Wednesday, January 10, 2024

Red Sea Oil Transport Uninterrupted Despite Regional Unrest

WHY OIL PRICES HAVE NOT INCREASED

By Irina Slav - Jan 09, 2024
Despite missile and drone attacks on container ships in the Red Sea from the Yemeni Houthis, tanker traffic remained stable in December, Reuters has reported, citing vessel tracking data.
On a daily basis, the data showed there were 76 tankers carrying crude oil and fuels in the Red Sea. This, Reuters wrote, was just two tankers fewer than the average for November and three fewer than the average for the first eleven months of last year.
"We haven't really seen the interruption to tanker traffic that everyone was expecting," Lloyd’s List shipping analyst Michelle Wiese Bockmann told Reuters.
The Houthis, who control most of Yemen, launched a string of attacks on Israel-bound ships in the Red Sea in reaction to Israel’s bombing of Gaza. As a result, container shippers have diverted traffic to the Cape of Good Hope, which adds more than a week to the average journey from Asia to Europe and has sent freight rates skyrocketing.
Some oil traders, notably BP and Equinor, have also diverted some tankers from the Bab-el Mandeb Strait and the Suez Canal to the Cape of Good Hope. These developments have boosted U.S. crude oil shipments to Europe as buyers consider U.S. oil safer and cheaper in the current circumstances.
Initially, the Houthi attacks on ships in the Red Sea caused a spike in oil prices but it did not last, with prices retreating to around $70-$76 per barrel. However, a more serious disruption in the flow of oil from the Middle East could change this, Goldman Sachs said earlier this week.
“The Red Sea is a transit route, and a prolonged disruption there, oil can be three or four dollars higher,” the head f the bank’s oil research unit, Daan Struyven, told CNBC.
“However if you have a disruption in the Strait of Hormuz for a month, [oil] prices would rise by 20 percent and could even eventually double if the disruption there lasted for longer.”

Republican governors in 15 states reject summer food money for kids

Story by Annie Gowen •
The Washington Post

© Joe Raedle/Getty Images

Moving beyond efforts to block expansion of health care for the poor and disabled, Republican governors in 15 states are now rejecting a new, federally funded summer program to give food assistance to hungry children.

The program is expected to serve 21 million youngsters starting around June, providing $2.5 billion in relief across the country.

The governors have given varying reasons for refusing to take part, from the price tag to the fact that the final details of the plan have yet to be worked out. Iowa Gov. Kim Reynolds (R) said she saw no need to add money to a program that helps food-insecure youths “when childhood obesity has become an epidemic.” Nebraska Gov. Jim Pillen (R) said bluntly, “I don’t believe in welfare.”

Republican leaders have been criticized for playing politics with children in need, but they argue it is necessary to revert to pre-pandemic spending levels at a time when the United States is trillions of dollars in debt and lawmakers in Washington are struggling to come to a budget agreement. The summer food program was approved as part of a bipartisan budget agreement in 2022.

“It’s sad,” Agriculture Secretary Tom Vilsack said, noting that the program has support from other states run by Republicans and Democrats. “There isn’t really a political reason for not doing this. This is unfortunate. I think governors may not have taken the time or made the effort to understand what this program is and what it isn’t.”

The U.S. Agriculture Department said Wednesday that 35 states, U.S. territories and Native American tribes indicated by the Jan. 1 deadline that they would be participating in the summer food assistance program. It will provide families with incomes below the poverty level who already get school lunches for a reduced price or free with $120 per child to buy food at grocery stores, farmers markets or other approved retailers. The USDA called it “a giant step forward” in meeting the needs of the country’s families in the summer months, when food assistance in schools is not available.

Those who work with families in states where the food money has been turned down said the impact will be devastating and add pressure to private food banks. Hunger in the United States is on the rise as pandemic aid programs have wound down and food costs have skyrocketed. In 2022, food insecurity rates increased sharply, with 17.3 percent of households with children lacking enough food, up from 12.5 percent in 2021, according to the USDA.

In Oklahoma, for example, pandemic food relief money has been helping more than 350,000 children in need for the past four summers. Now that money has dried up with no statewide replacement on the way, and nonprofit assistance groups are scrambling to fill the gap.

