Li Auto Is Making Major Moves In China’s Competitive Car Market

By Michael Kern - Apr 18, 2023

• Li Auto is expanding its lineup to 11 models by 2025.
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• The expansion includes one flagship model, five range-extended electric models, and five high-voltage pure electric models.
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• Li Auto also aims to build over 3,000 supercharging stations across China by 2025.

Li Auto Inc, one of China's up-and-coming electric vehicle (EV) producers, is looking to expand its footprint in a big way, announcing on Tuesday that it aims to add seven new cars to its lineup.

The new lineup will include five range-extended electric models, five pure electric models, and its flagship model. The vehicles will be priced at 200,000 yuan ($29,100) and up.

Ma Donghui, Li Auto's president and chief engineer, announced the new lineup at the Shanghai auto show, noting that Li Auto's current best-selling car in China - the Li One sport utility vehicle (SUV) - delivered 257,334 cars in total in 2022. 

In addition to the rollout of its new fleet, Li Auto is also working on the construction of 300 high-speed charging stations across China. The stations will be installed across the Yangtze River Delta and Beijing-Tianjin-Hebei region and is expected to be completed by the end of the year. 

By 2025, Li Auto aims to build over 3,000 supercharging stations across China, covering 90% of major cities and highways.

The ambitious plan is part of a larger trend among Chinese EV makers looking to capitalize on the growing demand for electric vehicles in their home market. 

In addition to Li Auto's expansion plans, other Chinese EV makers such as NIO Inc., Xpeng Motors and WM Motor Technology Co Ltd have also announced plans to expand their own product lines. 

NIO recently announced that it would launch an all-new sedan model, while Xpeng Motors has revealed plans for a new SUV model with extended range capabilities. 

WM Motor Technology Co Ltd is also planning a new lineup of cars with advanced autonomous driving features and improved battery technology for longer-range capabilities.

These moves come at a time when global automakers are increasingly turning their attention towards China's rapidly growing EV market. 

Volkswagen AG recently announced that it would be investing $12 billion into its Chinese operations over the next five years. General Motors said it will launch ten all-new EVs in China by 2025 under its Cadillac brand alone.

Chinese EV makers are set to benefit from this increased competition as they continue ramping up their product offerings to capture a larger share of this rapidly expanding market segment. 

With Li Auto's ambitious expansion plans now officially announced, we can expect even more exciting developments from them in the near future as they look to solidify their position among China's leading EV manufacturers.

By Michael Kern for Oilprice.com

A U.S. Shale Job Boom Is Coming

By Tsvetana Paraskova - Apr 18, 2023, 

• Energy research firm Rystad Energy believes the U.S. shale patch is set for a job boom, with wages for shale workers set to grow through the end of 2024.
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• The average wage growth is forecast to be between 2.5% and 7.2% in 2023 and 2024, which will contribute to higher costs for operators.
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• Executives have warned that a tight labor market, high wage pressures, and supply-chain issues are adding pressure to drilling activities.

Rising oil and gas production in the U.S. shale patch is expected to bring higher wages for workers in the sector as companies need to attract more labor in an already tight market, energy research firm Rystad Energy says.  

Wages are set to grow through the end of 2024, due to the tight labor market, retirements in the industry, and competition from clean energy jobs, Rystad Energy said in a new report quoted by the Journal of Petroleum Technology.   

Average wage growth is expected at 2.5% and 7.2% in 2023 and 2024. Wages have already grown in the key shale basins, including the Permian, the Eagle Ford, Haynesville, Williston, and Appalachia, according to Rystad Energy. Those areas saw on average over 9% growth in wages in 2022.

The growth in wages has increased the budgets of the operators in the shale patch and contributed to cost inflation.

According to the Dallas Fed Energy Survey for the first quarter, executives at Permian operators saw oil and gas expansion stall amid surging costs and worsening outlooks.

The aggregate wages and benefits index edged higher, to 43.6 from 40.2, according to the survey.

Asked about what changes they expect in the workforce at their company from December 2022 to December 2023, more than half of the executives — 55% —expect their headcount to remain unchanged from December 2022 to December 2023. However, 37% of executives expect the number of employees to increase, of which 4% expect a significant increase and 33% anticipate a slight increase. Only 8% anticipate the number of employees decreasing over the period, according to the survey.

Whereas the most-selected response among E&P firms was for employment to “remain the same” in 2023, the most-selected response of support service firms was for employment to “increase slightly” in 2023, the poll found.

One executive at a services firm said in comments to the survey, “Regulatory uncertainty is a major overhang. Labor remains tight, with continued wage pressures. Supply-chain issues remain.”  

