Oxford Institute for Energy Studies

Oxford Institute for Energy Studies paper looks at Contracts for difference (CfDs) in energy transition and how to balance market efficiency and risk mitigation 👉 Link to OIES paper: https://lnkd.in/eyygPVPF Key conclusions: 💠  Contracts for Difference (CfDs) play critical role in driving renewable energy transition by providing revenue stability and encouraging investment in low-carbon technologies 💠 Historically CfDs been successful particularly in UK where they have significantly expanded renewable capacity and reduced costs especially for offshore wind 💠 Traditional two-sided CfD model while stabilizing revenues has inherent challenges including market distortions, inefficiencies, and encouraging a ‘produce-and-forget’ mentality among generators 💠 Conventional CfDs often fail to align generators’ incentives with market signals, leading to overproduction and inefficient dispatch especially during periods of low or negative market prices and this misalignment can exacerbate grid imbalances and increase system costs 💠 Proposed reforms which decouple payout from actual generation offer promising avenues to enhance market integration and address the shortcomings of traditional models 💠 But these reforms introduce the basis risk which poses financial challenges for generators and governments alike 💠 The inherent trade-off between incentivising efficient behaviour through risk exposure and ensuring revenue stability for renewable energy projects underscores complexity of CfD design 💠 Although effect is unlikely to be uniform across generation technologies, regions and CfD types, generators, seeking predictable revenue streams, may be hesitant to embrace models that introduce basis risk 💠 Governments must balance the need for market efficiency with the financial implications of supporting renewable energy through CfDs 💠 Financial institutions and specifically consumers also play a crucial role as they ultimately bear the risks and costs associated with CfD mechanisms 💠 Policymakers must carefully navigate this trade-off considering the diverse perspectives and interests of various stakeholders #cfds #energytransition #renewables #riskmitigation #basisrisk #lowcarbontechnology

Michal Meidan article in latest Oxford Institute for Energy Studies Energy Forum on gas developments in China and the gas outlook 👉 Link to OIES Energy Forum: https://lnkd.in/eMBZ_Y3f Key points 💠 China’s gas demand has increased by an annual average of 10% between 2013 and 2023 with consumption more than doubling from 177 bcm in 2013 to 395 bcm in 2023 💠 Strong growth was driven by a combination of factors: availability of domestically produced gas to fuel industrial activities alongside policies encouraging gas consumption 💠 When gas was available at competitive prices policy makers sought to accelerate its use 💠 But just as supplies, policy and prices have enabled gas consumption, they have also, at times hindered it: When overly ambitious fuel switching policies led to supply shortages and price spikes appetite for gas waned 💠 Global market volatility and concerns about import dependence could also slow the uptake of gas in the future especially since China has abundant reserves of coal and increasingly the largest renewable manufacturing base globally and has achieved rapid deployment of wind and solar 💠 In light of these uncertainties estimates of the country’s future demand range from a very conservative 406 bcm in 2030 to a more ambitious 617 bcm that same year 💠 Views also diverge as to whether industry or power will be the main drivers of demand growth 💠 Article argues that while gas demand is likely to grow strongly in China because it is viewed as a partner fuel in the country’s energy transition, it will still be constrained by the availability of both coal and renewables 💠 Policy environment in China is enabling for gas but it is not supportive: This means that without a clear mandate to switch from coal to gas, the cost competitiveness of coal and renewables—both of which in Beijing’s eyes offer greater supply security—will limit the growth potential for gas 💠 Gas use will rise across the board, with the biggest gains in industrial consumption followed closely by the power sector, but it will always play second fiddle to coal and increasingly to renewables 💠 China’s gas demand is unlikely to reach 600 bcm in 2030, but is still poised for remarkable growth with as much as 50 bcm growth in 2024-2025; Policies, however, will remain the key driver #china #gas #renewables #coal #powersector #lng #decarbonization

Nitin Zamre article in latest Oxford Institute for Energy Studies Energy Forum on India’s energy landscape and the role of gas in its energy transition 👉 Link to OIES Energy Forum: https://lnkd.in/eMBZ_Y3f Key points 💠  India has publicly stated the aim of increasing the share of natural gas in primary energy to 15 per cent by 2030 💠  That target will be met only if the power sector becomes a major gas consumer 💠Given the price-sensitive nature of the power sector and the inroads made by renewable energy, only a prolonged low gas price scenario will make that happen 💠  Recent studies indicated that even in a low gas price scenario, the share of natural gas would be limited to just 16-18 per cent by 2040 💠  Over the next decade, natural gas (either domestic production or LNG) can be expected to incrementally replace oil products like naphtha, fuel oil and diesel in industry depending on continued reforms 💠  While natural gas has a clear edge over other fossil fuels it has much tougher competition from renewable energy and battery storage 💠  Natural gas can play an increasing role in this transition but enabling it will need policy support across the natural gas value chain #india #gas #lng #renewables #energytransition #powersector