“It’s just heartbreaking,” said Stacy Dykstra, chief executive of the Regional Food Bank of Oklahoma, noting that 3 in 5 school-age children in her state who qualify for free or reduced-cost lunches at school would be eligible for the new program. “Many children this summer won’t have access to the food they need. It is really scary and gives me goose bumps just saying it out loud to you.”

Washington Louis sorts through cans of food for those in need at the LifeNet4Families community food pantry in Fort Lauderdale, Fla.© Joe Raedle/Getty Images

Other states declining to participate are Alabama, Alaska, Florida, Georgia, Idaho, Louisiana, Mississippi, South Carolina, South Dakota, Texas, Vermont and Wyoming. Four of these states — Florida, Georgia, South Carolina and Wyoming — are among the seven that have not fully extended Medicaid eligibility to low-income individuals.

The push for a summer benefit program dates back more than a decade, according to Katie Bergh, a senior policy analyst at the Center on Budget and Policy Priorities, a Washington-based nonpartisan research and policy institute. Studies of early pilot programs showed that summer grocery assistance helped decrease the percentage of children suffering from the most extreme hunger by one-third and also expanded access to healthier, more expensive options like fruits, vegetables and whole grains.

That is why many nutrition advocates were dismayed by Reynolds’s contention in a statement last week that Iowa was opting out of the summer program because it has “few restrictions on food purchases” and “does nothing to promote nutrition at a time when childhood obesity has become an epidemic.”

“There is no evidence that a program like this has anything to do with childhood obesity,” said Erica Kenney, an assistant professor at Harvard University’s T.H. Chan School of Public Health who studies childhood nutrition programs and their effects. “It’s absolutely true you can have obesity and be struggling to get food on the table for your family. It is not at all true that helping people who are struggling financially means they’re going to eat more and gain weight.”

Reynolds noted that the state served 1.6 million meals to Iowa’s children last summer at 500 meal sites and said it would be expanding “already existing childhood nutrition programs.”

Nutrition advocates have long pushed for food assistance programs for the summer months that go beyond existing on-site meal programs that can be hard for parents to access, especially in rural areas. Only about 1 in 6 children eligible for summer feeding sites actually make it there because of transportation difficulties, according to the USDA.

Volunteers cut and prepare fruit at a Houston Food Bank facility on Feb. 8, 2022.© Brandon Bell/Getty Images

In Oklahoma, Gov. Kevin Stitt (R) has given varying reasons for not joining the program, including that there was not yet enough information, that it was “duplicative” of existing federal programs and that he was “satisfied” with the state’s current resources.

“Governor Stitt was not comfortable opting into a program where the rules weren’t finalized,” Stitt’s spokeswoman, Abegail Cave, said in an email. “He has not shut the door on participating in future years. The Oklahoma Department of Human Services and the Oklahoma State Department of Education as well as multiple nonprofits go to great efforts every summer to ensure that kids in Oklahoma don’t go hungry.”

Chris Bernard, the chief executive of Hunger Free Oklahoma, said that with the state not opting into the program, an estimated 300,000 children won’t have access to the summer monetary benefit when school lets out. Three of the state’s sovereign Indian nations — the Cherokee, Chickasaw and Osage — have decided to join the new program, expecting to reach about 100,000 students, Bernard said.

Roxey Clayburn, 33, a stay-at-home mother from Oklahoma City, said that having no replacement for the money her family received in pandemic assistance in previous summers will mean she and her husband, a plumber, will have to skimp on fruit and other snacks for her daughters, ages 9 and 10, when school lets out.

“It’s stressful,” Clayburn said, “because they’re here all day in the summertime, and the bigger they get, the more they eat, too.” She said she is going to try to plant a garden so the family will have access to vegetables.

Vilsack said the USDA is still talking to some states about the possibility of joining the program, either this year or in 2025.

And in Nebraska, a bipartisan group of state senators is filing legislation to force the state’s Department of Health and Human Services to opt in, according to state Sen. Jen Day (D) from Omaha.

