time it is not the upstarts that have been muscling in. It is the descendants of the Seven Sisters and their fellow oil giants, which see trading as an ever-bigger part of their future.

The companies do not like to talk about this part of their business. Their traders’ profits are hidden away in other parts of the organisation. Chief executives bat away prying questions. Opening the books, they say, risks giving away too much information to competitors. But conversations with analysts and industry insiders paint a picture of large and sophisticated operations—and ones that are growing, both in size and in sophistication.

In February ExxonMobil, America’s mightiest supermajor, which abandoned large-scale trading two decades ago, announced it was giving it another go. The Gulf countries’ state-run oil giants are game, too: Saudi Aramco, Abu Dhabi National Oil Company and QatarEnergy are expanding their trading desks in a bid to keep up with the supermajors. But it is Europe’s oil giants whose trading ambitions are the most vaulting.

BP, Shell and TotalEnergies have been silently expanding their trading desks since the early 2000s, says Jorge Léon of Rystad Energy, a consultancy. In the first half of 2023 trading generated a combined $20bn of gross profit for the three companies, estimates Bernstein, a research firm. That was two-thirds more than in the same period in 2019 (see chart 2), and one-fifth of their total gross earnings, up from one-seventh four years ago. Oliver Wyman estimates that the headcount of traders at the world’s largest private-sector oil firms swelled by 46% between 2016 and 2022. Most of that is attributable to Europe’s big three. Each of these traders also generates one and a half times more profit than seven years ago.

Today BP employs 3,000 traders worldwide. Shell’s traders are also thought to number thousands and TotalEnergies’ perhaps 800. That is almost certainly more than the (equally coy) independent traders such as Trafigura and Vitol, whose head counts are, respectively, estimated at around 1,200 and 450 (judging by the disclosed number of employees who are shareholders in the firms). It is probably no coincidence that BP’s head of trading, Carol Howle, is a frontrunner for the British company’s top job, recently vacated by Bernard Looney.

The supermajors’ trading desks are likely to stay busy for a while, because the world’s energy markets look unlikely to calm down. As Saad Rahim of Trafigura puts it, “We are moving away from a world of commodity cycles to a world of commodity spikes.” And such a world is the trader’s dream.

One reason for the heightened volatility is intensifying geopolitical strife. The conflict between Israel and the Palestinians is just the latest example. Another is the war in Ukraine. When last year Russia stopped pumping its gas west after the EU imposed sanctions on it in the wake of its aggression, demand for liquefied natural gas (LNG) rocketed. The European supermajors’ trading arms were among those rushing to fill the gap, making a fortune in the process. They raked in a combined $15bn from trading LNG last year, accounting for around two-fifths of their trading profits, according to Bernstein.

This could be just the beginning. A recent report from McKinsey, a consultancy, models a scenario in which regional trade blocs for hydrocarbons emerge. Russian fuel would flow east to China, India and Turkey rather than west to Europe. At the same time, China is trying to prise the Gulf’s powerful producers away from America and its allies. All that is creating vast arbitrage opportunities for traders.

Another reason to expect persistent volatility is climate change. A combination of increasing temperatures, rising sea levels and extreme weather will disrupt supply of fossil fuels with greater regularity. In 2021 a cold snap in Texas knocked out close to 40% of oil production in America for about two weeks. Around 30% of oil and gas reserves around the world are at a “high risk” of similar climate disruption, according to Verisk Maplecroft, a risk consultancy.

Then there is the energy transition, which is meant to avert even worse climate extremes. In the long run, a greener energy system will in all likelihood be less volatile than today’s fossil-fuel-based one. It will be more distributed and thus less concentrated in the hands of a few producers in unstable parts of the world. But the path from now to a climate-friendlier future is riven with uncertainty.

Some governments and activist shareholders are pressing oil companies, especially in Europe, to reduce their fossil-fuel wagers. Rystad Energy reckons that partly as a result, global investment in oil and gas production will reach $540bn this year, down by 35% from its peak in 2014. Demand for oil, meanwhile, continues to rise. “That creates stress in the system,” says Roland Rechtsteiner of McKinsey.

