China Is Rethinking Its Russian Pipeline Plans

By Eurasianet - Aug 29, 2024

• China appears to be reconsidering the Power of Siberia 2 gas pipeline project with Russia, as indicated by Mongolia's exclusion of funding for the pipeline in its economic plan.
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• Turkmenistan is emerging as a favored gas supplier for China, with increased cooperation and higher gas export revenue compared to Russia in 2024.
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• Experts suggest that China sees Turkmenistan as a more manageable partner for energy projects, given its political landscape and simpler economy.

Buddies in war, Russia and China appear to be frenemies when it comes to energy. As a result, Turkmenistan may be the primary beneficiary of Beijing’s need for more natural gas.

Just a few months ago, Russian and Chinese officials were saying that an agreement to build a new gas pipeline connecting the two countries, dubbed Power of Siberia 2, was imminent. Now, it appears those plans have been put on hold. A recent decision by Mongolia’s government not to include funding for pipeline construction in a five-year economic plan is widely seen as an indicator that China is rethinking the pipeline project, the South China Morning Post reported. 

Power of Siberia 2 is projected to carry up to 50 billion cubic meters of gas annually from western Siberia to China via Mongolia. Its operation would provide much needed revenue for Russia, which is straining to afford the cost of its war in Ukraine. China has proven an important supporter of Russia, helping the Kremlin surmount sanctions imposed by the West. But the hold put on the Power of Siberia 2 project suggests Beijing’s friendship does have boundaries, despite the famous proclamation by Chinese leader Xi Jinping and his Russian counterpart, Vladimir Putin, that bilateral relations had “no limits.”

While China is keeping Russia hanging on energy cooperation, it is tightening ties with Turkmenistan. A cohort of Turkmen students, for example, has spent the summer taking a training course at Petroleum University in Beijing, the Turkmenportal website reported.

RFE/RL cited a regional expert, Alexey Chigadayev, as saying a new pipeline connecting China and Turkmenistan makes more sense for Beijing. For one, China would maintain a far greater degree of control over such a pipeline during both the construction and operational phases. “Negotiating with Turkmenistan’s political leadership is also easier – it has an even higher level of authoritarianism than Russia and a simpler economy,” Chigadayev told RFE/RL.

So far in 2024, Turkmenistan is outpacing Russia in supplying gas to China, in terms of revenue. A report published by an Uzbek news outlet, Spot.uz, said that Turkmenistan was China’s top gas supplier during the January-July period, exporting $5.67 billion in gas. Russia was second with $4.69 billion in sales. Kazakhstan also provided over $730 million worth of gas to China during the period.

By Eurasianet.org

Understanding Peak Oil: What It Is And Why It Matters

By Michael Kern - Aug 29, 2024

• Peak oil and peak oil demand are two separate phenomena with different implications for our society and economy.
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• It is important to understand the complex factors driving peak oil, from geopolitics to technology.
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• We need to prepare ourselves for a sustainable future based on renewable energy sources by navigating the uncertainty of peak oil demand and production.
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Are we running out of oil? 

This question has been on the minds of many experts in recent years.

The world consumes a staggering 100 million barrels of oil every single day. This dependence on fossil fuels has powered our modern society, but recent events like the war in Ukraine and the resulting energy crisis have underscored our vulnerability to disruptions in the global oil supply.

But what does this mean for our future? Will we have to give up our cars and switch to bicycles? Or will new technologies save us from a world without oil? 

Understanding the concept of "peak oil " is crucial in navigating this uncertain energy landscape.

In this article, we'll dive deep into the topic of peak oil and explore its causes, implications, and potential solutions. 

What Is Peak Oil

Peak oil refers to the point in time when global petroleum production reaches its maximum point and subsequently begins an irreversible decline. This occurs when readily accessible oil reserves are depleted, forcing us to rely on more challenging and expensive extraction methods.

The concept was first introduced by M. King Hubbert in the 1950s. His theory proposed that oil production would follow a bell-shaped curve, with a peak representing the point at which half of the total recoverable reserves had been extracted. This prediction has been largely accurate, as we have witnessed a steady increase in global oil production followed by signs of plateauing and even decline in recent years.