By Tsvetana Paraskova for Oilprice.com

China’s Refinery Throughput Surges To Record High

By Charles Kennedy - Apr 18, 2023, 

• China’s refinery throughput rates climbed to 14.9 million barrels per day in March, the highest level on record.
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• The rise in throughput was driven by strong demand for fuels from overseas and the need to stock up on fuel ahead of maintenance season.
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• As well as higher refinery runs, fresh data out of China showed the country’s economy had expanded by 4.5% in the first quarter, adding upward pressure to oil prices.

Refinery throughput rates in China rose to a record high last month, reflecting strong demand for fuels from overseas and the need to build inventories before maintenance season.

At some14.9 million bpd, according to data released this week and cited by Reuters, China’s March refinery runs could add upside potential to oil prices as indicative of the country’s continued recovery from pandemic lockdowns.

The average for January and February stood at 14.36 million barrels daily, which compared with 13.98 million bpd for the first two months of 2022 and 14.1 million bpd for December 2022.

Over the first three months of the year, refinery throughput rates were 5.2% higher than a year earlier, the data also showed.

Meanwhile, fresh economic data out of Beijing showed the country’s economy had expanded by 4.5% in the first quarter, which pushed oil prices higher earlier today.

This rate of growth was higher than expected and a lot higher than the 2.9% growth rate booked for the final quarter of 2022.

The increase in refinery throughput rates is a direct result of this rebound, which features a strong increase in travel, both domestic and international. According to the latest data, Chinese refined product exports last month rose by 35.1% from March last year.

What’s more, the European Union’s embargo on Russian oil and fuels is benefiting other large fuel exporters, such as China, which also has the advantage of having access to discount Russian crude it can use to produce fuels it then sells to the European Union.

Throughput rates will likely decline before long as refineries enter regularly scheduled maintenance but until then they will stay high as refiners stock up on refined products, Reuters noted in its report.

Economists expect China to account for the biggest portion of oil demand growth this year, although their expectations differ in the part about the actual size of the increase. It varies between 500,000 and 1 million bpd.

How Big Oil Has Adapted To A New Energy Reality

By Irina Slav - Apr 17, 2023

• The oil and gas industry has been under pressure to adapt to a new world that still requires fossil fuels, but also needs them to lower emissions.
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• Big oil’s operations has grown increasingly lean after the meagre years of 2015-2020.
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• Oil majors are exploring other revenue streams such as carbon capture and storage, renewable energy and LNG.

The last decade or so has been tumultuous for the oil industry. It's an industry underpinning every world economy, except perhaps isolated communities in the Amazon jungle, yet its existence has been called into question repeatedly and persistently.

After enjoying many decades of government support because of the essential nature of the products it extracts from the ground, now the oil and gas industry is finding itself under fire from those same governments that used to support it.

It's the target of activist pressure the likes of which the world has not seen before. It has encountered a whole new—and very dangerous—kind of activism: investor activism. And financial regulators are breathing down businesses' necks on climate disclosures. What's an industry to do?

What the oil and gas industry has done is adapt. It has not been quick, to be fair, but oil and gas have not exactly been known for being at the cutting edge of progress. It's the nature of the industry that holds it back from the intensive innovation typical of Big Tech.

Yet oil and gas have risen to the challenge. From a digital transformation to streamlined costs and improved efficiencies across operations, to diversification into things like low-carbon energy generation and carbon capture, the industry has adapted.

Take Exxon, for instance. The biggest of Big Oil, stated enemy of the environment by scores of environmentalist organizations, some of which have been suing the company for knowing about the effect its products had on the planet's atmosphere and not doing anything about it. So far, no luck.

That same Exxon is now staking a major claim on carbon capture. Indeed, the company believes its low-carbon business department, where carbon capture features heavily, could in the future outperform its traditional business of extracting and refining oil and gas.

Or how about BP? After it renamed itself into Beyond Petroleum, one of the original Seven Sisters seemingly went all in on the transition, getting a lot more active than before in solar, wind, and EV charging. Basically, the supermajor wanted in on everything going on in the alternative energy sector. So did its European peers, although at least one of them was a bit forced into it.

Speaking of forcing, litigation—and the threat of litigation—has become a major motivator for oil and gas companies to "clean up their act". Shell was ordered to reduce its emission footprint by 45 percent by 2030. Other companies, seeing the writing on the wall, are embarking on a journey of emission reduction before courts begin to tell them to do it.

The oil and gas industry has shown remarkable adaptation skills in the past decade. It has also enjoyed a lot of evidence that, contrary to activist chants, oil and gas will not be kept in the ground anytime soon. Because the world needs them in growing amounts.

