Connective Wisdom Series

TotalEnergies has agreed to supply airline group Air France-KLM with more than 800,000 mt of sustainable aviation fuel, or SAF, over a 10-year period starting from 2023. The companies signed a memorandum of understanding Dec. 5 for it is one of the larger long term SAF supply deals seen in this nascent market. SAF is a renewable alternative to traditional jet fuel, made by converting sustainable feedstocks into fuel. It is mostly manufactured from bio-waste, namely agricultural waste fats and/or oils, or residue raw materials. More and more airlines are chalking up an increasing number of long-term SAF supply deals as part of their efforts to reduce carbon footprints. The SAF will be produced at TotalEnergies' biorefineries, and will be used by Air France-KLM Group's airlines, mainly for flights departing from France and the Netherlands. TotalEnergies aims to produce 1.5 million mt of SAF by 2030. TotalEnergies claims that the SAF it produces reduces "CO2 emissions by at least 80% on average over the entire lifecycle, compared with their fossil equivalent." "Air France-KLM is fully committed to advancing SAF production in Europe and around the world. This MoU... is another building block in the development of French production that can meet the airlines' needs, marking a milestone in the successful decarbonization of our business," said Air France-KLM CEO Benjamin Smith. In late-October, Air France-KLM also signed a deal with Finnish refiner and clean fuels producer Neste for the delivery of more than 1 million mt of SAF, over a period of eight years starting in 2023. The French energy major has already been supplying some SAF for a number of Air France-KLM Group commercial flights for the past two years. SAF infrastructure France is building more infrastructure to boost imports of sustainable aviation fuel, with notably the construction by Compagnie Industrielle Maritime of four dedicated tanks to blend SAF with jet fuel at the Le Havre terminal. Only three countries in the world are currently applying a mandate for a minimum amount of SAF to be blended with fossil jet fuel: Sweden, Norway and France, with a minimum 1% of SAF in aviation fuel since Jan. 1, 2022. The EU's blending mandate will kick in in 2025, with a minimum 2% SAF, to be increased to 5% in 2030 and 63% in 2050. In the summer of 2021, SAF accounted for only 0.01% of total aviation fuel demand in Europe. Air France-KLM hopes to reduce its CO2 emissions per passenger/km by 30% by 2030 compared to 2019, by using 10% SAF in its fuel needs by 2030. Aircraft can currently only operate using a maximum 50% blend of SAF and conventional jet fuel known as Jet A1. But the amount of SAF that can be blended into Jet A1 depends on the purity of the initial petroleum-based product. The SAF market remains tiny in comparison with the amount of jet fuel traded globally, and accounts for only 0.02% of global jet fuel use, according to estimates by S&P Global Commodity Insights. But the SAF market is poised to grow steadily in the coming decades as the aviation and energy sectors collaborate more to reduce greenhouse gas and carbon emissions. SAF prices are currently around two times higher than fossil fuel-derived jet fuel compared to two years ago when they were four times the price. Platts assessed Northwest Europe SAF price at $2,166.819/mt on Dec. 2, S&P Global data showed. Platts assessed a conventional jet fuel cargo at $983/mt on Dec. 2, on an FOB Amsterdam-Rotterdam-Antwerp basis.

