Daily on Energy: A big oil price cap move, ExxonMobil to mine uranium, and OPEC sees strong market

Treasury’s Office of Foreign Assets Control, or OFAC, sent the notices to shippers in 30 countries, Reuters reported today— reflecting the magnitude of the problem, threatening the West’s plan to curb Russia’s oil revenue and cut into the Kremlin’s war chest.

According to the price cap scheme, any vessels that use Western service providers to ship Russian crude oil are required to sell it at or below the $60 capped price. (Refined petroleum products, such as gasoline and diesel, are capped at a slightly higher rate of $100 per barrel.)

The move is a sign Treasury is following through on its pledge to crack down on shippers that violate the price cap, following the news that Russia has been able to command prices well above it in recent months. Last month, it imposed the first enforcement measures for price cap violaters—slapping sanctions on two tanker owners and warning that other, more punishing actions could follow. Treasury Department officials did not immediately respond to the Examiner’s request for comment.

Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writers Breanne Deppisch (@breanne_dep) and Nancy Vu (@NancyVu99). Email [email protected] or [email protected] for tips, suggestions, calendar items, and anything else. If a friend sent this to you and you’d like to sign up, click here. If signing up doesn’t work, shoot us an email, and we’ll add you to our list.

ICYMI – UKRAINIAN OFFICER REPORTEDLY BEHIND NORD STREAM EXPLOSIONS: A senior Ukrainian military officer played a key role in coordinating the September 2022 attacks on the Nord Stream 1 and 2 gas pipelines in the Baltic Sea, the Washington Post reported over the weekend.

The attack appears to have been coordinated by one Roman Chervinsky, a high-ranking Ukrainian colonel in the country’s special forces. It was Chervinsky who served as the point person for logistics and support for the explosions on the twin gas pipelines, and whose team rented a boat using fake identities and used deep-sea diving equipment to place hundreds of pounds of explosives on the sea floor along the Nord Stream 1 and 2 gas pipelines.

The Sept. 22 attacks resulted in major damage to both lines, including Nord Stream 1, the primary gas artery linking Russia to the EU.

The Post reports that Chervinsky did not plan the operation or act alone. Rather, he took and passed along orders from Gen. Valerii Zaluzhnyi, Ukraine’s highest-ranking military officer, in a bid to give Ukrainian President Volodymyr Zelensky plausible deniability in any attack.

Remember: The U.S. was reportedly given a heads up by European intelligence last June that the military had been planning an attack on Nord Stream 1, though it was later informed that the operation was “put on hold” for unknown reasons. That report said the divers who had planned to carry out the attack were all members of Ukraine’s special military forces team and reported directly to Zaluzhnyi.

Response: Chervinsky said through an attorney that “[a]ll speculations about my involvement in the attack on Nord Stream are being spread by Russian propaganda without any basis.”

To date, no Western leaders have assigned any blame in the attacks, though they have all described the blasts as an act of sabotage.

U.S. AND E.U. SUPPORT PUSH TO TRIPLE RENEWABLES BY 2030: The U.S. and European Union threw their weight behind the United Nations-led push to triple renewables capacity by 2030.

In a draft letter sent to governments this month, a coalition of more than 60 countries said that tripling the world’s renewable capacity by the end of the decade is the most important thing they can do if they hope to deliver on their Paris commitments. “We have the solutions at hand, and we have already made huge strides in expanding the global renewable energy capacity and becoming more energy efficient,” they said.

Next steps: Western leaders, as well as the UAE, are hoping to include the goal in the final outcome of the COP28 summit in Dubai. Bloomberg reports that they are looking to a Dec. 2 meeting to gin up support.

COP28 president Sultan Al Jaber told attendees to “come to COP with tangible commitments” to realizing the goal of tripling renewables.

The effort has earned broad support from wealthy governments, as well as the IEA and IRENA, who have described the tripling goal as “essential” to delivering on the 2015 Paris targets. “The world is teetering at the peak of power sector emissions, and we now need to unleash the momentum for a rapid decline in fossil fuels by securing a global agreement to triple renewables capacity this decade,” Malgorzata Wiatros-Motyka, a senior official at the climate think tank Ember, said earlier this month.

But there are plenty of hurdles: Among them, securing the agreement of China and India, two major polluters that have not yet endorsed the plan. Their failure to endorse the effort could prove devastating, since UN decisions require the approval of at least 190 countries.

“Unabated” definition: Another sticking point is a provision that says renewables growth must be accompanied by “the phase down of unabated coal power,” something that could alienate Saudi Arabia and Russia, among others.

EXXONMOBIL HOPPING INTO LITHIUM MARKET: ExxonMobil announced it would begin producing lithium in 2027 – marking a major pivot by the oil giant, as it bets it can use its expertise in drilling and processing to become a leading player in the battery metal market, the Financial Times reports. 

The company said today it had begun work to extract lithium from underground brines in Arkansas, where it has acquired the rights to 120,000 acres of land in the Smackover formation.

The green transition is driving demand for the metal. The International Energy Agency has predicted consumption could increase by more than 40 times between 2020 and 2040, with the use of lithium-ion batteries needed for the growing presence of electric vehicles and energy storage.

Exxon – which has faced criticism from environmentalists that it has not invested enough in lowering carbon emissions while funding future oil and gas production – did not say how much it would invest in the new business, which will be branded Mobil Lithium.

