The recovery of China's economy is the only major bright spot visible for 2023, according to Martin Brudermüller, BASF's chairman and CEO. "I see only one positive spark as we look forward this year, and that is China coming back," Brudermüller said March 22, speaking at the World Petrochemical Conference by S&P Global in Houston. "If you look into their second quarter, the mood is getting better already," he said. "It comes from the fact that after the Chinese New Year, the second wave of COVID did not come. So I hope that we have a situation a little like in 2008, where actually China was bailing out the world." Brudermüller, speaking at a panel discussion with Dan Yergin, vice chairman of S&P Global, and Jim Fitterling, CEO of Dow, described the chemical industry, along with the global economy, as "now slipping into a demand crisis. Because the backlog of COVID has gone, you see now that people, with inflation, are spending less, buying less goods, and less chemicals. That's how we started this year. Overall we have a pretty difficult environment." The Russia-Ukraine war can be viewed as a "local conflict" in the middle of Europe -- but with "massive repercussions all over the world, questioning energy supply, supply chains, totally reshuffling energy prices and a lot of other questions," Brudermüller said. The geopolitical environment between Western governments and China also concerns him, he acknowledged. Although there is "a lot of stuff we don't like that's happening in China, on the other hand, you only can solve global problems together with China," he said. "If you think about decarbonization, how should we achieve it without China? Yes, we can step up competitiveness, and yes, we can also criticize certain things, but the third thing is cooperation." In 2030, China is forecast to represent about 50% of the global chemicals market, Brudermüller said. "If you are conservative and you plan for something like 4% GDP growth for China -- which is on the low side -- you conclude that 75% of the additional chemical demand generated until 2030 is from China," he said. "So for that reason, can we abandon 50% of the market? This is the fundamental question... There is a risk to being in China, but there's also a huge risk not to be in China." Relearning supply chains Fitterling highlighted that about 30% of petrochemical exports currently flow from the US to China. "The increment of growth is higher in China," he said. Fitterling also flagged the long-term lack of investment up until now in US manufacturing. "We want to have a growing manufacturing economy here in the US ... but until the shale gas revolution, we weren't interested too much in having a growing manufacturing economy here," he said. "Now you've got to relearn what the supply chains are for that manufacturing economy," Fitterling said. "[The US] has an aspirational policy, which says we want to reshore manufacturing, but now we have some realities we've got to deal with, which is we don't have the natural resources to support that. It's not that the aspirational policy is wrong, but if you get yourself too far ahead on the aspirational side, you can't afford it." If foreign policy starts to cut off relationships, "you're just hurting yourself," he added. "You're hurting all of the industries that have now become dependent on China. So it's a tough balancing act to manage right now." IRA reaction Brudermüller also said the US Inflation Reduction Act reflects "fundamentally different philosophy behind policies" between Europe and the US. "Europe generates a regulatory framework to enforce transformation," he said. "The Americans generate a business case to facilitate transformation. The major difference is that the Europeans take a lot of taxpayers' money to fund your capex, while the IRA goes on [operating expenses] ... this is certainly the better model to accelerate." Brudermüller described the IRA as a "wake-up call. Everyone got the message quite quickly," he said. The IRA scheme is easy to understand and will attract investments, including investments away from Europe. "If you don't have predictability in Europe, about chemical law, energy cost, and permitting processes, which is making you hesitant to invest," Brudermüller said. "And the market is slow to grow. That's why some of the projects will move to the US, and that is certainly an alarm bell for Brussels."

Finalizing the world's first global stocktake of climate actions, committing to the phase-out of unabated fossils and setting up more ambitious Nationally Determined Contributions (NDCs) are set to dominate discussions at this year's COP28 UN Climate Change Conference, key climate officials said March 21. This comes as climate ministers from almost 50 countries met in Copenhagen March 20-21 to kickstart the negotiations for COP28, which will be taking place in Dubai from Nov. 30 to Dec. 12. In a statement, Sultan al-Jaber, the president of COP28, reiterated that the conclusion of the world's first global stocktake will be one of the key priorities at this year's summit, rekindling global efforts in the fight against climate change. The stocktake, itemizing what countries and stakeholders are doing or failing to do to meet their Paris Agreement commitments, is considered to be the centerpiece in global climate efforts. The United Nations Framework Convention on Climate Change has described the stocktake as "looking at everything related to where the world stands on climate action and support, identifying the gaps, and working together to agree on solutions pathways (to 2030 and beyond)." At a press conference, Simon Steele, executive secretary of the UNFCCC, said the stocktake would help chart a way forward "for the course correction that is needed." COP27 , held in Sharm el-Sheikh in November, achieved a landmark agreement on "loss and damage" funding, paving the way for climate change reparations. However, progress on cutting emissions was disappointing, with the conference barely managing to keep language seeking to limit temperature rises to 1.5 C from the previous agreement at COP26 in Glasgow in 2021 . Analysts at S&P Global Commodity Insights said discussion and presentation of the findings from the technical assessment of the stocktake will help in identifying key opportunities for increasing climate action and support. "The global stocktake is a key part of the Paris Agreement; countries publicly assess how far they have come since 2015 -- a thorough reality check on actual progress. Importantly, they also need to think about how to increase ambition going forward... a key part of the Paris Agreement is the 'ratcheting up' of ambition over time," said Yuejia Peng, Associate Director, Climate and Sustainability Group at S&P Global. Fossil fuels Denmark's climate minister Dan Jorgensen confirmed the contentious issue of phasing out unabated fossil fuels would be discussed in Dubai, but said it was "difficult to say" whether an agreement could be reached. "We need to deliver on our promise to get on track for 1.5 degrees [Celsius]. To this end, more ambitious NDCs are needed, and we simply need to agree on a commitment to phase out unabated fossil fuels," Jorgensen said at a press conference. "This should be replaced among other things by approximately 100 GW of renewable energy capacity every year." Many viewed the lack of progress on explicitly mentioning reducing fossil fuel use as a failure of Egypt's presidency of the UN climate conference. Countries were also reluctant to strengthen NDCs -- pledges on how nations are to reach their emissions reduction targets -- because of a lack of access to finance. The COP27 conference , however, agreed to set up a fund for nations hardest hit by climate change, with a new transitional committee to make recommendations on "operationalization" of the fund at COP28 in November 2023. "It is clear that we need to enhance NDCs, encourage all countries to align around net-zero by 2050 and define measurable interim plans by 2030," Jorgensen added. Climate finance Issues around adaption and mitigation financing and funding for loss and damage will also be a key part of the negotiations, the statement added. This meeting concluded a day after the United Nations Intergovernmental Panel on Climate Change urged governments and the financial sector to "play their part" and hasten global climate action efforts. The latest IPCC report said investment in climate mitigation and adaption would have to rise by around three to six times from current levels by 2030. "Increased finance, technology and international cooperation are critical enablers for accelerated climate action," the IPCC said in a statement. "If climate goals are to be achieved, both adaptation and mitigation financing would need to increase many-fold." The IPCC's 2018 report had indicated that CO2 emissions needed to be cut by almost 50% by 2030 compared with 2010 levels to avoid the worst impacts of climate change, including more frequent and severe droughts, heat waves and rainfall. The IPCC and other groups have described the 2020s as a decisive decade for climate, with the global atmospheric concentration of CO2 continuing to rise annually despite a widening pool of countries and companies setting targets to reach net-zero emissions by 2050.