Future traders
This presents opportunities for traders, and not just in oil. Mr Rechtsteiner notes that heavy investment in renewables without a simultaneous increase in transmission capacity also causes bottlenecks. In Britain, Italy and Spain more than 150-gigawatts’-worth of wind and solar power, equivalent to 83% of the three countries’ total existing renewables capacity, cannot come online because their grids cannot handle it, says BloombergNEF, a research firm. Traders cannot build grids, but they can help ease gridlock by helping channel resources to their most profitable use.

Europe’s three oil supermajors are already dealing in electric power and carbon credits, as well as a lot more gas, which as the least grubby of fossil fuels is considered essential to the energy transition. Last year they had twice as many traders transacting such things than they did in 2016. Ernst Frankl of Oliver Wyman estimates that gross profits they generated rose from $6bn to $30bn over that period. Other green commodities may come next. David Knipe, a former head of trading at BP now at Bain, a consultancy, expects some of the majors to start trading lithium, a metal used in battery-making. If the hydrogen economy takes off, as many oil giants hope, that will offer another thing not just to produce, but also to buy and sell.

AoL, October 23, 2023

Saudi Aramco is entering the global LNG business by signing a deal to buy a minority stake in LNG company MidOcean Energy, which is in the process of acquiring interests in four Australian LNG projects, the Saudi state oil giant said on Thursday.

Aramco has signed the definitive agreements to buy a strategic minority stake in MidOcean Energy for $500 million, which is the Saudi firm’s first international investment in LNG.

MidOcean Energy is formed and managed by EIG, an institutional investor in the global energy and infrastructure sectors, with which Aramco signed in 2021 a deal to sell a 49% stake in Aramco Oil Pipelines Company.

The LNG stake agreement announced today includes an option for Aramco to raise its shareholding and associated rights in MidOcean Energy in the future. The deal is subject to closing conditions which include regulatory approvals, Aramco said.

The Saudi giant, the world’s single largest crude oil exporter, has been looking for months to tap the global gas and LNG business and was rumored earlier this year to have been in early talks with developers aiming to secure a stake in a project in the United States or Asia.

Going into LNG trading would be another lucrative business for the Saudi oil giant, considering that LNG demand is only set to grow in the coming years as Europe ditches Russian gas and Asia looks to use more natural gas instead of coal.

Commenting on today’s deal, Aramco Upstream President, Nasir K. Al-Naimi, said: “This is an important step in Aramco’s strategy to become a leading global LNG player.”

“MidOcean Energy is well-equipped to capitalize on rising LNG demand, and this strategic partnership reflects our willingness to work with leading international players to identify and unlock new opportunities at a global level,” Al-Naimi added.

MidOcean Energy’s initial focus is on the LNG deals in Australia, but the company believes the opportunity set is global, said Blair Thomas, EIG chairman and CEO.

OilPrice.com, Tsvetana Paraskova, September 28, 2023

Crude prices will likely get a fresh boost this week, as stockpiles at the key US storage hub in Cushing, Oklahoma, risk collapsing to the lowest level (aka “tank-bottoms”) in almost a decade. Such a move would embolden those aiming for a return of $100 oil by year-end.

Cushing matters. Being the delivery point for the WTI futures contract, the rise and fall of the holdings is among the market’s most closely followed trends. So far in 3Q, inventories have slumped by ~47% to 22.9m barrels. That’s the lowest since July 2022 and that’s not far away from the 2014 lows.

If that comes to pass, it’d highlight the scramble for near-term supplies as the global market tightens up.

OilPrice.com, ZeroHedge, September 26, 2023

Venezuela has an opportunity to resuscitate the linchpin of its economy — oil — now that punishing US sanctions have been relaxed.

The surprise move on Oct. 18 allows international companies to apply the full weight of their expertise and technology to crude fields and infrastructure that atrophied amid years or underinvestment, civil turmoil and international isolation.

Here’s a snapshot of who stands to gain and who may be left out:

Chevron Corp.
The second-largest US explorer is best-positioned to benefit from the reopening. Chevron adopted a patient approach across the tenures of three CEOs by maintaining a presence in-country after late President Hugo Chavez nationalized oil assets during the first decade of this century.

The California-based company got a head start on the rest of the sector late last year when the US government awarded it a special license to commence limited operations at four joint ventures and sell Venezuelan crude to American refiners.

“We are a constructive presence in Venezuela, where we have dedicated investments and a large workforce,” Chevron said in an email. “We remain committed to the safety and wellbeing of our employees and their families, the integrity of our joint venture assets, and the company’s social and humanitarian programs.”