Despite the push for decarbonization and alternative carbon-neutral fuels in the maritime sector, only a third of dry bulk shipping market participants expect new dry bulk orders to be fueled by these substitutes in the next five years, according to a survey by S&P Global Commodity Insights. The survey, conducted in November to gauge the mood of dry bulk market participants in the wake of the International Maritime Organization's greenhouse gas emissions regulations, had 112 respondents consisting of shipowners, ship-operators, charterers, shipbrokers and analysts. A flurry of new emission regulations slated for introduction next year have made shipowners reluctant to commit to newbuilding orders amid a lack of clarity regarding the most dependable and easily available zero-carbon alternative fuel. The IMO has made it mandatory for ships to get energy efficiency certification known as the Energy Efficiency Existing Ship Index or EEXI from Jan. 1, 2023, which is based on a vessel's design parameters. From 2023, the collection of CO2 emission data also begins for reporting a ship's annual operational Carbon Intensity Indicator or CII, based on which ships will get an environmental rating from A to E in 2024. A ship assigned a D rating for three consecutive years or an E rating in a single year has to come up with a corrective action plan to improve its rating. Among the interesting findings from the survey, the majority of participants expected the earnings or returns from different dry bulk segments such as Capesize, Kamsarmax/Panamax and Ultramax/Supramax to remain almost at par with one another over 2023, implying a subdued market next year. The new emission regulations could also spawn a multi-tier market based on ships' environmental ratings and energy efficiency specifications, the respondents said. Fuel oil to remain dry bulk's mainstay The uncertainties over regulations and technology for ships using alternative fuels are expected to temper enthusiasm for ordering new dry bulk ships. Among the few new orders that could be made over the next five years, almost 48% of the respondents expect the ships to be powered by fuel oil, while the rest were split between LNG (27%), ammonia (14%) and methanol (11%) as the fuel of choice. "At the moment, most investors remain quite cautious towards building new ships, in part due to the exceedingly high prices demanded by yards, but also in relation to [lack of clarity over} new fuels," said Marc Pauchet, Director, Dry Bulk Research at Maersk Broker. With no clear indication as to which one will be the best fuel, most owners may rely on the secondhand market to increase their fleet size, he added. Emarat Maritime Managing Director Rishi Nyati said there were no clear alternatives currently apart from LNG, although it is not an answer to the decarbonization goals the maritime industry has set itself. "Methanol, ammonia and hydrogen are boutique," Nyati said, adding the aviation sector was looking at biofuels or synthetic fuels on its path to decarbonization. The cost is high for shipowners to embrace alternative fuels to power their ships, especially for smaller dry bulk segments like Supramaxes and sizes below it, a Sales & Purchase or SnP broker said. "Only 5% of owners, who are well-capitalized, will venture into investing in ships with new technology," the source said, adding that only a few advanced economies could support these investments with tax breaks and other incentives. Economic feasibility aside, multiple market sources said many shipyards continued to promote conventional designs based on fuel oil with some provisions to shift to alternative fuels like ammonia or methanol in the future. "Of course, this changes with a big order from a market leader who is looking at any of the alternative fuels," a shipbroker source said. A lack of bunkering ecosystem for the proposed alternative fuels and the consideration of total carbon emissions on a well-to-wake basis are also deterrents to ditching fuel oil. An improvement in the fuel efficiency of newly designed ships compared with designs from a decade ago is further impeding the switch from fuel oil. "The fuel consumption of ships with new design is very low and even lower [when sailing at] eco-speed," a Handysize shipowner source said, adding: "The buffer their eco-speed gives them will help maintain good emission ratings for the next five years at least." Since smaller ships are not big fuel-guzzlers, they may also not feel pressured to embrace alternative fuels in the immediate future. The incentive to adopt newer fuels is also linked to the trade envisioned for the vessel. "A mining giant like Vale using Very Large Ore Carriers [VLOCs] to do a Brazil to China voyage or other Australian miners that need Western Australia to China runs can incentivize owners to go for ships with new technology," the SnP broker said. Maritime research consultancy Drewry says about 6.5% of the current orderbook has a dual fuel propulsion system, where vessels can consume either fuel oil or LNG, while another 3.6% are ammonia- or LNG-ready. Shipowners are also looking at alternative methods to optimize fuel consumption and reduce carbon emissions. "Shaft generator, air lubrication system, vessel route optimization, weather routing and wind-assisted propulsion are the technologies that will be increasingly used," said Drewry's Director-Deputy Head Maritime Advisors Jayendu Krishna. Fleets to grow via secondhand market As the ordering of new ships slumps, activity in the secondhand market is expected to remain robust in 2023, with only 12.73% of survey respondents expecting a slowdown in ships changing hands. "I do expect the current trend of higher demand for secondhand to continue for the dry bulk sector," Maersk Broker's Pauchet said. Market sources also anticipate that high liquidity as well as high prices could be witnessed in the secondhand market, with instances of used ship values going above newbuilding prices in coming years. Over 600 dry bulk ships had changed hands as of November 2022, compared with about 900 in 2021 and 550 in 2020, according to industry sources. Market watchers expect investors to quickly build spot market exposure through the secondhand market due to a lack of slots at yards for delivery of new ships until 2025. "[By] entering the secondhand market now, there will be a two-year period or so where ships can be traded without having to [worry] much about issues regarding fuels, etc.," the shipbroker source said. The secondhand market is less concerned about the CII and EEXI regulations, the SnP broker said, adding: "The sale and purchase market only reflects how the current spot cum period market is faring." This is the first story in a two-part series based on a survey by S&P Global Commodity Insights.

