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Business

White House blasts Exxon over historical $56 bln annual profit

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WASHINGTON, Jan 31 (Reuters) – The White House on Tuesday expressed outrage on Tuesday at Exxon Mobil Corp’s record net profit in 2022 of $56 billion, a historical high not just for the company but for the entire Western oil industry.

Oil majors are expected to break their own annual records due to high prices and soaring demand, pushing their combined take to near $200 billion. The scale has brought renewed criticism of the oil industry and sparked calls for more countries to levy windfall profit taxes on the companies.

A White House statement said Exxon’s (XOM.N) profit margin was particularly galling as Americans paid record high prices at the pump. It criticized attempts by Republicans in the House of Representatives to push policies aimed at supporting the oil industry.

A logo of the Exxon Mobil Corp is seen at the Rio Oil and Gas Expo and Conference in Rio de Janeiro, Brazil September 24, 2018. REUTERS/Sergio Moraes

“The latest earnings reports make clear that oil companies have everything they need, including record profits and thousands of unused but approved permits, to increase production, but they’re instead choosing to plow those profits into padding the pockets of executives and shareholders while House Republicans manufacture excuse after excuse to shield them from any accountability,” the White House said.

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President Joe Biden has blasted oil companies and refiners for much of the last year for enjoying surging profits as gasoline prices soared. In June, he Biden wrote to executives of major oil refiners and complained they had cut back on production to pad profits, according to a copy of a letter seen by Reuters.

Exxon’s CFO Kathryn Mikells responded to growing criticism over the industry’s windfall profits and suggested the answer is not increased taxes.

“We look at the EU tax on the energy sector, and you know, it’s just unlawful and bad policy trying to tax something, when what you actually need is for it to increase,” Mikells said. “It has the opposite effect of what you’re trying to achieve.”

Reporting By Trevor Hunnicut and Steve Holland; additional reporting by Jarrett Renshaw and Sabrina Valle; Editing by Franklin Paul and David Gregorio

Our Standards: The Thomson Reuters Trust Principles.

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Business

Adani loses Asia’s richest crown as stock rout deepens to $84 billion

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BENGALURU, Feb 1 (Reuters) – Shares in Indian tycoon Gautam Adani’s conglomerate plunged again on Wednesday as a rout in his companies deepened to $84 billion in the wake of a U.S. short-seller report, with the billionaire also losing his title as Asia’s richest person.

Wednesday’s stock losses saw Adani slip to 15th on Forbes rich list with an estimated net worth of $76.8 billion, below rival Mukesh Ambani, the chairman of Reliance Industries Ltd (RELI.NS) who ranks ninth with a net worth of $83.6 billion.

Before the critical report by U.S. short-seller Hindenburg, Adani had ranked third.

The losses mark a dramatic setback for Adani, the school-dropout-turned-billionaire whose business interests stretch from ports and airports to mining and cement. Now, the tycoon is fighting to stabilise his businesses and defend his reputation.

It comes just a day after the group managed to muster support from investors for a $2.5 billion share sale for flagship firm Adani Enterprises on Tuesday, in what some saw as a stamp of investor confidence.

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The report by Hindenburg Research last week alleged improper use by the Adani Group of offshore tax havens and stock manipulation. It also raised concerns about high debt and the valuations of seven listed Adani companies.

The group has denied the allegations, saying the short-seller’s narrative of stock manipulation has “no basis” and stems from an ignorance of Indian law. It has always made the necessary regulatory disclosures, it added.

Shares in Adani Enterprises (ADEL.NS), often described as the incubator of Adani businesses, plunged 30% on Wednesday. Adani Power (ADAN.NS) fell 5%, while Adani Total Gas (ADAG.NS) slumped 10%, down by its daily price limit.

Adani Transmission (ADAI.NS) was down 6% and Adani Ports and Special Economic Zone (APSE.NS) dropped 20%.

Adani Total Gas, a joint venture with France’s Total (TTEF.PA), has been the biggest casualty of the short seller report, losing about $27 billion.

“There was a slight bounce yesterday after the share sale went through, after seeming improbable at a point, but now the weak market sentiment has become visible again after the bombshell Hindenburg report,” said Ambareesh Baliga, a Mumbai-based independent market analyst.

“With the stocks down despite Adani’s rebuttal, it clearly shows some damage on investor sentiment. It will take a while to stabilise,” Baliga added.

Reuters Graphics

SCRUTINY

Underscoring the nervousness in some quarters, Bloomberg reported on Wednesday that Credit Suisse (CSGN.S) had stopped accepting bonds of Adani group companies as collateral for margin loans to its private banking clients.

Deven Choksey, managing director of KRChoksey Shares and Securities, said this was a big factor in Wednesday’s share slides.

Credit Suisse had no immediate comment.

Scrutiny of the conglomerate is stepping up, with an Australian regulator saying on Wednesday it would review Hindenburg’s allegations to see if further enquiries were warranted.

Data also showed that foreign investors sold a net $1.5 billion worth of Indian equities after the Hindenburg report – the biggest outflow over four consecutive days since Sept. 30.

Headaches for the Adani Group are expected to continue for some time.

India’s markets regulator, which has been looking into deals by the conglomerate, has said it will add Hindenburg’s report to its own preliminary investigation.

