Saudi Arabia is set to continue its 1 million-barrel oil supply cut into September as part of its efforts to support a fragile recovery in crude prices. This additional cutback was introduced alongside existing output reductions made in collaboration with other OPEC+ producers to stabilize oil markets amid uncertain economic conditions. The extension of the measure into August has already been implemented, and a Bloomberg survey of 22 traders, analysts, and refiners indicates that 15 of them predict it will persist into September. The two previous announcements regarding the kingdom’s voluntary production cuts were conveyed through state media in the first week of the month. Over the past month, oil prices have risen approximately 12 percent, reaching around $83 per barrel in London, thanks to the recovery in global fuel consumption and the restraint on output by the Organization of the Petroleum Exporting Countries (OPEC+), leading to a long-awaited tightening of world markets. This improvement offers some relief to consumers in the US and elsewhere who have been grappling with last year’s unprecedented wave of inflation. It may also give the Saudis the opportunity to ease their supply curbs. However, it is believed that prices might still be too low for the kingdom’s liking. Bloomberg Economics suggests that Saudi Arabia needs $100-a-barrel crude to finance its ambitious spending plans. To consider reintroducing the 1 million barrels per day into the market, the kingdom would likely want to see oil prices continue to rise, possibly reaching $90 a barrel, and witness improvements in Chinese economic data. Some analysts speculate that the supply shortfall in global oil markets is expected to deepen significantly in the coming months, with the International Energy Agency projecting a shortage of approximately 1.7 million barrels a day during the second half of the year. According to six participants in the survey, this anticipated supply shortage might prompt the Saudis to gradually reduce their extra cut by restoring around 250,000 to 500,000 barrels a day of halted production in September. Some analysts believe there is sufficient evidence to support this move, as the market is showing a high demand for these barrels, and refiners are actively seeking to acquire them. While the Saudis have a history of making unexpected moves in the oil market to surprise speculators, the financial pressures they face may make it challenging for them to relax their production curbs. Crown Prince Mohammad bin Salman’s ambitious economic and social transformation plans require much higher oil prices, as emphasized by Bloomberg Economics. Recently, the kingdom experienced the steepest growth downgrade among major economies by the International Monetary Fund, projecting a modest 1.9 percent expansion of Saudi gross domestic product for the year. By maintaining a tight grip on oil supplies, Riyadh can also encourage discipline among other members of the OPEC+ alliance. Russia, a key player in the group, has finally begun implementing its promised share of supply curbs after months of delay. The recent focus of Moscow on maximizing oil sales to fund its invasion of Ukraine has caused a decline in shipments to a six-month low of 3.1 million barrels a day. Key nations from the OPEC+ alliance will conduct an online meeting on August 4 to assess oil market conditions, with the full 23-nation group scheduled to convene in late November.

The recent meeting of the Group of 20 energy ministers in India concluded without reaching a consensus on the phase-down of fossil fuels, highlighting the slow progress on climate diplomacy in the lead-up to crucial meetings this year. While some nations acknowledged the necessity to reduce the unrestrained use of oil and gas, others contended that carbon removal technologies, like carbon capture, use, and sequestration (CCUS) or other abatement technologies, could address emission concerns. India’s power minister, Raj Kumar Singh, revealed that both approaches were considered acceptable, and overall, the majority of members agreed on the importance of addressing climate change. The talks took place in Goa and were aimed at establishing a framework for the energy transition in anticipation of the upcoming G 20 leaders’ meeting in September and the COP28 forum in Dubai in December. The urgency of climate action was further emphasized by extreme weather events affecting Europe, Asia, and the US, including deadly heatwaves in India. Notably, negotiations between the United States and China, the two largest emitters globally, did not yield significant progress, though both countries agreed to intensify discussions and found some common ground on reducing coal usage, according to US climate envoy John Kerry. During the Goa meeting, officials also struggled to find consensus on criticizing Russia for its invasion of Ukraine in 2022, which disrupted global supply chains and impacted energy provisions to several countries. German Economy Minister Robert Habeck criticized Russia’s First Deputy Energy Minister Pavel Sorokin for promoting a distorted worldview on the energy crisis and the conflict in Ukraine. Some disagreements emerged over increasing renewable generation capacity by 2030, with Russia and Saudi Arabia objecting to the agreement, and China preventing enhanced cooperation on critical raw materials, as mentioned by Habeck. Despite these challenges, there was unanimous agreement on mobilizing low-cost finance for the energy transition, fostering the development of clean technologies like hydrogen, energy storage, and ensuring universal access to energy, according to the meeting document. Additionally, the group decided to consider blue hydrogen, which is produced with carbon dioxide sequestration, on par with green hydrogen, indicating a willingness to explore multiple sustainable energy options.

