It’s possible that I shall make an ass of myself. But in that case one can always get out of it with a little dialectic. I have, of course, so worded my proposition as to be right either way (K.Marx, Letter to F.Engels on the Indian Mutiny)
China's oil imports in July were down 12% from June and 3% from July 2023, raising concerns about the country's economic health and future oil demand.
Factors such as the rise of electric vehicles, the shift to LNG in trucks, and a slowdown in manufacturing and real estate are contributing to this trend.
While some analysts believe the slowdown is temporary, others argue that China's oil demand may have already peaked, with significant implications for global oil markets.
Uncertainty about Chinese oil demand has become the single most important bearish factor for oil. Every time analysts cite lower prices it is because of uncertainty about Chinese demand—or the potential certainty that this demand is not going higher.
As the world’s largest importer of oil, the Asian powerhouse has pretty understandable significance for oil markets. The players in those markets may need to start adapting to the idea that China will not continue to consume ever more crude oil far into the future.
The latest import figures for China and crude oil disappointed many of those who had made the above assumption. In July, China imported 12% less oil than it did in June and 3% less oil than it imported in July 2023. The figures, as usual, spurred comments that China’s economy was slowing down—and so was oil demand—and international prices fell.
In further potentially bearish news, India just surpassed China as the biggest buyer of sanctioned Russian crude at a rate of close to 2.1 million barrels daily, which represented a 4.2% monthly increase and a 12% annual increase.
Along with the oil import figures, economic data on China has fueled a lot of the demand uncertainty gripping traders and analysts alike. A slowdown in manufacturing growth and a real estate crisis are pretty solid reasons to worry about demand for oil in a country known for its manufacturing industry and once booming real estate sector.
It appears that this uncertainty has now reached its culmination: Reuters columnist Clyde Russell this week posed the question of whether China’s demand had not already peaked. Russell noted China’s record import rate for crude oil last year and the perception that most analysts and traders appear to believe that this year’s slowdown is a temporary thing. And then he asked the question: what if it isn’t?
It is easy to see why so many market participants expect the demand wobble to be a temporary problem. As Russell pointed out, China’s oil imports have been on a straight upward trajectory for 19 years in a row before plummeting in 2020 and 2021 because of the pandemic lockdowns. Then they started recovering, to reach an all-time high of 11.29 million barrels daily last year.
It was China’s post-pandemic recovery that many oil bulls pinned their hopes on. After all, it only made sense that the country that had been importing ever-growing volumes of oil would return to this growth trend after the end of the lockdowns. It appears this group of market players ignored other processes, such as the real estate industry’s troubles after years of growth on government steroids and the manufacturing slowdown in a global economy where many big players are still struggling to get back on their feet after the pandemic.
Then, of course, there is the electric vehicle story. China set out to become a leader in electric vehicles, and it did. The country is currently the biggest EV market in the world. And it is a market that continues to grow, unlike the EV market in Europe, for instance, where EVs are still struggling to compete with internal combustion engine cars.
This is not the case in China, where sales of plug-in hybrids and battery electric cars represented over 50% of all car sales, at a total of 853,000, per figures from market research company Rho Motion as cited by Reuters earlier this month. It was this trend in EV sales growth that prompted Sinopec, the state oil major, to predict that oil demand in China would peak before 2027.
A contributing factor to the expectation of peak oil demand is the replacement of diesel with liquefied natural gas as fuel in trucks. With LNG getting cheaper and burning more cleanly than diesel, industrial machinery operators are switching, with demand destruction for diesel topping 200,000 barrels daily last year, according to Wood Mackenzie.
Some of these factors that play a part in determining China’s oil demand are consistent trends, such as EV growth. Others are market-determined, such as the replacement of diesel with LNG. The moment LNG prices jump, the switch will slow down. There is also the manufacturing and real estate factor, where the slowdown is unlikely to be permanent. Yet, given the overcapacity that China has built in both sectors, the recovery may be more modest than bulls might hope.
What this means is that China may not return to its path of consuming ever-growing volumes of crude oil. To be fair, however, it was unrealistic to expect it would. China relies on imports for close to 60% of its consumption, and China doesn’t like to rely on imports so much. It makes sense to do everything to reduce this dependence by encouraging alternative energy solutions. In other words, China’s peak oil demand may be here, or it may be around the corner—but it is only a matter of time before that peak comes. The sooner the market adjusts, the sooner it could start paying attention to other factors determining global prices, such as supply.