The implications of peak oil are far-reaching. As we deplete the most accessible oil reserves, extracting remaining resources becomes increasingly challenging and expensive. This leads to higher production costs, which are eventually passed on to consumers in the form of higher prices for gasoline, diesel fuel, and other petroleum-based products. Additionally, the transition to less accessible reserves can disrupt supply chains and geopolitical stability, further exacerbating the challenges associated with peak oil.

What Will Cause Peak Oil?

The inevitability of peak oil is driven by a confluence of factors:

• Geological Constraints: One of the primary reasons for peak oil is geological constraints. Most of the world's easily accessible oil reserves have already been discovered and exploited, meaning that oil companies must turn to more difficult-to-reach reserves, such as deepwater offshore drilling or unconventional sources like shale oil. These reserves are often more expensive to extract and produce smaller yields than traditional wells. As a result, the cost of producing each barrel of oil increases over time.
• Geopolitical Instability: Geopolitical instability can also play a role in peak oil. Many of the world's largest oil-producing regions are located in politically unstable areas where conflict and unrest can disrupt production and supply chains. For example, wars in Iraq and Syria have led to significant disruptions in global petroleum production in recent years. And Venezuela’s ongoing economic crisis has absolutely crushed its ability to produce oil.
• Technological Limitations: Despite advancements in drilling technology, there are limits to how much oil can be extracted from a given reserve. Environmental concerns also restrict new drilling sites and expansions, making it more challenging to increase production.
• Rising Demand: The growing energy needs of developing economies, particularly China and India, put additional strain on the global oil supply. As these countries continue to industrialize and urbanize, their demand for oil is expected to rise, further accelerating the depletion of reserves.
• Environmental Pressures: The increasing awareness of climate change and the associated environmental impacts of fossil fuel consumption have led to growing pressure to reduce reliance on oil. This includes efforts to transition to renewable energy sources and to implement policies that limit the use of fossil fuels.

The consequences of this decline could be catastrophic if we do not take action now to transition away from fossil fuels towards renewable energy sources or invest heavily in carbon capture technologies designed to mitigate their impact on the environment.

Peak Oil Is Not The Same As Peak Oil Demand

One common misconception about peak oil is that it is the same as peak oil demandhttps://oilprice.com/Energy/Crude-Oil/How-Close-Are-We-To-Peak-Oil-Demand.html. While both concepts are related to the future of global petroleum production, they represent different phenomena.

Peak oil refers to the point at which global petroleum production reaches its maximum point and begins to decline. This means that we will have extracted all of the easily accessible and cost-effective reserves, and will need to turn to more expensive and difficult-to-reach sources to meet our energy needs. The consequences of peak oil could be significant, including higher prices for gasoline, diesel fuel, and other petroleum-based products.

On the other hand, peak oil demand refers to the point at which global demand for petroleum products begins to decline. 

This could happen for a variety of reasons, including: 

• Increased adoption of electric or hydrogen vehicles
• Increased availability of consistent renewable energy
• Rising oil prices 
• Environmental concerns

While these two concepts are related in that they both relate to the future of global energy production and consumption, they represent fundamentally different phenomena with distinct implications for our society and economy.

It's worth noting that while peak oil demand may not necessarily coincide with peak oil production, there is some evidence suggesting that it may be coming sooner than previously thought. 

For example, several countries have announced plans to phase out gasoline-powered cars within the next few decades in favor of electric vehicles.

Additionally, advances in lithium battery technology, alternative battery technology and renewable energy could make it increasingly cost-effective for individuals and businesses alike to switch away from fossil fuels.

What's Next? Navigating a Post-Peak Oil World

As global oil production eventually declines, several scenarios could unfold:

• Complete Transition to Renewables: A shift towards solar, wind, and other renewable energy sources to meet all our energy needs.
• Reduced Fossil Fuel Use with Carbon Capture: Continued but diminished fossil fuel use, coupled with technologies to mitigate their environmental impact.
• New Technologies: Development of innovative extraction methods or synthetic alternatives to access previously inaccessible reserves.

Regardless of the path we take, proactive measures are necessary to avoid a chaotic transition.

One thing is certain: our reliance on fossil fuels cannot continue indefinitely. By investing in new technologies now, we can help ensure a smooth transition away from petroleum-based products over time.

Peak oil represents a major challenge for humanity as we seek ways to meet our growing energy needs. 