The shipping industry will need to significantly increase its uptake of bio- and hydrogen-based marine fuels by 2040 to help the world achieve net-zero emissions by midcentury, Shell said in its energy security scenarios report. In the report published March 21, the UK major explored how the energy mix will evolve in two scenarios -- Archipelagos, where net-zero will be "in sight" but not achieved by 2100, and Sky 2050, where net-zero will be reached by midcentury, a condition scientists said would be required to avoid climate disasters. While the global bunker mix is currently dominated by oil-based fuels, Shell said the 2030s will see the arrival of containerships fueled by hydrogen or hydrogen-based ammonia in Sky 2050, while such a development will be a decade later in Archipelagos. In the Sky 2050 scenario, the shipping industry will have a 10% biofuel share in fuel mix and 10,000 ships powered by hydrogen fuel cells, ammonia, or other types of hydrogen-based fuels by 2040. Cargo-carrying ships will consume 11.56 Ej of energy in 2040, including 1.49 Ej of hydrogen, 0.57 Ej of gaseous hydrocarbon fuels and 9.42 Ej liquid hydrocarbon fuels, according to Shell. In Sky 2050, hydrogen's share in the marine energy mix will rise to 44.4% in 2050, from 12.9% in 2040, before a further jump to 98.5% in 2100. Separately, Shell said cargo-carrying ships will consume 12.61 Ej of energy in Archipelagos, where the pace of decarbonization is slower amid energy security concerns. This will include 0.05 Ej of hydrogen, 0.43 Ej gaseous hydrocarbon fuels, and 12.13 Ej liquid hydrocarbon fuels. Hydrogen's share in the marine energy mix will rise to 5% in 2050, from 0.4% in 2040, before a further hike to 50.3% in this scenario. "Hydrogen can play a crucial role in helping the world reach net-zero emissions. It is particularly suitable for use in hard-to-electrify sectors like heavy-duty transport, heavy industry, shipping and aviation because of its high energy density," Shell said in its energy transition progress report March 16. The major has stressed its scenarios do not represent predictions. S&P Global Commodity Insights expects ammonia and hydrogen to account for 20.7% of global bunker consumption of 300 million mt in 2050 if the public and private sectors accelerate decarbonization initiatives. Current projects For the near term, Shell said it has started supplying biofuels and LNG to the shipping industry to promote maritime decarbonization while studying renewable natural gas as marine fuel. Industry estimates suggest LNG can reduce emissions by 20%-30% versus oil-based fuels. Biofuels could be carbon neutral and their decarbonization effects depend on blending proportions. Hydrogen and ammonia could be zero-emission fuels when produced from renewable energy. In the energy transition report, Shell said that it completed more than 250 ship-to-ship LNG bunkering operations in 2022, without disclosing sales volume. Some LNG producers, including Shell and TotalEnergies, have been investing in bunkering infrastructure in recent years, eyeing the maritime sector as an emerging market for their products and in bids to cut Scope 3 emissions. In its latest annual sustainability report, TotalEnergies said it sold more than 1 million cu m of the fuel in 110 bunkering operations last year. The French major has been operating an LNG bunker vessel in Rotterdam since November 2020 and a second in Marseille since January 2022. A third one, the 12,000-cu m Brassavola, is due to serve in Singapore from this quarter. TotalEnergies aims to supply 10% of the global LNG bunker market by 2030. S&P Global expects LNG to make up 7.8% of the world's bunker consumption of 328 million mt in 2030 in its reference case. Industry participants said LNG sales as marine fuel were hurt by high prices in 2022, as evidenced by lower volumes reported by Rotterdam and Singapore, but demand could recover as LNG prices fell after reaching a peak. LNG bunker prices hit a record high of $3,476.614/mt on an oil-equivalent basis in Rotterdam Aug. 26 before easing to $592.448/mt March 21, S&P Global data showed. The price of 0.5%S marine fuel oil, the most common type of bunker fuel currently, was $525/mt.