Maria Olczak and Jonathan Stern article in latest Oxford Institute for Energy Studies Energy Forum on the EU Methane Regulation and what impact it will have on EU LNG imports 👉 Link to OIES Energy Forum: https://lnkd.in/eMBZ_Y3f Key points 💠  Over the past two years LNG has mostly been discussed in the context of security of supply. Europe's increased reliance on LNG provided the supplies needed to replace Russian pipeline gas in aftermath of invasion of Ukraine 💠  As security crisis recedes and the gas market reaches a new equilibrium, discussions on decarbonization and the greenhouse gases associated with, particularly LNG supply chains have again begun to attract increasing attention 💠  Hence, the question arises: will its new global role enable the EU to impose stricter environmental standards on LNG market players and specifically the standard proposed in the new Methane Regulation? 💠 On 27 May, the Council approved the EU Methane Regulation which will come into force over summer 2024 💠 Regulation imposes obligations on oil and gas operators, coal mine operators, importers and member states with regard to monitoring, measurement reporting and independent verification of #methaneemissions. EU is the first jurisdiction to set requirements for fossil fuel imports which will be implemented gradually from 2025-30 💠 Regulation aims at ensuring that companies exporting fossil fuels to the EU face the same MRV and mitigation requirements as EU operators. Companies failing to comply will face financial penalties set by member states and reputational damage with customers. 💠  Authors conclude that regulation of methane fills an obvious gap in EU climate policies, but it remains to be seen how high this will be on the list of priorities for the new EU Commission and member states 💠 Methane emissions reduction – a highly complex and technical topic– is not part of mainstream political discussions in Brussels and national capitals 💠 If LNG demand remains strong in Europe and is seen as endangering EU climate objectives or the EU’s image as a climate leader, more regulations and more assertive national and EU policies can be expected, as long as these measures are not seen by member states as compromising security of gas supply #lng #methaneregulation #methaneemissionsreduction #climatepolicies #energysecurity #eu #mrv #decarbonizaton

Katja Yafimava article in latest Oxford Institute for Energy Studies Energy Forum: Decarbonizing the Eu Gas Network- Is the New EU Regulatory Framework up to the Challenge? 👉 Link to OIES Energy Forum: https://lnkd.in/eMBZ_Y3f Key points: 💠  EU gas system is undergoing significant transformation in line with EU #decarbonization policies aimed at achieving legally-binding net-zero GHG emission targets by 2050 💠 EU views its future #gas system as consisting of two separate systems – one for progressively decarbonized #methane and another for #hydrogen – both developing in parallel and co- existing as part of ongoing European energy system decarbonization 💠 This vision is reflected in the EU Renewable and Natural Gases and Hydrogen (RNGH) Directive and the RNGH Regulation (the Decarbonized Gas and Hydrogen Package) 💠 Together with the TEN-E Regulation, they constitute the new regulatory framework, governing construction of, and access to, hydrogen networks, and the re-purposing and de-commissioning of, and access to, natural gas networks in the EU 💠 This framework is aimed primarily at development and operation of hydrogen system while it also amends existing rules for the natural gas system 💠 Framework will be of paramount importance for governing process of upcoming gas network transformation and ensuring that it adheres to EU vision 💠 Scale of transformation is enormous given that at present the EU gas system consists primarily of the natural gas system (networks, storage, LNG import terminals) with very little hydrogen infrastructure yet in place 💠 As far as the network component is concerned, there are 200,000 km of transmission and over 2,000,000 km of distribution natural gas pipelines, and only ~2,000 km of hydrogen networks (mostly privately owned, small capacity, unregulated lines) 💠 New framework faces challenge of enabling and supporting the development of the EU hydrogen system – including hydrogen networks – without stifling the (as yet non existent) hydrogen market 💠 There are two key criteria that the framework must meet to overcome this challenge 1️⃣ it must provide flexibility, enabling a step-by-step development of hydrogen networks, whose topology, scale and size will depend on the supply and demand for hydrogen (at present highly uncertain) and on the decarbonisation pathways chosen by (mostly) industrial users (i.e. via renewable and/or low - carbon hydrogen)while also enabling the required evolution of natural gas networks 2️⃣  It must provide assurance that gas network decarbonisation will take place in a co-ordinated manner across the EU without negatively affecting the security of natural gas supply #gas #hydrogen #eu #regulation #security