At least for now, we’re dependent on oil. And while no one knows exactly when or how this process will unfold, one thing is clear: change is coming whether we're ready for it or not.

Peak Oil Frequently Asked Questions

Will peak oil ever happen?

Yes, peak oil is highly likely to happen. It is a matter of when, not if. While new discoveries and technological advancements can extend the timeline, geological limitations and increasing demand will eventually lead to a decline in global oil production.

When was peak oil in the US?

The United States experienced its first peak oil in conventional oil production in 1970, reaching around 9.6 million barrels per day. However, with the advent of fracking and other technological advancements, the U.S. has seen a resurgence in production, reaching a new peak of approximately 13 million barrels per day in 2019. It's worth noting that this new peak is primarily driven by unconventional sources like shale oil, which are more expensive and environmentally impactful to extract. Experts predict a decline in U.S. oil production in the coming years as shale oil wells deplete faster than conventional ones.

How many years of oil is left in the world?

Estimates vary, but based on current proven reserves and consumption rates, we have roughly 50 years of oil left at current production levels. However, this is a dynamic figure influenced by new discoveries, technological developments, and changes in demand. As we transition to cleaner energy sources, oil consumption might decrease, extending the timeline.

How does peak oil affect humans?

Peak oil has the potential to cause significant disruptions to human society, including:

• Economic Impacts: Rising energy prices and supply disruptions can lead to increased transportation costs, higher food prices, and economic recession, particularly affecting industries heavily reliant on oil.
• Social and Political Unrest: Economic hardship and energy insecurity can trigger social unrest and political instability.
• Geopolitical Conflicts: Competition for dwindling oil resources can exacerbate existing geopolitical tensions and even lead to new conflicts.
• Environmental Impacts: Increased reliance on unconventional oil sources can lead to heightened environmental damage due to more intensive extraction processes.

It is crucial to proactively mitigate these potential impacts through a multifaceted approach, encompassing investments in renewable energy, energy efficiency measures, and sustainable transportation solutions.

 

By Michael Kern for Oilprice.com 

 

Shell To Slash Exploration Workforce by 20%: Reuters

By Charles Kennedy - Aug 29, 2024

• Reuters: Shell plans to reduce its oil and gas exploration and development staff by 20%.
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• The new cuts follow Shell’s earlier moves to reduce its workforce in the renewable and low-carbon segment.
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• Shell’s new CEO, Wael Sawan, is on a cost-saving drive to improve the company’s performance in comparison with its peers.
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Oil supermajor Shell (NYSE:SHEL) is planning to reduce its oil and gas exploration and development staff by 20%, according to an exclusive report from Reuters, citing intentions to cut costs to what has long been a wildly profitable segment of the oil giant’s business. 

The new cuts follow Shell’s earlier moves to reduce its workforce and costs in the renewable and low-carbon segments. 

According to Reuters, citing unnamed company sources, Shell is restructuring its operations, targeting exploration, well development and subsurface units, with its UK and Dutch branches set to carry the heaviest burdens. 

The workforce cuts are not set in stone, and must still be discussed with employee representatives.  

Shell’s new CEO, Wael Sawan, is on a cost-saving drive to improve the company’s performance in comparison with its peers. 

"Shell aims to create more value with less emissions by focusing on performance, discipline and simplification across the business. That includes delivering structural operating cost reductions of $2-3 billion by the end of 2025," Shell said in a statement carried by Reuters. 

On August 1, Shell reported adjusted earnings of $6.3bn for the second quarter, beating analyst consensus. The company initiated a $3.5bn share buyback program, to be completed by the third quarter results.

The previous month, Shell pressed pause on the construction of its Rotterdam biofuels facility and announced it would divest from a Singapore refining plant. Those two movies, plus slower trading in its gas division, resulted in a ~$2-billion impairment. 

Shell’s subsidiary Shell Nederland Raffinaderij announced in July that it would temporarily pause on-site construction work at its 820,000 tons-a-year biofuels facility at the Shell Energy and Chemicals Park Rotterdam in the Netherlands “to address project delivery and ensure future competitiveness given current market conditions,” the company said. 

That move saw Shell walk back several of its climate commitments and pledges, which triggered the resignation of several high-profile executives in its renewables division.