Rosneft PJSC
The Russian giant may have the most to lose because the US measure prohibits American companies from cooperating with or providing financing for Rosneft’s assets in Venezuela. The company’s trading arm, which accounted for half of Venezuelan crude exports as recently as 2020, has reduced operations in the country since it was hit with sanctions. Rosneft’s Venezuelan oil joint ventures are run mostly by crews from state-controlled Petroleos de Venezuela SA.

Rosneft didn’t respond to a request for comment left outside of normal business hours.

Repsol SA
The Spanish oil explorer has a stake in one of Venezuela’s biggest undeveloped fields with estimated potential output of more than 300,000 barrels a day. Repsol also is keen to recover money owed by PDVSA related to the offshore Cardon IV natural gas project.

Repsol and partner Eni SpA are in talks with the Nicolas Maduro regime for a license to export liquefied natural gas to European markets.

Repsol didn’t respond to a request for comment.

Eni
The Italian oil company holds stakes in three joint ventures. Prior to the Oct. 18 announcement, it had been permitted to take PDVSA crude in lieu of Cardon IV gas sales but now it will be able to receive direct payments from Venezuela.

Eni said the temporary easing of sanctions will increase “the flexibility and effectiveness of debt collection activities.”

Maurel & Prom
The French driller focused on Latin America and Africa has been expanding its footprint in Venezuela with an aim to boost oil production in Zulia state, Venezuela’s oil cradle. The company, which is 24% owned by Indonesia’s Pertamina, is a participant in the $1.5 billion plan to capture PDVSA’s methane emissions.

Maurel & Prom didn’t respond to a request for comment.

Bloomberg, Fabiola Zerpa and Joe Carroll, October 21, 2023

A 27-year agreement signed between QatarEnergy and TotalEnergies will see Qatar supply up to 3.5 million tonnes per annum (MTPA) of liquefied natural gas (LNG) to France.

Affirmed through two long-term LNG sale and purchase agreements (SPAs), LNG will be delivered via ship to the Fos Cavaou LNG receiving terminal in southern France, with deliveries expected to start in 2026.

According to QatarEnergy, the LNG volumes will be sourced from the two joint ventures between the partners that hold interests in Qatar’s North Field East (NFE) and North Field South (NFS) projects.

Saad Sherida Al-Kaabi, the Minister of State for Energy Affairs, President and CEO of QatarEnergy, stated that the agreements ‘demonstrate our continued commitment to the European markets in general’, in particular the French market.

“The State of Qatar has been supplying the French market with LNG since 2009, and the new agreements reflect the joint effort of two trusted partners, QatarEnergy and TotalEnergies, to provide reliable and credible LNG solutions to customers across the globe,” he added.

Enthusing about the company’s new LNG expansion in Qatar, Al-Kaabi went on to say that the project is the least carbon intensive project in the world.

In addition to its projects in Qatar, the company has bolstered production capacity in the US through the Golden Pass LNG export project in addition to its commitments in LNG receiving terminals in Europe.

The NFE project is expected to increase the LNG production capacity of Qatar from 77mtpa to 11mtpa by 2025 by 2025.

Its second phase, the NFS project, is expected to further increase the LNG production capacity of Qatar from 110mtpa to 126mtpa by 2027.

Fears of overinvestment
A recently published study from the Institute for Energy Economics and Financial Analysis (IEEFA) revealed that France faces potential overinvestment in LNG infrastructure as the utilisation rates of existing terminals drop and gas consumption declines.

The research reveals that the average utilisation rate of France’s operational LNG import terminals stood at 60% during the period between January and August 2023.

This was down from the previous year’s rate of 74%, casting doubts on the need for the newly arrived floating storage regasification unit (FSRU) at the port of Le Havre.

Despite a 9% decrease in gas usage in 2022, France is considering an expansion of capacity for operational LNG terminals and international gas pipelines.

“If demand continues declining, France and neighbouring European countries risk investing in gas infrastructure that will fail to improve security of energy supply and could become underutilised,” said Ana Maria Jaller-Makarewicz, author of the IEEFA report and an energy analyst.

GasWorld, Anthony Wright, October 11, 2023

Vopak celebrates the repurposing of 22 tanks at Vopak’s Los Angeles terminal in California, USA. With a combined capacity of 148,000 cubic meters (39 million gallons), this is a clear example of how storage capacity used for traditional products can be repurposed to store the products of the future like Sustainable Aviation Fuel (SAF) and renewable diesel.