Carbon-negative biohydrogen still in need of policy support Build-in-Europe clean tech act proposed in response to IRA China relaxes compliance carbon market rules for coal plants Clean hydrogen is gaining momentum in the US market thanks to generous policy support from the Inflation Reduction Act and infrastructure bill. But while green and blue varieties of hydrogen are rewarded by tax credits according to their lifecycle carbon intensity levels, there is no mechanism to reward hydrogen produced with negative carbon intensity levels. This hydrogen is known as biohydrogen, an emerging variety in which organic waste material is turned into “greener-than-green” hydrogen. But without extra incentives to support this carbon-negative pathway, it will be hard for such projects find commercial viability, researchers said last week. Meanwhile, several power turbine manufacturers said will begin commercializing their turbines capable of combusting a pure hydrogen stream in 2025 as US power companies look to future-proof their plants. The European Commission has set an ambitious target to meet at least 40% of EU clean tech needs from domestic manufacturing by 2030, according to a draft Net-Zero Industry Act laid out March 16. The target, a direct response to the US’ Inflation Reduction Act, translates into annual production of at least 36 GW for wind turbines, 30 GW for solar panels and 31 GW of heat pumps. The EC is also aiming to have to almost 90% of its annual battery demand manufactured domestically. Meanwhile EU carbon prices fell 15% mid-March as weak demand and tepid auction results coupled with bank sector concerns. “The combination of weaker investor interest and fuel switching is expected to add bearish fundamental pressure on EUA prices into next month,” said S&P Global carbon analyst Michael Evans. In Asia Pacific, China has relaxed rules under its national carbon market to reduce the financial burden on coal-fired power generators after a year of record fuel prices. The key measures include setting a limit on penalties under the mechanism, and allowing power plants to borrow emissions allowances from future years to offset current obligations. Meanwhile India is on course to announce details for its national carbon market scheme in June, consulting on market elements with a view to trade in 2025. In Australia and New Zealand, institutional investors are starting to participate in local carbon markets, attracted by rising carbon prices and improved policy certainty. Finally Japan and Germany have agreed to cooperate on clean energy, hydrogen and battery supply, while Singapore has approved 1 GW of renewable electricity imports from Cambodia. -- Henry Edwardes-Evans North America SPGlobal.com US industry groups urge EPA to hand over CO2 well permitting authority to states Carbon 'negativeness' of biohydrogen not rewarded by US policy framework: researchers Premium content (available exclusively on Platts Dimensions Pro ) Panelists pessimistic on quick transmission fix from US Congress, eye alternatives Power drives cuts in energy sector CO2, but still falls short of US goals: EIA Turbines capable of burning 100% hydrogen to hit US market beginning in 2025 EMEA SPGlobal.com European biodiesel prices plummet amid weakening market factors Barriers remain to commercial CCS rollout in Europe, despite high carbon prices INTERVIEW: HFI close to $2/kg H2 production using proprietary wind technology Premium content (available exclusively on Platts Dimensions Pro ) EU ETS price drops below Eur90/mt as bearish factors close in EU unveils multi-gigawatt targets for 'made-in-Europe' clean technology UK's Protium to supply Budweiser's Samlesbury site with green hydrogen Asia Pacific SPGlobal.com China relaxes compliance carbon market rules for coal-fired power plants India may announce details of national carbon market scheme in June: official FEATURE: Rising prices attract institutional investors to carbon markets in New Zealand, Australia Premium content (available exclusively on Platts Dimensions Pro ) Japan, Germany agree to cooperate for clean energy, hydrogen, battery supply Singapore approves 1 GW of renewable electricity imports from Cambodia Australia sees nearly 20% rise in power prices, to offer bill relief in May budget Quotes of the week "If projects like ours help save 50 basis points on a global financing, there is a huge benefit [to the buyer of green hydrogen]. Levelized cost of hydrogen is important, but it's a relatively small piece of the broader package" -- Chris Jackson, Protium CEO "Since those incurring the biggest deficits are also the ones that will be buying up the CEAs [China Emission Allowances], capping their obligations will inevitably cast downside pressure on market liquidity and prices in the current compliance cycle" -- Feng Xiaonan, senior research analyst S&P Global Commodity Insights Charts of the week European biodiesel prices have been declining this year on the back of weaker diesel demand China’s compliance emission allowance price remained steady at around $8.1/mtCO2e in the week to March 17, implying that the newly launched policy resulted in limited buyers’ interests Price of the week Eur87.29/mtCO2 Platts’ assessed price of EU allowances (nearest December) is well down on February 27’s all-time high of Eur100.23/mtCO2

Domestic coil prices rapidly rose in March 2022 due to panic buying triggered by Russia's attack on Ukraine on February 24. The market originally anticipated that the geopolitical tension would cut availability of steel and might result in shortage. Against this expectation, steel demand suffered while supply remained on normal levels, despite a disruption of Black Sea supply and effects from sanctions. As a result, domestic coil prices in Europe had started to decline, with the negative trend lingering until December. Coil producers across Europe reduced production rates in the second half of 2022, with some idling blast furnaces in an attempt to balance lower demand and supply and, consequently, prevent the decline of flat steel prices. As operations at blast furnaces declined, iron ore markets suffered, especially the demand for pellets, while sinter and lump were incentivized in some cases due to lower comparative costs. By December, European distributors have depleted the massive stocks accumulated in H1 2022. Restocking activities, combined with the effects from production cuts, rising import prices and high energy costs drove prices up. Some of these idled blast furnaces have come back to life since the start of 2023, with European distributors restocking since December, and as European steelmakers respond to some improvement in demand and prices. After finishing restocking in January, buyers have expressed concerns that higher prices might not be sustainable. This was due to stable end-user demand while availability of hot-rolled coil increased as a number of blast furnaces resumed operation. Steelmakers, however, insist