By Irina Slav for Oilprice.com
China Launches New Generation of Energy-Efficient Inland Cargo Ships
China launched the prototypes for a new generation of inland shipping (Shandong Xinneng Shipbuilding)
Chinese officials are highlighting the launch of the first of a new generation of highly energy-efficient inland cargo ships. The vessels feature a standardized design for mass production and will be the leaders in the modernization of China’s inland operations.
The two ships were launched on August 22 at the Shandong Xinneng Shipbuilding Company. One is 295 feet (90 meters) in length and fueled with LNG for container transport. The second vessel is 222 feet (67.6 meters) in length and uses a hybrid electric drive to transport general cargo. Among the innovations being promoted is that they were able to increase container capacity from 70 to 161 boxes. They also feature a fuel-efficient design.
Among the technologies employed are inland power packs for electric power as well as a gas-electric hybrid power system. The hull is low resistance. They predict the ships will have about six percent lower resistance which will produce at least a three percent energy savings. The deadweight of the vessels is five percent lower than older ships and through the use of LNG and batteries, emissions will be lowered by 90 percent. Carbon emissions with lowered by 15 percent.
Two prototype vessels launched in China (Shandong Xinneng Shipbuilding)
The ships will become the largest new energy intelligence shipping on the Beijing-Hangzhou canal. Officials point out that there are more than 10,000 ships operating on the inland rivers in China. Most of the ships they said are generally more than 10 to 15 years old and lack standardized designs. They also have higher emissions and lack fuel efficiency.
The new ships they predict will be the first of a batch of new energy intelligence shipping for the inland industry. A key feature is that the design has been standardized for ease of production. Xinneng reports it has four standardized designs. In addition to the 90-meter LNG-fueled containership and smaller multi-purpose vessel, they are proposing a 67.6-meter fully battery-powered multi-purpose ship and a 57.8-meter (189-foot) LNG-fueled ship.
Using the standardized designs, the shipyard says will save costs and time in production and also make the ships more efficient to operate. Xinneng Shipbuilding predicts it can each year build 400 ships, each in a range of 1,000 to 2,000 tons for inland shipping.
NYK Completes World’s First Commercial-Use Ammonia-Fueled Vessel
Sakigake becomes the world's first ammonia-fueled commercial vessel and will demonstrate operations in Tokyo Bay (NYK)
Japan’s NYK working in conjunction with IHI Power Systems has completed the conversion of a tugboat operating in Tokyo Bay to run on ammonia-fueled propulsion. The project which began four years ago marks the first successful deployment of a commercial vessel fueled by ammonia. The project was reviewed, and the vessel now classed by ClassNK.
The conversion project, which was awarded in August 2022, is based on the 272-ton tug Sakigake which was built in 2015 as Japan’s first LNG-fueled tug. At the time it was viewed as a proof of concept for alternative fuel operations in the class and it is again taking that role for ammonia fueled propulsion. The NYK Group company Shin-Nippon Kaiyosha will now employ the vessel in Tokyo Bay over a three-month demonstration period.
The vessel measures just 122 feet in length. NYK reported that the project which was under Japan’s New Energy and Industrial Technology Development Organization (NEDO), is part of an effort to develop vessels equipped with domestically produced ammonia-fueled engines. They had to overcome numerous challenges in handling and operating on ammonia.
After eight years of tug service in Tokyo Bay, the vessel was docked at the NYK Group's Keihin Dock Co. in October 2023 for conversion to an ammonia-fueled vessel. The main engine and fuel tanks were replaced for ammonia, and sea trials were conducted using ammonia as fuel.
Bunkering of the Sakigake, which is also being called A-Tug, took place for the first time in Yokohama, Japan in July. The bunkering was completed using the truck-to-ship method, marking the first time the tug has been fueled with ammonia and followed two similar bunkering operations earlier this year in Singapore for Fortescue’s converted OSV which became the first large ship to be bunkered with ammonia as part of testing and certification by the Singapore authorities.