Pillen, the Nebraska governor, said in a statement that the program is “unnecessary and is not adequate to meeting the needs of children. … Handing out money is not enough to meet kid’s needs. They need much more.”

Activist Investors Drop ESG Campaigns on Lack of Profits

By Irina Slav - Jan 09, 2024

Consultancy Alvarez & Marsal: activist investors were less likely to engage in ESG campaigns this year after they proved to be markedly less lucrative than campaigns that focused on effecting operational or strategic change.
The research focused on 550 activist shareholder campaigns that took place between 2016 and 2021 at companies in the U.S. and Europe.
Activist investors have been an important tool for bringing the climate change agenda closer to the management of companies in the energy industry.

Activist investors’ love for sustainability-related shareholder campaigns appears to be growing cold in the absence of any practical outcomes, a consultancy has said.

Per Alvarez & Marsal, as quoted by Bloomberg, activist investors were less likely to engage in ESG campaigns this year after they proved to be markedly less lucrative than campaigns that focused on effecting operational or strategic change.

“As investors focus more firmly on returns in 2024 in a challenging market, we expect to see a decline in ESG-related campaigns and a renewed focus on metrics such as margin growth, cash generation and return on capital,” Alvarez & Marsal managing director Andre Medeiros said.

The consultancy looked at 550 activist shareholder campaigns that took place between 2016 and 2021 at companies in the U.S. and Europe.

According to an analysis of the campaign outcome data, the consultancy found that investor campaigns that focused on change in the operational or strategic departments, outperformed the market by an average 9.4% over the past six years.

At the same time, campaigns focused on sustainability-related aspects of a company’s activities outperformed the market at a much more modest rate of 0.2% over the six-year period.

Activist investors have been an important tool for bringing the climate change agenda closer to the management of companies in the energy industry and for forcing public energy companies to make commitments for emission reduction and investments in low-carbon energy.

However, these investments have failed to produce the returns that most investors would like, which recently led to a couple of U-turns at supermajors BP and Shell—both previously fully committed to directing more money to things like wind, solar, and EVs, while reducing their core business of producing and marketing oil and gas. The reason cited for the change in strategy was consistent underperformance of these investments as opposed to cash spent on core business.

By Irina Slav for Oilprice.com

COP29 HOST

Azerbaijan Doubles Down on Its Domestic Oil Potential

By Eurasianet - Jan 09, 2024

Equinor divests its 7.27% stake in the ACG oil field and 50% in the Karabakh oil field, as well as an 8.71% stake in the BTC pipeline.
The sale strengthens SOCAR's control over Azerbaijan's key oil assets and export routes.
This move aligns with Azerbaijan’s strategy to boost its influence in the international oil and gas business.

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Norway's national oil company Equinor has announced that it has sold its shares in two Azerbaijani oil fields and the Baku Tbilisi Ceyhan oil pipeline to Azerbaijan's state oil company SOCAR and will exit from Azerbaijan after 30 years in the country.

"Equinor is in the process of reshaping its international oil and gas business, and the divestments in Azerbaijan are in line with our strategy to focus our international portfolio," said Philippe Mathieu, Equinor's executive vice-president for international exploration and production in a statement released on December 22.

In its statement on the purchase of Equinor's assets SOCAR confirmed only that it had signed an agreement to buy Equinor's assets in Azerbaijan and that "the transaction will be completed following compliance with all regulatory requirements and contractual obligations."

The oil field assets consist of a 7.27 percent stake in Azerbaijan's giant Azeri-Chirag-Guneshli (ACG) oil field which produces the bulk of Azerbaijan's oil exports, and a 50 percent stake in the much smaller Karabakh oil field which has yet to start production. (Both oil fields are in the Caspian Sea.)

In addition, Equinor is selling its 8.71 percent stake in the Baku-Tbilisi-Ceyhan (BTC) oil pipeline which runs from the Caspian through Azerbaijan and Georgia to Turkey's Mediterranean oil hub at Ceyhan, through which most of Azerbaijan's oil exports are made.

The purchase by SOCAR takes the state-owned company's stake in ACG to 32.27 percent, in the BTC pipeline to 33.71 percent and gives it complete ownership of the Karabakh field.

Neither company stated the price being paid for Equinor's assets.