Vopak Los Angeles has a long-term agreement for this storage infrastructure with Neste, the world’s leading producer of SAF, renewable diesel, and renewable feedstock solutions for various polymers and chemicals industry uses.

The Vopak Los Angeles Terminal is strategically located in the Port of Los Angeles and is well-connected for logistics via various modes of transportation, including vessels, barges, trucks, pipeline, and trains. The storage capacity at the Vopak terminal significantly increases the availability and accessibility of Neste’s renewable fuels at critical hubs in the Los Angeles area, such as SAF for airlines at the Los Angeles International Airport (LAX) and surrounding airports, and renewable diesel for fueling stations serving road transportation.

“Neste is fully committed to supporting the energy transition in the U.S. as well as globally via working closely together with partners to increase the availability of our renewable fuels. Our cooperation with Vopak shows how repurposing existing fuel distribution infrastructure can accelerate the much needed transition to renewable energy,” says Annika Tibbe, acting President for Neste US. “California has been at the forefront of adopting and endorsing climate-friendly policies and solutions. We are glad to enable more cities, businesses and individual travelers in the state to take advantage of Neste’s renewable solutions to reduce their emissions and help fight against climate change.”

“The Port of Los Angeles congratulates Vopak for its work here at the Port converting nearly two dozen of its tanks to sustainable aviation fuel and renewable low-carbon fuel sources,” said Port of Los Angeles Executive Director Gene Seroka. “The Port of Los Angeles supports the use of lower carbon intense fuel options in the local transportation industry as we progress towards our own zero emission goals beginning in 2030. We appreciate Vopak’s efforts and partnership in this transition.”

Maria Ciliberti, Vopak President United States and Canada: “We are proud to serve Neste! Repurposing Vopak’s assets from oil and traditional fossil fuel products to low carbon energy solutions is right on target with our strategy. We are happy that our services and infrastructure have been selected and are committed to be a part of the Los Angeles energy transition”.

Neste products supporting the energy transition
Neste’s renewable fuels offer a more sustainable alternative to fossil fuels. Neste MY Renewable Diesel™ reduces greenhouse gas (GHG) emissions up to 75%* compared to fossil diesel over its life cycle. Neste MY Sustainable Aviation Fuel™ reduces GHG emissions by up to 80%** over the fuel’s life cycle compared to using fossil jet fuel. Both fuels are fully compatible with current diesel and aircraft engines and fueling infrastructure, making them ideal solutions to reduce emissions in hard to abate sectors like aviation, heavy duty transport, and freight.

Vopak is investing in infrastructure for the energy transition
Vopak has invested approximately EUR 30 million into repurposing existing conventional oil storage capacity over the last months into biofuels storage. As previously announced, Vopak will accelerate its portfolio investments towards new energies and sustainable feedstocks by allocating EUR 1 billion in growth capital to these activities by 2030. This is half of Vopak’s growth capital allocation till 2030. Vopak’s focus is on infrastructure solutions for low-carbon and renewable hydrogen, ammonia, CO2, long duration energy storage and sustainable feedstocks. This strategy will help shape the future of Vopak, but also contribute positively to the transition within key industrial clusters and the shaping of energy hubs of the future.

*Life cycle greenhouse gas emission reductions compared to fossil diesel and based on current feedstock pathways. Calculation method complies with the LCFS CA-GREET 3.0.

Vopak, Liesbeth Lans, 27 September 2023

As hydrogen gains prominence amid the global pursuit of decarbonization and energy security, many major infrastructure projects are considering transportation in the form of ammonia, a safer and more cost-effective method for exporting hydrogen supplies in large volumes.

Rystad Energy’s projections indicate that 174 export terminals will primarily focus on converting hydrogen into ammonia by 2035, accounting for 62% of total exported volumes, or about 13.5 million tonnes per annum (tpa).

In support of the broader energy transition, a substantial upsurge in clean ammonia transportation and trade is anticipated, with traded volumes of ammonia projected to reach 76 million tonnes by 2035, four times the volume transported and traded in 2020. This surge, primarily originating from Africa and North America, will lead to a five-fold increase in ammonia exports by 2050 to 121 million tonnes.