As part of the development of vessels equipped with domestically produced ammonia-fueled engines through NEDO’s Green Innovation Fund Project, NYK is also conducting research and development on an ammonia-fueled medium gas carrier with Japan Engine Corporation, Nihon Shipyard Co., IHI Power Systems, and ClassNK. This vessel is scheduled for delivery in November 2026.
The NYK Group reports it will continue to utilize the knowledge gained through the research and development of these vessels to contribute to the decarbonization of the shipping industry. The group plans to promote and expand the use of ammonia-fueled vessels.
GREENWASHING
DNC Climate Panels Offered Empty Rhetoric Instead of Specific Plans
At ExxonMobil-sponsored events on the sidelines of the convention, energy CEOs rehashed fossil fuel misinformation.
A man walks by a Democratic National Convention 2024 sign at the United Center on August 18, 2024, in Chicago, Illinois.Kevin Dietsch / Getty Images
The climate crisis didn’t receive much primetime attention during this year’s Democratic National Convention (DNC).
But away from the bright lights of the main stage, a series of low-profile panel discussions have offered a fascinating window into some key obstacles facing the Democrats’ climate agenda — and a lack of concrete policy proposals to overcome them.
Over the course of nearly three and a half hours, Democratic lawmakers, delegates and climate advocates convened for two Environmental & Climate Crisis Council meetings on Monday and Wednesday. The discussions boasted a broad slate of speakers, including progressives like Rep. Ro Khanna (D-California), Rep. Jamie Raskin (D-Maryland), Rep. Maxwell Frost (D-Florida) and Sen. Jeff Merkley (D-Oregon)
“I love the energy here. You’ve got the biggest caucus here at the DNC,” Khanna exclaimed during his address.
Indeed, the energy and enthusiasm in the room were palpable, even when watched via a YouTube livestream. Speakers repeatedly emphasized the climate wins of the Biden-Harris administration, particularly the passage of the Inflation Reduction Act (IRA) and the Justice40 Initiative, an executive order that allocates certain federal funds to marginalized communities overburdened by pollution. A crucial focus was placed on the intersection of climate policy and racial and economic justice. Several Democrats pointed to the fact that, during her time as San Francisco’s district attorney, Vice President Kamala Harris created one of the first environmental justice units explicitly focused on prosecuting polluters.
“Vice President Harris and Gov. Tim Walz are committed to bold action to build a clean energy economy, to create good jobs, ensure America’s energy security, reduce emissions, protect public health, support communities in the face of climate disasters, and hold polluters accountable,” said Harris’s chief climate adviser, Dr. Ike Irby. These are admirable goals, and Irby noted that Harris and Walz are “fully committed to building upon this promise.”
How, though, will they do it? That’s yet to be seen.
The Harris campaign has yet to outline its specific plans to tackle climate change. She has already walked back on her previous pledge to ban fracking. And the speeches at these two council meetings focused heavily on past wins, not the future — such as the fact that the United States is currently set to fail to meet carbon emissions targets by 2030.
Senator Merkley, a longtime climate voice on Capitol Hill, was the only speaker on the council panels to reference this reality. “We have been woefully inadequate in addressing carbon in the atmosphere,” he said, emphasizing that “as long as we are increasing fossil infrastructure, taking more fossils out of the ground, burning more carbon, that’s more carbon in the air.” The only way to avoid climate catastrophe, he said, is to “electrify everything” and keep fossil fuels in the ground.
Merkley railed against “natural gas,” which, as he noted, is not natural at all. “Fossil gas is not a bridge,” said Merkley. “Please call it fossil gas, call it methane. There is nothing natural about pulling it out of the ground.”
Earlier this year, President Joe Biden announced a temporary pause on permits for liquified natural gas (LNG) exports, a decision that was blocked by a federal judge in July. But at an event on the sidelines of the DNC hosted by Punchbowl News — and sponsored by ExxonMobil — one Democratic lawmaker claimed that a shift from coal to fossil gas would be an “important transition” to achieve climate goals.
“It is in our national interest, it is in our economic interest, in our national security interest to export LNG, and I just hope they’ll reach that decision soon,” said Rep. Lizzie Fletcher of Houston, Texas, a city at the global epicenter of the fossil fuel industry. Fletcher is a co-chair of the Congressional Natural Gas Caucus and one of the top House Democrats receiving oil and gas dollars, trailing only Texas Rep. Henry Cuellar.
