Sunday, May 12, 2024

 

South Africa May Limit Shell's Drilling Licenses After Its Downstream Exit

South Africa has hinted that Shell could receive fewer oil exploration licenses after the supermajor decided to sell its downstream business in the country, Mineral Resources and Energy Minister Gwede Mantashe told Bloomberg in an interview published on Friday.

Earlier this week, Shell said it is preparing to divest from downstream operations in South Africa as a result of an internal portfolio review.

Shell holds a majority share in Shell Downstream SA (SDSA), which was formed by the merger agreement between Shell South Africa and Thebe Investment Corporation a decade ago. The partnership was intended to merge Shell’s marketing and refining business, with Thebe, a black empowerment group, holding a 28% stake in the downstream business, as reported by Reuters.

According to the Daily Maverick, Shell and Thebe Investments are still in heated debate over the value of Thebe's stake in the project.

“Shell has decided to reshape the Downstream portfolio and intends to divest our shareholding in Shell Downstream South Africa (SDSA),” the oil giant said in a statement in response to Daily Maverick’s queries, adding that the decision followed a full review of “… the Downstream and Renewables businesses across all regions and markets in line with Shell’s focus on performance, discipline, and simplification”.

Following this announcement, South Africa’s Energy Minister Gwede Mantashe told Bloomberg “They still want to stay upstream, so what we should be doing, we should be more reluctant to grant licenses and permits, at that level, to Shell.”

Shell has relinquished some licenses offshore South Africa amid regulatory uncertainty as the country hasn’t finalized yet a draft Upstream Petroleum Resources Development Bill.

Analysts believe that some offshore formations that South Africa shares with the offshore areas of Namibia – the latest deepwater exploration hotspot – could hold great resource potential.

Shell and TotalEnergies have already made large discoveries offshore Namibia, kicking off the Namibian oil rush in 2022.  

By Charles Kennedy for Oilprice.com

 

U.S. Extends License For Transactions With Venezuela's PDVSA

The United States has extended a general license through November 15, allowing certain transactions with Venezuelan state oil company PDVSA that are necessary for wind-down operations, according to a notice from the U.S. Treasury Department. The extension covers key players in the industry, including Halliburton, Schlumberger, Baker Hughes Holdings, and Weatherford International PLC.

This extension comes amid ongoing political tensions and economic challenges in Venezuela. Recent contract cancellations by entities like Polish refiner Orlen underscore the impact of geopolitical uncertainty on global energy markets, highlighting the complexities faced by industry stakeholders.

Despite the sanctions, Venezuela remains open to dialogue with key global players, particularly China, its largest creditor, and the United States. Venezuela's Nicolas Maduro expressed earlier this week the country's commitment to repay its debt to China.

The Biden Administration's decision to extend the general license reflects the nuanced approach of the U.S. in managing its relationship with Venezuela's oil sector, seeking balance between diplomatic considerations and commercial interests by providing temporary relief for companies engaged in wind-down operations.

Last month, crude oil prices were pressured by news that the U.S. would reimpose oil sanctions on Venezuela after a six-month pause, beginning on May 31. The upward pressure on oil prices, however, was tempered by a build in U.S. crude oil inventories. That license allowing wind-down transactions is now being extended until November.

Last November, Venezuelan Oil Ministry officials said that its crude oil production had reached 850,000 bpd and was on its way to recovering market share. While the figure was an improvement from the 786,000 bpd in October, and despite oil ministry officials' claim that recovery in its troubled crude oil industry was ongoing, the six-month pause in sanctions left but a temporary window open for traders to rush into Venezuelan crude that will soon close.

By Julianne Geiger for Oilprice.com

Xi's Euro Trip Showcases Beijing's Expanding Influence



By RFE/RL staff - May 11, 2024



  • Xi received warm welcomes and inked strategic partnerships in France, Serbia, and Hungary, emphasizing China's expanding influence in Central and Eastern Europe.

  • Despite tensions over issues like trade and Ukraine, Xi effectively navigated diplomatic challenges and strengthened ties with key European leaders.

  • China's assertive diplomacy aims to position the country as a dominant player on the world stage, with investments and agreements reflecting its ambition to shape global dynamics.

While Xi’s trip dealt with everything from trade ties with the European Union to China’s relationship with Russia amid the war in Ukraine, the tour can be boiled down to one overarching message from China: Xi leads a rising global superpower that can’t be contained and its influence in Europe is here to stay.