that they have good order books and demand remains solid to allow further price rise. In addition, import material availability had been limited, with HRC from Asia having long lead times and relatively high prices and exports from Turkey disrupted by the February earthquakes. S&P Global Commodity Insights takes a look at the furnaces returned into operation in 2023, upcoming stoppages and anticipated changes in the European steel coil market. Northwest Europe Northwest Europe Germany ArcelorMittal Bremen did not idle one of its two blast furnaces despite the original plans announced in September 2022. The steelmaker, however, had kept production at reduced rates and increased it when demand started to recover. "Production levels are back to normal," an ArcelorMittal Germany spokesperson said. Meanwhile, a direct-reduced iron plant at ArcelorMittal Hamburg, Germany, remained idled "due to overall economic situation", the spokesperson said. ArcelorMittal plans to resume production at the facility this year. Another German flat steel producer, Szlagitter, postponed the restart of its blast furnace C in summer last year. The equipment remained idled in February. Finland SSAB resumed operations of the blast furnace at its Raahe steel plant in January after maintenance. Netherlands Tata Steel in the Netherlands did not idle equipment last year, but the company reduced production rates without stoppage. One of the plant's BFs will be closed for scheduled maintenance in Q2. Although the steelmaker accumulated some slab stocks ahead of the stoppage, production is likely to be reduced, according to market sources. France ArcelorMittal Dunkirk is currently operating two furnaces, while BF No. 2 "was permanently stopped in December as it is end-of-life," ArcelorMittal's spokesperson said. BF No. 3 has been idle since mid-September 2022. ArcelorMittal Fos-sur-Mer, on the other hand, is preparing to restart a 2 million mt/year BF in Aprilthat, which was closed in November 2022. Market sources have expressed concerns that increased output from Fos-sur-Mer might have a negative impact on the South European market adding volumes and, therefore, potentially affecting the price recovery. South Europe Italy Domestic availability of the coil in Italy remained reduced as an integrated producer Acciaierie d'Italia (ADI) had limited production, electric-arc furnace operating mill Arvedi has been focusing on downstream coil trading, and re-rollers have limited volumes to offer. In January, ADI unveiled plans for 2023: to increase crude steel production of 4 million mt in 2023 from below 3 million mt in 2022, according to market participants' estimates; to restart blast furnace No. 2; and to start the relining of blast furnace No. 5 in H2. The plans, however, have yet to result in higher production, according to market sources. Arvedi had been operating on a limited number of days each month starting from Q3 2022, but the production recovered in 2023. Use of EAF allowed the steelmaker to better adjust to shifts in market demand and they increased production rates as soon as market started to recover. Spain ArcelorMittal Gijon restarted BF A at the start of 2023 after it was idled on Sept. 29, 2022. Central Europe Coil supply in Central Europe has been particularly impacted by both planned and unexpected stoppages at local mills and missing import volumes from Russian and Ukraine. Slovakia US Steel Kosice restarted two BFs in January and it has been operating all three of its furnaces since. The steelmaker has higher production costs compared to its peers and its production is unlikely to trigger price drop, according to the estimations of market sources. Romania Liberty Galati will resume pig iron and steel making operations in full when it restarts its only blast furnace in mid-March. The equipment was idled in June 2022. Czech Republic BF No. 2 located at Liberty Ostrava remains idle. The company declined to disclose any information about its possible restart. Market sources, however, said that the blast furnace is expected to resume operation after the company's production resumes in Romania. Poland In January, ArcelorMittal Dabrowa Gornicza resumed production at blast furnace No. 3 that has not been operating since October 2022. The steelmaker currently is preparing to shut its BF No. 2 this quarter for an extended overhaul. Hungary Dunaferr, that went under administration in December, resumed production at blast furnace No. 2 in mid-February. UK's Liberty Steel reportedly secured a deal with the Hungarian state, allowing it to draw a credit line in state-owned EXIM Hungary to manage Dunaferr. Liberty began to pay for raw materials and transportation fees and has already supplied 40,000 mt of coal to the mill. Serbia HBIS Serbia continued to operate one furnace after its blast furnace No. 1, which has a capacity of 900,000 mt/year, was shut in late November. The steelmaker, however, expects to see a production rise soon.

Clean hydrogen was CERAWeek’s hottest commodity this year Shell admits climate, energy transition threat to business Japan commits $1.58 billion to Australia’s HESC clean hydrogen project Stakeholders from across the global energy industry gathered in Houston last week for the CERAWeek energy conference by S&P Global to align with one another as the industry embarks on a new chapter of the energy transition. Emerging transitional commodities and technologies, such as hydrogen and carbon capture, took center stage as energy companies continue calculating how they can best take advantage of the clean energy incentives within the Inflation Reduction Act. Green hydrogen attracted a considerable amount of attention throughout the week as all manner of companies rush to fit the clean fuel into decarbonization strategies. Many attendees, however, remain concerned that green hydrogen may still be overhyped. In Europe, big oil’s chickens are coming home to roost. Shell admitted in its annual report last week that climate change, as well as an accelerating energy transition, could have an adverse impact on its profits, assets and operations, even warning of the risk of stranded assets, should carbon prices continue to rise. The company’s carbon costs are set to treble in the coming decade, it said. The news followed a sober assessment by Egypt’s chief climate negotiator of the failure of COP27 to deliver on emissions mitigation. Egypt’s negotiator told a press briefing the lack of progress on financing for poorer countries blocked the way for agreement in Sharm el-Sheikh. Elsewhere, Mauritania is emerging as a green hydrogen center, with yet another megaproject announcement. Egypt’s Infinity and UAE’s Masdar have partnered with German project developer Conjuncta on a 10-GW plant, with a first 400-MW phase due to start in 2028. In Asia Pacific, Japan has committed $1.58 billion to the Hydrogen Energy Supply Chain project in Australia’s southeastern state of