Climate advocates interrupted the event chanting, “Exxon lies, people die” — a reference to the fact that, since 1977, ExxonMobil hid its knowledge from the public that burning fossil fuels contributes to climate change.
Indeed, during the first Environmental & Climate Crisis Council meeting, Representative Khanna called out ExxonMobil by name. “We had the Exxon CEO, Chevron CEO, BP CEO, Shell CEO in front of our committee, and they gave millions of documents, and they admitted that they’d lied to the American public,” said Khanna. “They had the best scientists in the world, but they chose to lie.” Massachusetts Gov. Maura Healey also highlighted that she had sued Exxon for deceptive advertising during her time as attorney general.
Still, that didn’t stop Exxon from getting the top spot at the Punchbowl event — not a shock, given the news outlet’s past reliance on the fossil fuel company to sponsor its newsletters. Vijay Swarup, Exxon’s senior director of climate strategy and technology, told his Punchbowl interviewer that the climate crisis would need to be combated with a so-called “And Equation,” meaning fossil fuels would need to continue to be supplied, and “everybody” — including Big Oil — would “get to be part” of the climate solution.
“I don’t think this industry gets near the credit it needs to get for innovation,” added Swarup.
One of the key innovations in question is carbon capture and sequestration (CCS). Backed heavily by the oil and gas industry, the technology remains unproven at scale and would enable the continued extraction of fossil fuels.
To the chagrin of many climate activists, the IRA included tax credits for CCS projects in its climate spending. In May, dozens of environmental groups sent a letter to the Treasury Department encouraging more stringent oversight. “Carbon capture and storage projects have not effectively reduced climate pollution. They have squandered billions of taxpayer dollars, subsidized the fossil fuel industry, expanded fossil fuel infrastructure, and burdened already disadvantaged communities with even more pollution,” wrote climate advocates. “We urge you to take strong action to avoid wasting more of our tax dollars on a tax break that has been prone to fraud and abuse.”
Representative Fletcher, however, praised CCS during her Exxon-sponsored panel, claiming it “plays a huge role” in reaching climate goals. She expressed the need for “permitting reform” by the Environmental Protection Agency to fast-track carbon pipelines for CCS projects.
At another Exxon-sponsored event, just before the panel with Swarup and Fletcher, Punchbowl hosted chief executives from various energy companies, including Karen Harbert, CEO of the American Gas Association, who called fossil gas the “North Star for the next 5 to 10 years.”
“We grew faster last year than we did the year before,” said Harbert. “And I think it’s because we’re proving we’re reliable, we’re affordable, and we can reduce emissions with natural gas.” In actuality, LNG facilities have been found to leak massive amounts of methane, an atmosphere-warming gas, and recentstudies have found that fossil gas could even generate more emissions than coal.
The Punchbowl panels were not part of official DNC programming, but rather one of many corporate-sponsored events, often inaccessible to other press, that occur quietly on the DNC’s sidelines. Still, at an event hosted by a news outlet targeting Washington insiders, and likely attended by Democratic delegates and lawmakers, it is troubling that misleading oil and gas industry talking points were given such a platform.
Taken together, the DNC environment council and Punchbowl panels illuminate key questions for Harris’s still-unknown climate agenda. Will she build on the IRA by taking even more aggressive action to curb emissions and move the nation away from fossil fuels? Or will her agenda fall prey to Big Oil’s faulty “climate solutions,” like CCS and “natural gas”? Only time will tell — but the clock is ticking.
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Schuyler Mitchell is a writer, editor and fact-checker from North Carolina, currently based in Brooklyn. Her work has appeared in The Intercept, The Baffler, Labor Notes, Los Angeles Magazine, and elsewhere. Find her on X: @schuy_ler
As part of a wave of measures to stimulate demand, China's government has announced new subsidies to incentivize domestic shipowners to renew their fleets with more efficient, green-fueled tonnage. The policy echoes the "scrap-and-build" subsidy program of the 2008 financial crisis, which helped buoy Chinese shipyards during a severe downturn.
China's economy grew at a comparatively sluggish pace of five percent in the first half, meeting government targets but falling below historical patterns. A housing market downturn, weak consumer demand and reduced government spending are weighing on the pace of Chinese economic expansion. To stoke demand, Beijing has rolled out subsidies for consumers and businesses to replace older buses, cars, appliances, farm machinery and more. The incentive for swapping an old car with a new battery-electric model has doubled to nearly $2,800 - about 15 percent of the purchase price for a typical EV in China.