Nations such as Japan and Germany have already adapted their respective national hydrogen strategies in anticipation of a greater role for the fuel, highlighting the pivotal role that hydrogen will play in helping reach net-zero emission targets. Despite the substantial scale of export projects and uncertainties surrounding future trade dynamics, some project developers may decide to partially convert hydrogen to ammonia or explore alternative transportation methods. In the meantime, investors are increasingly raising their confidence in the ammonia market and making significant near-term investments.

Green hydrogen, produced using renewable energy, is the cleanest but most expensive form. Blue hydrogen, produced using natural gas, is more cost-efficient and widely seen as a transition fuel that can help reduce emissions until affordable and reliable alternatives are scaled up. Liquefied natural gas (LNG) is already widely used as transportation and power-generation fuel, and its facilities could be adapted to transport hydrogen as well.

Hydrogen penetration is moving quickly and globally, entering new geographies and outpacing market expectations. With the ammonia trade booming, there is an urgent need to leverage existing assets to their fullest potential. Converting LNG terminals could be a good solution, not only optimizing current infrastructure but also spurring a re-evaluation of strategies that can cope with the scale of the expected market expansion.

Future flows: North America, Africa and Australia feature prominently
Our estimates show global clean ammonia exports are set to surge to 121 million tpa by 2050, with Africa contributing 40.7 million tpa and Australia with 35.9 million tpa based on announced projects.

There are currently 220 ammonia infrastructure projects globally, with a combined handling capacity of more than 6 million tonnes. Australia, which is aspiring to be a top clean ammonia exporter, presently has just seven terminals with total storage capacity of approximately 173,000 tonnes. Without substantial expansion by 2040, this would be capable of accommodating just two to three days of planned clean ammonia exports.

To handle Australia’s projected monthly exports of ammonia, terminal capacity will need to increase ten-fold. This is especially important considering Australian projects, such as the Western Green Hydrogen Hub and the Australia Renewable Energy Hub, will be among the largest hydrogen projects worldwide and are considering ammonia as a transportation medium.

Public-private partnerships: government holds the key to action, matching industry enthusiasm
Although the hydrogen economy is still in its early stages of development, demand for ammonia is already on-track to outpace available infrastructure. Both private and public sectors support the development of a global hydrogen economy, with major companies signing agreements with ammonia producers and governments auctioning off import contracts.

For example, JERA, a prominent player in Japan’s power generation sector, recently initiated a tender to secure an annual supply of up to 500,000 tonnes of ammonia, starting from 2027. This move is aimed at supporting coal generation co-firing applications within Japan and has involved active negotiations with ammonia producers such as CF Industries and Yara. Meanwhile, in Germany, major energy companies E. ON, Uniper and RWE have entered ammonia-related memorandums of understanding with international firms, including EverWind (Canada), Greenko (India) and Hyphen (Namibia).

On the governmental front, auctions aimed at sourcing ammonia imports are gaining popularity. Germany’s H2Global auction, backed by €900 million ($978 million) in governmental support, will be the first of its kind globally and offer 10-year purchase agreements for green ammonia. Additionally, various government-backed initiatives are geared towards creating fresh demand for ammonia, including its use as an alternative fuel in the maritime sector (supported by the FuelEU Maritime initiative) and co-firing applications in Japan.

Industry experts are already exploring the technical feasibility of these transitions, especially considering the projected rise in ammonia utilization for power generation and shipping. We estimate that switching LNG export and import facilities to ammonia would incur estimated costs ranging from 11% to 20% of the total LNG terminal capital expenditure, depending on factors such as demand and location.

Shipping industry growth and transition opportunities for LPG carriers
While still in its early stages, the ammonia shipping industry is expanding swiftly. Currently, just 30% of the global liquefied petroleum gas (LPG) fleet can transport ammonia, with only 50 large and very large gas carriers having this capability. To meet rising demand, Eastern Pacific Shipping has commissioned four very large ammonia carriers (VLACs) from Jiangnan Shipbuilding Group. These VLACs will become the world’s largest carriers, each boasting 93,000 cubic meters of capacity.

To transport the announced 121 million tonnes of ammonia, approximately 200 VLACs will be required, necessitating an investment of approximately $20 billion in newbuilds. Beyond newbuilds, interest is growing in retrofitting LPG vessels for ammonia carriage. Given the availability of over 1,450 LPG carriers, converting these vessels into ammonia-ready carriers offers a robust transition strategy for shipowners, particularly as demand for LPG tonne-mileage is anticipated to decline amid decarbonization efforts.