State-run Life Insurance Corporation (LIC) (LIFI.NS)said on Monday it would seek clarifications from Adani’s management on the short seller report. The insurance giant was, however, a key investor in the Adani Enterprises share sale.

Hindenburg said in its report it had shorted U.S.-bonds and non-India traded derivatives of the Adani Group.

Reporting by Chris Thomas in Bengaluru and Aditi Shah in New Delhi; Additional reporting by Bharath Rajeshwaran and Aditya Kalra; Editing by Edwina Gibbs and Mark Potter

Our Standards: The Thomson Reuters Trust Principles.

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World

Western allies differ over jets for Ukraine as Russia claims gains

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  • Biden says ‘no’ when asked about F-16s for Ukraine
  • Zelenskiy says Moscow seeks ‘big revenge’
  • Russian administrator claims foothold in Vuhledar
  • Kyiv could recapture ground when Western weapons arrive – group

KYIV, Jan 31 (Reuters) – Ukraine’s defence minister is expected in Paris on Tuesday to meet President Emmanuel Macron amid a debate among Kyiv’s allies over whether to provide fighter jets for its war against Russia, after U.S. President Joe Biden ruled out giving F-16s.

Ukraine planned to push for Western fourth-generation fighters like F-16s after securing supplies of main battle tanks last week, an adviser to Defence Minister Oleksiy Reznikov said on Friday.

Asked at the White House on Monday if the United States would provide F-16s, Biden told reporters: “No.”

But France and Poland appear to be willing to entertain any such request from Ukraine, with Macron telling reporters in The Hague on Monday that “by definition, nothing is excluded” when it comes to military assistance.

In remarks carried on French television before Biden spoke in Washington, Macron stressed any such move would depend on several factors including the need to avoid escalation and assurances that the aircraft would not “touch Russian soil.” He said Reznikov would also meet his French counterpart Sebastien Lecornu in Paris on Tuesday.

In Poland on Monday, Prime Minister Mateusz Morawiecki also did not rule out a possible supply of F-16s to neighbouring Ukraine, in response to a question from a reporter before Biden spoke.

Morawiecki said in remarks posted on his website that any such transfer would take place “in complete coordination” with NATO countries.

Andriy Yermak, head of the Ukraine president’s office, noted “positive signals” from Poland and said France “does not exclude” such a move in separate posts on his Telegram channel.

NATO Secretary-General Jens Stoltenberg was in Japan on Tuesday where he thanked Tokyo for the “planes and the cargo capabilities” it is providing Ukraine. A day earlier in South Korea he urged Seoul to increase its military support to Ukraine.

Biden’s comment came shortly after Ukrainian President Volodymyr Zelenskiy said Russia had begun exacting its revenge for Ukraine’s resistance to its invasion with relentless attacks in the east, where it appeared to be making incremental gains.

Zelenskiy has warned for weeks that Moscow aims to step up its assault after about two months of virtual stalemate along the front line that stretches across the south and east.

Ukraine won a huge boost last week when Germany and the United States announced plans to provide heavy tanks, ending weeks of diplomatic deadlock on the issue.

While there was no sign of a broader new Russian offensive, the administrator of Russian-controlled parts of Ukraine’s eastern Donetsk province, Denis Pushilin, said Russian troops had secured a foothold in Vuhledar, a coal-mining town whose ruins have been a Ukrainian bastion since the outset of the war.

Pushilin said that despite “huge losses” Ukrainian forces were consolidating positions in industrial facilities.

‘BATTLE FOR EVERY METER’

Pushilin said Ukrainian forces were throwing reinforcements at Bakhmut, Maryinka and Vuhledar, towns running from north to south just west of Donetsk city. The Russian state news agency TASS quoted him as saying Russian forces were making advances there, but “not clear-cut, that is, here there is a battle for literally every meter.”

Ukrainian military analyst Oleh Zhdanov said Ukraine still controlled Maryinka and Vuhledar, where Russian attacks were less intense on Monday.

Pushilin’s adviser, Yan Gagin, said fighters from Russian mercenary force Wagner had taken partial control of a supply road leading to Bakhmut, a city that has been Moscow’s focus for months.

A day earlier, the head of Wagner said his fighters had secured Blahodatne, a village just north of Bakhmut, although Kyiv said it had repelled assaults on Blahodatne.

Reuters could not independently verify the battlefield reports. But the locations of the reported fighting indicated clear, though gradual, Russian gains.

In central Zaporizhzhia region and in southern Kherson region, Russian forces shelled more than 40 settlements, Ukraine’s General Staff said. Targets included the city of Kherson, where there were casualties.

The Russians also launched four rocket attacks on Ochakiv in southern Mykolaiv, the army said, on the day Zelenskiy met the Danish prime minister in Mykolaiv city, to the northeast.

WESTERN DELAYS

Zelenskiy is urging the West to hasten delivery of its promised weapons so Ukraine can go on the offensive, but most of the hundreds of tanks pledged by Western countries are months away from delivery.

British Defence Minister Ben Wallace said the 14 Challenger tanks donated by Britain would be on the front line around April or May, without giving an exact timetable.

Kremlin spokesperson Dmitry Peskov said Western countries supplying arms leads “to NATO countries more and more becoming directly involved in the conflict – but it doesn’t have the potential to change the course of events and will not do so.”