Victoria, progressing the project to commercial demonstration phase. Last year the project delivered the world’s first liquified hydrogen cargo to Japan from Australia. Meanwhile China's “Two Sessions” annual plenary set the stage for the country's post-pandemic economic recovery and long-term roadmap. The consistent push toward decarbonization is likely to limit growth in oil and natural gas demand this year. Finally, Indonesia’s state-owned oil and gas company PT Pertamina is working with Chevron to study carbon capture, use and storage in East Kalimantan while South Korea is to commission 36,900 mt/year of hydrogen liquefaction capacity across three plants by year-end – Rocco Canonica Americas SPGlobal.com CERAWEEK: Chevron expands Gulf Coast CCS project's storage capacity to 1 bil mt of CO2 CERAWEEK: Federal laws boost energy transition opportunities, but challenges remain Premium content (available exclusively on Platts Dimensions Pro ) CERAWEEK: Proponents defend nature-based carbon market as greenwashing charges intensify CERAWEEK: Queue backlog could prevent US from reaching IRA potential, net-zero CERAWEEK: Mitsubishi Power shifts focal point of hydrogen business from Japan to US EMEA SPGlobal.com Shell warns of ballooning carbon costs, climate risks to its oil, gas business Unlocking finance key to progress on climate change mitigation: COP27 Presidency VoltH2 targets mid-sized green hydrogen projects to optimize offshore wind Premium content (available exclusively on Platts Dimensions Pro ) Conjuncta, Infinity Power to develop 10-GW green hydrogen project in Mauritania UK grid constraints put 2035 decarbonized power system goal at risk: CCC APAC SPGlobal.com Japan commits $1.58 billion to HESC clean hydrogen project in Australia What China's 'Two Sessions' mean for 2023 commodity demand Carbon in early stages of development as asset class: Standard Chartered Premium content (available exclusively on Platts Dimensions Pro ) Indonesia’s Pertamina, Chevron to conduct feasibility study on CCUS in East Kalimantan South Korea to start up 36,900 mt/year hydrogen liquefaction capacity across 3 plants by year end Australian HIR-Generic carbon credit spread widens on focus on nature-based units Charts of the week: https://www.spglobal.com/platts/PlattsContent/_assets/_images/latest-news/20230307-infographic-china-two-sessions-2023-commodity-demand-gas-oil-steel.jpg Quote of the week: “My leaders in Japan have recognized that the energy transition is going to happen in the US first. As such, our center of excellence for the energy transition is going to be in the US. We’ve got team members coming over from Japan, and we are the tip of the spear for learning everything.” -- Mitsubishi Power Americas CEO Bill Newsom. Price of the week: $493 million How much Shell spent on EU ETS allowances and other carbon market schemes in 2022

IE Week: industry leaders clash over H2, CCS, renewables Asian nations establish 'practical' carbon neutrality alliance Nel grows in US while others struggle in nascent H2 market International Energy Week returned to London in late February, with BP boss Bernard Looney taking to the stage to defend his company’s revived enthusiasm for fossil fuel investments. Elsewhere the event was notable for a strong focus on CCS, perhaps unsurprising given the still-strong presence of oil companies at what used to be International Petroleum Week. A lively debate saw BNEF founder Michael Liebreich take a swipe at the green hydrogen economy (more properly called “importing fertilizers,” he said), while the CEO of Morocco-UK power cable developer Xlinks lambasted Looney’s lack of green ambition. Over the Channel, Germany’s first green ammonia import tender under its H2Global scheme closed, with a price cap of Eur1,282/mt, around double the market price for conventional ammonia, but still below price spikes seen at the height of the gas crisis last year. In Asia Pacific 11 countries have launched the Asia Zero Emission Community to pursue "practical pathways" to carbon neutrality via coordinated steps such as developing hydrogen supply chains. Partner countries include Australia, Indonesia, Japan, Malaysia, the Philippines, Singapore, Thailand and Vietnam. India meanwhile is about to issue guidelines for its green hydrogen subsidies, providing implementation details for the country’s $2.4 billion National Green Hydrogen Mission. Japan’s government institute JOGMEC and China’s national oil company Sinopec have both called for support of carbon capture, utilization and storage projects to generate carbon credits under domestic carbon market mechanisms. Finally the world’s second largest hydropower station, the 16-GW Baihetan facility in China, has been completed. In the US, Norwegian hydrogen company Nel has reached a final investment decision on an electrolyzer manufacturing plant expansion in Wallingford, Connecticut, taking the plant from a 50 MW/yr capacity, already the largest in the US, to 500 MW/yr. The expansion would raise that capacity to 500 MW by 2025, distributed between PEM and alkaline-based electrolyzers. Meanwhile two prominent companies leading the US hydrogen economy reported lackluster financial growth over 2022. Plug Power missed its annual growth target by half, while fuel cell truck builder Nikola reported a deficit that has now deepened to $2 billion. In a SEC filing, Nikola said there is “substantial doubt” it will have enough funds to meet its financial obligations over the next year -- Henry Edwardes-Evans EMEA SPGlobal.com Starting gun sounds for global 'race to the top' in hydrogen economy: IE Week panel EU ETS price approaching viable commercial level for CCS projects: Equinor Clean energy growth helps stymie pace of global carbon emissions in 2022: IEA Premium content (available exclusively on Platts Dimensions Pro ) Europe's CCS ambitions at risk as US pulls ahead: industry experts First tender under Germany’s H2Global green hydrogen derivative imports scheme closes Asia Pacific SPGlobal.com Japan, 10 other Asian countries agree to pursue 'practical' carbon neutrality China completes construction of world's second-largest hydropower station India to issue guidelines for green hydrogen subsidies 'very soon ' Premium content (available exclusively on Platts Dimensions Pro ) Japan pushes for early development of CCS-based carbon credits across carbon schemes Sinopec calls for inclusion of CCUS methodology in domestic voluntary carbon market South Korea carbon allowance prices see slight bounce, sentiment still bearish North America SPGlobal.com Washington's new 'cap-and-invest' carbon market holds first auction Northwest hydro outlook trending below normal on drier February; prices climb Premium content (available exclusively on Platts Dimensions Pro ) Norway's Nel ASA reaches final investment decision on Connecticut electrolyzer plant expansion Tesla to harness Texas wind for EV charging as retail electric business expands Nikola, Plug