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By David Gaffen, Editor, Energy Markets

Hello Power Up readers! Somehow, it’s already May, and the world’s biggest oil companies are sitting on piles of cash, Brazil is touting ethanol, and Japan may see its LNG imports peak. But first let’s look at a developing story out of Mexico.  

Today’s top headlines:

• EXCLUSIVE: Biden administration could delay EV biofuels program decision
• COLUMN: Soft China PMI likely to flow through to uneven commodity demand
• China’s Baosteel, Saudi Aramco and PIF set up JV to build steel plant in Aramco

That’s Mexico’s President Andres Manuel Lopez Obrador at the inauguration of the Dos Bocas refinery last year; he’s been pushing for more oil-and-gas development. REUTERS/Edgard Garrido

Stefanie Eschenbacher is out with a big scoop here on Pemex. Last year, the state oil regulator rejected a plan by Pemex to develop a big field in the southern state of Tabasco, arguing it was economically and technically unsound. And then the head of the agency that nixed the idea was replaced. 

A few months later, in November, the regulator approved the plan for the Quesqui field, and what Reuters is reporting is that the head of the National Hydrocarbons Commission (CNH), Rogelio Hernandez, was pressured the government of President Andres Manuel Lopez Obrador to approve the plans or resign. When he was pushed out, a former Pemex official was named the head of the CNH – who approved the plan.  

Lopez Obrador has been making a big push to boost Pemex’s production, as Mexico’s output has been falling for two decades. And the Quesqui field was a big part of that effort. 

Exxon posted a record for its first quarter.

The two largest U.S. oil companies are sitting on a pile of money, and the only difference between the two companies is over what they each plan on doing with it, as Sabrina Valle and Arunima Kumar report here. Exxon Mobil wants to hang onto the money, while Chevron plans on doing something with it.  

After the most recent quarter, the two companies revealed they have about $33 billion and $16 billion, respectively, thanks to a tight rein over spending and ongoing strength in revenues due to higher prices. Both have about a 4% net debt-to-capital ratio, far below the double-digit levels of a few years ago.

Exxon CEO Darren Woods said he would expect to see cash balances higher in coming quarters, keeping it on hand for a downturn, while Pierre Breber, CFO of Chevron, says it will reduce those levels, saying it is “economically inefficient” to hold that level of dough on the balance sheet.  

Those are JERA employees talking to reporters at JERA’s Hekinan thermal power station in Hekinan. REUTERS/Yuka Obayashi

So Japan’s JERA, one of the world’s biggest buyers of liquefied natural gas (LNG), is likely to shift its trade to other parts of Asia in coming years as its overall demand slows, as Yuka Obayashi and Katya Golubkova report here. The company’s volumes “may decline or may stay the same,” in coming years, Yukio Kani, JERA’s new global CEO, told Reuters.  

That would be a notable shift for the nation, which accounts for about a fifth of total global imports of LNG. The country’s overall use of gas has dipped in recent years as nuclear plants have come back online and expects to keep cutting its consumption as it shifts more to renewables. About all of Japan’s gas comes from LNG imports because it produces little on its own; overall gas was about 34% of its power generation in 2019. 

Ethanol, gasoline, whatever you want, fill it here. Gas station in Cuiaba, Brazil. REUTERS/Marcelo Teixeira

Brazil’s ability to make and sell hybrid cars that run entirely on ethanol is a huge asset for its auto industry, Vice President Geraldo Alckmin told Reuters’ Gabriel Araujo here. The country, the world’s top producer of sugarcane and No. 2 in ethanol, is notable because autos there can “flex,” shifting from gasoline to ethanol and back.  

Alckmin was speaking to Reuters at the opening of a factory by Chinese carmaker Great Wall Motor Co that will produce hybrid cars, including a flex-fuel pickup. “It brings together ethanol – a clean, renewable energy – and electricity. In a continental-sized country, that is a wonderful alternative to protect the environment,” Alckmin said. 

Sugar-based ethanol does produce fewer emissions than gasoline, even though it burns more quickly and also affects the environment in other ways.

“Demand is yet to normalize with international air route turnover only beginning to pick back up.”

Goldman Sachs analyst Nikhil Bhandari, on the expectations for China’s air travel after COVID restrictions were lifted

Oil output in the U.S. Gulf of Mexico is set to peak in the next couple of years as companies refocus their efforts on the region towards burying greenhouse gases through the process known as carbon capture, as Sabrina Valle reports here.  

U.S. Gulf oil and gas output is expected to jump 17% to a record 2.6 million barrels of oil equivalent per day (boepd) by 2025 – but will start to fall off from there, according to consultants Wood Mackenzie. A number of new platforms have been added of late from Shell, Chevron and others, but what is notable is that this week’s Offshore Technology Conference (OTC) will feature nearly a quarter of its presenters talking about offshore wind, renewables, carbon capture and energy transition.  

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