The U.S.-based Institute for the Study of War think-tank said “the West’s failure to provide the necessary materiel” last year was the main reason Kyiv’s advances had halted since November.

The researchers said in a report that Ukraine could still recapture territory once the promised weapons arrive.

The Belarusian defence ministry said on Tuesday that Russia and Belarus had started a week-long session of staff training in preparation for joint drills in Russia in September.

The Russian invasion of Ukraine, which Moscow justifies as necessary to protect itself from its neighbour’s ties with the West, has killed tens of thousands of people and driven millions from their homes.

Reporting by Reuters bureaus; Writing by Doina Chiacu and Stephen Coates; Editing by Cynthia Osterman & Simon Cameron-Moore

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World

Biden says no F-16s for Ukraine as Russia claims gains

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  • Russian administrator claims foothold in Vuhledar
  • Kyiv says Russian gains come at huge cost
  • Think-tank says delay in Western arms halted Ukraine’s advance

KYIV, Ukraine/WASHINGTON Jan 30 (Reuters) – The United States will not provide the F-16 fighter jets that Ukraine has sought in its fight against Russia, President Joe Biden said on Monday, as Russian forces claimed a series of incremental gains in the country’s east.

Ukraine planned to push for Western fourth-generation fighter jets such as the F-16 after securing supplies of main battle tanks last week, an adviser to Ukraine’s defence minister said on Friday. A Ukrainian air force spokesman said it would take its pilots about half a year to train on such fighter jets.

Asked if the United States would provide the jets, Biden told reporters at the White House, “No.”

The brief exchange came shortly after Ukrainian President Volodymyr Zelenskiy said that Russia had begun exacting its revenge for Ukraine’s resistance to its invasion with relentless attacks in the east.

Zelenskiy has warned for weeks that Moscow aims to step up its assault on Ukraine after about two months of virtual stalemate along the front line that stretches across the south and east.

Ukraine won a huge boost last week when Germany and the United States announced plans to provide heavy tanks, ending weeks of diplomatic deadlock on the issue.

“The next big hurdle will now be the fighter jets,” Yuriy Sak, who advises Defence Minister Oleksiy Reznikov, told Reuters on Friday.

While there was no sign of a broader new Russian offensive, the administrator of Russian-controlled parts of Ukraine’s eastern Donetsk province, Denis Pushilin, said Russian troops had secured a foothold in Vuhledar, a coal-mining town whose ruins have been a Ukrainian bastion since the outset of the war.

Pushilin said Ukrainian forces were continuing to throw reinforcements at Bakhmut, Maryinka and Vuhledar, three towns running from north to south just west of Donetsk city. The Russian state news agency TASS quoted him as saying Russian forces were making advances there, but “not clear-cut, that is, here there is a battle for literally every meter.”

Pushilin’s adviser, Yan Gagin, said fighters from Russian mercenary force Wagner had taken partial control of a supply road leading to Bakhmut, a city that has been Moscow’s main focus for months.

A day earlier, the head of Wagner said his fighters had secured Blahodatne, a village just north of Bakhmut.

Kyiv said it had repelled assaults on Blahodatne and Vuhledar, and Reuters could not independently verify the situations there. But the locations of the reported fighting indicated clear, though gradual, Russian gains.

Zelenskiy said Russian attacks in the east were relentless despite heavy casualties on the Russian side, casting the assaults as payback for Ukraine’s success in pushing Russian forces back from the capital, northeast and south earlier in the conflict.

[1/7] U.S. Air Force F-16 Fighting Falcon from the 140th Wing of the Colorado Air National Guard during NATO exercise Saber Strike flies over Amari military air base, Estonia June 12, 2018. REUTERS/Ints Kalnins

“I think that Russia really wants its big revenge. I think they have (already) started it,” Zelenskiy told reporters in the southern port city of Odesa.

Mykola Salamakha, a Ukrainian colonel and military analyst, told Ukrainian Radio NV that Moscow’s assault in Vuhledar was coming at huge cost.

“The town is on an upland and an extremely strong defensive hub has been created there,” he said. “This is a repetition of the situation in Bakhmut – one wave of Russian troops after another crushed by the Ukrainian armed forces.”

WESTERN DELAYS

The hundreds of modern tanks and armoured vehicles pledged to Ukraine by Western countries in recent weeks for a counteroffensive to recapture territory are months away from delivery.

This leaves Kyiv to fight through the winter in what both sides have described as a meat grinder of relentless attritional warfare.

Moscow’s Wagner mercenary force has sent thousands of convicts recruited from Russian prisons into battle around Bakhmut, buying time for Russia’s regular military to reconstitute units with hundreds of thousands of reservists.

Zelenskiy is urging the West to hasten delivery of its promised weapons so Ukraine can go on the offensive.

Kremlin spokesman Dmitry Peskov said Western countries supplying arms leads “to NATO countries more and more becoming directly involved in the conflict – but it doesn’t have the potential to change the course of events and will not do so.”

The U.S.-based Institute for the Study of War think-tank said “the West’s failure to provide the necessary materiel” last year was the main reason Kyiv’s advances had halted since November.

That allowed Russia to apply pressure at Bakhmut and fortify the front against a future Ukrainian counter-attack, its researchers said in a report, though they said Ukraine could still recapture territory once the promised weapons arrive.