However, the timing of the sale suggests that Equinor is selling at a point when it believes it can get the best price from the sale.

Crude oil prices are still higher than they have been for most of the past decade thanks to the disruption to global oil markets caused first by Russia's full-scale invasion of Ukraine two years ago, and more recently by Israel's invasion of Gaza and the attacks on international shipping in the Red Sea.

Similarly, security concerns for the safety of shipping in the Black Sea in the wake of the Russia-Ukraine conflict have disrupted the flow of crude oil through the three pipelines which carry crude oil from the Caspian to the Black Sea.

BP last year halted exports of crude from Azerbaijan via its Baku-Supsa pipeline, exporting the oil via the BTC pipeline instead.

Similarly, Kazakhstan has reduced the volume of oil it sends by pipeline to Russia's Black Sea port of Novorossiysk, signing an agreement to send 1.5 million tons a year via the BTC pipeline instead, a volume which may well be increased if the war in Ukraine further threatens the safety of Black Sea shipping.

It also comes ahead of an anticipated boost in oil production from the ACG field thanks to the drilling of new wells, and with further new wells suggesting that the field could also produce natural gas.

The decision by SOCAR to purchase all of Equinor's assets suggests Baku is intent both on maximizing its returns from its main export revenue earner, and keeping close control on its main oil export route.

Azerbaijan's crude oil and natural gas exports are the country's main source of revenue, accounting for around 90 percent of export revenue and funding as much as 60 percent of the state's annual budget.

Hydrocarbons also supply 98 percent of the country's primary energy usage and generate around 90 percent of its electricity.

That dependence on fossil fuels is something Baku would like to change, with ambitious plans to develop its renewable energy resources both to meet growing domestic power demand and to export any excess power to Europe.

It's debatable whether Baku's commitment to renewables is primarily due to its Paris Agreement commitment to reduce greenhouse gas emissions by 35 percent from 1990 by 2030, or more to a desire to free up extra volumes of oil and gas for export.

Either way Azerbaijan will host the UN Climate Change Conference (COP29) in November this year and has been concluding agreements with a host of international players aiming at tapping their experience of wind, solar and hydropower development.

The latest of these being Equinor itself, which as a parting gesture to Baku has signed a Memorandum of Understanding agreeing to "share experience and best practice on low carbon solutions, reducing greenhouse gas emissions and carbon management."

SOCAR also interested in Lukoil refinery in Bulgaria

In addition to increasing its stake in Azerbaijan's ACG oil field, SOCAR is also showing interest in further expanding its operations "downstream."

According to Azerbaijan's ambassador in Bulgaria, SOCAR may be interested in purchasing the Neftohim Burgas oil refinery near the Bulgarian port of Burgas, owned by Russia's Lukoil since 1999.

Lukoil announced on December 5 that it was thinking of selling the 9.5 million tons/year refinery and its other assets in Bulgaria.

The announcement was in response to the cancelation of a European Union waiver that allowed it to continue to refine Russian crude oil despite the ban on imports of Russian crude into the EU, following Russia's invasion of Ukraine.

Lukoil's Bulgarian operations also include a chain of over 200 gas stations, nine fuel depots and businesses supplying marine and aviation fuels and lubricants.

SOCAR opened an office in the Bulgarian capital Sofia in April last year which currently only conducts natural gas trading.

If it was to purchase Lukoil's refinery, SOCAR would be able to supply it with crude oil from Azerbaijan which it exports to the Black Sea via the Baku-Novorossiysk pipeline.

By David O’Byrne via Eurasianet.org

First Oil Extracted From Krishna Godavari Basin in India

DY365
Published: January 9,2024

STORY HIGHLIGHTS

The news about the oil extraction was announced by the Union Minister for Petroleum and Natural Gas, Hardeep Singh Puri on Monday

January 9, 2024: India announced its first oil extraction from new discovery in the Krishna Godavari Basin, starting with 4 wells and targeting 45,000 barrels per day by June. This will contribute 7% to both crude oil and gas production.