Exxon’s shift into lithium is the first by an oil supermajor. Koch Industries, Occidental Petroleum and Norway’s Equinor have been exploring a move into the battery metal. Read more here. 

OPEC SAYS OIL MARKET IS STRONG DESPITE NEGATIVE SENTIMENT: OPEC is contending oil market fundamentals are remaining strong, and is blaming speculators for a drop in oil prices as it slightly raises its 2023 forecast for global oil demand growth and sticks to its relatively high 2024 prediction.

Oil has weakened to around $82 a barrel for Brent crude, dropping from a 2023 high in September of near $98. Concerns about economic growth and demand have pressured prices, despite support from supply cuts by OPEC and its allies, and conflict in the Middle East.

But in a monthly report from the Petroleum Exporting Countries, OPEC said the market was healthy despite “exaggerated negative statements,” and cited strong Chinese imports, minor risks to economic growth, and a robust oil market.

“Recent data confirms robust major global growth trends and healthy oil market fundamentals,” OPEC said in its report. “Oil prices have trended lower in recent weeks, mainly driven by financial market speculators.”

In the report, OPEC has also increased its forecast for world oil demand growth in 2023 to 2.46 million barrels a day, up 20,000 bpd from its previous forecast.

This is the last report before OPEC and its allies, known as OPEC+, meet on Nov. 26 to set policy. The group has been cutting production since late 2022 to support the market, and its latest agreement calls for output curbs throughout 2024. Read more about that here. 

EDF AND FRANCE STRIKE A DEAL ON NUCLEAR PRICES: State-controlled energy company EDF and the French government have reached a tentative agreement on future nuclear power prices, Reuters reports, closing out months of tense negotiations.

What they agreed on: The two sides agreed on 70 euros per megawatt hour as a reference level for power prices, the source told Reuters, cautioning that details of the deal were still being finalized.

Negotiators aimed to find a compromise between EDF, an entity eager to maximize revenues, and the government, which is aiming to keep electricity bills for French households and businesses as low as possible.

The agreement would outline mechanisms aimed at protecting consumers if power markets rise above 110 euros/mwh, along with clauses that would provide a price guarantee for EDF. For example, the agreement allows the government to tax EDF’s extra revenues at 90% if prices surpass 110 Euros/mwh, in order to offset the impact on consumers. The agreement would also enable a review of conditions in case of market fluctuations, in order to safeguard the 70 euro level for EDF, the source said.

French electricity prices are still above 100 euros/mwh, after climbing to 1,200 euros during last year’s energy crisis.

A final agreement should be announced on Tuesday, following a meeting between Finance Minister Bruno Le Maire, Energy Transition Minister Agnes Pannier Runacher and EDF Chief Luc Remont. The meeting will work out the final details of the agreement. Read more on that here. 

ORAL ARGUMENTS BEGIN ON LEASE SALE 261: The 5th Circuit Court of Appeals will begin oral arguments today on an oil lease sale in the Gulf of Mexico, which was delayed after litigation had been initiated over the details of the sale.

The Interior Department’s Bureau of Ocean Energy Management had intended to hold the sale on Sept. 27, but had changed the terms of Lease Sale 261 in September after the Biden administration struck a deal with environmentalists in a court fight over protecting the endangered Rice’s whale. The changes would revoke 6 million acres from the sale, and add shipping restrictions for new leases.

A federal district court issued a preliminary injunction that would have prevented the late changes. The Biden administration appealed, and the Fifth Circuit delayed the sale to Nov. 8. The appellate court then later issued an order stating the preliminary injunction “is stayed pending the merits panel’s decision on appeal.”

Oral arguments are set for 1:30 EST/12:30 CST. Listen to the oral arguments here. 

JOHNSON’S CR PLAN: Speaker Mike Johnson unveiled his plan to avoid a government shutdown on Saturday, revealing that he has chosen to try and pass a “two-part” continuing resolution where some appropriations bills will be extended to mid-January and the rest into February, our Reese Gorman reports. 

The new approach, which Johnson unveiled on a GOP member call on Saturday, would extend the Agriculture, Military Construction and Veterans Affairs, Transportation, Housing and Urban Development, and the Energy and Water appropriations bills until Jan. 19 and the remaining bills until Feb. 2.

While the bill does not include any aid to Ukraine or Israel, and does not provide an extension to FISA 702 authorities, it does provide an extension to the expired Farm Bill provisions through September 2024.

The idea behind this two-step approach is that it would create a sense of urgency to pass individual appropriations bills during the time frame and avoid an omnibus or another continuing resolution. So, if it were to pass, Congress would focus on passing the first four appropriations bills before Jan. 19, and then after that, it would focus on getting the remaining bills passed before the February deadline. Read more on that here. 

USAID AND GREECE AGREEMENT ON ENERGY SECURITY: The USAID and Greece signed a memorandum of understanding today with the aim of improving energy security cooperation in the western Balkans – a move that follows Europe’s energy crisis catalyzed by the Russian invasion of Ukraine.

In a statement, USAID stated that this partnership will advance collaboration between “energy entities and authorities in Greece, Albania, North Macedonia, and Kosovo to integrate their electricity markets to create a more connected and secure region.”

The partnership is also a part of a larger USAID initiative, the U.S. Europe Energy Bridge, which was created to help build partnerships between the two regions to further boost energy security for Europe while accelerating the transition towards clean energy.

Following the Russian invasion into Ukraine, energy prices skyrocketed for countries in the Western Balkans after natural gas supply was disrupted.

The Rundown

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