Zelenskiy met Danish Prime Minister Mette Frederiksen on Monday in Mykolaiv, a rare visit by a foreign leader close to the front. The city, where Russia’s advance in the south was halted, had been under relentless bombardment until Ukraine pushed the front line back in November.

Russia’s invasion, which it launched on Feb. 24 last year claiming it was necessary to protect itself from its neighbour’s ties with the West, has killed tens of thousands of people and driven millions from their homes.

Additional reporting by Pavel Polityuk, Kevin Liffey, Ronald Popeski and Reuters bureaus; Writing by Peter Graff, Philippa Fletcher and Doina Chiacu; Editing by Gareth Jones, William Maclean and Cynthia Osterman

Our Standards: The Thomson Reuters Trust Principles.

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World

Davos 2023: Big Oil in sights of climate activist protests

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DAVOS, Switzerland, Jan 16 (Reuters) – Big oil firms came under pressure at the start of the World Economic Forum (WEF) from activists who accused them of hijacking the climate debate, while a Greta Thunberg-sponsored “cease and desist” campaign gained support on social media.

Major energy firms including BP (BP.L), Chevron (CVX.N) and Saudi Aramco (2222.SE) are among the 1,500 business leaders gathering for the annual meeting in the Swiss resort of Davos, where global threats including climate change are on the agenda.

“We are demanding concrete and real climate action,” said Nicolas Siegrist, the 26-year-old organiser of the protest who also heads the Young Socialists party in Switzerland.

The annual meeting of global business and political leaders opens in Davos on Monday.

“They will be in the same room with state leaders and they will push for their interests,” Siegrist said of the involvement of energy companies during a demonstration attended by several hundred people on Sunday.

The oil and gas industry has said that it needs to be part of the energy transition as fossil fuels will continue to play a major role in the world’s energy mix as countries shift to low carbon economies.

[1/5] Climate activists display a banner during a protest ahead of the World Economic Forum (WEF) 2023 in the Alpine resort of Davos, Switzerland, January 15, 2023. REUTERS/Arnd Wiegmann

On Monday, a social media campaign added to the pressure on oil and gas companies, by promoting a “cease and desist” notice sponsored by climate activists Thunberg, Vanessa Nakate and Luisa Neubauer, through the non-profit website Avaaz.

It demands energy company CEOs “immediately stop opening any new oil, gas, or coal extraction sites, and stop blocking the clean energy transition we all so urgently need”, and threatens legal action and more protests if they fail to comply.

The campaign, which had been signed by more than 660,000 people, had almost 200,000 shares on Monday morning.

Sumant Sinha, who heads one of India’s largest renewable energy firms, said it would be good to include big oil companies in the transition debate as they have a vital role to play.

“If oil people are part of these conversations to the extent that they are also committing to change then by all means. It is better to get them inside the tent than to have them outside the tent,” Sinha, chairman and CEO of ReNew Power, told Reuters, saying that inclusion should not lead to “sabotage”.

Rising interest rates have made it harder for renewable energy developments to attract financing, giving traditional players with deep pockets a competitive advantage.

As delegates began to arrive in Davos, Debt for Climate activists protested at a private airport in eastern Switzerland, which they said would be used by some WEF attendees, and issued a statement calling for foreign debts of poorer countries to be cancelled in order to accelerate the global energy transition.

Additional reporting by Kathryn Lurie; Editing by Alexander Smith and Alex Richardson

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Business

Storm cuts U.S. oil, gas, power output, sending prices higher

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Dec 23 (Reuters) – Frigid cold and blowing winds on Friday knocked out power and cut energy production across the United States, driving up heating and electricity prices as people prepared for holiday celebrations.

Winter Storm Elliott brought sub-freezing temperatures and extreme weather alerts to about two-thirds of the United States, with cold and snow in some areas to linger through the Christmas holiday.

More than 1.5 million homes and businesses lost power, oil refineries in Texas cut gasoline and diesel production on equipment failures, and heating and power prices surged on the losses. Oil and gas output from North Dakota to Texas suffered freeze-ins, cutting supplies.

Some 1.5 million barrels of daily refining capacity along the U.S. Gulf Coast was shut due to the bitterly cold temperatures. The production losses are not expected to last, but they have lifted fuel prices.

Knocked out were TotalEnergies (TTEF.PA), Motiva Enterprises (MOTIV.UL) and Marathon Petroleum (MPC.N) facilities outside Houston. Cold weather also disrupted Exxon Mobil (XOM.N), LyondellBasell (LYB.N) and Valero Energy (VLO.N) plants in Texas that produce gasoline, diesel and jet fuel.

Sempra Infrastructure’s Cameron LNG plant in Louisiana said weather disrupted its production of liquefied natural gas without providing details. Crews at the 12 million tonne-per-year facility were trying to restore output, it said.

Freeze-ins – in which ice crystals halt oil and gas production – this week trimmed production in North Dakota’s oilfields by 300,000 to 350,000 barrels per day, or a third of normal. In Texas’s Permian oilfield, the freeze led to more gas being withdrawn than was injected, said El Paso Natural Gas operator Kinder Morgan Inc. (KMI.N).

U.S. benchmark oil prices on Friday jumped 2.4% to $79.56, and next-day gas in west Texas jumped 22% to around $9 per million British thermal units , the highest since the state’s 2021 deep freeze.