The news about the oil extraction was announced by the Union Minister for Petroleum and Natural Gas, Hardeep Singh Puri on Monday. He also added, “Production is expected to be 45,000 barrels per day and over 10 million cubic metres of gas per day, contributing towards an energy Aatmanirbhar Bharat”.

Taking to X, the twitter handle of Oil and Natural Gas Corporation Limited (ONGC) has also shared a post on the oil extraction.

India Hails First Oil Production from Long-Delayed Deepwater Project

By Tsvetana Paraskova - Jan 09, 2024,

Indian state-run Oil and Natural Gas Corporation (ONGC) began this week oil production at a major deepwater oil and gas project, which is expected to boost domestic oil and gas production and help reduce India’s dependence on energy imports.

ONGC said it had launched first oil production from deepwater block KG-DWN-98/2 in the Krishna Godavari basin in the Bay of Bengal, which would raise the company’s oil and gas production by 11% and 15%, respectively. The start-up of the deepwater project was also hailed as a “transformative path for economic development” in India and the state of Andhra Pradesh, off the coast of which the field is located.

The project, estimated to be worth $5 billion, has seen more than three years of delays. It has been delayed several times, and at the end of 2023 it was running three and a half years behind the original schedule for start-up in March 2020, after it was delayed by the pandemic.

KG-DWN-98/2, or the KG-D5 block, sits next to the KG-D6 block of India’s private conglomerate Reliance Industries in the Krishna Godavari (KG) basin.

ONGC initially expected to begin oil production in the block in March 2020. The deadline has been further extended several times. Early in 2023, an ONGC official said crude oil production could begin by June. The timeline was subsequently pushed back to August 2023, then to September 2023, to October 2023, and finally, to November.

Now that the “first oil” milestone has been achieved, India bets on the deepwater project to reduce its reliance on imports, which make up around 85% of the oil India consumes.

India’s energy production is set to rise from the deepest frontiers of the Krishna Godavari basin, Oil Minister Hardeep Singh Puri said.

Production at the field is expected to be 45,000 barrels per day (bpd) and more than 10 million cubic meters of gas per day, the minister added, noting that the project will raise India’s oil and gas production by 7%.

Barclays slashes 5,000 jobs in 2023 in reshaping and efficiency bid

Barclays is estimated to have reduced about 5,000 jobs throughout the world in 2023, as part of its cost-cutting initiative which started late last year. The figure is around 5% of its total workforce at the moment.

The job cuts are expected to be a combination of actual redundancies and vacancies which will not be filled after all. The full details are expected to be revealed along with the bank’s earnings release on 20 February, but this cost-cutting plan is expected to be valued at about £1 billion (€1.16 billion).

The move has mainly impacted the Barclays UK chief operating officer function, as well as Barclays Execution Services (BX), as the group veers towards becoming less top-heavy.

A spokesperson for the investment bank highlighted that Barclays was doing this as "part of its ongoing efficiency programme designed to simplify and reshape the business, improve service, and deliver higher returns."

Barclays looks towards more attractive opportunities

Barclays has been struggling for years with how its investment banking division has been doing, even leading to speculations of the group dropping thousands of investment banking clients. Doing so is expected to provide more capital for more profit-generating ventures.

The group has also faced a number of scandals entangling past CEOs in the past few years. Jes Staley, who was Barclays CEO for six years, faced allegations of a closer relationship with convicted paedophile Jeffrey Epstein, than previously revealed.

This led to a long and contentious battle with City regulators, ultimately leading to Staley stepping down in November 2021. In October, the UK Financial Conduct Authority banned Staley from holding any senior City role and fined him £1.8 million for failing to reveal the extent of his close relationship with Epstein.

In 2012, then-CEO Bob Diamond had also been accused of Libor rate-rigging, as well as criticised for his failure to make a name for Barclays amongst major Wall Street investment banks.

Barclays also failed to hold on to its post-COVID April 2022 peak, with share prices dropping as much as 35% by the end of 2023. This has led to a cost-cutting drive becoming especially necessary right now, which the lender hopes will also create more room to hire more front-office personnel across its most important divisions.

More focus is also expected to be put on automation and technology in the coming year.

According to current CEO C.S. Venkatakrishnan, "We always modulate the size of our workforce everywhere in the world in which we are, and that’s what we will continue to do."