Power report gloomy financial progress over 2022 Chart of the week: Germany’s H2Global green ammonia import tender price cap gives an indication of the ground left to cover through subsidies for the scheme Quotes of the week: “Personally, I thought it was a real shame that Bernard Looney was up on the stage earlier today saying that by 2030 he was still going to be investing 50% of BP’s capital in climate-destroying hydrocarbons. That lacks a massive amount of ambition.” - Xlinks CEO Simon Morrish “The US and Europe have been increasing their policy support for CCUS projects . . . International policy deployment should be the reference for developing localized CCUS tax incentives and subsidy schemes that fit into our carbon neutrality targets.” - Ma Yongsheng, chairman of China’s Sinopec Group “We are an early-stage company with a history of losses, expect to incur significant expenses and continuing losses for the foreseeable future, and there is substantial doubt that we will have sufficient funds to satisfy our obligations through the next 12 months from the date of this report.” –Nikola’s annual report filed to the Securities Exchange Commission Price of the week: Won 12,950/mtCO2e ($9.88/mtCO2e) South Korea’s current year allowance or KAU carbon price saw a slight pickup on March 2 driven by compliance buyers’ demand, but overall sentiment remained bearish. Platts, part of S&P Global Commodity Insights, has just launched its KAU price assessment

After a year of chaotic trade flows in the wheat market, global supplies are likely to normalize in 2023. According to the US Department of Agriculture, global wheat output is seen rising slightly to 783.8 million mt in marketing year 2022-23 (July-June), while global imports are estimated to increase 5% year on year to 213 million mt. During the past year, global wheat supplies tightened in the aftermath of Russia-Ukraine war and continued weather concerns in North America. Global supplies are seen recovering due to a rise in exports from Canada and Russia, which are seen offsetting the shrinking supplies from Argentina and Ukraine. The likely increase in global shipments is seen weighing on prices across origins such as Australia, Canada and Russia. Click for the full-size infographic

US offshore wind heats up India defines carbon credits for cross-border trade EU carbon prices break Eur100/mt The US Department of Interior proposed the first-ever offshore wind power lease sale in the Gulf of Mexico Feb. 22, an early step in the process of utilizing the Gulf to help meet the Biden administration’s goal of installing 30 GW of offshore wind power by 2030. The proposed lease sale follows the department’s approval of two others in offshore New York and offshore California. As the administration seeks to tap more offshore wind resources, investments in the offshore market tripled year-over-year to $9.8 billion in 2022, according to the Feb. 21 US Offshore Wind Market Report. While most investments were driven by lease auction fees, more than $4.4 billion was directed to port infrastructure, supply chain development and transmission. In Asia Pacific, the India government has issued a list of carbon credit types eligible for cross-border trading under Article 6 of the Paris Agreement, with the aim of attracting foreign capital to costly innovative green technologies. Meanwhile Indonesia’s long-awaited national carbon market has been officially launched, covering 42 companies operating 99 coal-fired power plants with installed capacity of 34 GW, while New Zealand’s carbon credit price fell to a 14-month low after the government set a new floor price for the instrument. Finally Japanese city gas utilities intend to introduce a framework of "clean gas certificates" for e-methane and biogas in fiscal year 2024-25 as part of accelerating efforts toward carbon neutrality. In an initial phase the certificates are to be issued to clean gas produced domestically. European carbon prices breached Eur100/mt for the first time ever, a significant milestone and a level that analysts say will drive further decarbonization in the EU. The foundations for the price rally were already laid at the end of 2022, with the EU introducing tighter rules under its Emissions Trading Scheme. An April deadline for annual surrendering of ETS allowances has also driven demand, though the market has decoupled from short-term fundamentals to some extent. In the Middle East, you’d have to say Saudi Arabia’s efforts in the area of carbon capture are mixed, from a climate perspective. State oil company Aramco is exploring how best to extract more crude oil by injecting CO2 captured from its Jubail CCS plant into existing wells from 2027. – James Burgess North America SPGlobal.com Bitcoin miners flocking to Texas want to stabilize ERCOT's volatile renewables Multiple US agencies launch offshore wind power development efforts US offshore wind investments more than triple in 2022, IRA to boost alternative uses Premium content (available exclusively on Platts Dimensions Pro ) US IRA creates alluring business models for carbon negative hydrogen: researcher Texas grid’s uncertainty in weather, economics, politics keep experts ‘up at night’ Asia Pacific SPGlobal.com India's cross-border carbon credit list focused on innovative green technologies Japanese gas utilities to introduce 'clean gas certificates' in FY 2024-25: JGA Australia's electricity market needs urgent investment over next decade, says operator Premium content (available exclusively on Platts Dimensions Pro ) Indonesia officially launches carbon trading for power sector New Zealand carbon price falls to over one-year low on weak policy support Japan's MOL, Air Water to study liquefied bio-methane potential for bunkering EMEA SPGlobal.com Developing economies hit hardest by EU’s carbon border tax European carbon prices breach Eur100/mtCO2e mark, trading at record-high Saudi Aramco identifying fields for EOR with CO2 injection from Jubail CCS plant Premium content (available exclusively on Platts Dimensions Pro ) Uniper warns of green hydrogen market distortion risk from proposed EC rules TES, Energie 360 partner on renewable natural gas plans in Switzerland Charts of the week: Source: S&P Global Commodity Insights Quotes of the week: "If we want more and more renewable energy to be built in this country we need to provide a load that allows [developers] to properly monetize that generation capacity. Bitcoin mining is the perfect load for renewable energy" -- Fred Thiel, CEO of Marathon Digital Holdings India’s Article 6 carbon credit technology definitions “will help the expansion of the carbon market as a whole and bring indirect positive impact on the VCM” -- Samrat Sengupta, EKI Energy Services Price of the week: NZ$67/mtCO2e The price of New Zealand Units fell to a 14-month low on Feb. 23, having hit NZ$88.50/mtCO2e in November. In December the government set a floor price for NZUs at NZ$33.06/mtCO2e.