Power prices on Texas’s grid also spiked to $3,700 per megawatt hour, prompting generators to add more power to the grid before prices fell back as thermal and solar supplies came online.

New England’s bulk power supplier said it expected to have enough to supply demand, but elsewhere strong winds led to outages largely in the Southeast and Midwest; North Carolina counted more than 187,000 without power.

“Crews are restoring power but high winds are making repairs challenging at most of the 4,600 outage locations,” Duke Energy spokesman Jeff Brooks wrote on Twitter.

Heating oil and natural gas futures rose sharply in response to the cold. U.S. heating oil futures gained 4.3% while natural gas futures rose 2.5%.

In New England, gas for Friday at the Algonquin hub soared 361% to a near 11-month high of $30 mmBtu.

About half of the power generated in New England comes from gas-fired plants, but on the coldest days, power generators shift to burn more oil. According to grid operator New England ISO, power companies’ generation mix was at 17% from oil-fired plants as of midday Friday.

Gas output dropped about 6.5 billion cubic feet per day (bcfd) over the past four days to a preliminary nine-month low of 92.4 bcfd on Friday as wells froze in Texas, Oklahoma, North Dakota, Pennsylvania and elsewhere.

That is the biggest drop in output since the February 2021 freeze knocked out power for millions in Texas.

One billion cubic feet is enough gas to supply about 5 million U.S. homes for a day.

Reporting by Erwin Seba and Scott DiSavino; additional reporting by Arathy Somasekhar and Laila Kearney; editing by Jonathan Oatis, Kirsten Donovan, Aurora Ellis and Leslie Adler

Our Standards: The Thomson Reuters Trust Principles.

Scott Disavino

Thomson Reuters

Covers the North American power and natural gas markets.

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World

German car giants and Asian battery kings: a match made in Hungary

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  • German, Chinese and S.Koreans head to Hungary
  • They dominate auto investment and subsidies
  • Orban’s Hungary keen to court foreign business

BERLIN/BUDAPEST, Dec 13 (Reuters) – German automakers and Asian battery suppliers are getting together in Hungary in a multi-billion-dollar marriage of convenience to drive their electric ambitions.

The companies are flocking to central Europe, where Viktor Orban’s government is defying Western wariness of China and offering generous benefits to host foreign operations and stake Hungary’s claim as a global centre for electric vehicles (EVs).

Investment in the Hungarian auto industry is being dominated by three countries – Germany, a champion carmaker, plus China and South Korea, EV battery leaders way ahead of European rivals.

Companies from those three countries have accounted for 29 out of the 31 cash subsidies handed out by Hungary for major investments in its auto and battery sector over the past decade, according to a Reuters analysis of government data that shows the scale of German, Chinese and Korean convergence there.

“Cathodes, anodes, separators, assembly lines, the full battery supply chain is here,” said Dirk Woelfer of the German-Hungarian Chamber of Commerce in Budapest. “This is a foot in the door to Europe.”

Recipients of such subsidies included the likes of German automakers BMW (BMWG.DE) and Mercedes-Benz (MBGn.DE), and battery makers such as China’s BYD and Korean rival Samsung SDI (006400.KS). The median subsidy level has been 15% of investment.

In total, Hungary has received over 14 billion euros ($15 billion) in foreign direct investment into its battery sector alone in the past six years, according to government figures.

Major investments are broadly classed as those worth over 5-10 million euros, varying with factors such as jobs created.

State incentives and the opportunity for automakers and battery suppliers to work next door to each other is proving a strong pull, according to interviews with about 20 industry players and consultants in Germany, Hungary, China and South Korea.

China’s CATL (300750.SZ), the world’s No. 1 EV battery maker, and Korean battery giants SK Innovation (096770.KS) and Samsung SDI, all told Reuters that the planned proximity to German carmakers was a key factor in their decisions to invest in Hungary, as well as being able to source separators and other components there.

CATL is investing $7.6 billion to build Europe’s largest battery plant in Hungary. This plant and the $2.1 billion BMW factory will both be sited in the city of Debrecen, which is attracting an ecosystem of suppliers, ranging from makers of brakes and battery cathodes to industrial machinery.

Mercedes-Benz is converting its factory in Kecskemet to produce electric cars, while Volkswagen’s (VOWG_p.DE) Audi is making cars and electric motors in Gyor.

Such big business could present a boon for Prime Minister Orban’s government as the country faces its toughest economic environment in more than a decade, with inflation running above 20%, the economy slowing and EU funds in limbo.

Yet the Hungarian EVs project also faces stiff obstacles, according to many of the industry insiders.

One key concern is the huge demands that massive battery plants will place on the electricity grid, which needs to shift away from fossil fuels towards renewables to meet the net-zero emissions targets of much of the auto industry, the people said.

A lack of specialised workers in Hungary to work in battery cell manufacturing could also drag on capacity, they added.

HIPA, the Hungarian Foreign Ministry agency responsible for attracting investments in areas ranging from batteries and cars to logistics, did not respond to Reuters queries about the EV industry.

‘CHINA’S MADE GOOD STEPS’

Hungary’s welcome to Asian battery makers might jar with concerns expressed by Brussels and Berlin about the perils of Europe becoming too dependent on China and other foreign powers, particularly in technologies central to the green transition.