Shipowners and shipyards need not feel left out. China's Ministry of Transport and the National Development and Reform Commission have released a new schedule of subsidies for the demolition and replacement of older domestic vessels. China's coastwise and inland fleet is vast, and replacing these small ships with newbuilds would create industrial-scale demand for steel and skilled labor.
The subsidies apply to domestic vessels of as little as 10 years of age, and vary depending on type (coastal, inland or passenger vessels). The starting-point value for the subsidy is $140 per gross ton, ranging up to $210 for qualifying passenger ships and tankers.
The subsidy applies when the newbuild replacement vessel is powered by LNG (at least 50 percent), or by methanol, hydrogen, ammonia or battery-electric propulsion.
The scrapping subsidy points to the possibility of a future for China's inland waterways that looks more like China's heavy-truck sector, which is already transitioning to LNG single-fuel power. Per unit of energy, LNG is now cheaper than diesel in China, and it has made rapid gains in the Chinese trucking market. Owners of older trucks who wish to make the switch may be eligible for subsidies of up to $19,000, enough to cover up to 20 percent of the price of a new LNG-fueled tractor-trailer. Even before the subsidy, LNG-powered trucks accounted for a third of all Chinese new-truck sales as of the end of 2023 - and China's road diesel demand is dropping, according to Wood Mac.
MOL Looks to Cow Manure to Supply Biomethane Fuel
MOL researches cow manure as source of biomethane fuel (MOL)
A group of Japanese companies is researching cow manure as a source to produce biomethane to fuel the decarbonization of heavy industry and shipping. While methane is viewed as a promising alternative fuel shipping companies such as Maersk continue to cite the shortage of supply while others such as Ørsted cite the weak demand for biomethane.
Mitsui O.S.K. Lines and its MOL Sunflower ferry company along with Hokkaido Gas Co., Takanashi Milk, and others announced they are launching a study on the production and utilization of biomethane. They point out the thriving dairy farming industry in Hamanaka town saying they believe animal manure from local dairy farms could be used in fuel production. MOL in 2023 highlighted that farmers have traditionally used this as a power source saying the biogas produced by cattle farmers is about 60 percent methane and 40 percent carbon dioxide.
Liquefied natural gas (LNG) is currently being used as a low-carbon fuel alternative to conventional fuels such as coal and oil and can reduce carbon dioxide (CO2) emissions by 25 to 40 percent compared to conventional fuels in factories and vessels. In this study, the six organizations will evaluate the feasibility of using all or part of the biomethane produced in Hamanaka Town to fuel factories and vessels.
Among the advantages MOL highlights are that the fuel can be used in current infrastructure for transport and consumption. MOL confirmed this in tests with one of its coastal vessels in 2023.
The Japanese company AirWater is one of the pioneers in commercializing this form of biomethane. In the company’s process, the gas is derived from dairy-owned biogas plants, liquefied at about -160°C, separating and refining its main component, methane. The resulting methane can be compressed to 1/600th of its volume when liquefied, enabling it to be transported on a large scale.
While orders of methane-fueled vessels skyrocketed, costs and the lack of production have raised concerns. Maersk recently admitted that it is looking at LNG-fueled vessels in its current fleet renewal project although those vessels could be transitioned to biofuels when it is available. Yet, citing slow delay for biofuels, Ørsted stopped construction on a prototype biomethane plant it is building. Production was slated to begin in 2025.
CEO interview: “Onshore oil industry must generate cash for well decommissioning”
The UK onshore industry needs to raise money to plug and abandon hundreds of redundant oil wells as part of the energy transition, Angus Energy’s chief executive told DrillOrDrop.
Richard Herbert, chief executive of Angus Energy. Photo: Angus Energy
In an extended interview, Richard Herbert said the onshore industry had to follow the North Sea’s example and invest to decommission old wells.
He said:
“It’s not on the same scale as the North Sea was but the [onshore] industry has hundreds and hundreds of wells to abandon safely, so that they don’t pollute future water courses.
Official data analysed by DrillOrDrop shows there are nearly 500 UK onshore wells that are not classed as operating but have not been fully decommissioned. More detailed article coming soon.
