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By David Gaffen, Editor, Energy Markets

Hello Power Up readers! The oil market continues its back-and-forth over the ongoing conflict in the Middle East and is facing other factors, most notably some strong U.S. data that tempered expectations for lower interest rates that might spur demand. But a lot of what we’re talking about this week is in Europe, where big economies are weighing the messy transition to renewable or cleaner resources, which have lately been dealt a few setbacks. Here’s what’s happening now… 

Today’s top headlines:

• Oil slips as rate cut caution overshadows Mideast strikes
• China to crack down on emissions data fraud as CO2 market expansion nears
• Italy’s Snam sounds out interest for carbon capture, hydrogen projects

Those are turbines at Orsted’s offshore wind farm near Nysted, Denmark. REUTERS/Tom Little

Investors are growing concerned that Orsted, the Danish renewable giant, will have to raise capital to stick to ambitious plans, as Reuters reports here. The company is expected to cut dividends and reduce its expected capital expenditures, hit by rising inflation, higher interest rates and supply chain delays that forced it and other big renewable players to cancel offshore projects. 

Orsted stopped development of two big wind projects in New Jersey in November and will open its doors for an investor day Wednesday in Copenhagen. The company was a big pioneer in offshore wind projects and had expectations of installing 50 gigawatts (GW) of renewable capacity by the end of the decade. But analysts now see that goal as unfeasible.  

“The 50 gigawatt target has to be removed, and the market knows it. But they need to cut their financial goals so deep that it hurts,” said a portfolio manager overseeing investments in Orsted. 

A model of an LNG tanker! REUTERS/Dado Ruvic/Illustration

The natural gas industry expressed concern over the United States’ decision to pause new LNG plant approvals, even in Europe, but the European Commission said the continent will have enough gas supply for the next 10 years and thereafter, as Reuters reports here. The issue is basically this – gas importers and lobby groups say the U.S. pause could hamstring energy security worldwide if it substantially slows the growth of new LNG supply, even though the country still has several projects in effect. 

What’s more, the U.S. has become the biggest exporter of LNG to Europe, as EU countries race to replace Russian fuel following Moscow’s invasion of Ukraine in 2022. Over 60% of U.S. LNG exports went to Europe in the last two years. However, a European Commission spokesperson told Reuters the U.S. decision “will not have any short-to-medium term impacts” on the EU’s gas supply. EU gas needs are expected to keep increasing for several years before ebbing due to efficiency gains and the use of renewable fuels.

A man walks next to world’s biggest gas turbine inside the gas-fired power plant of German utility giant in Irsching. REUTERS/Michaela Rehle

Germany’s government has agreed to plans to subsidize gas power plants that can switch to hydrogen, as Reuters reports here, part of a broader effort to supplement intermittent renewable energy and speed up the transition to low carbon generation. Utilities had been pressing for details on a previously announced strategy aimed at boosting renewable usage in the power grid. Germany has had to shift dramatically away from gas after Russia cut off supplies following its invasion of Ukraine in 2022.  

The planned plants are also key for Berlin to convince eastern producers of brown coal, the most polluting kind, to phase out coal-fired stations earlier than the official date of 2038.  

Lower energy prices, so, lower profits. (Sabrina Valle)

The big oil majors’ profits in 2023 dropped about a third from record levels seen in 2022,  as Reuters reported, as oil and gas prices fell in the wake o f the Russian invasion of Ukraine. That said, it’s hardly gloom and doom for the giants – Exxon Mobil posted a better-than-expected $36 billion profit for 2023 due to fuels trading and higher oil and gas production. Both Exxon and Chevron made key acquisitions in 2023, buying up some of the most desirable land in shale country that will help keep their output rising in coming years.  

Exxon agreed in October to buy rival Pioneer Natural Resources to boost its U.S. shale oil production while Chevron proposed to purchase Hess Corp to get a foothold in Guyana and in North Dakota’s Bakken shale region. Both deals are now expected to close mid-year. 

“By hitting oil refineries working for the Russian military-industrial complex, we not only cut off the logistics of fuel supplies for enemy equipment, but also reduce funds into the Russian budget.”  

A Ukrainian source after two drones hit the largest oil refinery in southern Russia on Saturday 

Venezuela’s exports of crude and refined products fell by 25% in January to roughly 624,000 barrels per day as the country was unable to deal with power outages that hit the main oil export terminal, according to vessel tracking data and internal documents from state oil firm PDVSA, as Reuters reports here.  

The country’s exports rose by 12% last year even despite operational problems as Washington eased some sanctions – but the loading delays due to power outages hurt exports, along with issues related to crude oil quality. 

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