The EU’s Carbon Border Adjustment Mechanism is set to have far-reaching impacts on world trade and the wider energy transition. Phasing in from 2026, CBAM will levy a carbon tax on imports of selected energy intensive materials and products into the EU, removing the gap between the EU’s ETS carbon price and the export country of origin’s carbon price. Analysis by S&P Global Commodity Insights shows Canada, Brazil, South Africa and Turkey will be most exposed to the mechanism, with iron and steel by far the biggest sector targeted. Click to see the full-size infographic Related Insight Blog entry: CBAM, ETS reform to impact fertilizer trade Related podcast: How will the EU's Carbon Border Adjustment Mechanism affect global trade and carbon pricing? More listening options:

The absence of Freeport LNG exports from June 2022 to February 2023 was a major event in the history of US natural gas exports that demonstrated the growing connection between US supply and global gas markets. Click here for the full-sized infographic Related content: Freeport LNG outage showed growing connection of US supply, global gas market

Russia’s war in Ukraine has impacted every corner of the oil market. With redirected oil flows, supply disruption and a market increasingly under pressure from energy security concerns and demand destruction, the quality of oil has never been more important. The medium sour barrel -- the most frequently processed oil in refineries -- has experienced the biggest change in oil flows. This is why the editorial team at S&P Global Commodity Insights has created the 5th edition of the interactive Periodic Table of Oil with new crude grades, carbon intensity values, a design refresh and enhanced technology to help customers plan and make more informed decisions in rapidly changing volatile markets. The market value of a crude grade has traditionally been defined by its density and sulfur content, but as the oil sector looks to better understand the emissions associated with producing different grades, carbon intensity is emerging as an important metric in price discovery. S&P Global now evaluates the carbon intensity of crude production for almost 100 oil fields . The results show a wide spectrum, from as low as 1.67 kg of carbon dioxide equivalent per barrel of production for Norway's Johan Sverdrup field, up to 527 kgCO2e/b for the Orinoco Belt in Venezuela. There are hundreds of different grades and varieties produced around the world, from light sour Murban in the UAE to Guyana’s medium sweet Liza and Mexican heavy-sour Maya crude. This interactive chart allows readers to find key information in one place on region of origin, price, trade volumes, sulfur content, viscosity, carbon intensity, trade flows and benchmarks. The latest update as of February 2023 includes: New carbon intensity data, focusing on upstream emissions of some oil fields New production and price data for 150 of the world's most traded crude grades New colour palate and significant redesign Improved functionality – shifted to D3.JS Click here to access the interactive Platts Periodic Table of Oil Click here to access the interactive Platts Periodic Table of Oil

From OPEC's market share in India's imports falling to a decade low to China's appetite for Russian crude posting double-digit growth, one year of conflict between Russia and Ukraine has dramatically altered Asia's oil flow map. As Moscow witnessed sanctions and restrictions, plentiful availability of discounted Russian crudes whetted the appetite of import-dependent Asia, which saw it as an opportunity to bring in as many cargoes as possible to cushion the impact of sky-high global energy prices. The trend is expected to continue in 2023. The first sign of that was visible in January numbers. According to data from S&P Global Commodities at Sea, Russian seaborne crude exports hit an eight-month high in January, with exports to China and India hitting record highs of 1.12 million b/d and 1.3 million b/d, respectively. And in 2023, the overall volume of oil shipments from Russia to Asia is expected to rise since more Russian oil products are expected to flow, in addition to the robust volumes of crude, as the EU ban on Russian products came into effect on Feb. 5. Trade flows India ended 2022 with a sevenfold increase in Russian crude imports from a year earlier. The import volume from Russia in 2022 was 700,000 b/d, up from 100,000 b/d in 2021. That boosted the Russian crude market share in India's overall crude import basket to around 15% in 2022, from just 2.2% in 2021 In 2023, S&P Global Commodity Insights expects the share of Russian crude to be around 1.2 million-1.5 million b/d, or about 25%-30% of India's total crude imports. Russia taking a much bigger market share in India in 2022 has dragged down OPEC's share to the lowest in more than a decade. OPEC saw its share of India's crude imports shrink to 64.5% in 2022, from a peak of 87% in 2008. Higher intake of Russian oil reduced India's appetite for African grades, whose share in 2022 imports declined to a 17-year low while that of Latin America plunged to the lowest in 15 years. China's crude imports from Russia in 2022 increased 10.2% year on year to 1.75 million b/d, customs data showed. The independent refiners' Russian feedstock imports increased by 14% on the year to reach a record high of 616,526 b/d in 2022. Feedstock imports from Russia accounted for 18% of China's independent sector's feedstock imports in 2022, up by three percentage points from a year earlier. Russia's ESPO crude flows into China's independent refining sector surged to record monthly high of 3.3 million mt (780,000 b/d) in January. As Russian inflows posted a double-digit growth, inflows from Latin America fell 17% in 2022 to 37.32 million mt, or 749,000 b/d, while shipments from Africa to China dropped 24.5% year on year to 1.02 million b/d, according to China's customs data. Major South Korean and Japanese refiners said they would remain hesitant about purchasing Russian crude in 2023. South Korea's Russian crude imports tumbled 59.7% in 2022 to 21.68 million barrels, data from Korea National Oil Corp. showed. Japan's crude imports from Russia plunged 60.2% in 2022 to 35,548 b/d, data from the Ministry of Economy, Trade and Industry showed. Chinese and Indian refiners' strong focus on relatively cheaper Russian crude allowed some room for other Asian nations to take more Middle Eastern supplies. South Korea secured 354 million barrels from Saudi Arabia in 2022, up 21.8% from 2021. Japan's crude imports from the UAE in 2022 rose 19% to 1.04 million b/d. China's LPG imports from Russia soared to 159,600 mt in 2022 from around 14,000 mt in 2021. Singapore's Russian naphtha imports have risen from 277,937 mt in 2022 to 361,848 mt year to date, as of the week ended Feb. 15, 2023, Enterprise Singapore data showed, as Russian origin barrels wait in Southeast Asia before finding final alternative outlets following the EU ban. Prices Far East Russian grades continue to trade at steep discounts in Asia. Platts assessed second-month ESPO Blend crude at front-month Dubai minus $11.55/b on an FOB Kozmino basis Feb. 22. Sokol was assessed at a discount of $8.35/b to Platts front-month Dubai crude assessments Feb. 22, on a CFR North Asia basis, while Sakhalin Blend crude was assessed at a discount of $10.30/b CFR North Asia. The Dubai market structure has been trending