OilPrice.com, Rested Energy, September 30, 2023

INEOS Inovyn is the largest operator of electrolysis technology in Europe, producing 60,000 tonnes of low-carbon hydrogen annually across multiple sites.

We have achieved a new ISCC certification, reflecting our ambition to reduce carbon emissions. From June 2023, hydrogen production at the group’s Antwerp site is now certified under ISCC PLUS – a global voluntary certification program for bio-based, circular and renewable raw materials across all markets.

It makes INEOS Inovyn the first certified company in Europe to have its required greenhouse gas data fully audited, providing added value to customers by enabling the traceability of sustainable materials along supply chains. Customers using our renewable hydrogen will now be able to develop sustainable downstream products which benefit from this certification – along with reducing their Scope 3 emissions.

Our Antwerp site produces hydrogen through Chlor-Alkali electrolysis – the electrolysis of brine producing chlorine, caustic soda/potash, sodium hypochlorite and hydrogen. The electricity used to produce this hydrogen comes directly from wind turbines off Belgium’s North Coast.

“We use renewable electricity from existing and local Power Purchase Agreements to produce renewable hydrogen. I’m proud that our hydrogen is now labelled renewable-energy-derived material and hope this drives the market towards greater sustainability.”

“Hydrogen produced from the Chlor-Alkali industry is vital as the European hydrogen market grows, this ISCC PLUS certification means there is only one product on the market today with robust and transparent sustainability credentials,” explains Wouter Bleukx.

Using our expertise in production, technology and storage, we are helping pioneer changes that will grow European hydrogen production.

Ineos, Paul Tuohy, October 4, 2023

UK and Germany sign agreement to help accelerate the development of an international hydrogen industry.

A new important agreement between the UK and Germany could help to accelerate the development of an international hydrogen industry – with the 2 countries at the cutting edge of its development.

Signed today at the UK Embassy in Berlin, by Minister for Energy Efficiency and Green Finance Lord Callanan and Federal Republic of Germany’s State Secretary for Energy Philip Nimmermann – a Joint Declaration of Intent will see the UK and Germany work together to underpin the international trade in hydrogen.

The 2 governments will also accelerate the role of low-carbon hydrogen in their nations’ energy mix, showing the world how to expand new, net zero-friendly markets. They committed to work together to further advance ground-breaking and renewable hydrogen technologies, supporting jobs and low-carbon investment.

The partnership follows significant investment by both countries in the development of hydrogen as an alternative fuel. In the UK, the government is supporting new low-carbon hydrogen production with capital from the £240 million Net Zero Hydrogen Fund and revenue support from the Hydrogen Production Business Model. In Germany, the government is also supporting the implementation of the National Hydrogen Strategy with funding from the Climate and Transformation Fund, providing a push for the ramp-up of a hydrogen market.

It will also further boost the move towards net zero emissions by 2050, and the energy security of both countries, moving away from fossil fuels and towards cleaner and more secure, diversified alternatives.

UK’s Minister for Energy Efficiency and Green Finance Lord Callanan said:

The UK and Germany are natural partners in making low-carbon hydrogen a cleaner and more sustainable way to power up our societies.

This agreement will underpin the development of this new fuel not just for our respective countries but also for an international trade that could be transformative in our work towards achieving net zero emissions by 2050.

It is through these partnerships that we can move away from expensive fossil fuels – and in doing so boost our energy security.

Federal Republic of Germany’s State Secretary for Energy, Philip Nimmermann said:

With this declaration we are on our way to jointly help developing the European and international markets for hydrogen. Our cooperation will not just involve trading of hydrogen and its derivatives, but also cooperation on technologies and innovation in this field, which will be of mutual benefit for both Germany and the UK.

Hydrogen is of the highest importance for us to meet our goals regarding emission reduction. Also, it is a great opportunity for business. I am looking forward to a successful partnership.

5 pillars of collaboration were agreed by the leaders:

(1) Accelerating the deployment of hydrogen projects for industry and consumers
(2) Establishing international leadership on hydrogen markets, setting safety and regulations to aid trade
(3) Research and innovation on hydrogen, from production to end use
(4) Promoting trade for hydrogen, plus related goods, technologies and services
Joint market analysis, to support planning and investment by government and industry
(5) This work is set to make hydrogen technologies cheaper and more accessible, aiming to lower energy costs for consumers in the future.

