Ethanol will create new prospects for Brazilian corn in the domestic market, with corn for ethanol use rising sharply to 17 million mt in the next marketing year, Arthur Neto, partner director at Alphamar Shipping Agency, told S&P Global Commodity Insights June 12. Register Now Pointing to the impact on domestic and export markets, Neto said on the sidelines of the IGC Grains Conference in London that increased use of ethanol for corn will push prices up, incentivizing corn production in a situation where "the market is flooded by corn because you don't have much exit for it in the domestic market." "This is going to be a dynamic that's going to make the price on the domestic market go higher, which makes the producers maintain the corn inside, meaning that if you have export demand, you need to pay much more," Neto said of the expectation of 17 million mt of corn for ethanol usage in marketing year 2024-25. For 2023, the figure was 13.26 million mt. Speaking on whether Brazilian corn is trading higher than competitors' in the current season, Neto said, "you have to understand that the market is very heated internally, so it doesn't make sense for the farmer to just sell it at pennies for the international market." "I do believe that there's going to be a lot of market, but not as much as in the previous year, because the market is good for the farmer domestically, and they will hold on to the cargo in the country, even though there are many incentives to export," Neto added. 'We are here to sell' Responding to speculation around China's move to bridge the gap between its domestic supply and consumption and what it means for its biggest supplier, Brazil, Neto said carrying out that plan would take time. "China is growing, not as much as it was, but there's a lot coming out of there," Neto said. Any change in China's domestic supply and demand equation will have a major impact on the global balance sheet, considering China's position as the biggest demand center for corn. "I wish them the best of luck," Neto said. "I hope they make it and reach their goals. Meanwhile, we are here to sell." Big flooding impact on soybeans, less on rice Speaking about flooding in Rio Grande do Sul, a key agricultural province that was expected to produce 70% of the country's rice and about 15% of its soybeans in the current marketing year, Neto said the floods were less likely to have a major impact on rice, but soybean production could take a hit. "Roughly 85% of the rice was already harvested when we had the floods," Neto said. "Now we just have logistics issues. Some delays are expected, but not much." However, he said he thought the floods would leave their mark on soybean production, a big factor considering Rio Grande do Sul's strategic location closer to major ports. "Soybeans were the core produce in the region, shipped to the port close to it," Neto said. "That system itself is going to lose a lot of volume." Neto further pointed to the floods in Rio Grande do Sul causing a terminal outage, which is posing a "big risk to the entire export ecosystem." Lower water levels a concern for shipping Brazil's northern ports saw some of the lowest water levels on record last year because of a severe Amazon drought, forcing cargoes to be diverted to Santos. The Alphamar director compared challenges in the northern ports to those on the Mississippi River in the US in the previous year. "When we talk about the northern ports, we're not talking about any problems with the capability on the ports," Neto said. "The water levels are OK. The problem is the cargo being transferred." He added that at some point, the water level will be so low that convoys will have to be disassembled to pass over shallow areas. "Sometimes a trip that is to be done in two days can take around five, so of course, with the total turnaround of the barges, it's very bad," Neto said, adding that there could be two months of major shipping challenges.

When it comes to carbon, the key to understanding opportunities and risks is access to consistent, comprehensive and credible data, writes Kevin Birn Carbon intensity has emerged as a new metric of competitiveness. The interest is driven by the belief that whether through the energy transition, more carbon-intensive assets, companies or commodities could be more exposed to faster-than-expected changes in demand or face new costs from incremental climate policy. Companies and their investors are keenly interested in how they can benefit from this new potential competitive framework, as well as understanding the potential risks. Key to understanding the opportunities and risks is access to consistent, comprehensive and credible data. Companies have been responding to greater interest in these data from stakeholders and regulators with increasing levels of emissions disclosure. But inconsistencies in disclosures, and the carbon accounting frameworks that underpin them, continue to limit the comparability of these data, even when comparing within the same industry. Common sources of inconsistency go beyond scope 1 and scope 2 definitions and can also include how certain emissions are estimated and which factors are used (if they are used), how co-products are treated, and the units used to present the information, with the different units not always readily convertible and thus comparable. The absence of a consistent framework continues to limit the utility of disclosure, leading to an increasing call for greater information. The irony is that more information may only exacerbate the confusion. This challenge is widely recognized by financial companies through to large industrial emitters. At CERAWeek 2024, one of the themes that presented itself around decarbonization and carbon markets was the need for a harmonized emissions accounting framework to support greater comparability across estimates. This is an active area within S&P Global Commodity Insights, which has been sharing detailed methods behind its emissions work to ensure market participants can understand and compare against our growing array of large, standardized datasets. Data quality is another source of inconsistencies between estimates that warrants more attention. For the market to be able to incorporate carbon into business decisions, the information must be believed to be accurate or representative. A greenhouse gas (GHG) emissions estimate, or claim is often based upon a spectrum of information, from observed or metered fuel or energy use to complex models and formulas based on expected or historical performance. Given the array of information often required, it is almost inevitable that some assumptions must be made. For users of these data, it is not clear what level of assumptions are being made between estimates, and thereby affecting the reliability of the result. Given sufficiently high-quality data, estimates of high reliability can be made. Today, however, emissions estimate can exhibit a wide range of rigor. Moreover, users