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By John Kemp

Welcome to Power Up. U.S. offshore wind development is “fundamentally broken” and needs a reset, according to the head of BP’s renewables business. The sector is struggling with permitting delays and escalating costs, forcing a string of embarrassing and expensive project write downs, and threatening an investment strike, even as the White House insists growing offshore generation remains a high priority.  

Today’s top headlines:

• Chevron in talks on 15-year LNG supply contracts to Europe 

• ConocoPhillips beats Q3 profit estimates on higher output 

• Shell boosts share buybacks despite fall in profits 

A construction barge and crane float erect a turbine for a wind farm in the waters of the Atlantic Ocean off Block Island, Rhode Island REUTERS/Brian Snyder

“Offshore wind in the U.S. is fundamentally broken” and needs a reset, Anja-Isabel Dotzenrath, the head of BP’s renewables business, told a conference in London.  

The offshore wind industry, one of the fastest growing energy sectors around the world, has recently suffered a string of major setbacks due to equipment reliability issues, supply chain problems and sharp cost increases, as Ron Bousso and Shadia Nasralla report here.  

BP’s head of gas and low carbon, said problems in the United States included permitting, the time lag between signing power purchase agreements and projects being built and a lack of inflationary adjustment mechanisms.  

BP is studying a new 10-point proposal by U.S. regulators that would allow the companies to re-bid for projects in an accelerated process. “There is a path forward but it’s challenging,” Dotzenrath told reporters. 

Sigma Lithium Corp SGML.V production at the Grota do Cirilo mine in Itinga, in Minas Gerais state, Brazil REUTERS/Washington Alves

In the mining sector, there is a growing gap between the need for more investment to sustain the energy transition and diversify supply chains away from China on the one hand, and the capital that western mining companies are actually willing and able to commit on the other, Clyde Russell argues in a column here.  

Previous models for developing mines appear no longer effective, and even if some projects do progress, they are nowhere near enough to provide enough material for the energy transition.  

Raising equity capital has become hard given the absence of deep pools of retail investor funds and the reluctance of institutional investors to fund risky, long-term projects. 

The major miners have pulled back on acquisitions in recent years, preferring to run operations leanly and return cash to shareholders, and if they do invest it’s largely been brownfield expansions of existing operations. 

Electrical pylons and power lines are seen in Yanqing district of Beijing, China REUTERS/Tingshu Wang

China’s government has warned peak power consumption could rise by as much as 140 gigawatts (12%) this winter, as the economy picks up, as Colleen Howe reports here.  

To ensure stable power supplies, the government has directed that coal production should be kept at a high level and power plant stocks should be maintained at 200 million tonnes, up from 170 million tonnes in October 2022.  

Even so, power shortages are expected this winter in Yunnan province and possibly in Inner Mongolia, according to a spokesman for the National Energy Administration.  

Crude oil storage tanks are seen at the Kinder Morgan terminal in Sherwood Park, near Edmonton, Alberta REUTERS/Chris Helgren

U.S. corporates and private equity firms are increasingly considering Canadian oil and gas companies for acquisition, drawn by lower valuations, ample fossil fuel reserves, and improving market access, Nia Williams and Maiya Keidan report here.  

The surge in interest for Canadian producers comes following Exxon’s bid for Pioneer Natural Resources and Chevron’s for Hess. Both deals were driven in part by the buyers’ need to increase drilling inventory and secure future production in key U.S. shale basins after several years of limited exploration spending. 

“One of the major driving factors for U.S. companies … is that there’s the potential for Canadian drilling inventory to be less expensive than what they’re seeing in the United States,” said Scott Barron, head of Calgary investment banking at TD Securities.

China, the world’s largest emitter of methane, is expected to unveil its strategy to cut output of the greenhouse gas “imminently” but may stop short of setting specific reduction targets, Valerie Volcovici reports here.  

China produces over 14% of global methane emissions but has so far resisted pressure to join a global pact to cut its methane output 30% by 2030 that was signed by over 150 other nations, led by the United States. 

The reduction plan under discussion focuses on some of China’s most challenging methane sources, including emissions from coal mine seams and agriculture (including rice) but does not contain binding numerical targets, following concerns expressed by the agriculture and energy ministries about their impact on the economy.  

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