By Charles Kennedy for Oilprice.com

 

Can Norway Remain Europe's Top Gas Supplier While Meeting Climate Goals?

By Felicity Bradstock - Aug 29, 2024

• Norway's oil production could start declining as early as 2025 if new exploration activities are not pursued.
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• The Norwegian Offshore Directorate (NOD) has outlined three scenarios for Norway's oil and gas production between 2025 and 2050, all of which show a decline in output.
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• Equinor plans to invest $66 billion in oil and gas by 2035, with the aim of maintaining production at around 1.2 million bpd over the next decade.

Norway has been investing heavily both in its renewable energy infrastructure as well as continuing to produce huge quantities of oil and gas for several years. However, with greater pressure from international organisations to curb oil production, a lack of new exploration activities, and worries of a decrease in global demand for fossil fuels in the coming decades, Norway’s oil production could begin to decline from as early as 2025. Norway’s upstream regulator, the Norwegian Offshore Directorate (NOD), reported this month that it expects the country’s oil and gas production to start decreasing from next year if the government does not pursue new exploration activities to maintain Norway’s output. This could prevent the Nordic country from earning billions in revenue. 

Norway has overtaken Russia as the biggest natural gas supplier for Europe, following the Russian invasion of Ukraine and subsequent sanctions on Russian energy. It has reserves of around 7.1 billion cubic metres of oil equivalent (Bcmoe), including around 3.5 Bcmoe of undiscovered resources, according to the regulator. In its report, the NOD set out three scenarios for Norway’s oil and gas production between 2025 and 2050, which all show a decline in output, and all, according to the regulator, adhere to Paris Agreement objectives. 

In the “base scenario”, oil and gas output increases to 243 million cubic metres of oil equivalent (MMcmoe) in 2025 before gradually falling to 83 MMcmoe in 2050. This would largely be owing to a decline in Norway’s bigger oil fields. The “low scenario” shows production falling, starting in 2025, to almost zero by 2050. This is driven by a lack of exploration activity and the drying up of wells in the Barents Sea. In the “high scenario”, production remains high for the next decade before decreasing to 120 MMcmoe by 2050. This is driven by greater exploration in the coming years and the rollout of advanced technologies in the industry. 

The NOD highlighted that the Norwegian continental shelf is still competitive, as it has vast oil and gas reserves and sufficient infrastructure, as well as favourable government policies. The 2000 petroleum tax reform has also helped spur investment in the sector, supporting growth. Further, Europe’s movement away from a reliance on Russian energy has helped Norway to become the biggest supplier of gas in the region, a trend that is expected to continue for several years, with natural gas seen as a transition fuel for the green transition. However, the regulator emphasised that the failure to capitalise on Norway’s massive oil and gas reserves, as shown in the high scenario, would equate to losing “nearly an entire government pension fund” – or around $1.42 trillion. 

Kjersti Dahle, the Director of Technology, Analysis, and Coexistence at the NOD, stated, “This is why we’ll need to ramp up exploration and investment in fields, discoveries and infrastructure moving forward in order to slow the decline in production. A failure to invest will lead to rapid dismantling of the petroleum industry.” Dahle added, “The scenarios reveal stark differences in future value creation and future government revenues from the petroleum activities. The Norwegian Offshore Directorate’s calculations show a difference in net cash flow of about NOK 15 thousand billion between the high and low scenarios.”

This year, two Norwegian firms brought an end to drilling operations in the Barents Sea. While Aker BP’s project resulted in a gas discovery, Equinor made no such find. Preliminary estimates show that the size of the Aker discovery could be between 0.51 – 0.7 million standard cubic metres (Sm3) of oil equivalent. The NOD is calling for more companies to launch exploration activities in the region, as well as for the development of a new pipeline to support increased gas production in the Barents Sea.

While Equinor may have failed to make a discovery in its recent Barents Sea project, it has big plans for oil and gas in Norway. Equinor's CEO, Anders Opedal, recently stated that it is important for Equinor to maintain economic growth and support Europe’s energy security, while also backing the green transition. Opedal said that high levels of investment in oil and gas will continue for “many, many years”, while also emphasising the importance of the electrification of Equinor’s operations to reduce emissions. 