The Chinese leader received opulent red-carpet welcomes in Paris from French President Emmanuel Macron and from China-friendly leaders like Serbia’s Aleksandar Vucic in Belgrade and Hungary’s Viktor Orban in Budapest.

In France, Macron looked to hammer home some tougher European positions on Ukraine and trade subsidies -- particularly over the ongoing EU probe into Chinese electric vehicles on the European market -- while still looking to charm Xi on other issues.

Ahead of the visit, Macron had argued in public statements for Europe to establish “a more balanced” trade relationship with China, and that issue was tackled on May 6 during three-way talks with Xi and EU Commission President Ursula von der Leyen.

As Theresa Fallon, director of the Center for Russia Europe Asia Studies, told me ahead of the visit, this would allow for Macron to “play good cop” and von der Leyen “to play bad cop” in dealing with Xi.

However, Xi looked effective at deflecting concerns and driving a wedge between Macron and von der Leyen by either flatly denying any problems, misrepresenting China’s position, or offering concessions that were only rhetorical.

In Belgrade and Budapest, meanwhile, Xi looked triumphant and received highly choreographed welcomes that reinforced Chinese messaging about deep divisions within Europe over how to engage with China.

Xi left both countries after announcing new strategic partnerships and investments that will further cement China’s relevance in Central and Eastern Europe.

Why It Matters: Public opinion on China across much of Europe has soured dramatically in recent years, particularly in Central and Eastern Europe.

When Xi last visited Europe in 2016, he was warmly embraced in Prague by then-Czech President Milos Zeman amid a wave of high-profile investments and visits to the Czech Republic, Serbia, and Poland.

Poland has since slowed its engagement with Beijing, and the Czech Republic, under new leadership, has become one of Europe’s more hawkish governments on China. Only Serbia has continued to deepen its ties out of that 2016 grouping.

While that marked a notable step back in the region, along with the irrelevance of the 14+1 Chinese format for engaging with Central and Eastern Europe, this recent visit shows that China can’t be blocked and that Beijing has plenty of new cards to play in its broader relations with Europe.

Reflecting this Chinese view, Renmin University Professor Wang Wen wrote in a recent column that the strategic scales look set to tilt in China’s favor because “Europe is eager for economic recovery more than ever.”

“Europe is having a rethink: After losing Russia, it can't afford to lose China, too,” Wang wrote.

Three More Stories From Xi's Visit

  1. France: Wining And Dining Can Only Go So Far

Macron, who has sought to develop Europe as a strategically autonomous military and economic power, tackled a host of issues with Xi, but was hoping that this independent line could shine through when discussing the war in Ukraine.

What It Means: During joint statements to the press, Xi announced that he backed Macron’s call for an “Olympics truce,” which the French president saw as an opportunity to “work toward a sustainable resolution [of conflicts] in the full respect of international law.”

The comments and behind the scenes talks reportedly left some in Macron’s circle cautiously upbeat that Xi could be receptive to curtailing some of China’s backing for Russia amid the war in Ukraine.

But Xi also conceded very little, at least publicly.

He reiterated that China will not deliver weapons to Russia and would “strictly control” exports of dual-use equipment, both of which are positions that his government has already vowed to enforce.

Xi also made no acknowledgement of Western concerns that China is helping to keep the Russian economy running by giving it access to goods sanctioned by the West, and he then accused Washington and other Western countries of hypocrisy by fueling the conflict through weapons deliveries to Ukraine.

“We oppose using the Ukraine crisis to cast blame, smear a third country, and incite a new Cold War,” Xi said on May 6.

While some French officials may have walked away with some glimmers of hope, that assessment is not widely shared. As I reported ahead of Xi’s visit, EU officials said that China was looking to bargain its participation this summer in a peace conference on Ukraine as a way to pave “the way for Moscow's participation in similar meetings in the future,” one official told RFE/RL.

Xi’s true stance is also borne out in Russia and on the battlefield in Ukraine. A U.S. intelligence assessment said that, in 2023, about 90 percent of Russia’s microelectronics came from China, which Russia has used to make missiles, tanks, and aircraft. The same research said that nearly 70 percent of Russia’s approximately $900 million in machine tool imports in the last quarter of 2023 came from China.