The UK government has reaffirmed its commitment to the ban on the sale of new petrol and diesel cars starting from 2030. This decision was made to instill confidence among businesses and investors in the electric vehicle industry, particularly after Prime Minister Rishi Sunak appeared to waver on the policy in recent days. Earlier, there were doubts raised about the ban’s implementation when Sunak and another minister, Andrew Mitchell, declined to confirm the deadline. However, Housing Secretary Michael Gove asserted that the timing of the ban was indeed immovable and provided an “absolute guarantee” on this matter. Nevertheless, Gove hinted that the government might review the pace of its roll-out for low-carbon domestic heating systems, like heat pumps, as a replacement for gas boilers. He acknowledged the need to revisit a policy that required all new homes to adopt such systems from 2025, while emphasizing that new housing should meet net zero standards. Sunak has been facing pressure from members of his own Conservative Party to soften his commitments aimed at achieving the UK’s net carbon emissions elimination by 2050. This pressure increased following a recent special election, where the Conservatives secured a narrow victory over Labour after campaigning against local vehicle emission restrictions. Some MPs believe that environmental policies are negatively impacting the Conservative Party’s popularity, especially during a cost-of-living crisis when the party is trailing the main opposition by about 20 points in recent polls. The 2030 ban on petrol cars had faced opposition from some conservative members, but Gove’s remarks seem to have put a stop to their efforts to delay the deadline. This assurance may ease concerns among electric vehicle businesses that the government is trying to attract to the UK. The 2030 ban, along with a generous government subsidy, played a significant role in Tata Group’s decision to invest £4 billion in a new electric car battery plant in the UK. The government has set a mandate for heating systems in new homes to be low carbon by 2025, with the goal of reaching about 600,000 heat pump installations per year by 2028. By 2035, all newly installed heating systems should be low carbon, or at least capable of conversion to use hydrogen in the case of gas boilers. Gove acknowledged the need for caution in imposing such requirements, considering the current cost-of-living challenges. The government aims to take a proportionate approach and not burden individuals with excessive costs at this stage. Another area the government is considering relaxing is the pace at which private landlords need to make energy efficiency improvements to the homes they rent out. The government plans to “ease off” on new environmental requirements for the private rental sector. Despite these considerations, there is uncertainty regarding how the government will manage to ease its position on transitioning away from gas boilers without compromising its legal commitments to end the UK’s contribution to global warming by 2050. Last year, ministers faced a significant setback when the High Court ruled that an earlier version of its Net Zero Strategy was unlawful due to insufficient detail on how it would meet emissions targets. To meet the 2050 target, the government is required by domestic law to set five-year carbon budgets 12 years in advance to outline its plans for reaching net zero emissions. These carbon budgets set the total allowable emissions for successive five-year periods.

Saad Sherida Al-Kaabi, Qatar’s Minister of State for Energy Affairs and President and CEO of QatarEnergy, emphasized the importance of a well-defined roadmap with specific targets to achieve a fair and efficient energy transition. Speaking at the 12th LNG Producer-Consumer Conference in Tokyo, Japan, Al-Kaabi urged the world to consider a transition that is realistic, stable, and prioritizes the needs of less affluent nations. He stressed the significance of integrating natural gas into the current and future energy mix as a secure and dependable base load for most countries, even beyond 2050. Al-Kaabi stated that gas will play a crucial role in achieving a successful and unwavering energy transition. Highlighting the unresolved issue of insufficient investment in the oil and gas upstream sector, Al-Kaabi pointed out the resulting lack of clarity, supply uncertainty, and increased global instability. To address this, Qatar is taking a proactive approach by providing the world with the cleanest available hydrocarbon energy source, meeting both economic and environmental aspirations. QatarEnergy’s projects are expected to contribute about 40 percent of new global LNG supplies by 2029. These projects focus on significant reductions in greenhouse gas emissions through carbon capture and sequestration, as well as the utilization of solar energy. The aim is to achieve an overall reduction in carbon intensity of approximately 30 percent compared to previous generation designs. In another conference, Al-Kaabi expressed concerns about the negative portrayal of oil and gas, which has led to substantial declines in sector investments. He noted that over the past decade, there has been an average reduction of 25 percent in investments, deviating from the expected normal investment cycle. While the market has been somewhat buffered by a warm winter in 2022-2023 and filled storage in Europe, Al-Kaabi cautioned that replenishing storage will not be easy, and investments are still lagging behind the necessary levels.