Still, for now, the need to ramp up EV output leaves the European auto industry little choice but to source from Asian players, said Csaba Kilian of Hungary’s automotive association.

“I absolutely agree that European manufacturers should have their own sources … but it’s a competition, and China has made good steps,” he added. “There is a learning curve.”

Europe should have a EV battery manufacturing capacity of 1,200 gigawatt hours (GWh) by 2031 if current plans come to fruition, outstripping expected demand of 875 GWh, Benchmark Mineral Intelligence (BMI) estimates. But of that 1,200 GWh, 44% will be provided by Asian companies with factories in Europe, ahead of homegrown firms on 43% and U.S. pioneer Tesla (TSLA.O) with 13%, according to a Reuters calculation based on BMI data.

The prospects for developing a battery sector in Germany have been set back by record energy there as a result of the loss of Russian gas, according to autos consultants at Boston Consulting Group and Berylls Strategy Advisors.

Hungary offers a comparatively stable energy system bolstered by nuclear energy, as well as high subsidies and Europe’s lowest corporate tax rate of 9%.

The entire battery supply chain has come to the country, said Ilka von Dalwigk, policy manager at the European Battery Alliance, launched by the European Union in 2017 to kick-start a homegrown industry.

“Everything is located there. When we look at the forecast for 2025 and 2030, it looks like it will have one of the largest production capacities in Europe,” she added.

“It might very well be that Hungary is in fact the next big battery production cluster in Europe.”

Asked about concerns about reliance on Asia for technology, an EU official said the bloc – which must approve member state subsidies to investors – had a system in place to cooperate and exchange information on investments from non-EU countries that may affect security.

The European Commission is currently in talks with Hungary over the size of the subsidy the country will offer to CATL for building the Debrecen plant, the official added.

‘SENDING THE WRONG SIGNAL’

For some Western companies, setting up shop in Hungary is a tough decision.

German autos supplier Schaeffler said it was on the verge of setting up its primary electric motor plant in Hungary rather than Germany in August because of the appeal of Hungary’s incentives, but decided on Germany for fear of sending “the wrong signal” to Germans who fear a loss of jobs to overseas.

Other industry players expressed a range of concerns over potential pitfalls for the burgeoning Hungarian auto industry as factories ramped up, including the power grid issue.

Batteries, in particular, are highly energy-intensive parts of EVs to produce, requiring high amounts of power for the drying the materials and machine operation.

Hungary’s sources of energy in 2021 comprised 80% fossil fuels, 14.5% nuclear and 3.6% solar, according to a Reuters calculation of data from the BP Statistical Review of World Energy.

The mix spells trouble for carmakers who will soon need to showcase carbon-free credentials across their supply chains under new German and European legislation.

Hungarian Foreign Minister Peter Szijjarto met senior executives from BMW and auto suppliers including Schaeffler and Knorr-Bremse in Munich last month, ahead of the German carmaker announcing it was beefing up its investment in the country.

Topics discussed included plans to improve logistics infrastructure in Hungary and increasing the amount of renewables energy used for the power grid, according to one of the companies that attended.

When BMW first announced its plan to build its Debrecen plant, in 2018, the government committed to spending around 135 billion forints on improving local infrastructure, according to calculations by the German-Hungarian Chamber of Commerce.

On the battery side, CATL told Reuters it was considering developing solar power with local partners in Hungary.

Despite the risks, Alexander Timmer, a partner at Munich-based consultants Berylls Strategy Advisors who has worked on several autos and battery projects in Hungary, said the country presented an appealing package.

“The combination of cost advantages, state subsidies, and closeness to automakers’ plants makes Hungary increasingly attractive to battery producers, he added.

($1 = 397.54 forints; $1 = 0.9483 euros)

Reporting by Victoria Waldersee in Berlin, Gergely Szakacs in Budapest; Additional reporting by Heekyong Yang, Zhang Yan; Editing by Pravin Char

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US

Kansas residents hold their noses as crews mop up massive U.S. oil spill

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WASHINGTON, Kan., Dec 10 (Reuters) – Residents near the site of the worst U.S. oil pipeline leak in a decade took the commotion and smell in stride as cleanup crews labored in near-freezing temperatures, and investigators searched for clues to what caused the spill.

A heavy odor of oil hung in the air as tractor trailers ferried generators, lighting and ground mats to a muddy site on the outskirts of this farming community, where a breach in the Keystone pipeline discovered on Wednesday spewed 14,000 barrels of oil.

Pipeline operator TC Energy (TRP.TO) said on Friday it was evaluating plans to restart the line, which carries 622,000 barrels per day of Canadian oil to U.S. refineries and export hubs.

“We could smell it first thing in the morning; it was bad,” said Washington resident Dana Cecrle, 56. He shrugged off the disruption: “Stuff breaks. Pipelines break, oil trains derail.”

TC Energy did not provide details of the breach or say when a restart on the broken segment could begin. Officials are scheduled on Monday to receive a briefing on the pipeline breach and cleanup, said Washington County’s emergency preparedness coordinator, Randy Hubbard, on Saturday.

OIL FLOWS TO CREEK

Environmental specialists from as far away as Mississippi were helping with the cleanup and federal investigators combed the site to determine what caused the 36-inch (91-cm) pipeline to break.