  1. Serbia: Reverence, Shared Grievance, And A Dose of Caution

Greeted by cheering crowds, Xi and Vucic praised their countries’ “ironclad friendship” with one another, as they signed 28 new cooperation agreements and announced a new deal that would “deepen and elevate the comprehensive strategic partnership between China and Serbia.”

The Details: The visit to Serbia touched on both substance and symbolism.

Serbia under Vucic has remained solidly pro-Chinese and still looks to China for billions of dollars in investment, something that Vuk Vuksanovic, a senior researcher at the Belgrade Center for Security Policy, told RFE/RL’s Balkan Service has turned Beijing into Serbia’s “most important partner in the East at the moment,” even surpassing Moscow now that “Russian-Serbian ties are under constant scrutiny because of Ukraine.”

The elevated strategic partnership reflects that trend, as does a new free-trade agreement signed before the visit that Vucic said would allow Serbia to export 95 percent of its goods duty-free to China.

Belgrade and Beijing also signed 28 documents that would continue to deepen their ties. While most of the agreements were vague and did not have dollar figures attached, they covered a range of issues, from ministerial exchanges to state media agreements, that chart a course for a larger Chinese role in the Balkan country.

When it came to the symbolism of the visit, Xi arrived on the 25th anniversary of NATO’s accidental 1999 bombing of the Chinese Embassy in Belgrade. In an article published on May 7 by Politika, a Serbian newspaper, Xi said that “NATO flagrantly bombed the Chinese Embassy,” which “will stay in the shared memory of the Chinese and Serbian peoples.”

But Xi also decided to skip the former embassy site during his visit, which is now a large Chinese cultural center that also includes a memorial for the bombing.

While the Chinese Foreign Ministry used the occasion to criticize NATO, the move shows a cautious approach from Xi when it comes to exciting anti-Western bombast at home and abroad, where it could have overshadowed other aspects of his visit.

  1. Hungary: A Risky Gamble That's Paying Off

Xi finished his Europe trip with a stop in another friendly nation, touching down on May 8 in Budapest, where he inked new investments and elevated Hungary’s relationship with China to new heights.

What You Need To Know: Xi’s visit marks a capstone for Orban’s embrace of China that positions Hungary as a bridgehead for Chinese influence in Central and Eastern Europe.

In an article in Magyar Nemzet, which is controlled by Orban’s governing Fidesz party, Xi called for Hungary to “lead” the region’s relations with Beijing and said that China wanted to work closely with Budapest on Belt and Road Initiative (BRI) projects. The Chinese leader also promised to “speed up” construction of a high-speed train line between Budapest and Belgrade that has been delayed for years.

During the visit, Xi and Orban also pledged to elevate their ties to an “all-weather comprehensive strategic partnership” -- a Chinese classification that denotes the highest possible type of relationship that Beijing can have with another country. Only Belarus, Pakistan, and Uzbekistan are labeled as “all-weather” partners.

The move is sure to further strain Hungary’s already fraught relationship with Brussels, as will the 18 joint projects with China that were announced by Hungarian Foreign Minister Peter Szijjarto.

While the announcement of the deals lacked details, they would include a high-speed rail project to Budapest’s international airport from the city and a new rail line across the country to transport electric cars, batteries, and other products from Chinese factories planned to be built in eastern Hungary. Budapest and Beijing also vowed to cooperate on nuclear energy projects.

The focus on electric vehicles is noteworthy as Hungary is looking to Chinese investment to establish itself as Europe’s premier manufacturing hub for electric vehicles, batteries, and other new technologies.

China’s electric vehicle giant BYD announced in December that it would build an assembly plant in Hungary, its first production facility in Europe. Great Wall Motor, another major Chinese electric vehicle maker, is also looking into building an even bigger factory in Hungary.

More From Xi’s Europe Trip

Taiwan and Kosovo: During his shared remarks with Xi, Vucic used the occasion to tie Serbia’s territorial claims with Kosovo to Beijing’s own claims over Taiwan.

“Just as we have clear positions on the issue of Chinese integrity -- that Taiwan is China -- so they support the territory of Serbia without any reservation,” Vucic said. Xi later said that China “supports Serbia’s efforts to preserve its territorial integrity regarding Kosovo.”

The Next Issue: Ahead of Xi’s visit and amid a slew of Chinese espionage and trade scandals in Europe, my colleagues and I looked at the spread of Chinese-made surveillance cameras from Dahua and Hikvision, two partially Chinese state-owned companies, across Central and Eastern Europe.