France’s Nexans has been awarded a substantial $1.6 billion (EUR 1.43 billion) contract by Cyprus’ EuroAsia Interconnector Ltd. The contract aims to construct an undersea cable that will interconnect the electricity grids of Greece, Cyprus, and Israel, allowing for the exchange of up to 1,000 megawatts of power. In an official press release, EuroAsia Interconnector stated that this Mediterranean Sea infrastructure project will effectively end the energy isolation of Cyprus and Israel, establishing a secure supply and an energy highway between Europe and Asia. The cable is set to be an impressive feat, as it will span approximately 750 miles (1.208 kilometers) and reach depths of around 9,800 feet (3,000 meters) below water. The 525-kilovolt direct current cable will measure about 1×560 miles (2×900 kilometers) in bi-pole length, as disclosed by EuroAsia Interconnector. At its initial stage, the EuroAsia Interconnector will enable the exchange of 1,000 MW between Israel, Cyprus, and Greece, connecting with Europe. However, the capacity is planned to increase to 2,000 MW in Stage Two, equivalent to the electricity consumption of three million households, according to the company’s owner, based in Nicosia. Nasos Ktorides, the Chief Executive, emphasized that Cyprus is the last European Union member to lack power interconnection. Nexans will be responsible for engineering, construction, and installation. The company will manufacture Subsea HVDC Mass Impregnated cables at its facilities in Halden (Norway) and Futtsu (Japan). These cables will then be installed using state-of-the-art cable laying vessels, Nexans Aurora and Nexans Skagerrak, as stated by EuroAsia Interconnector. This ambitious project has earned the designation of an EU Project of Common Interest (PCI), making it eligible for expedited permitting and funding through the EU’s Connecting Europe Facility (CEF). The European Climate, Infrastructure, and Environmental Executive Agency has already granted EuroAsia Interconnector a substantial amount of EUR 657,905,500.00 (approximately $737 million) for the project. This funding is the largest ever granted to Cyprus and one of the most significant amounts received from the Connecting Europe Facility for electricity interconnectors, as proudly announced by EuroAsia Interconnector on September 9, 2022. Additionally, the EU Council has agreed to provide around $112 million (EUR 100 million) in grant funding through the Recovery and Resilience Facility, which was confirmed by EuroAsia Interconnector on July 27, 2021. Nexans emphasized that the majority of the electricity exchanged through the cable will be sourced from renewable and decarbonized sources, aligning with the project’s commitment to becoming a PCI project. Nexans’ Christopher Guerin hailed the project as a crucial step towards achieving a carbon-free economy.
The company proudly takes the lead in connecting regions with the highest potential for renewable energy to areas with the greatest demand for electricity, according to their separate media statement. In summary, the Nexans-contracted undersea cable project promises to bring transformative benefits by enhancing energy connectivity and sustainability across the regions involved.

China has initiated its second 10,000-meter deep drilling project of the year in pursuit of accessing ultra-deep reservoirs of natural gas. According to Xinhua News Agency, China National Petroleum Corp. (CNPC) commenced drilling the Shendi Chuanke 1 Well in Sichuan province on Thursday. The well is designed to reach a depth of 10,520 meters (approximately 6.5 miles). This endeavor comes after CNPC’s previous drilling operation in Xinjiang, which began in May and was recognized as the deepest drilling project ever undertaken in China at that time. While the earlier drilling project in Xinjiang had an experimental purpose, focusing on testing drilling technologies and gathering data on the Earth’s internal structure, the current undertaking in Sichuan aims to explore ultra deep natural gas reserves, as per Xinhua’s report. Sichuan, renowned for its spicy cuisine, breathtaking mountain vistas, and iconic pandas, also hosts some of China’s significant shale gas reserves. Despite the vast potential, the state-owned oil giants have faced challenges in extracting these resources due to the complex underground geology and challenging terrains. China’s government has been urging energy companies to bolster domestic production in recent years to ensure fuel security amid power shortages, geopolitical tensions, and global price fluctuations.