Mr Herbert said:
“[site operators] have sites to demolish and return to open fields and someone has to pay for that. And the government won’t pay for it and nobody else is going to pay for it.
“So the industry has to generate some wealth that can be used to reward its shareholders but also can be used responsibly to end the oil era in onshore UK.”
Mr Herbert, who runs the UK’s biggest onshore gas field at Saltfleetby in Lincolnshire, said the onshore industry was playing “a very important role” in the energy transition “that maybe people don’t’ understand when they look at our business model.”
He said:
“the energy transition doesn’t just involve building a lot of windmills and solar farms and everyone buying electric cars and cooking on those electric things, that I can’t cook on.
“It also involves cleaning up more than 100 years of industrial activity and if you look at all these producing fields in the Weald and in the east midlands, it’s a bit like the North Sea.
“the big [offshore] companies are investing billions of pounds now in taking out the platforms and plugging the wells and making it look like it did before we ever went there. We have to do the same onshore.”
He said the investment tax breaks in the energy profits levy – described by fossil fuel opponents as a loophole – were “critical capital allowances that allow the industry to invest and replenish our domestic production”.
Last month, the new Labour government extended the energy profits levy, also known as windfall tax, by another year. It also increased the rate of tax and removed the investment allowances.
Other key points
Mr Herbert has been Angus Energy’s chief executive since 2023 and was a senior executive at BP. As well as Saltfleetby, his company operates onshore oil sites at Balcombe and Lidsey in West Sussex and Brockham in Surrey.
In his DrillOrDrop interview, he also said:
The oil and gas industry had to lower its climate impact but developing domestic oil and gas fields was in the best interests of the country
“We all recognise that we have to continue to lower the impact of oil and gas because of the climate impacts of it.
“But at the same time, it has to be done in the right way.”
He said:
“we are in the very early days of the energy transition. We still rely significantly on oil and gas for our energy, for transportation, for home heating, for electricity generation, for industry, and importing oil and gas when we have domestic resources does not make any sense.
“I think the whole industry recognises that if we are given a chance to produce and develop domestic oil and gas fields it is in the best interests of the country as we manage our way through what’s going to be a complex energy transition.”
Campaigner Sarah Finch who brought the successful legal challenge at the Supreme Court on downstream carbon emissions. Photo: DrillOrDrop
“The reaction I’ve heard since this case was that people are confused about how this is this is going to be interpreted and what does it really mean.”
The court ‘s majority judgement said Surrey County Council should have taken into account downstream emissions from burning oil produced at UKOG’s Horse Hill site when deciding planning permission.
The decision is expected to have widespread implications for carbon intensive industries, including a new coal mine in Cumbria.
Mr Herbert said it was difficult to know how the judgement would affect Angus Energy and the onshore generally. He said “right now we are waiting to see.
“We have a planning application which has just been submitted to drill additional wells at the Saltfleetby gas field and that approval process could be affected by this. At this stage, we remain optimistic that we will get the right outcome and if this involves more work to be clear about the impact of what we’re trying to do then so be it. We can live with that.”
He described the argument, put forward by the former head of BP, John Browne and others, against issuing new North Sea licences as “an interesting point to debate”.
He said:
“I think in terms of production and opportunities to get as much out of the ground now or in the short term to stop us importing, I find it much harder to find arguments against that because that seems to me to be efficient and logical.
“We still have an electricity system that is very dependent on hydrocarbons. We have home heating that is very largely dependent on hydrocarbons. We don’t have that many electric cars on the road yet and a lot of those that are there the electricity is being generated by gas. So we’ve got a long way to go.”
He said he would be “the first to support” Labour’s plans for investment in alternative energy”.
But he said “it can’t come at the cost of the oil and gas industry”.
The energy transition “has to be done in the right way”, he said.
“What doesn’t work right now is the high levels of taxation that were committed by the last government as a knee-jerk reaction to what happened in Ukraine. And rather than seeing those come down as commodity prices have come down again, we’re actually seeing people trying to push them up.”
Angus Energy in southern England
The Weald – potential in question
Mr Herbert described the Weald oil fields in southern England as “small and complicated”.
Asked whether there was potential for future development of oil and gas in the Weald, he said:
“Probably not.”