This month, Equinor announced plans to invest $66 billion in oil and gas by 2035, as well as an emergency preparedness plan for Barents Sea activities, following the recent NOD report. The plan earmarks between $5.7 and $6.6 billion a year for hydrocarbons. The company hopes to maintain production at around 1.2 million bpd over the next decade. Funding will boost exploration activities, with plans to drill between 20 to 30 wells a year to ensure a stable output over the next 10 years. This action from Equinor is expected to help Norway avoid the “low scenario” set out by the NOD, as it continues to produce high levels of oil and gas well into the next decade. 

By Felicity Bradstock for Oilprice.com 

Pipeline Politics Is Forcing (IRAQ) Kurdistan to Sell Oil at a Discount

By Charles Kennedy - Aug 29, 2024

Crude oil production in Iraq’s semi-autonomous region of Kurdistan is currently about 350,000 barrels per day (bpd), but it all goes to local buyers at steep discounts as the key export route via a pipeline to Turkey’s Mediterranean coast continues to be shut in.

Kurdistan’s crude output is now around 50,000 bpd lower compared to production levels before March 2023, when the pipeline to Turkey’s Ceyhan was closed due to an international dispute, according to figures provided to Argus by Myles Caggins, a spokesperson for the Association of the Petroleum Industry of Kurdistan (Apikur).

Kurdish oil flows via pipeline to Turkey, of about 450,000 bpd, ceased last year after they were shut in in March 2023 due to a dispute over who should authorize the Kurdish exports.

The impasse followed an International Chamber of Commerce ruling in March 2023 in a dispute between Turkey and Iraq regarding Kurdistan oil. The ICC ruled in favor of Iraq, which had argued that Turkey should not allow Kurdish oil exports via the Iraq-Turkey pipeline and the Turkish port of Ceyhan without approval from the federal government of Iraq.

The companies members of the Apikur association continue to produce oil in the semi-autonomous Iraqi region, but have to sell their crude to local buyers at steep discounts of around $45-$50 per barrel below international crude oil prices, Apikur’s Caggins has estimated.

“The volume of production has generally increased since the shuttering of the pipeline in March 2023. All Apikur members remain focused on ultimately having the pipeline reopened for exports,” the spokesperson told Argus.

Kurdistan hasn’t been able to export its oil via a pipeline for more than a year now, but crude continues to flow out of the semi-autonomous Iraqi region in smuggling operations, on tank trucks to the border with Iran. 

More than 1,000 such tank trucks are estimated to be transporting at least 200,000 bpd of Kurdish oil to Iran and Turkey, a Reuters investigation has found.

By Charles Kennedy for Oilprice.com

Who Is Playing Who In The Great Iraq Carve-Up?

By Simon Watkins - Aug 28, 2024

• Chinese firms won most of Iraq's latest oil contracts, continuing China's dominance in Iraq's oil and gas sector.
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• The U.S. and its allies counter this by securing deals like the $27 billion TotalEnergies project to reduce Iraq's energy dependence on Iran.
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• Surprisingly, China Energy and TotalEnergies are collaborating on a solar project, signaling potential cooperation between China and the West in Iraq.

Recent days have seen two major announcements from Iraq’s oil and gas sector that may only add to the broad-based malaise felt by those who are frequently afflicted with cognitive dissonance when looking at the country. On the one hand, Chinese firms again won most of the 13 contracts for oil fields and exploration blocks awarded by Iraq’s Oil Ministry in the latest bidding round held from the 11^th to the 13^th of May. When fully developed these will add 750,000 barrels per day (bpd) of oil and 850 million cubic feet per day (MMcf/d) of gas to the country’s output. This is in line with China’s ongoing attempts to take control of these Iraqi assets and much of its political and economic future as well, as analysed in depth in my latest book on the new global oil market order. On the other hand, the U.S. and its key allies have sought to stymie this power-grab project by Beijing, principally through the making of other oil and gas deals in the country wherever possible by key firms associated with the West. Most notably of all perhaps, this included the US$27 billion four-pronged deal being run by France’s TotalEnergies. Given these two factors, then, last week’s announcement that the China Energy Engineering Corporation (CEEC) is to work with the French firm on the roll-out of the 1-gigawatt solar power project at the Artawi field in Basra – a key element of TotalEnergies’ megadeal – has come as something of a surprise, to say the least. So, what on earth is going on?