Norway’s Minister of Energy emphasizes the importance of expanding export capacity for the exploration and development of gas reserves in the offshore areas of the Barents Sea, which hold significant untapped potential. According to a recent report by Wood Mackenzie, a potential new pipeline connecting the Arctic platforms in Norway’s Barents Sea to Europe could help reduce the continent’s reliance on liquefied natural gas (LNG) imports. Since Russia curtailed most of its gas pipeline deliveries in 2022 following the Ukrainian invasion, Norway has emerged as Europe’s largest natural gas supplier. However, currently, the only means of transporting gas from the Barents Sea to the market is through Equinor’s Hammerfest LNG export facility. There are no direct links between the Barents Sea and Norway’s primary gas pipeline network. Recognizing the significance of gas supply to Europe, the Norwegian Ministry of Energy requested Gassco, the gas infrastructure operator, to explore options for bringing more Barents Sea gas to the market. Gassco’s analysis considered various technical solutions to boost gas export capacity, including expanding the Hammerfest LNG plant’s export capabilities, exporting blue ammonia, and constructing a new gas plant and pipeline to the Norwegian Sea, enabling further transportation through the existing pipeline network. Gassco concluded that a Barents Sea pipeline appears to be the most economically viable option. Minister of Energy Terje Aasland emphasized the necessity of increasing export capacity for the continued exploration and development of the Barents Sea’s gas potential. Wood Mackenzie’s report highlights that the proposed $5 billion pipeline project would require government support. Daniel Rogers, Senior Analyst at Wood Mackenzie, stated that while the environmental and socioeconomic considerations surrounding the pipeline and further basin development are significant, they can only be realized with government backing. Wood Mackenzie’s report also suggests that government funding for the pipeline project or the implementation of a carbon border adjustment mechanism by the European Union to promote cleaner industrial production in third countries would enhance the project’s cost competitiveness. Overall, Norway is actively exploring ways to boost gas export capacity from the Barents Sea, with the aim of ensuring a reliable and independent gas supply to Europe.

Last year, the United States Securities and Exchange Commission (SEC) published a proposal outlining a plan that would require publicly traded companies in the U.S. to report their greenhouse gas emissions associated with the energy they consume. There is a growing global push for robust carbon accounting, where private companies will be responsible for monitoring and disclosing their climate-related data, including the lifecycle emissions of their products and services. The collection and communication of climate data are seen as essential steps in the fight to keep global warming within 1.5-2 degrees Celsius above pre-industrial levels, thereby avoiding catastrophic climate change. Members of the Task Force on Climate-Related Financial Disclosure (TCFD), an international task force on climate-related financial reporting, include Belgium, Canada, Chile, France, Japan, New Zealand, Sweden, and the United Kingdom. However, in the United States, the future of climate disclosure mandates is somewhat uncertain due to an ongoing standoff between policymakers and investors. Last year, the United States Securities and Exchange Commission (SEC) published a 534- page proposal outlining a plan that would require publicly traded companies in the U.S. to report their greenhouse gas emissions associated with the energy they consume, as well as all emissions resulting from their operations. These estimates will need to be independently certified to ensure their accuracy. “In some cases, companies will also be required to report greenhouse gas production from both their supply chains and consumers, known as Scope 3 emissions,” reported The Wall Street Journal at the time of the proposal’s release. “An SEC official stated that most S&P 500 companies will likely have to report Scope 3 emissions. Companies will need to include the information in SEC documents such as annual reports.” It is not surprising that the plan has been met with considerable disapproval from the private sector, and there is strong pressure against the proposed rules. As a result, the SEC has indicated that it will likely soften certain aspects of the mandates, with an updated version of the proposal to be released by the end of the year. However, the basic principles of the proposal will remain the same, and publicly traded companies can expect to start accounting for their carbon in the near future. “The SEC has no role when it comes to climate risk itself,” said SEC Chairman Gary Gensler earlier this year to the U.S. House Financial Services Committee, adding that “we do have an important role in ensuring public companies have full, fair, and accurate disclosure on material risks.” Many companies are already undertaking some form of this accounting to meet investor demands, as investors are increasingly interested in ESG (environmental, social, and governance) aspects. However, the SEC is seeking to standardize these data. In fact, many large companies in the United States are already preparing for increased carbon accounting and disclosure rules. For other companies wondering where to start, WSJ Sustainable Business recently published introductory guidelines for initiating carbon accounting based on advice from sustainability executives at Holcim, HP, and Nestlé. “Carbon is not a new science; no one should panic,” said Benjamin Ware, Nestlé’s Global Head of Climate and Sustainable Sourcing. The steps outlined in WSJ Sustainable Business are as follows: Build expertise: Starting with the hiring of external consultants to guide the process, companies will also need to work on building internal capabilities. Companies should approach this by hiring graduates in environmental sciences rather than relying solely on training existing employees. Follow established standards: While the SEC mandates may not be in place yet, there are many existing guidelines and standards that establish more or less universal rules and approaches for basic carbon accounting. Start with the easier tasks: Companies will need to begin with the more concrete and easily monitorable Scope 1 and Scope 2 emissions, which are the direct emissions from operations and energy consumption. Collaborate with suppliers to address Scope 3: Since Scope 3 emissions include emissions throughout the value chain, collaborating with suppliers and consumers to track their emissions can be very helpful for overall accounting. Don’t rush to publish and review: Companies should keep their emission data for the first two years internally to ensure that any bugs are resolved and their methodology is scientifically valid and withstands scrutiny.