🚨 In 2024, the OIES #Gas #Research Programme published a series of papers, podcasts and presentations on various aspects of #gasmarkets and #energytransition List of selected papers (all free to download): 📖 European Traded Gas Hubs: the markets have rebalanced 👉 https://lnkd.in/effEBz4y 📖 EU sanctions on Russian LNG: choices and consequences 👉 https://lnkd.in/eirR-4cf   📖 Quarterly Gas Review –25– July 2024 👉 https://lnkd.in/e4yJ4ASA   📖 The Uniper-Gazprom Arbitration Ruling: Is the final curtain coming down on remaining long-term Russian gas supply contracts to Europe? 👉 https://lnkd.in/eSJ-2dw3 📖 Energy Transition Scenarios: Impact on Natural Gas 👉 https://lnkd.in/dTqTzJgv 📖 Analysing the EU Methane Regulation: what is changing, for whom and by when? 👉 https://lnkd.in/eVgsTkdt 📖 East Mediterranean Gas: a triangle of interdependencies 👉 https://lnkd.in/dBHHADzH 📖 Hydrogen for the ‘low hanging fruits’ of South America: Decarbonising hard-to-abate sectors in Brazil, Argentina, Colombia, and Chile 👉 https://lnkd.in/eh4MZTGv 📖 Quarterly Gas Review –24– April 2024 👉 https://lnkd.in/egPdcsD7   📖 From natural gas to hydrogen: what are the rules for European gas network decarbonisation and do they ensure flexibility and security of supply? 👉 https://lnkd.in/e_35hwaq   📖 Burning the Bridge to Ostpolitik? Stress-Testing Europe’s Shift from Russian Gas to Renewables Using a Global Energy Model 👉 https://lnkd.in/enGNqpbg   Supplementary information: 👉 Mathematical formulation of the global energy market model: https://lnkd.in/e4NU6u3u 👉 Data inputs, sources and assumptions: https://lnkd.in/erH7E5kp 👉 Detailed analysis of modelling results: https://lnkd.in/e7iyaTaS 📖 The role of LNG in the North Asian energy transition: lagging renewables means more LNG for longer? 👉 https://lnkd.in/eGsJ_iw8 📖 Outlook for Russia’s oil and gas production and exports 👉 https://lnkd.in/e597zcQW   📖 Follow the Money: Understanding Russia’s oil and gas revenues 👉 https://lnkd.in/eibwuTxT 📖 LNG Shipping Chokepoints: The Impact of Red Sea and Panama Canal Disruption 👉 https://lnkd.in/erRms8YF   📖 Finland and the Baltics without the Balticconnector 👉 https://lnkd.in/eKPDiBys   📖 Decarbonizing Germany’s heating sector 👉 https://lnkd.in/erWB74UD 📖 What next for US LNG Exports? 👉 https://lnkd.in/eDPG39K7   ▶ For more information on the OIES Gas Research Programme, please contact Bill Farren-Price, Head of Gas Research, and visit our webpage: https://lnkd.in/drMwjnj ▶ Browse all Oxford Institute for Energy Studies publications on our website: https://lnkd.in/d9SU_x6 #OIESGas

Michal Meidan, Head of China Energy Research at the Oxford Institute for Energy Studies joins Harry Tchilinguirian Group Head of Research Onyx Capital Group to discuss China energy 💠Harry and Michal explore China's oil demand outlook as institutional forecasters, including the IEA and OPEC, alongside prominent Wall Street banks, downgrade their views 💠They discuss how weak macroeconomic data, coupled with challenges in government policy stimulus, cast doubts on China's ability to achieve its targets and deliver on oil demand growth 💠Harry and Michal review oil product demand in China, particularly how the shift towards electric vehicles affects gasoline demand 💠 Naphtha and propane demand from the petrochemical sector are also discussed in the context of weakening margins 💠Finally, substitution toward natural gas is also examined to see how it affects the diesel outlook #china #energy #oil #gas #energypolicy 👉 Link: https://lnkd.in/eWZ9W9hS