From the Chinese side, many of its top oil and gas companies were among those who won contracts most recently. These included China National Offshore Oil Corporation (CNOOC) for Block 7, ZPEC for the East Baghdad and Middle Furat oil fields (and for the Qurnain and Abu Khaima blocks), Geo-Jade for the Zurbatiya and Jebel Sanam blocks, Sinopec for the Summer block, Anton Oil for Al-Dhifriya oil field, and the Hong Kong-based UEG for the Fao Block. Even before this latest awards extravaganza, more than a third of all Iraq’s proven oil and gas reserves and over two-thirds of its current production were managed by Chinese companies, according to industry figures. This degree of dominance had long been Beijing’s plan, once the U.S. had officially ended its combat mission in the country at the end of 2021, and to that end China’s Zhenhua Oil signed a US$2 billion five–year prepayment oil supply deal with the Federal Government of Iraq (FGI) in Baghdad around that time. This deal precisely mirrored the same type of deal done by Russia in the Kurdistan Region of Iraq (KRI) after the failure of the independence referendum toward the end of 2017, which gave Moscow effective control over all the KRI’s oil and gas assets.

Although the U.S. still had enough clout to lean on Baghdad to stymie the deal, China then moved ahead with expanding the terms of its 2019 ‘Oil for Reconstruction and Investment’ agreement with Iraq into the much broader and deeper 2021 ‘Iraq-China Framework Agreement’, as also detailed in my latest book on the new global oil market order. One element of this was a preference to be given to Chinese firms on all future oil and gas contracts for the sites in which Beijing had an interest, and another element was discounted pricing on Iraqi oil and gas for Beijing. But the 2021 deal went a lot further than oil and gas, allowing China great scope to build out corollary infrastructure across the country. One notable case in point was the awarding in 2021 to China of contracts to build a civilian airport to replace the military base in the capital of the southern oil-rich Dhi Qar governorate. This region includes two of Iraq’s potentially biggest oil fields – Gharraf and Nassiriya – and China said that it intended to complete the airport by 2024. This project would include the construction of multiple cargo buildings and roads linking the airport to the city’s town centre and separately to other key oil areas in southern Iraq. In later discussions connected to the 2021 Agreement, it was decided that the airport could be expanded later to be a dual-use civilian and military airport. The military component would be usable by China without first having to consult with whatever Iraqi government was in power at the time. Even more tendrils have sprouted from this evergreen Agreement for China, in the shape of plans to link Iraq’s US$17 billion Strategic Development Road (SDR) program directly into China’s own ‘Belt and Road Initiative’ (BRI)’. This effectively allows free movement of goods and people from China into Europe across Iraq, and it can link into both Iran’s long-sought ‘Land Bridge’ to the Mediterranean and to the adjunct ‘Russia-Iran Energy Corridor’. 

About the only thing that had not gone Beijing’s way in Iraq since the end of 2021 was the US$27 billion four-layered TotalEnergies’ deal. One of the key projects is the Common Seawater Supply Project (CSSP) that is critical in enabling Iraq to dramatically increase its crude oil production up to 6 million barrels per day (bpd), or 9 million bod, or even 13 million bpd, as also analysed in full in my latest book on the new global oil market order. The project was delayed for over a decade, as the U.S.’s ExxonMobil and the China National Petroleum Corporation (CNPC) battled it out for control until finally the U.S. firm withdrew and CNPC made no substantive progress, allowing TotalEnergies to take the contract. The project involves taking and treating seawater from the Persian Gulf and then transporting it via pipe­lines to oil production facilities to maintain pressure in oil reservoirs to optimise the longevity and output of fields. The initial plan for the CSSP is that it initially supplies around 6 million bpd of water to at least five southern Basra fields and one in Maysan Province and is then expanded for use in other fields.

A second major project is for the French firm to collect and refine associated gas that is currently burned off during oil drilling at the five southern Iraq oilfields of West Qurna 2, Majnoon, Tuba, Luhais, and Artawi. For the West, the key advantage of this would be to reduce Iraq’s long-running dependence on neighbouring Iran for up to 40 percent of its energy supplies through gas and electricity imports. This would be a good start in driving a wedge – albeit a slim one to begin with - between the two countries that could be further exploited to undermine the regional influence of the Shia Crescent of Power. This could then be used to stymie Iran’s ongoing efforts to build its Land Bridge that will then be used by Tehran to increase arms shipments to its militant proxies for use against Israel.