Clients now want specialised - not universal - banking

Barclays is already on the lower end of valuations, compared to both major UK banks such as NatWest, as well as other Wall Street mammoths such as Morgan Stanley, Goldman Sachs and JP Morgan.

This is largely due to the majority of clients and investors no longer being attracted to universal banking, instead preferring much more specialised banks offering just one or two kinds of services, such as commercial or retail banking.

Furthermore, Barclays has also been criticised in the UK for failing to evolve or tailor its services to the economic conditions of the country, such as recession, or the post-financial crisis environment. These criticisms have mainly hit the bank's credit card and fixed-income trading branches.

SCI: green locomotive fleet in Europe slow and expensive

Karel Novak, 08/01/2024

Initial optimism about a green locomotive fleet in Europe is giving way to the realisation that the transition will be slow and expensive, according to a new study on diesel and alternative drive locomotives by SCI Verkehr.

In 2023, the global market for new diesel and alternative drive locomotives will be small, with a value of around EUR 2.62 billion. For many years, the market for new diesel locomotives has been under enormous pressure for a variety of reasons. In countries with large fleets, such as China (rapidly increasing electrification of the network - no deliveries from 2019) and the USA (the new operating concept of rail freight operators allows for fleet reductions - recently the focus has been on modernising existing fleets), deliveries of new locomotives have collapsed.

However, starting from the current low level, SCI Verkehr expects a significant increase in new vehicle business to EUR 3.97 billion in 2028. Many alternative drive locomotive types have come out of the testing phase and will gain significant market share. The regions under the greatest pressure to reduce fleet emissions are also the regions with the largest volumes of new vehicles: Europe and North America.

In Europe, the last major deliveries of diesel locomotive fleets are taking place and alternative drive locomotives are already driving the new vehicle business. It is mainly national railways and leasing companies that are making major investments in alternative drive locomotives. At the same time, the first high-performance battery locomotives are being launched in the USA. In combination with diesel locomotives, these are expected to reduce emissions in rail freight transport. Overall, however, there is no discernible shift away from diesel traction in rail freight in most of the world's market regions. In many regions with low levels of electrification, such as Australia/Pacific and Africa, rail freight operators are opting for diesel traction with modern (or more modern) technology. With a global electrification rate of only 33%, catenary independent traction will remain essential for rail freight in many regions for the long term.

Between 2019 and 2023, around 4,100 diesel locomotives and almost 500 alternative drive locomotives will be delivered worldwide. The North American manufacturer Wabtec is the market leader with a 28% share, followed by Russia's TMH (27%). SCI Verkehr is currently observing high price levels in many regions, driven by high inflation rates and stricter emission standards.

Germany: Another major strike hits rail transport

Marketa Horpeniakova, 10/01/2024

The strike, driven by demands for reduced working hours and higher wages amid rising inflation, is expected to cause widespread travel disruption across the country.

Germany is bracing for another mass strike by railway workers. Negotiations between the German Locomotive Drivers' Union (GDL) and Deutsche Bahn (DB) have been marked by several significant developments and strikes.

Last year, the GDL called several strikes, including a notable 20-hour strike in November. The upcoming rail strike in Germany, which started on 9 January and will last for three days, is primarily the result of a pay dispute between the German Locomotive Drivers' Union (GDL) and Deutsche Bahn (DB), the main national rail operator. At the heart of the dispute is the union's demand that shift workers' working hours be reduced from 38 to 35 hours a week without a pay cut. The union is also demanding a pay rise of €555 per month, plus a one-off payment of up to €3,000 to counter inflation. In response, Deutsche Bahn has offered an 11 percent pay rise over 32 months, which the union has rejected.

The strike is expected to have a significant impact on both freight and passenger rail services across Germany. Freight trains are not running from the evening of 9 January to the evening of 12 January, causing significant disruption to the movement of goods. Passenger services will be affected from the early hours of 10 January, with Deutsche Bahn planning to run trains on an emergency timetable, using longer trains on available journeys to accommodate as many people as possible. Previous strikes have caused significant disruption to the network, with only a fraction of scheduled services running.

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