He said there was “not much public support from the community” for the industry.
Balcombe – well test, stimulation and wrong location
Balcombe residents challenging the Balcombe well test at the High Court. Photo: DrillOrDrop
At Balcombe, where there were near daily protests during drilling in 2013, local people have delayed a well test by bringing a legal challenge. Angus Energy and the Department of Housing, Communities and Local Government will defend the case at the appeal court in January 2025.
Asked whether the Balcombe oil site, in the High Weald Area of Outstanding Natural Beauty, was in the wrong place, Mr Herbert said:
“If we were starting from scratch today, we would say ‘shall we go and explore for oil in an area of outstanding beauty? Probably too difficult’.”
He acknowledged local opposition to the plans, but said they were “borne out of the fear of fracking”. He said he thought the site could be “developed responsibly without putting at risk the water course and everything that’s in the AONB”.
The well would have to be flowed even if it was going to be abandoned, he said.
“the only way to deal with this is to allow the well to be flowed and then we either make a commercial decision to abandon it and put it back to what it was like before we drilled, or we have some encouragement that says we have an asset here that could be developed and which could generate production, taxes, jobs and all the things that we do this for.”
Asked if Angus Energy planned any form of stimulation of the Balcombe well, Mr Herbert said:
“Not in terms of hydraulic stimulation, no. We have not applied in our planning permission to do that. And if we were to develop the field, I think it is extremely unlikely that we would be looking to do that. I can’t say impossible because I don’t know what the test might tell us about the best way to encourage production from the wells.”
He said high volume hydraulic fracturing “never got off the ground in the UK. I don’t think it ever will”.
But he said the industry had been stimulating wells to deal with formation damage “for decades” and “no one ever made a fuss about it”.
“If we wanted to clean up a well and do a very small job on it, that is something that we would have to apply for permission for. It’s not something we have currently applied for.”
Mr Herbert said Angus had no recent contact with Frack Free Balcombe Residents’ Association, the group bringing the challenge to the Balcombe well test.
Brockham and Lidsey – water injection plans
At Brockham, near Dorking, Angus said it was seeking permission to import formation water from other sites to inject into the reservoir. It currently has permission to inject just water from Brockham.
The company restarted production at Brockham in June 2024, after a break of 18 months. New production levels were 40-50 barrels of crude oil a day, Mr Herbert said. But 60% of the output from the field was formation water.
Mr Herbert said:
“we’ve argued successfully that to maximise the recovery from Brockham we need to replace the fluids we’re taking out. And therefore we would like the ability to bring additional tanker loads of water in to make sure that we’re doing that. We’re in the process of putting that together.”
He said this permission would allow Angus Energy to restart production at its Lidsey field, near Bognor Regis, which has no water disposal facilities.
Lidsey produced about 15-20 barrels a day in 2020. Mr Herbert said even at this level of production the field “would still be economic”.
“we have licences from the government to maximise production from these fields so we will do what we can to achieve that. But we can’t make a decision on that until we’re able to consider the movement of the fluids, particularly the water, to Brockham.”
Official figures show the field contributes about 80% of UK onshore gas production. But this represents less than 1% of total UK gas production.
Mr Herbert said the field was currently constrained to about 11 or 12 million cubic feet per day. He said he hoped new wells, workovers and a £3m project to install a booster compressor, would increase production at Saltfleetby.
The company was revising its reservoir model for the field, Mr Herbert said, to shape decisions on future wells and workovers.
Angus and its partner, Trafigua, are also looking at potential gas storage at Saltfleetby. Mr Herbert said “there could be a role” for market-driven storage at the field, where a trader buys a cargo of cheap liquefied natural gas (LNG) and stores it until prices rise.
He added:
“I believe we should take a serious look at carbon capture at this site. This government has both committed to net zero emissions and at the same time acknowledged the role of gas in the foreseeable future. Onshore sites will have to be an essential part of the new strategy.”
He also said once Saltfleetby’s gas was worked out, the company would “be looking to see if there is anything else around”, including oil.
Acquisitions and hedging
Angus has previously hinted about new areas of interest and Mr Herbert suggested this could include additional UK onshore fields:
“we recognise that the company has the potential to grow and we can take on more opportunities.”