BP just opened its first platform in the Gulf of Mexico after the Deepwater Horizon disaster. You'd think they would stay away, just in case, but demand for oil is on the rise, and that platform sits above a field that could produce some 140,000 barrels of crude daily.

Exxon—the same Exxon that plans a carbon capture business that would bring in more money than oil and gas—has put Guyana at the center of its growth plans for the future. Just this year, the company eyes production of 360,000 bpd there. That's up from 120,000 bpd just a couple of years ago, and it is going to rise much further.

Shell is expecting intensified competition in the LNG space because of Europe's emergence as a new—and huge—source of demand. According to the company, which has quite a big gas trading business division, this is a long-term trend, and it will no doubt take an active part in it.

Activists are unhappy with such developments. Yet these developments are as unavoidable as the outflow of investor money from so-called sustainable funds that only invest in low-carbon companies. The reason they are unavoidable is the simple truth stated earlier: the world needs oil and gas.

In fact, the world needs energy, and few people actually care where this energy comes from. For now, despite a lot of effort to change the status quo, oil and gas—and even coal—remain superior to their newer alternatives in terms of energy density and reliability. They still account for more than 80 percent of the global energy mix despite trillions of dollars that have been poured into low-carbon alternatives.

And the world will need even more energy in the coming years. This will complicate the task of energy transition advocates because it's no longer about replacing oil and gas—it's about replacing them and being able to respond to much higher energy demand.

The oil and gas industry knows this. And it stands ready to deliver in response to these demand developments and, of course, reap the benefits. Some have said last year's record profits the industry booked will never repeat, but who knows? With enough anti-oil and gas activity from governments and activists, supply may shrink just enough to make for more record profit years.

By Irina Slav for Oilprice.com

Exxon Faces Shareholder Scrutiny Over Unclear Decommissioning Plans

By City A.M - Apr 17, 2023, 

• Exxon Mobil is facing scrutiny from investors over its climate goals
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• Legal and General Investment Management and Christian Brothers Investment Services are demanding greater transparency from Exxon Mobil
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• The investment groups have co-filed a shareholder resolution, seeking more disclosures on potentially stranded assets post-energy transition.

Exxon Mobil is facing fresh scrutiny from investors over its climate ambitions at its upcoming AGM next month.

Legal and General Investment Management (LGIM) and Christian Brothers Investment Services (CBIS) have co-filed a shareholder resolution, calling on the energy giant to provide more disclosures on potentially stranded assets post-energy transition.

The two investment groups are requesting Exxon’s board reveals whether their asset retirement obligations (ARO) are in line with the International Energy Agency’s (IEA) net zero emissions targets.

Oil and gas companies are legally required to decommission long-lived tangible assets at the end of their useful lives – known as AROs.

As the lifespan of oil and gas infrastructure is being shortened amid the low-carbon transition, there is a growing chance companies risk holding stranded assets with expensive decommissioning costs.

Given the uncertainty around the lifespans of assets in midstream and downstream segments such as refineries, pipelines, and wells, most oil and gas companies have only recognised upstream AROs.

While this is permissible under accounting rules, LGIM and CBIS argue this does not provide investors with the full information to assess the company’s climate plans.

The two parties believe the disclosures they are seeking will provide insight about how Exxon estimates AROs in financial statements and the effects of IEA net zero obligations.

LGIM considers the move to be a natural escalation step for its investment stewardship team, as Exxon’s business model is not aligned with the Paris Agreement climate goals of 1.5 degrees.

Michael Marks, head of investment stewardship and responsible investment integration at LGIM, said: “By filing this proposal, we are seeking greater clarity into the costs associated with the retirement of Exxon’s assets, in the event of an accelerated energy transition. We believe such level of disclosure is imperative for investors to better evaluate long-term risks and economic viability of the business in a carbon constrained future.”

John W Geissinger, chief investment officer at CBIM, noted that a majority of Exxon’s shareholders voted for its resolution last year seeking an audited report assessing the financial impact of the IEA’s net zero assumptions, including future AROs.

He said: “Despite this, the company’s disclosures still give investors little insight into how retirement costs might accelerate, and how large they might be. Exxon may assume an asset can operate indefinitely, but this may not prove out. Investors are simply asking: what is the total cost of meeting these liabilities?”

Shell, one of Exxon’s major rivals, has already disclosed significantly more ARO details.

The UK-based fossil fuel trader has accelerated the assessment of the discount rate from a 30-year term to a 20-year term, with a provision at £26.7bn for the process.

Exxon is also not the only energy giant facing challenges from investors, with Follow This attempting to convince shareholders to force Total to commit to scope three emission targets.

A spokesperson for Exxon said: “We respect that our shareholders may have viewpoints and perspectives that differ from management and the board, and we always consider their feedback.”

By CityAM