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Power Up: Energy of the Future

(Power Up is published on Mondays and Thursdays. Think your friend or colleague should know about us? Forward this newsletter to them. They can also subscribe here.) David Gaffen Editor-in-Charge, Energy Markets Hello Power Up readers! It’s a week of conferences in the energy world, as Power Up is all over the Reuters Energy Transition event in Houston while a load of others are at the annual COP27 conference in Sharm El-Sheikh in Egypt. Here’s what we’ve gleaned in both locales, so let’s dive in! EVERYTHING’S OK WITH IRA Massive U.S. Bill Dominates Talk at Transition Confab Here in Houston at the Reuters Energy Transition conference, the common thread among speakers, panelists, interviewees and overheard conversations was this: the Inflation Reduction Act (IRA), the giant U.S. climate legislation that passed this summer, is going to ripple through U.S. energy investment for the next decade or more. “We’re now at a global table that we frankly weren’t before as a country,” said Gretchen Watkins, head of Shell North America. “We look at the passing of the IRA as setting a very stable investment climate for big investments, so when you talk about carbon capture that’s billions of dollars you spend over multiple years before even turning the on switch.” The giant legislation garnered praise for tax provisions that make renewable installations, carbon capture and other projects more viable - and likely to shift global investment in the direction of the United States. Enrico Viale, head of North American operations for Enel, told Reuters the bill could unlock about $3.5 trillion in investment. “What the U.S. is doing is really eclipsing what the Europeans have done, and therefore, we can witness that there is an incredible interest in investing in the U.S.,” he said. FOSSIL FUEL BACK AT CLIMATE CONFERENCE Oil and gas companies look to Africa for business After being sidelined at last year’s COP26 conference, representatives from oil and gas companies are all over this year’s meet in Egypt, as numerous African nations spoke out about the need for reliable energy that many on the continent do not have, a continuation of a call that emerged in March at the annual CERAWeek conference in Houston. Countries including Namibia, Senegal and Mauritania are working with Western energy companies to boost oil and gas exports and generate electricity - worrying climate activists who say this will make it more difficult to keep temperatures from rising more than 1.5C. Some African nations said wealthy countries have not delivered on funding that would help nations expand clean energy instead of exploiting their fossil fuel resources. "Africa wants to send a message that we are going to develop all of our energy resources for the benefit of our people because our issue is energy poverty,” said Namibia's petroleum commissioner, Maggy Shino. Some 636 fossil fuel lobbyists were registered to attend COP27, about 100 more than in 2021. IN CONVERSATION: ALAN ARMSTRONG, WILLIAMS CEO, TALKS GLOBALIZATION, LNG Alan Armstrong, CEO of Tulsa, Okla.-based Williams Companies, kicked off the Reuters Energy Transition conference in Houston Wednesday, and he sat down with Power Up for an interview following his remarks. What is your outlook for natural gas production in the next year? “It’s going to be a while before we get the next round of LNG expansion of any size coming on, so until then there’s a lot of new production coming on, particularly in the Haynesville. The Permian is somewhat limited because of infrastructure, the Marcellus/Utica is somewhat limited because of infrastructure. In the Haynesville things are going to get really tight in terms of takeaway capacity. It’s going to be unlocked about the same time the LNG demand comes on-line.” Are U.S. gas prices being affected by the globalization of the market? “If we had MVP (Mountain Valley Pipeline) running right now, we would be long natural gas. It’s not a lack of supply. It’s not a lack of price signal. It’s the upstream saying, ‘I’m not going to produce anymore because there’s a cap on what I can produce because there’s no more infrastructure.’ Think about Waha (Texas) going negative last week. That’s a clear indication that this is just an infrastructure issue.” What is the biggest challenge in the coming years for you for the energy transition? “The challenge, and this is not small, is expansions on the system required to meet (demand) and permitting challenges to make that happen. That is the primary issue. A lot of people want to blame it on the federal agencies - it is not. And it is not this administration, we had these problems during the Trump Administration.” SOWING THE WIND AT COP27 Reaping Emissions Reductions Later There’s a lot of speechifying going on at the annual COP27 conference in Egypt, but one of the more substantive moments so far centers around an agreement signed by the presidents of the United Arab Emirates (UAE) and Egypt to develop one of the world's largest onshore wind projects in Egypt. UAE renewable energy firm Masdar will be developing what would be its biggest project yet, a 10 gigawatt wind farm that produces roughly 47,790 gigawatt hours (GWh) of clean energy annually, with promises to offset 23.8 million tonnes of carbon dioxide emissions - or about 9% of Egypt's current CO2 emissions. That GWh figure is equal to nearly one-third of Egypt’s annual electricity consumption, according to U.S. federal data. Egypt wants to boost its renewable energy production to more than 40% of the country’s energy mix by 2035 - right now it’s less than 15%, and much of that is hydropower. REFINERS RUN FULL BLAST U.S., China ramp up big The world’s two largest refining nations, the United States and China, are going full throttle on refinery processing as winter approaches, boosting their output to take advantage of big profits on expected high demand and the market’s ongoing tightness.

China looks like it will be refining roughly 14.4 million barrels a day in November, up from 13.8 million in September, while U.S. refiners are expected to keep their processing rates at more than 90% of overall capacity. The difference of course is that U.S. capacity is lower than it had been, while China just opened two new greenfield refineries. Either way, it’s the world that needs the supply. China’s product exports are going to hit their highest since April 2020, while U.S. product exports are routinely hitting highs in weekly figures. That’s due to the combination of big demand in general and especially in Europe, where the continent is trying to attract any diesel, gasoil or other product for domestic uses. QUOTE Hydrogen Hype “People talk about the global hydrogen market. There is no global hydrogen market. There isn’t even a local hydrogen market.” Gretchen Watkins of Shell North America, at the Reuters Energy Transition conference, on why there needs to be more investment in hydrogen, carbon capture and other new energy technologies.

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