He said:
“as a UK onshore producer, the first place people would expect us to look at is onshore UK and there’s quite a lot of companies that are, if not distressed, then they are struggling.
“There’s a logic to potentially combining or adding assets in onshore UK. But this comes back to the attitude of the new government to the environment in which we would be investing.
“I think we need to have clearer rules and a clearer understanding of government direction before we commit to that.”
At the time of writing, Angus Energy’s share price was 0.25p. This is down from 1.37p when DrillOrDrop last interviewed an Angus Energy chief executive.
Mr Hebert said:
“I believe we’re significantly undervalued. We’ve had to fight to get through some very difficult situations in the last 12-18 months.”
The company hedged Saltfleetby gas during a period of lower prices and before production from the field got underway.
Mr Herbert said the bubble in the gas price “largely coincided with the period when the field was still being developed”. He said the situation was worsened by the need to honour hedges when there was no production. He said: “there was a bit of a lost opportunity there”.
The hedging commitments will continue until summer 2025 and cash flow would be lower, Mr Herbert said.
“we’ve got another 12 months of dealing with those, where for quite a significant part of our production we receive a price that is significantly below the current price. That’s just a legacy position that we have to deal with.
“The good news is that 12 months from now that will be gone and we’re still hedging a percentage of our production but we’re doing it at prices that are much more aligned to current market prices so they give us price protection.”
The company restructured its debt earlier this year and Mr Herbert appeared optimistic for the future. He said:
“We have a very strong asset that has very strong cash generating potential”.
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Sunday, August 18, 2024
CMA CGM Vessel on MV Losses 99 Containers During Storm off South Africa
CMA CGM's brand new containership has lost up to 99 boxes overboard in a storm off South Africa (Hudong-Zhonghua)
For the second time in approximately a month, one of CMA CGM’s large containerships, the newly inaugurated CMA CMG Belem (13,000 TEU) has lost boxes overboard in storms off South Africa. Industry observers had noted that the large boxships would encounter difficult weather on the Cape of Good Hope route as they divert from the normal routing through the Red Sea.
The South Africa Maritime Safety Authority received a report from the containership that it has lost as many as 99 containers off the east coast of South Africa. The incident happened on Thursday, August 15, with SAMSA saying it had also been informed there was a “significant stowage collapse,” and that the vessel was seeking a port of refuge.
“The vessel had initially sought refuge at Maputo Bay. However, after further assessment, the decision was made to redirect the ship to Qheberha (Port Elizabeth). The CMA CGM Belem is currently slow steaming towards Port of Ngqura, with an expected time of arrival on August 18, 2024,” said SAMSA.
Given the size of the vessel, 145,650 dwt with a length of 1,102 feet (336 meters) and a draft of 48.5 feet (14.8 meters), SAMSA said the Port of Ngqura terminal is the only one in local area suitable for the vessel. The vessel’s AIS signal shows that as of late on Sunday she had arrived in the Port Elizabeth anchorage. CMA CGM has not issued a statement, but it is likely undergoing a full damage assessment at the moment.
“Stowage collapses have been confirmed, and the affected containers will need to be discharged at a container port facility upon arrival,” according to SAMSA.
The vessel which is registered in Malta, was delivered to the French company in late June. It is the fifth of six dual-fuel LNG vessels built by CSSC’s Hudong-Zhonghua yard under its latest contract CMA CGM. The vessel sailed from Qingdao, China on July 18, making stops at three additional Chinese ports and Singapore. It is bound for Rio de Janeiro and Santos, Brazil, where it was due at the beginning of September.
A month ago, on July 9, the ultra-large container vessel CMA CGM Benjamin Franklin (18,000 TEU), also reportedly lost up to 40 containers in the same region of the South African Indian Ocean area, while also sailing past the country from Asia to Europe. The vessel put into Algoa Bay and finally resumed its trip on July 16.
South Africa has been experiencing a series of strong later winter storms this year. Industry experts had warned that ships would find the routing around South Africa possibly more challenging in addition to the distances required. The storms have disrupted operations with the bulker Ultra Galaxy also being caught in the July storms. The authorities speculate the vessel’s cargo of bagged fertilizer shifted causing the ship to take on a heavy list. After the crew abandoned the vessel, it capsized and washed ashore north of Cape Town. The vessel broke apart in subsequent storms.