of these data have limited ability to distinguish the differences. This erodes the confidence in these numbers, and the utility of them. Consider the scatter plot of data above contrasting S&P Global Commodity Insights’ assessment of the quality of a number of our own upstream GHG estimates against the corresponding estimate of the carbon intensity. Most of the discussion today about carbon intensity has been one-dimensional: better versus worse or high versus low. The introduction of data quality brings in another dimension and introduces trade-offs. Obviously, highly reliable estimates of lower carbon commodities or assets are desirable in all cases (bottom left in the figure). However, if a carbon intensity estimate is low but unreliable is that still more desirable? Contrast this dilemma to the market today where there is limited ability to differentiate. If the market is to act upon GHG emissions data, it must be believed to be accurate or sufficiently representative. This requires the ability to systematically communicate and track quality. The inability to distinguish quality limits the ability for users to assign value to the relative effort between estimates. For companies reporting their GHG emissions, the ability to distinguish rigor is critical to support investments in estimation improvement, such as projects to measure and monitor methane. This is a particularly important point when the outcome of investments is uncertain and could result in upward revision of emissions. The principles of data and estimate quality are well documented throughout the GHG estimation and life-cycle analysis literature. Most of the work and literature has been focused on self-assessment to identify area of improvement. However, in today’s world the need is to be able to compare. To this end, S&P Global worked with the US Department of Energy National Energy Technology Laboratory to develop a means to communicate data quality. The result was the Data Quality Metric (DQM). The initial DQM was developed with the oil and gas sector in mind. However, the concept of the DQM has broad applicability to GHG estimation and reporting with the appropriate sectoral guidance. The Data Quality Metric was first proposed in a 2022 special report by S&P Global Commodity Insights titled “The Right Measure: A guidebook for life-cycle GHG estimation of crude oil.” The DQM assesses quality along two variables – reliability and representativeness – using a five-by-five pedigree matrix. Reliability is the degree to which an estimate can be depended on to be accurate, for example, the comprehensiveness of underlying data; while representativeness refers to the degree an estimate can be expected to reflect reality or to what degree the data represents the asset or assets in question. The system can be scaled from an individual flow, through to an asset and even across a value chain. Throughout, the DQM delivers a consistent two letter grade assessment. In this way, the communication value can be consistent across companies, sectors, and even value-chains, making it easily understood. The DQM is far from a perfect solution as there are far more rigorous means to assess quality. It does, however, provide a balance between granularity and ease of communication. Over time the DQM will evolve as the rigor of estimates improve, and so will our estimation. S&P Global is currently deploying the DQM at scale against its own estimates. The aim is to provide a data quality assessment with each carbon intensity estimate. We are also seeing some traction in the market with this approach. Frameworks similar to the DQM can be found as part of the Open-Hydrogen Initiative, and the advancing US Department of Energy Greenhouse Gas Supply Chain Emissions Measurement, Monitoring, Reporting, Verification Framework. If the market is going to transact on carbon, then it needs to have a consistent framework to compare, contrast and ultimately make choices. Quality needs to be part of that framework. This article was first published in the May 2024 issue of Commodity Insights Magazine .

The annual Middle East Petroleum and Gas Conference convened in Dubai from May 20 to May 22 at a time of heightened concern about the oil markets, the longevity of OPEC+ cuts, the future of hydrocarbons and the switch to non-fossil fuel sources by the middle of the century. The S&P Global Commodity Insights-run event focused on the outlooks for oil and gas on day one with insights from inhouse experts as well as industry leaders and external analysts. The event opened with a keynote address by Emirates National Oil Company group chief executive Saif Humaid Al Falasi, who heads a leading energy company in the UAE. On day one, Carlos Pascual, senior vice president - global energy & international affairs at S&P Global addressed the deepening polarization in the US, the ongoing China-US standoff and potential spill out, and two ongoing wars – Russia-Ukraine and Israel-Hamas – all of them risks to energy market stability. Pascual also talked about energy poverty in the developing world – where many lack access to electricity and have been left behind by the rapid pace of the energy transition. FGE chairman Fereidun Fesharaki tapped his famous crystal ball for analysis on the oil markets. He noted that with a global surplus capacity of 6 million b/d, the world is unlikely to see dramatic swings in oil prices in the event of major political conflict. The focus also turned towards liquefied natural gas, which is widely seen as a transitional fuel. The global LNG market is heating up with European LNG prices rising to a five-month high amid ongoing geopolitical risk factors and tightness in European supply, according to Commodity Insights. There will be “chaos in the markets for the next few years” as the supply of LNG is set to increase by 50% in the next two years, Fesharaki said in his crystal ball analysis. The conference's much-attended events were the ones focused on oil market vagaries with traders concerned about to navigate the sector rife with so much uncertainty. S&P’s Global's vice president and head of crude oil market and energy and mobility research, Jim Burkhard said in his presentation that the surplus in the market will last as long as the US continues pumping more oil, which could extend for a year or two. Members of OPEC+, who are due to meet virtually on June 2 have to make choices about whether to keep the current cuts in place or increase production later this year, he added. Day two of MPGC focused on several downstream tracks with in-house and external experts discussing outlooks for refineries and petrochemicals as well as plans to scale up hydrogen and strategize for a low-carbon future. MPGC attendees also benefited from a day of training courses on May 20. S&P Global experts taught carbon markets fundamentals, oil markets & commercial strategies as well as refining economics and refineries of the future to those in the energy industry.