Jack Sharples article in the latest Oxford Institute for Energy Studies Energy Forum: Riding the Next Wave of LNG: Opportunity and Uncertainty 👉 Link to OIES Energy Forum: https://lnkd.in/eMBZ_Y3f Key points: 💠  In first half of 2024 global LNG market was relatively finely balanced 💠 Global gross exports (including re-exports) and global net imports (net of re-exports) grew by 1 per cent year-on-year in context of growing LNG demand outside Europe (+17.7 Bcm year-on-year) and the ongoing decline in European imports (-15.0 Bcm year-on-year) in H1 2024 💠 Tightening of global LNG market underpinned counter-seasonal price rally in European and Asian LNG benchmark prices between late February and early June 2024 💠 Near-term outlook for rest of 2024 is one of very limited new supply, with just three new liquefaction projects launched this year: ➡ Congo FLNG loaded its first cargo in February 2024 ➡ Altamira (Mexico) achieved first LNG production in July which suggests that its first LNG cargo loading is imminent ➡ Greater Tortue Ahmeyim (Senegal-Mauritania) is expected to load its first cargo in Q4 2024 💠Near-term outlook is one of limited supply growth, growing demand outside Europe and the year-on-year decline in European imports balancing the market 💠 This situation will not change until the next wave of new supply reaches the market between 2025 and 2030 💠 In this context, article addresses several key questions regarding this growth in global LNG liquefaction capacity: 1️⃣ What volume of new capacity will be added, and how will the growth be spread across the period 2025-2030? How much of that capacity is certain to be launched (post-FID and currently under construction) and how much is ‘planned’ (pre-FID with construction not yet begun)? 2️⃣ Where is that new capacity located? 3️⃣ Are there any further projects that have been proposed but not yet added to the ‘planned’ category which could be added? 4️⃣ What are the challenges that could yet cause some of the new projects to be delayed or cancelled? #gasmarkets #lng #lngcapacity #lngprojects

New Issue of the Oxford Institute for Energy Studies Energy Forum: GAS TO 2030: TRANSITION, SUPPLY RISK AND MARKET UNCERTAINTY 👉 Link to Forum: https://lnkd.in/eMBZ_Y3f 💠  This gas-focused edition of the OIES Energy Forum updates the scorecard on the key issues driving medium-to long-term gas demand prospects in key consuming countries 💠  Whether it is European climate policy and the regulation of decarbonized gases, the demand outlook for Asian industrial economies or the political and macroeconomic context for energy transition, this issue attempts to unpick the key themes and challenges in the global gas picture 💠  Beyond the OECD countries, it looks at China, India and Africa from a policy, investment and resource perspective, while also digging into the dynamics of global gas supply that will underpin the growing LNG market Contributors: Graeme Bethune Danila Bochkarev Julian Bowden Ji CHEN Trisha Curtis Bill Farren-Price Bassam Fattouh Mike Fulwood Ieda Gomes Yell, MSc, FEI, MIoD Marshall Hall Martin Lambert  Michal Meidan  Maria Olczak Mostefa Ouki Alex P. Jack Sharples Jonathan Stern Shuai Wang Katja Yafimava Nitin Zamre #gas #gasdemand #power #industry #renewables #climate #china #asia #europe #mediterranean #argentina #Brazil #colombia #Israel #egypt #Jordan #cyprus #norway #pipeline #turkmenistan #usshale #decarbonization #methane #regulation #Japan #korea #taiwan #geopolitics #conflict #ukraine #russia #elections #india #lng #liquefaction #sanctions #hydro #vacamuerta #investment #upstream #rigcount #fertilizer #petrochemical #hydrogen #africa #projectfinance

Dr Katja Yafimava has recently interviewed by NE Global on the importance of the ongoing German investigation of Nord Stream attacks and its implications for future European energy security. 👉 Link to article: https://lnkd.in/dHKGrG25 Key points: 💠 Nord Stream attacks have endangered European gas supply in two ways: directly, by making one of its major gas supply routes inoperable; indirectly, by demonstrating that any piece of European energy infrastructure can be sabotaged at will. 💠 An oft-made argument that Nord Stream was not transporting any gas at the time of the explosions and therefore Europe’s supply security was not affected by the attacks is misleading because flows through Nord Stream could potentially re-start pending a resolution of the turbine maintenance dispute had it not been physically damaged. The attack has made such return impossible. 💠 The very fact that Germany has continued its investigation (even though Sweden and Denmark closed theirs) and collected evidence that was deemed sufficient by the German court to grant a request to issue an arrest warrant is a positive development. 💠 It suggests that the rule of law is respected while also signalling that an attack on national energy infrastructure will not be ignored, irrespective of whether and if any allied state actor(s) might have been involved. 💠 If such involvement were to be proven, it would be surprising if it were not to have at least some bearing on Germany’s energy and foreign policies. 💠 If the investigation were to conclude with an indictment of all those involved in masterminding and execution of the attack, it would de facto decrease the risk of any potential attacks on European infrastructure in the future.