TotalEnergies already has ongoing experience of working across Iraq, holding a 22.5 percent stake in the Halfaya oil field in Missan province in the south and an 18 percent stake in the Sarsang exploration block in the semi-autonomous region of Kurdistan in the north. This gives it very specific operational experience of working on the ground in Iraq, which would also enable it to increase crude oil output from the Artawi oil field, which is the third of the four projects to which it is committed. According to earlier comments from Iraq’s Oil Ministry, TotalEnergies would help to boost output from the Artawi oilfield to 210,000 bpd of crude oil, up from the current circa 85,000 bpd. The last of the four projects that were to have been undertaken by the French company would be the construction and operation of a 1-gigawatt solar energy plant in Iraq.

The engagement of China to help on both the Artawi and solar energy project, then, may mark an extension of a new tactic by the West of cooperation between both sides in Iraq, at least for as long as it is beneficial. It is apposite to note that shortly before this cooperation was announced between the French and Chinese firms, the UK’s BP signed a preliminary agreement to rehabilitate and develop four fields in the hugely oil-rich region of Kirkuk in Iraq’s politically sensitive northern region. “The policy of antagonism between the West and East in Iraq has not benefitted us [the West] there [in  Iraq], so a change in tack is wise at this point,” concluded a senior European Union energy security source exclusively spoken to by OilPrice.com last week.

By Simon Watkins for Oilprice.com

Zambia plans state firm to own 30% of critical minerals mines

Bloomberg News | August 29, 2024 |
KoBold Metals is involved in nearly 60 explorations projects across three continents. (Image courtesy of KoBold Metals.)

Zambia plans to establish an investment company that will control at least 30% of critical minerals production from future mines.


Mines Minister Paul Kabuswe unveiled a strategy on Thursday that he said will allow Zambia to maximize the benefits from its deposits of metals key to the energy transition. Africa’s second-largest copper producer aims to more than quadruple output of the metal by early in the next decade, but it also has deposits of cobalt, graphite and lithium.

The state will set up a special purpose vehicle to invest in critical minerals under a design framework that includes a “production sharing mechanism” setting aside a minimum 30% of the output from new mining projects, according to the document unveiled by Kabuswe in Zambia’s capital, Lusaka.

Miners including Barrick Gold Corp., First Quantum Minerals Ltd. and China Nonferrous Mining Corp. are investing in their Zambian copper projects. Zambia is also counting on the Konkola and Mopani copper mines — under the control of Vedanta Resources Ltd. and Abu Dhabi’s International Resources Holding respectively — to ramp up production.

The government’s goal of producing 3 million tons of copper a year by 2031 requires existing assets to double their output to about 1.4 million tons, according to a separate document prepared by Kabuswe’s ministry. Sites currently in the exploration phase – such as the Bill Gates-backed KoBold Metals’ Mingomba project – are expected to provide an ambitious 1.2 million tons annually.

The government also intends to make investors in the critical minerals sector allocate at least 35% of procurement costs to local suppliers, according to the strategy. It will also review Zambia’s policy and regulatory environment to restrict the export of unprocessed materials.

(By William Clowes)

Iron ore’s ‘irrational’ rally past $100 triggers warning from Chinese media

Bloomberg News | August 29, 2024 

Financial street in Beijing (Stock Image)

Iron ore has jumped by about 10% in 10 days to breach $100 a ton, prompting the official journal of China’s metals industry to pen a long article on why the gains are overdone.


The steelmaking material has powered higher in the face of a barrage of downbeat commentary on prospects for Chinese demand — including from top global iron ore miner BHP Group Ltd. The advance is piling pressure on China’s struggling steelmakers, according to state-affiliated China Metallurgical News.

“The current rise in iron ore prices lacks fundamental support,” according to the journal’s column on Wednesday, which called the spike “irrational.” Plentiful supply, weak demand, high inventories, and low mining costs should continue to weigh on the commodity in the rest of 2024, it said.

China’s steel sector is battling what its top producer China Baowu Steel Group Corp. claimed were worse conditions than earlier crises in 2008 or 2015. Iron ore prices are still down by more than a quarter this year — as construction activity contracts — but a slight tick-up in steel prices in recent weeks has encouraged gains for the raw material.