Global upstream oil and gas investment growth is expected to slow in 2024, driven primarily by Middle Eastern and Asian NOCs, but remains at levels well above that needed for governments to hit key climate targets in full and on time by 2030, the International Energy Agency said June 6. Global upstream spreading is expected to rise by 7% to reach $570 billion this year, following a 9% increase seen in 2023, the IEA said in its World Energy Investment 2024 report. Cost efficiency improvements have helped contain upstream spending which now stands at 30% below the 2015 peak, the IEA said. At the same time, however, global spending on clean energy such as renewable power and energy efficiency is now almost twice the levels of those on fossil fuels, the IEA said. While investment in clean energy is growing fast, the report finds that oil and gas spending this year is broadly aligned with oil demand levels implied in 2030 by today's policy settings under the IEA base-case STEPS scenario, which shows coal, oil and natural gas demand leveling off or declining before 2030. Measured against its central Announced Pledges Scenario, however, the IEA said upstream spending is on pace to be around 35% higher than needed for national climate goals to be achieved by 2030. Global upstream spending is also more and more than double the 2030 levels needed if oil consumption falls in line with Paris Agreement targets to contain global warming, the IEA said. As a result, the IEA reiterated its call that no further developing spending on long-lead-time oil and gas projects is needed to meet global demand in the coming decades. "The trajectory for oil and gas consumption is curbed by rapid growth in renewables, efficiency, and other clean energy sources. There is no need in this scenario for further oil and gas exploration, as already-discovered fields are sufficient to cover projected demand," the IEA said in the report. Total energy investment worldwide is expected to exceed $3 trillion in 2024 for the first time, the IEA estimates, with some $2 trillion set to go toward clean technologies – including renewables, electric vehicles, nuclear power, grids, storage, low-emissions fuels, efficiency improvements and heat pumps. Peak demand The IEA's latest energy investment report comes amid a growing divergence in long-term demand outlooks by key forecasters due to uncertainty over the ramp-up and affordability of clean energy sources. The IEA predicts that demand for gas, oil and coal will peak by 2030, with road transport no longer a source of oil demand growth by the end of the decade. Under its central APS scenario, the IEA expects global oil demand to average around 97.5 million b/d in 2030. According to S&P Global's reference case scenario, global oil and biofuel demand will peak at around 111 million b/d in 2031 while OPEC expects global oil demand to reach 110.2 million b/d in 2028. The IEA report also comes a day after a similar investment report which concluded that spending on oil and gas projects worldwide must rise by almost a quarter to $738 billion from next year to meet rising hydrocarbons demand and prevent a supply crunch by 2030. According to the "Upstream Oil and Gas Investment Outlook" carried out by the International Energy Forum and S&P Global Commodity Insights, just over $600 billion will be spent on upstream projects to boost or maintain oil and gas output in 2024, the highest figure for a decade. Analysts at S&P Global Commodity Insights estimate that global oil demand -- including biofuels -- will remain at around 31% of the global energy mix through 2030, while renewable energy sources will grow 6%-8% per year to make up 13% of total energy demand at the end of the decade, up from 8% in 2022. Refining sector In the downstream sector, the IEA said it expects spending on oil refineries to decline globally by 5% in 2024, following a similar trend in 2023 where investment was just under $37 billion. Around 800,000 b/d of new refining capacity is set to come online in 2024, the IEA estimates, with future investments likely to continue to be concentrated in China, India, and the Middle East due to competitive operating costs and stronger demand growth. With a rising disconnect between long-term climate change targets and measured global emissions, many refiners are increasingly opting to rationalize capacity or shift to low-carbon feedstock processing. "Uncertainties around future demand growth present significant challenges for new investments in the refining sector," the report notes. Clean energy investments by oil and gas companies themselves reached $30 billion in 2023, accounting for only 4% of the industry's overall capital spending in 2023, according to the report. Meanwhile, coal investment continues to rise, with more than 50 gigawatts of unabated coal-fired power approved in 2023, the highest since 2015. Clean spending by oil and gas companies in 2023 was a 30% increase from 2022 levels but well below the 65% jump seen from 2021 to 2022, reflecting in part the inflationary environment and supply chain issues for some renewable projects, the IEA said.