You're committed to a low-carbon future. Getting there is as critical as it is complicated. For residual emissions that can't be reduced with today's technology, efficiency gains, and fuels options, the world turns to offsetting.Fortunately, the voluntary carbon market infrastructure now includes transparent, liquid spot and futures markets, and robust market data to enable market participants to model, trade, and hedge their emissions exposures with clarity and confidence.  S&P Global Commodity Insights together with Xpansiv and CME Group came together recently with our Navigating the Voluntary Carbon Markets Trade Ecosystem Webinar to provide you with deep insight into how the voluntary carbon market is evolving and will continue to grow in the coming yearsWatch this video series today if you're interested in turning your commitments into carbon action as we provide a clear path to progress toward your net-zero goals.Topics discussed:The role of price transparency in Voluntary Carbon Markets - Paula Vanlaningham, Global Head of Carbon, S&P Global Commodity InsightsScaling Up: Current Market Trends and How New Standardized Contracts are Reshaping Voluntary Carbon Markets - Rene Velasquez, Head of Global Carbon, Xpansiv Market CBLManage climate risk using voluntary carbon offset futures - Peter Keavey, Global Head of Energy and Environmental Products, CME Group

Voluntary carbon markets have seen significant growth in recent years and are expected to surge in the years ahead. But they have traditionally been seen as opaque, complex and niche. That is rapidly changing as a large range of companies start to engage with them.In the latest Platts Future Energy podcast, Jonty Rushforth is joined by Paula Vanlaningham and Jeff Berman to discuss the ‘beauty' of carbon credit markets.

Despite serving multiple purposes in the energy transition, batteries have their own footprint, and downstream players want to have that addressed. With automakers in the driving seat, ESG requirements have been spreading out through battery supply chains, although there remains a lack of standardized guidelines.In this episode of the Platts Future Energy podcast, metals editors Henrique Ribeiro and Leah Chen discuss the main ESG challenges faced by the battery industry and what steps are being taken to mitigate the risks. More listening options:Related price assessments:BATLC04 - Lithium Carbonate CIF North Asia $/mtBATCA04 - Lithium Carbonate DDP China Yuan/mtBATLH04 - Lithium Hydroxide CIF North Asia $/mtBATHY04 - Lithium Hydroxide DDP China Yuan/mtBATSP03 - Lithium Spodumene 6% FOB Australia $/mt WklyBATCO04 - Cobalt Sulfate 20.5% CIF North Asia $/mtBATCS04 - Cobalt Sulfate min 20.5% DDP ChinaBATCH04 - Cobalt Hydroxide CIF China $/lbBATNS04 - Nickel Sulfate DDP China Yuan/mtBATMS00 - Manganese Sulfate DDP China Yuan/mt

In this episode of the Platts Future Energy podcast, Varaleka Pant and Arsalan Syed discuss with Deb Ryan the importance of evaluating the carbon intensity for crude and some of the major global crude grades, and explain the need for standards in this space to ensure consistency in low carbon crude trading.More listening options:Explore and identify low-carbon crude grades with our Periodic Table of Oil™

Texas is one of the largest emitting states in the US and stands to become ground zero of the carbon management industry. But unlike other states, Texas law provides no clarity on ownership rights of pore space -- the empty underground cavities where companies can pump and permanently store captured CO2. While surface rights and mineral rights are crystal clear, Texas hasn't defined who owns those underground pore spaces. Carbon Neutral Coalition Executive Director John Colyandro joined S&P Global reporter Brandon Mulder on the podcast to share his insights on the issues surrounding pore space ownership, how it could be holding back the industry, and ways it could be resolved in the upcoming legislative session. Stick around after the interview for Jeff Mower with the Market Minute, a look at near-term oil market drivers.Related content:Texas seeks regulatory authority from EPA over CO2 injection wells45Q, financial uncertainties hinder capital flow for CCS deployment: panelS&P Global Market Intelligence: Natural gas plants with carbon capture could save industry billions – think tankMore listening options:

Despite serving multiple purposes in the energy transition, batteries have their own footprint, and downstream players want to have that addressed. With automakers in the driving seat, ESG requirements have been spreading out through battery supply chains, although there remains a lack of standardized guidelines.In this episode of the Platts Future Energy podcast, metals editors Henrique Ribeiro and Leah Chen discuss the main ESG challenges faced by the battery industry and what steps are being taken to mitigate the risks. More listening options:Related price assessments:BATLC04 - Lithium Carbonate CIF North Asia $/mtBATCA04 - Lithium Carbonate DDP China Yuan/mtBATLH04 - Lithium Hydroxide CIF North Asia $/mtBATHY04 - Lithium Hydroxide DDP China Yuan/mtBATSP03 - Lithium Spodumene 6% FOB Australia $/mt WklyBATCO04 - Cobalt Sulfate 20.5% CIF North Asia $/mtBATCS04 - Cobalt Sulfate min 20.5% DDP ChinaBATCH04 - Cobalt Hydroxide CIF China $/lbBATNS04 - Nickel Sulfate DDP China Yuan/mtBATMS00 - Manganese Sulfate DDP China Yuan/mt

Navigating a pathway to a low-carbon global economy requires a new plan. The S&P Global Platts Atlas of Energy Transition™, produced in collaboration with S&P Global Market Intelligence, is your map to the sustainable commodity markets of the future. LAUNCH REPORT

What are Platts Hydrogen Assesments? See Factsheet for more Hydrogen Assessment Information >Building on the world's first-to-market hydrogen assessments launched in December 2019, we expanded in April 2020 on our North American and European assessments and launched its first hydrogen assessments in Asia, following by adding Australian pricing in August 2021.Our daily price assessments include 10 US regional set of prices, one Canadian set of prices, prices in the Netherlands, Japan and the UK.The daily price assessments demonstrate the production cost of hydrogen for Steam Methane Reforming (SMR) production methods, including some regions Carbon Capture and Storage (CCS), along with prices for Proton Exchange Membrane (PEM) Electrolysis, Alkaline Electrolysis, Auto Thermal Reforming (ATR), Coal Gasification and Lignite Gasification production pathways, depending on the production hubs.The calculated prices reflect both the commodity production cost and the capital expenditure (CapEx) associated with building a hydrogen facility.The assessments include a commodity price as well as a commodity plus production cost, for the following hydrogen production hubs:Canada— Alberta (SMR w/o CCS, Alkaline Electrolysis, PEM Electrolysis, excluding and including CapEx)United States(SMR w/o CCS, Alkaline Electrolysis, and PEM Electrolysis, all excluding and including CapEx)— Appalachia— Gulf Coast— Midcontinent— Northeast— Northern California— Northwest— Rockies— Southeast— Southern California— Upper MidwestThe Netherlands— SMR w/o CCS— SMR with CCS— PEM Electrolysis— Alkaline ElectrolysisJapan— SMR w/o CCS— PEM Electrolysis— Alkaline ElectrolysisUnited Kingdom(all include and exclude CapEx)— ATR with CCS— PEM Electrolysis— Alkaline ElectrolysisAustralia(all are published in A$/kg, $/MMBtu, $/kg, both including and excluding CapEx)— New South Wales - Coal Gasification w/CCS, PEM Electrolysis, Alkaline Electrolysis— Queensland - Coal Gasification w/CCS, PEM Electrolysis, Alkaline Electrolysis— Victoria - Lignite Gasification w/ CCS, PEM Electrolysis, Alkaline Electrolysis— Western Australia - SMR w/ CCS, PEM Electrolysis, Alkaline Electrolysis— South Australia - PEM Electrolysis, Alkaline Electrolysis— Tasmania - PEM Electrolysis, Alkaline ElectrolysisMiddle East— Saudi Arabia - PEM Electrolysis, Alkaline Electrolysis, SMR w/ CCS— UAE - PEM Electrolysis, Alkaline Electrolysis, SMR w/ CCS— Oman - PEM Electrolysis, Alkaline Electrolysis, SMR w/ CCS— Qatar - PEM Electrolysis, Alkaline Electrolysis, SMR w/ CCS

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