Industry and government officials in China often issue warnings about over-exuberance in the volatile iron ore market, especially when prices post rapid rallies or notch new highs. Steelmakers across the world’s top-producing nation are struggling to make money as slowing demand spurs fierce competition.

An executive at Baowu’s listed unit echoed the complaints about the squeeze on the industry. Big miners are making outsized profits and the Chinese steel industry is planning output cuts, Zou Jixin, chairman of Baoshan Iron & Steel Co., said on a call with investors, after the company reported flat first-half profits.

“We should pass on industry pressure to the upstream sector,” said Zou. “With mills cutting output, that will surely reduce demand for iron ore.”
Cost support

On Tuesday, BHP said a major transition was underway in China’s steel industry as decades of property-intensive growth come to an end. Still, other sectors including transportation, infrastructure and shipbuilding — as well as overseas sales — are taking up some of the slack. BHP’s underlying earnings from iron ore in the year through June rose 13%.

The Australian mining behemoth said iron ore has support in a band between $80 and $100 a ton, a level at which many high-cost producers in China, India and other areas will have to consider halting output.

“Iron ore is prone to rise but resistant to declines — repeatedly devouring industry profits — and this year the situation is even worse,” the China Metallurgical News said in its commentary, which was also shared on the WeChat account of the China Iron & Steel Association. “Looking back at the market situation in recent years, the above scenario seems to be constantly repeating itself.”

Futures in Singapore on Thursday rose 0.9% to $101.80 a ton, heading for their highest close since Aug. 6. Rebar and hot-rolled coil futures in Shanghai also increased.

CHART: Peru’s phat copper pipeline

Frik Els | August 28, 2024 | 2:00 pm Battery Metals Markets Latin America Copper

Tía María copper project in Peru’s Arequipa region. (Image courtesy of Southern Copper.)

In the outlook accompanying its annual results released this week, BHP (ASX: BHP) said longer term copper demand from the green energy transition could be such that shortages could become structural, creating an environment for a “fly-up pricing regime” in the latter part of the decade.


Some analysts put the copper need from global investment in electric grids, renewable energy and electric vehicles at as much as 12 million tonnes per year by the end of decade – double current levels. The scale up in supply is startling considering total global primary copper production in 2023 was estimated at 22 million tonnes.

Where that extra six million tonnes will come from is the subject of much debate, but it won’t happen without investment in Peruvian copper.

“Tia Maria, despite being one of the smaller projects in the pipeline, has become emblematic of the challenges posed by social resistance, with construction stopped midway in 2019.”

Peru was until last year the world’s second largest copper miner before it was overtaken by Congo (thanks in no small part to the ramp up to 600kt per year at Ivanhoe Mines’ Kamoa-Kakula).

Peru has been struggling to maintain output amid community protests, political turmoil and an unpredictable regulatory regime.

A new report by the copper service of Benchmark Mineral Intelligence cites an interview with energy and mining minister Romulo Mucho last week as a sign Peru’s copper industry is coming back on track.

Mucho, who took office in February, has been working hard to lure investors back to Peru and pointed to the Tia Maria project, which was revived by owners Southern Copper in June.

Mucho said construction of Tia Maria will signal to others it’s safe to recommit to mining in the country, including to backers of La Granja, which after Kamoa-Kakula would be the largest copper project to come on line in decades.

Peru’s copper production, which reached 2.75 million tonnes in 2023, is expected to stagnate during 2024 for the first time since 2020, according to Benchmark:

“Despite these challenges, Peru’s copper potential remains substantial, with 2.6Mtpa of potential capacity in advanced projects. However, social opposition continues to pose a significant barrier. Projects like FQM’s 200ktpa Haquira have struggled with noticeable community resistance for over a decade, impeding growth.

“On the other hand, Peru’s mining climate is gradually becoming more favourable, as evidenced by the recent approval of the 120ktpa Tia Maria project, signalling a shift towards a more pro-mining stance by the government.

“Tia Maria, despite being one of the smaller projects in the pipeline, has become emblematic of the challenges posed by social resistance, with construction stopped midway in 2019. Completion of this project can send a strong signal to other miners with projects in the country that Peru is again open for business.”