An RFE/RL survey of nine countries in the region shows that governments have purchased millions of cameras over the last five years, despite the devices’ security vulnerabilities and the manufacturers’ lax data practices.

No Presser: After their talks on May 9, Xi and Orban held what was billed as a news conference, but was instead just both leaders reading statements without taking any questions.

Xi famously avoids any unscripted media encounters. MTVA, a state-owned and financed Hungarian channel, had the exclusive broadcast rights to Xi’s visit, and my colleagues in RFE/RL’s Hungarian Service were not granted accreditation from the Hungarian prime minister’s office to attend.

Prime Time: As Xi arrived at Belgrade's airport on May 7, Serbia’s state-owned television station even interrupted a broadcast of the Eurovision Song Contest to make way for coverage of the welcoming ceremony for the Chinese leader.

One Thing To Watch

Now that Xi’s big Europe trip is a wrap, attention will turn to Russian President Vladimir Putin’s upcoming visit to China. The dates for the Russian leader’s trip have not yet been confirmed, but Bloomberg quoted Kremlin sources saying that it would take place May 15-16.

By RFE/RL

 

European Automakers on Edge as Chinese EVs Gain Traction


  • Chinese EVs are projected to reach a 20% market share in Europe by 2027, up from 0.4% in 2019.

  • European automakers are concerned about losing market share to more affordable Chinese EVs.

  • Chinese automakers are investing in local factories to build tailored cars for European consumers.


Despite EU investigations and jawboning from within the industry, it looks as though Europe has faced the inevitable: it needs to "face up" to the fact that Chinese EVs have arrived, and probably aren't going anywhere, anytime soon.

Chinese President Xi Jinping arrived in Paris on Sunday to ease trade tensions with a wary Europe. Accompanied by a business delegation focused on the electric vehicle industry, including Envision Group, SAIC Motor, and Xpeng Motors, the visit served as both a shopping trip and networking opportunity, Nikkei reported.

"We want to welcome more Chinese investors to France," President Emmanuel Macron said during the visit. 

As we have been writing about extensively for the last 6 months, the shift to electrification has changed the global auto industry's dynamics, which were once dominated by European brands. Now, China now leads in EV production, compelling European automakers to address the growing Chinese competition

According to Nikkei, with the EU set to ban combustion engines by 2035, China plans to expand exports and production, maintaining a significant lead in affordable EVs.

As consumers shift to EVs, European manufacturers fear losing market share. Chinese brands, which made up only 7.9% of EU's electric vehicle sales in 2023, up from 0.4% in 2019, are projected to reach a 20% market share by 2027, according to Transport & Environment.

Felipe Munoz, senior analyst at JATO Dynamics told Nikkei: "When we're talking about these mass market segments, it's mainly about price ... and when you look at [Chinese brands'] price positioning compared to European rivals, there is always an advantage." 

Gregor Sebastian, a senior analyst at Rhodium Group, told Nikkei Asia: "I don't think in Europe there's the necessary capital at the moment to really do this without China, and on top of that ... in terms of the technology we're also behind China."

Europe remains divided over the potential influx of Chinese EVs. The European Commission has launched an investigation into Chinese EV subsidies, potentially leading to preliminary duties in May and permanent tariffs in November.

German Chancellor Olaf Scholz recently visited Beijing to ease trade relations, advocating for fair competition. While brands like Volkswagen and BMW welcome Chinese investment, others remain cautious. 

Exports

Despite concerns, Europe is the largest destination for Chinese EV-related FDI, attracting $7.6 billion in 2023 following $11.8 billion in 2022. Chinese automakers like SAIC and BYD are investing in local factories to build tailored cars for European consumers. Xi Jinping's trip includes a visit to Hungary, where BYD and Great Wall Motor are expanding, and Chery recently announced a joint venture plant in Spain.

"The student has overcome the teacher," Munoz added. He said Chinese cars are now "at the same level or even more in terms of quality, in terms of design, in terms of appeal, and in price."

Recall back in March we wrote about Mercedes CEO slamming the idea of import tariffs on Chinese EVs. 

“Don’t raise tariffs. I’m a contrarian, I think go the other way around: take the tariffs that we have and reduce them," Mercedes-Benz boss Ola Källenius said at the time.