lower since the third quarter of 2022 as Indian and Chinese traders shift focus to cheap and attractive Russian barrels. The spread between front-month Platts cash Dubai and same-month Dubai swap has averaged $1.53/b to date in the first quarter 2023, down from the $2.98/b average in Q4 2022 and $6.47/b in Q3 last year. Middle Eastern sour crude official selling prices have also been trending lower as Chinese and Indian refiners heavily favor Russian barrels. Saudi Aramco set the OSP for its Arab Light crude for loading in March at a premium of $2/b to the Platts Dubai/Oman average. In comparison, the OSP for the medium sour Saudi grade commanded a premium of $9.80/b for cargoes loaded in September 2022. On Feb. 14, Platts decided to no longer include Russia as part of the open origin basis of its gasoline assessments in Asia and the Middle East amid concerns of the impact on trading operations around Singapore following EU sanctions on Russian oil products and the price cap mechanism by G7 member countries. Platts assessments of Asian naphtha no longer reflect Russia-origin product, as material of Russian origin was no longer deemed merchantable for a significant portion of the Asia naphtha spot market on the same basis as other production regions, S&P Global wrote in a clarification note on April 8, 2022. The respective cash differentials for spot paraffinic naphtha in the Middle East and Northeast Asia against the benchmark Mean of Platts Arab Gulf and Mean of Platts Japan naphtha assessments surged to 11-month highs in the week of Feb. 19, as less cargoes from the Mediterranean head East amid tight supply in Europe, while South Korean petrochemical companies stopped importing naphtha from Russia but were buying more from Qatar. Platts assessed the FOB Arab Gulf naphtha differential at $51/mt on Feb. 22, up 126% on the month, while the CFR Korea naphtha differential surged 443% on the month to $19/mt at the Feb. 22 Asian close. Europe's need to diversify middle distillate supply sources in 2023 may present an opportunity for Asian refiners to assess the profitability of shifting some of their export volumes to the West, but the recent arbitrage window is rather narrow, while logistics costs for oil product shipments from the Far East to Europe are high, according to refinery and trading sources in Seoul and Singapore. Reflecting the unattractive East-West arbitrage economics, the front-month gasoil Exchange of Futures for Swaps spread was assessed by Platts at minus $32.85/mt at the 0830 GMT Asian close Feb. 22, narrowing from minus $74.04/mt at the start of the year, S&P Global data showed. Infrastructure Sakhalinskaya Energia, the new operator of the Sakhalin 2 LNG project where Sakhalin Blend crude is produced, said the company has been implementing a rational field development scenario to ensure stable production. In June 2022, Russian President Vladimir Putin issued a decree transferring all rights and obligations held by Sakhalin Energy to the new company Sakhalinskaya Energia. Gazprom now holds a 50% shareholding plus one share in the new company. Sakhalinskaya Energia plans to regularly offer the light sweet crude in the market. China-based traders and Indian oil companies often move Far East Russian barrels to leased storage facilities in South Korea's southern coastal city of Yeosu, before taking the cargoes to their customers in China and India.

Platts, part of S&P Global Commodity Insights, Feb. 20 launched daily assessments for crop feedstock biomethane guarantees of origin (GOs) in the UK, and for manure feedstock biomethane GOs in Denmark and the Netherlands. The new daily assessments are for current-year and year-ahead vintages for both the UK crop and Denmark/Netherlands manure assessments, with a minimum trade volume for assessment of 1 GWh. They include carbon intensity (CI) value definitions for crop and manure. The CI value definition range for the UK crop biomethane GO assessments is for certificates with an associated CI value of higher than 25.00 g Co2e/MJ with no maximum. Platts understands that biomethane of significantly higher carbon intensity do not receive GOs. For manure biomethane GO assessments in Denmark and the Netherlands, the CI definition is for values lower than minus 85.00 g Co2e/MJ. Existing assessments for European biomethane GOs, with CI from 25.00 to 0 g CO2e/MJ, are relabeled as waste. The UK crop assessments are punished in GBP/MWh and Eur/MWh, while the Denmark and Netherlands manure assessments are published in Eur/MWh. The assessments are published at a 4:30 pm London timestamp. Platts invites all questions and feedback to Platts_Carbon@spglobal.com, power@spglobal.com and pricegroup@spglobal.com. For written comments, please provide a clear indication if comments are not intended for publication by Platts for public viewing. Platts will consider all comments received and will make comments not marked as confidential available upon request. The Platts European Biomethane GO assessments are available through the following channels: European Gas Daily Platts Market Data category EBM Platts Dimensions Pro Fixed Pages PGN0876, PEP1107, LNG0841

Platts, part of S&P Global Commodity Insights, has decided to launch a new daily assessment for Parboiled Rice 5% STX on a CFR West Africa basis, effective Feb. 20. Platts decided to launch a CFR West Africa parboiled rice assessment Jan. 9, following a period of consultation: https://www.spglobal.com/commodityinsights/en/our-methodology/subscriber-notes/010923-platts-to-launch-parboiled-rice-5-stx-cfr-west-africa-assessment Platts first proposed to launch a CFR West Africa parboiled rice assessment Dec. 14, 2022, available here: https://www.spglobal.com/commodityinsights/en/our-methodology/subscriber-notes/121422-platts-proposes-to-launch-parboiled-rice-5-stx-cfr-west-africa-assessment The assessment is the first delivered rice assessment by a price reporting agency and results from the increasing need for transparent rice pricing information in destination markets. The assessment reflects prices of parboiled rice that meet the required physical specifications, from any global origin. Assessment Long Grain Parboiled Milled Rice 5% STX CFR West Africa Frequency Daily Bates Close Timestamp 4:30 pm UK time Unit of measurement $/mt Incoterm CFR Destination Cotonou, Benin Arrival at disport 60-90 days from date of assessment Shipment Breakbulk Cargo size 1,000-10,000 mt, normalized to 5,000 mt Packaging 50kg PP bags Max. broken kernels 5% Min. average grain length 5.7mm Max. moisture 14% Max. damaged/discolored 2% Max. red/red streaked 0.25% Max. black/black tip 0.25% Max. foreign matter 0.25% Min. Milling degree Well milled, STX quality All other specifications and clauses should be as per market practice. Delivered prices to other West African ports may be considered in the assessment. Normalization for quality, dimensions, cargo size, packaging, payment terms will reflect current differentials applied in the market, and locational normalization may make use of freight netbacks and freight forwards. Please send all comments, feedback and questions to europe_ags@spglobal.com and pricegroup@spglobal.com. For written comments, please provide a clear indication if comments are not intended for publication by Platts for public viewing. Platts will consider all comments received and will make comments not marked as confidential available upon request.