As industry feels the benefit of trade opportunities between the 2 countries, private investment in hydrogen technology and projects is set to follow the agreement.

Providing supportive environments, the countries will discuss safety standards that can be used internationally with the aim to establish reliable, stable markets for sustainable low carbon hydrogen, in particular from renewables.

The agreement will further help the UK and Germany reach their respective goals of net zero emissions by 2050 and to secure a reliable energy supply for economic and energy security purposes, recognising the shifting geopolitical landscape.

Steve Scrimshaw, VP of Siemens Energy UK&I and a member of the UK government’s Hydrogen Advisory Council and the Green Jobs Delivery Group, said:
The UK and Germany have a proud track record when it comes to green energy and today’s Hydrogen Partnership reinforces that commitment. Ramping up the hydrogen economy will take time. Closer cooperation between countries such as the UK and Germany will help accelerate the scale and pace that is needed.

The sustainable decarbonisation of industry is unthinkable without renewable hydrogen that is why partnerships like this are so important. At Siemens Energy we cover the energy value chain – from power generation and transmission to storage, including hydrogen electrolysis technology – and are committed to playing a key role across Europe and the rest of the globe.

Dennis Schulz, CEO of ITM Power, said:
As the UK’s only commercial electrolyser manufacturer, we are welcoming this cross-border collaboration agreement. An effective hydrogen economy can only take shape if countries form alliances like this one. Germany is a very significant market for hydrogen and for ITM Power. We are currently building several hundreds of megawatts of electrolyser capacity for projects in Germany, some of which are among the biggest projects in the world. In October, we will open our new office and EU after sales hub near Frankfurt that will further strengthen our links with our customers and partners in Germany and the wider EU.

Michael Lewis, CEO of Uniper, said:
Today is an important milestone for the German-British energy cooperation. Uniper is proud to be actively shaping the energy transition in the UK. Indeed, hydrogen projects in the UK are an essential part of Uniper’s new strategy and its implementation. Our commitment to driving large-scale hydrogen production is already underpinned with projects: The Humber H2ub® is a 720 MW CCS-enabled hydrogen production project. At its Ratcliffe power station site Uniper plans to develop large-scale, low carbon hydrogen production.

Sopna Sury, COO at Hydrogen RWE Generation, said:
RWE is committed to ramping up green hydrogen in the UK and Germany as part of its clean energy growth plans. By the end of the decade, RWE aims to build a net 2 GW of dedicated electrolyser capacity in our core markets, including the UK. Evidence of this is our flagship GetH2 project in Lingen, Germany and our project development work in England, Scotland and Wales. As a leading international energy company with a strong footprint in the UK, RWE is well-placed to support this partnership and help put the UK and Germany at the forefront of the European hydrogen economy.

Gov.UK, 26 September 2023

Despite Europe’s better preparedness this year, “We actually expect the market to be quite volatile over the winter,” Equinor CEO Anders Opedal told the Energy Intelligence Forum in London on Wednesday.

“We will do everything we can to make sure that we maximise gas to come through the pipes, but Europe will be dependent on the LNG (liquefied natural gas) supply,” Opedal added, as reported by Reuters.

Equinor is the largest gas producer on the Norwegian continental shelf, and the second-largest gas supplier in Europe, supplying more than 20% of Europe’s gas.

The European Union has now managed to store record amounts of natural gas ahead of schedule for winter. As of early October, gas storage in the EU was close to 100% full. This record-full storage, however, does not fully cover consumption.

In early Wednesday trading, we saw Dutch wholesale gas prices rise on the escalating Middle East conflict in the wake of the Hamas attack on Israel and a missile strike on a hospital in Gaza, for which blame is still being apportioned and denied. The Dutch TTF November gas contract was up nearly 4% on Wednesday, tracking a nearly 2% rise in oil prices over Middle East uncertainty.

On the flip side of this, Europe has also lost some demand for natural gas as a direct result of the energy crisis and soaring oil and gas prices, which dampened industrial demand. Trader Vitol Group on Tuesday told the same Energy Intelligence Forum in London that there have been double-digit percentage reductions in European gas demand and they “expect some of the lost demand to be permanent”.

OilPrice.com, Charles Kennedy, October 18 2023