Källenius said that the increased competition would "help Europe’s carmakers produce better cars in the long run" and that government protectionism is "going the wrong way", Financial Times reported this week

He called Chinese companies looking to export to Europe a “natural progression of competition and it needs to be met with better product, better technology, more agility.”

“That is the market economy. Let competition play out," he added. “We did not ask for this [probe]. We as companies are not asking for protection, and I believe the best Chinese companies are not asking for protection. They want to compete in the world like everybody else.”

“If we believe protectionism is the thing that gives us long-term success, I believe history tells us that is not the case," he added. “We live in a pragmatic world and realize there are some expectations to the general market economy rule . . . but if we seek our fortune in increased protectionism, we are going the wrong way.”

Recall back in September 2023 we wrote that the EU was opening an investigation into Chinese EV subsidies. 

At the time, we noted that European Commission President Ursula von der Leyen was taking exception with the fact that "the global market is flooded with cheap Chinese cars". 

By Zerohedge.com

 

Nuclear Energy: The New Geopolitical Battleground


  • Russia's nuclear energy sector continues to generate significant revenue despite sanctions on its fossil fuels.

  • Western nations are increasingly turning to China for nuclear energy supply chains, strengthening China's economic and geopolitical power.

  • This transition is part of a broader trend of China's growing influence in the global energy landscape.

While the west has had a considerable amount of success imposing energy sanctions on Russia in response to the ongoing war in Ukraine, Russian nuclear sector exports have proven harder to kick. But now, as more western nations get serious about cutting Russia out of their nuclear energy supply chains, they are pushing more and more economic and geopolitical power into the hands of China. 

While it seemed impossible to wean Europe off of Russian oil and natural gas without devastating the economy and dangerously compromising European energy security, the European Union has had remarkable success cutting those ties thanks to a surge in renewable energy production and a very mild winter during the critical transition phase. But the potency of those efforts has been undermined by the continued global reliance on Russian nuclear energy supply chains. 

Russian state-operated nuclear energy firm Rosatom has long been one of the primary exporters of nuclear fuel and uranium enrichment services around the world. European countries including Hungary, the Czech Republic, Slovakia, Finland, and Bulgaria have increased their imports of Russian nuclear fuel in order to make up for Russian fossil fuels, meaning that they’re still providing significant funding to the Kremlin. The Belladonna think tank estimates that nuclear fuel exports earned over  $739 million for Moscow in the last year alone. Rostatom is also a major source of funding for the construction of new nuclear facilities on a global level. At present, nearly one in five nuclear power plants on the planet is either in Russia or is Russian-built. 

But Russia’s influence in certain nuclear markets appears to be faltering as the nation’s ongoing war in Ukraine compromises its ability to deliver on its projects. Bulgaria has pleaded with the United States to help get out from under Russia’s nuclear thumb, and Hungary seems to be trying to get out as well Rosatom’s Paks II nuclear power plant in Hungary has been delayed and over budget since its earliest planning phases in 2014, but the setbacks have intensified in recent years as Europe’s stance toward the Kremlin and heightened security measures have complicated Russia’s ability to finalize the project.

As Russia continues to spin its wheels on Paks II, Hungary appears to be turning to China to continue its nuclear energy development. China’s President Xi Jinping will be making a stop in Budapest later this week, where he is expected to sign 16 agreements with the Hungarian government, including one which concerns “cooperation covering the entire portfolio of nuclear energy.” This would seem to include Paks II, signaling that Hungary is looking to cut Rosatom out of its nuclear industry.

This is not the first time that nuclear energy has been a ‘geopolitical flashpoint’ between Russia and China. The two economic giants have also been facing off for nuclear dominance in emerging economies, and particularly in sub-Saharan Africa, where the growth potential for a nuclear power industry is enormous and in dire need of funding to kick off the prohibitively expensive development phase of nuclear power plant planning and construction. But with Moscow’s attention and resources caught up in wartime chaos, China has a clear upper hand.

This potential transition of nuclear energy power and profit toward China is part of a much bigger trend in the global energy landscape. Beijing has been outspending the rest of the world on renewable energy and green infrastructure and manufacturing for years now. Beijing has placed itself at the nexus of global clean energy supply chains, becoming indispensable to growing clean energy sectors in developed nations in Europe and the Americas while simultaneously expanding its energy influence in emerging economies. Filling Russia’s shoes in the global nuclear energy industry is just one more step toward Beijing’s consolidation of power over global energy markets.

By Haley Zaremba for Oilprice.com