Rystad Energy has conducted an analysis showing that claims of chronic underinvestment in the global oil and gas industry are exaggerated. According to their findings, investments in the upstream sector have declined since reaching a peak of $887 billion in 2014, with an estimated $580 billion to be invested this year. The number of completed wells has also decreased from 88,000 in 2014 to 59,000 in 2023. This has led many market participants to predict a persistent underinvestment trend, resulting in a shortage of oil supply. However, Rystad Energy’s analysis presents a different perspective. They point out that lower unit costs, increased efficiency, productivity gains, and evolving portfolio strategies have significantly improved the efficiency of the upstream sector. In other words, the industry can achieve the same results as before but at a much lower cost. Although investments have declined, overall activity and production remain healthy and in line with the levels seen between 2010 and 2014. Espen Erlingsen, Head of Upstream Research at Rystad Energy, stated that contrary to popular belief, the world is investing adequate amounts of money in fossil fuel production to meet demand. Cost savings have allowed operators to produce the same amount of oil at a lower cost, alleviating concerns of an immediate oil supply crisis due to underinvestment.
Global upstream investments peaked at nearly $900 billion in 2014 but declined to around $500 billion two years later after the 2015 oil price collapse. Another drop occurred in 2020 when investments fell to $400 billion due to the impact of the Covid pandemic and the subsequent oil price crash. However, there has been a recovery in oil and gas activity, resulting in approximately $500 billion in spending last year. Despite this rebound, investments in 2022 only reached 60% of 2014 levels, leading to the assumption that upstream activity has decreased by 40% since 2014.

The secretary-general of the Organization of the Petroleum Exporting Countries (OPEC) has indicated that the influential alliance of producers is actively seeking new members. When asked about expanding the OPEC coalition, Haitham al-Ghais, the secretary-general, confirmed during a press conference on Wednesday, “Yes, we are.” Currently, the group consists of 13 members, primarily located in the Middle East, North and West Africa, and South America. The organization of oil producers faces the challenge of reconciling expectations of a tighter crude oil supply in the second half of the year with ongoing concerns about the macroeconomy and inflation. OPEC members coordinate their oil production levels to influence prices. Ecuador left the group in 2020 due to political circumstances but was invited to rejoin OPEC in May, as stated in a letter from al-Ghais shared by the Ecuadorian Energy Ministry. “The organization considers it a top priority for Ecuador to rejoin the OPEC family,” the letter stated. The response from the Ecuadorian ministry has not been disclosed. Al-Ghais declined to disclose the names of potential new members. However, he mentioned recent visits to oil-producing countries, including allies that are part of the OPEC+ group, which implements a joint production strategy with OPEC countries. “I visited Malaysia and Brunei,” he mentioned, emphasizing that he did not necessarily invite these countries to join the organization. “I also visited Azerbaijan and Mexico.” OPEC previously clarified in late June that although there has been speculation about Guyana’s potential membership, the South American country had not received an invitation to join, although it is recognized as an emerging player in the international oil market. When asked about the requirements for becoming an OPEC member, al- Ghais explained, “They need to be a substantial net oil exporter and share similar goals with OPEC.
These criteria are clearly outlined in our statute. Many of the countries I mentioned earlier actually fit this profile. So, it’s a work in progress.”