Washington County, a rural area of about 5,500 people, is about 200 miles (322 km) northwest of Kansas City.

The spill has not threatened the water supply or forced residents to evacuate. Emergency workers installed booms to contain oil that flowed into a creek and that sprayed onto a hillside near a livestock pasture, said Hubbard.

TC Energy aims to restart on Saturday a pipeline segment that sends oil to Illinois, and another portion that brings oil to the major trading hub of Cushing, Oklahoma, on Dec. 20, Bloomberg News reported, citing sources. Reuters has not verified those details.

It was the third spill of several thousand barrels of crude on the 2,687-mile (4,324-km) pipeline since it opened in 2010. A previous Keystone spill had caused the pipeline to remain shut for about two weeks.

“Hell, that’s life,” said 70-year-old Carol Hollingsworth of nearby Hollenberg, Kansas, about the latest spill. “We got to have the oil.”

TC Energy had around 100 workers leading the cleanup and containment efforts, and the U.S. Environmental Protection Agency was providing oversight and monitoring, said Kellen Ashford, an EPA spokesperson.

U.S. regulator Pipeline and Hazardous Materials Administration (PHMSA) said the company shut the pipeline seven minutes after receiving a leak detection alarm.

CRUDE BOTTLENECK

A lengthy shutdown of the pipeline could lead to Canadian crude getting bottlenecked in Alberta, and drive prices at the Hardisty storage hub lower, although price reaction on Friday was muted.

Western Canada Select (WCS), the benchmark Canadian heavy grade, for December delivery last traded at a discount of $27.70 per barrel to the U.S. crude futures benchmark , according to a Calgary-based broker. On Thursday, December WCS traded as low as $33.50 under U.S. crude, before settling at around a $28.45 discount.

“The real impact could come if Keystone faces any (flow) pressure restrictions from PHMSA, even after the pipeline is allowed to resume operations,” said Ryan Saxton, head of oil data at consultants Wood Mackenzie.

Reporting by Erwin Seba in Washington, Kansas, and Nia Williams in Calgary, Alberta;
Additional reporting by Arathy Somasekhar in Houston, Rod Nickel in Winnipeg and Stephanie Kelly in New York
Editing by Gary McWilliams, Stephen Coates and Matthew Lewis

Our Standards: The Thomson Reuters Trust Principles.

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Oil removal effort for Keystone pipeline spill to extend to next week, U.S. EPA says

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Dec 9 (Reuters) – The effort to remove oil from the largest crude spill in the United States in nearly a decade will extend into next week, the U.S. Environmental Protection Agency said on Friday, making it likely that the Keystone pipeline shutdown will last for several more days.

TC Energy (TRP.TO) shut the largest oil pipeline to the United States from Canada on Wednesday after it leaked 14,000 barrels of oil into a Kansas creek. It said on Friday it is still determining when it will be able to return the line to service.

The outage on the Keystone, which carries 622,000 barrels of Canadian crude per day (bpd) to various parts of the United States, could affect inventories at the key Cushing, Oklahoma, storage hub and cut crude supplies to two oil refining centers, analysts said. Crews in Kansas continued clean-up efforts on Friday from the breach, the cause of which remained unknown.

“We’re beginning to get a better sense of the clean up efforts that will need to be undertaken in the longer-term,” said Kellen Ashford, spokesperson for the EPA Region 7, which includes Kansas.

TC Energy aims to restart on Saturday a pipeline segment that sends oil to Illinois, and another portion that brings oil to Cushing on Dec. 20, Bloomberg News reported, citing sources. Reuters has not verified those details.

This is the third spill of several thousand barrels of crude on the pipeline since it first opened in 2010. A previous Keystone spill had caused the pipeline to remain shut for about two weeks.

TC Energy remained on site with around 100 workers leading the clean-up and containment efforts, and the EPA was providing oversight and monitoring, Ashford said. TC is responsible for determining the cause of the leak.

A corrective action order from the U.S. Pipeline and Hazardous Materials Administration (PHMSA) to TC on Thursday said the company shut the pipeline down seven minutes after receiving a leak detection alarm. The affected segment, 36 inches (91 cm) in diameter, was Keystone’s Phase 2 extension to Cushing built in 2011.

Washington County, a rural area of about 5,500 people, is about 200 miles (320 km) northwest of Kansas City.

The oil spill has not threatened the local water supply or forced local residents to evacuate, Washington County Emergency Management Coordinator Randy Hubbard told Reuters. Workers quickly set up a containment area to restrict oil that had spilled into a creek from flowing downstream.

“There is no human consumption drinking water that would come out of this,” Hubbard said.

Livestock producers in the area have been notified and have taken their own corrective measure to protect their animals, he added.

The EPA is the main federal agency that oversees inland oil spills. If the EPA finds TC Energy liable for the spill, the company would be responsible for the cost of cleanup and repairing any harm to the environment, as well as potential civil and criminal penalties.

Pipeline operators are typically held accountable for breaches by the EPA through the Clean Water Act (CWA) and the related Oil Pollution Act, among others, according to Zygmunt Plater, an environmental law professor at Boston College Law School.

Those federal acts restrict the discharge of pollutants such as oil into waterways and hold pipeline operators responsible for the costs associated with containment, cleanup and damages from spills.

