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By Gavin Maguire, Global Energy Transition Columnist

Oil markets remain skittish over the conflict in the Middle East, but price gains have been limited this week by a rise in U.S. crude inventories and gloomy demand prospects in Europe. 

In the power sector, more pain for Siemens Energy, which is in talks with the German government about state guarantees after major setbacks at its wind division. Shares plunged 40% on Thursday, wiping billions off its market value.

Today’s top headlines:

• World’s ghost fleet in focus over US Russian price cap crackdown
• High hopes for a smaller but more focused hydrogen economy
• Europe’s oil majors are stuck as M&A party-poopers

That’s a miniature windmill in front of the Siemens Energy logo, but Siemens engineers have faced life sized problems with their rotor blades and gears. REUTERS/Dado Ruvic/Illustration 

Shares in Siemens Energy plunged nearly 40% on Thursday, wiping 3 billion euros ($3.16 billion) off its market value, after the company said it was in talks with the German government about state guarantees after major setbacks at its wind division.

Quality problems emerged this year at the power engineering company’s wind unit Siemens Gamesa centered on rotor blades and gears in newer onshore wind turbines, drawing the ire of top shareholder and former parent Siemens AG. Siemens Gamesa has booked billions in losses.

Due to the losses, Siemens Energy fears it will struggle to secure guarantees from banks, and has approached the government and Siemens to obtain a guarantee framework.

In a statement confirming the talks, Siemens Energy also said its financial results in 2023 are expected to be fully in line with previous guidance, and that Siemens Gamesa is working through its quality issues. It did not comment on the financial details of a targeted package.

Beijing’s latest measures target the closure of outdated plants and restrict new refineries to at least 10 Mln tonnes per year capacity. REUTERS/Sean Yong

China has set a minimum size for new oil refineries and will ban small crude processors that claim to be chemicals or bitumen producers under its plan to limit total capacity at 1 billion metric tons by 2025, Siyi Liu and Chen Aizhu report here.

China, the world’s top crude oil importer, first unveiled the cap of 1 billion tons, or 20 million barrels per day (bpd), two years ago in an effort to streamline its sprawling refining industry and curb carbon emissions.

Capacity increased last year to 920 million tonnes per year, or 18.4 million bpd, overtaking the U.S. for the first time and enabling large volumes of diesel and other refined products to be exported.

The policy is likely to see Beijing tighten approval of new refineries and favour expansion and revamping of existing plants operated by major players such as state refiners, as well as those integrated with petrochemicals production, said an expert.

Methane gas leaking from an LNG terminal in Italy is captured by an infrared camera. CATF/James Turitto/Handout via Reuters

The European Commission has proposed imposing methane emissions limits on EU gas imports from 2030, a move that would pressure the bloc’s suppliers like the U.S. to cut leaks of the potent planet-warming gas, Kate Abnett in Brussels reports here.

The proposal comes in response to pressure from the European Parliament and some big EU countries including France in ongoing talks on a law addressing methane emissions inside the bloc.

The new proposal would require foreign gas suppliers to curb methane emissions from leaky oil and gas infrastructure.

“Failure to comply shall be disincentivised, taking security of supply considerations into account,” said the draft proposal, made during EU negotiations on the upcoming methane-cutting law.

Wind turbines and solar panels at a State Grid Corporation of China site in Hebei Province, China. REUTERS/Jason Lee

The International Energy Agency (IEA) said in its World Energy Outlook 2023 report this week that China is reaching an inflection point and its total energy demand is likely to peak around the middle of this decade.

That sounds like good news, but as my colleague Clyde Russell writes, the sheer scale of China’s total energy needs means the country will still consume “vast quantities of fossil fuels for decades to come.”

The IEA report is effectively outlining a bet that China’s economic growth will slow enough to curb energy demand, and that demand will be met by a rising share of cleaner energies, such as wind, solar and nuclear.

But even small variations in what China may or may not achieve have huge ramifications, as the IEA acknowledges.

As if to underscore that risk, China’s latest electricity generation data showed a steep rise in power demand in September which renewable supplies struggled to keep pace with. Reuters energy columnist John Kemp digs into the data here.

“Failure to comply shall be disincentivised, taking security of supply considerations into account.”

EU draft proposal that limits on methane emissions in EU gas imports

Oil and gas major Shell will cut at least 15% of the workforce at its low-carbon solutions division and scale back its hydrogen business as part of CEO Wael Sawan’s drive to boost profits, Ron Bousso reports here.

The staff cuts and organizational changes come after Sawan, who took the helm in January, vowed to revamp Shell’s strategy to focus on higher-margin projects, steady oil output and grow natural gas production.

Shell will cut 200 jobs in 2024 and has placed another 130 positions under review as part of a drive to reduce the headcount in the unit, which numbers around 1,300 employees, the company confirmed in response to a query from Reuters.

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