Want more timely analysis on the Energy Transition that’s also easily digestible? Welcome to BTU Analytics’ newest energy market offering, the Energy Transition First Take Round-Up! Currently, BTU Analytics publishes a clients-only news blast at the end of each week called the First Take in which BTU Analytics assembles the most significant energy-related headlines of the week, including those related to the Energy Transition, and offers accompanying pieces of bite-sized analysis. For this new series, BTU Analytics will take the most dominant trends of the previous month’s Energy Transition-related First Takes and assemble them into a single Energy Market Insight. These Insights will help you stay updated and informed on the ever-changing Energy Transition as it continues to affect U.S. and international energy markets.
For more timely access to all Energy Transition First Takes, subscribe to StreetAccount, FactSet’s provider of energy market news, equity market intelligence, and the distributor of BTU Analytics’ First Take. Sign up for your free trial here.
With that, we hope you enjoy the January edition of the new Energy Transition First Take Round-Up!
One theme BTU Analytics is currently tracking is the ongoing decarbonization efforts in Asia-Pacific. These efforts are continuing to gain momentum as seen in the increase in announcements this month from several Japanese companies, including Nippon Steel, Mitsubishi, Mitsui, and Kansai Electric Power. These announcements highlight the region’s efforts to meet decarbonization goals by exploring various carbon capture & storage (CCS) strategies and heavily utilizing low-carbon, hydrogen-based fuels, such as hydrogen, ammonia, and methanol. The Asia-Pacific region faces many struggles on the way to decarbonization due, in part, to unfavorable CCS geography, lack of good renewable power resources, and the lack of political and social willpower to push nuclear technologies. However, as Asia-Pacific continues towards its goals, BTU Analytics expects to see even more announcements of pilot and commercial scale projects for producing, importing, and utilizing green hydrogen and ammonia. Several First Takes highlighting this trend can be found below.
- BTU’s Take: Japanese steel manufacturer Nippon Steel (TYO: 5401) is considering applying carbon capture at its plants, with Mitsubishi (TYO: 8058) and ExxonMobil (NYSE: XOM) partnering to explore overseas transportation and storage options for captured carbon. The MOU announcement came just a day before Japan’s minister of industry announced a goal of 6-12 Mt/y carbon capture capacity by 2030. Carbon capture and storage (CCS) is expected to be difficult in Japan because the island nation has few depleted oil or gas fields, which are typically the lowest cost storage options for capture carbon. The prospect of shipping liquified CO2 overseas has been previously studied by Nippon Steel and was a topic of discussion during COP27. Chevron (NYSE: CVX) and Mitsui (TYO: 8031), among other companies, are simultaneously promoting the idea of a seaborn CO2 value chain.
- BTU’s Take: Mitsui & Co., Ltd., a large investment firm headquartered in Tokyo, signed a Memorandum of Understanding (MOU) with Kansai Electric Power Company to conduct a feasibility study on the Carbon Capture and Sequestration (CCS) value chain development. The focus of the study is on capturing CO2 from Kansai’s thermal power plants in Japan and marks another step Mitsui is taking to meet its goals of 15 Mt/y of CCS capacity by 2035 and bringing CCS to the Asia-Pacific region, a region known for its difficulty in finding viable CCS solutions due to its geography. BTU Analytics is currently tracking one small-scale CCS pilot project in Japan, and Mitsui has launched three other feasibility studies for CCS in Asia-Pacific in the last year. These studies will be important in helping the Asia-Pacific region determine how to integrate CCS into decarbonization strategies, which, without CCS, would need to rely heavily on other strategies, like green ammonia.
- BTU’s Take: Interest in ammonia continues to grow as a low-carbon fuel, with Japan’s power utility JERA beginning co-firing ammonia with coal this year. While most of the world’s current ammonia supply has a high carbon intensity, produced using fossil fuels without carbon capture, CF Industries (NYSE: CF) is one of several ammonia producers pivoting toward “blue” and “green” ammonia, which are produced with carbon capture and renewable energy electrolysis, respectively. While non-binding, this MOU between JERA and CF marks one of the most advanced takeaway plans for exporting clean ammonia and a meaningful milestone for the development of clean hydrogen export markets. BTU Analytics is tracking three CF projects in development, all located on the U.S. Gulf Coast. The volume in question represents nearly 30% of the clean ammonia capacity that CF plans to have online by 2025.
- BTU’s Take: Parallel to a similar agreement with CF Industries (NYSE: CF) announced last week, Japanese power utility JERA (TYO: 9502) recently made a non-binding agreement to purchase low-carbon ammonia from Yara International (OSL: YAR). Interest in ammonia as a low-carbon fuel continues to grow, with JERA beginning co-firing ammonia at one coal power plant this year. While most of the world’s current ammonia supply has a high carbon intensity, produced using fossil fuels without carbon capture, YAR is one of several ammonia producers pivoting toward “blue” and “green” ammonia, which are produced with carbon capture or renewable energy electrolysis, respectively. BTU Analytics is tracking two blue ammonia plants and three green ammonia plants currently in development by YAR, as well as expansions to YAR’s ammonia import terminals in Germany. The MOU also included the potential joint development of a 1 Mt/y blue ammonia facility on the U.S. Gulf Coast.