CRUDE BOTTLENECK

A lengthy shutdown of the pipeline could also lead to Canadian crude getting bottlenecked in Alberta, and drive prices at the Hardisty storage hub lower, although price reaction on Friday was muted.

Western Canada Select (WCS), the benchmark Canadian heavy grade, for December delivery last traded at a discount of $27.70 per barrel to the U.S crude futures benchmark, according to a Calgary-based broker. On Thursday, December WCS traded as low as $33.50 under U.S. crude, before settling at around a $28.45 discount.

PHMSA has to approve the restart of the line. Even once the pipeline starts operating again, the affected area will have to flow at reduced rates pending PHMSA approval.

“The real impact could come if Keystone faces any pressure restrictions from PHMSA, even after the pipeline is allowed to resume operations,” said Ryan Saxton, head of oil data at Wood Mackenzie.

Additional reporting by Arathy Somasekhar, Rod Nickel, Stephanie Kelly and Clark Mindock; Editing by Marguerita Choy

Our Standards: The Thomson Reuters Trust Principles.

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Keystone pipeline shut after 14,000-barrel oil spill in Kansas

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Dec 8 (Reuters) – Canada’s TC Energy shut its Keystone pipeline in the United States after more than 14,000 barrels of crude oil spilled into a creek in Kansas, making it one of the largest crude spills in the United States in nearly a decade.

The cause of the leak, which occurred in Kansas about 20 miles (32 km) south of a key junction in Steele City, Nebraska, is unknown. It is the third spill of several thousand barrels of crude on the pipeline since it first opened in 2010.

The 622,000 barrel-per-day Keystone line is a critical artery shipping heavy Canadian crude from Alberta to refiners in the U.S. Midwest and the Gulf Coast. It is unclear how long the closure will last.

There have been no effects on drinking water wells or the public, the U.S Environmental Protection Agency said in a statement, though surface water of Mill Creek was affected.

Kellan Ashford, spokesperson for EPA Region 7, which includes Kansas, said the cause of the leak was still unclear on Thursday evening.

TC had mobilised around 100 people to respond to the spill, while the EPA had dispatched two coordinators, Ashford said. Washington County Emergency Management and Kansas’s Department of Health and Safety were also on the scene.

Keystone shut the line at about 8 p.m. CT Wednesday (0200 GMT Thursday) after alarms went off and system pressure dropped, TC (TRP.TO) said in a release. It said booms were being used to contain the spill.

LARGEST ONSHORE SPILL IN YEARS

According to U.S. Pipeline and Hazardous Materials Safety Administration (PHMSA) data, this would be the largest crude oil leak since a Tesoro pipeline leaked more than 20,000 barrels of oil in North Dakota in October 2013.

PHMSA is also investigating the leak, which occurred near Washington, Kansas, a town of about 1,000 people.

There have been seven Keystone spills since it became operational in June 2010, according to PHMSA data. The largest were in December 2017, when more than 6,600 barrels spilled in South Dakota, and in November 2019, when more than 4,500 barrels spilled in North Dakota, according to PHMSA figures.

“It is troubling to see so many failures and so much oil spilled from any pipeline, but it is especially troubling from such a relatively new pipeline,” said Bill Caram, executive director of the nonprofit Pipeline Safety Trust, in a statement.

LENGTH OF SHUTDOWN UNCLEAR

TC declared force majeure over the outage, according to a source with direct knowledge, referring to unexpected external circumstances that prevent a party to a contract from meeting its obligations. TC did not respond to a request for comment.

Two Keystone shippers said TC had not yet notified them how long the pipeline may be shut.

Keystone’s shutdown will hamper deliveries of Canadian crude both to the U.S. storage hub in Cushing, Oklahoma and to the Gulf, where it is processed by refiners or exported.

The shutdown is expected to increase the discount on Western Canada Select (WCS) heavy oil from Alberta to U.S. crude , which was already high due to lackluster demand for heavy, sour Canadian oil.

WCS for December delivery traded at $33.50 a barrel below WTI, compared with Wednesday’s settle of $27.50 a barrel below the benchmark, according to one broker.

“It’s really a worst-case scenario if this outage is long-lasting,” said Rory Johnston, founder of energy newsletter Commodity Context, noting that if the price falls further, shippers may opt to move crude by rail.

Steele City is roughly the junction where Keystone splits, with one segment moving crude to Illinois refineries and the other carrying oil south to Oklahoma and the Gulf Coast.

If the spill is located south of the junction, TC may be able to quickly restart the segment to Illinois, RBC analyst Robert Kwan said in a note.

Past shutdowns have generally lasted about two weeks, but this could last longer as it involves a water body, Kwan said.

TC shares ended down 0.1% in Toronto.

Reporting by Arpan Varghese, Brijesh Patel and Deep Vakil in Bengaluru, Rod Nickel, Nia Williams and Arathy Somasekhar; Editing by Josie Kao and Stephen Coates

Our Standards: The Thomson Reuters Trust Principles.

Rod Nickel

Thomson Reuters

Covers energy, agriculture and politics in Western Canada with the energy transition a key area of focus. Has done short reporting stints in Afghanistan, Pakistan, France and Brazil and covered Hurricane Michael in Florida, Tropical Storm Nate in New Orleans and the 2016 Alberta wildfires and the campaign trails of political leaders during two Canadian election campaigns.

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