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  • Germany Considers Reactivating Lignite Reserve // China Ramps Up Iranian Oil Imports // Indonesia Delays Climate Plan

Germany Considers Reactivating Lignite Reserve // China Ramps Up Iranian Oil Imports // Indonesia Delays Climate Plan

Welcome to Grid Brief! Here’s what we’re looking at today: Germany ponders reactivating some lignite plants, China imports more Iranian crude, Indonesia delays its climate plan, and more.

Germany Considers Reactivating Lignite Reserve

Rather than recommissioning its nuclear power plants, Germany is considering reactivating 1.93 GW of reserve lignite coal power as a hedge against a hard winter.

“The return of other units in the grid reserve, particularly coal-fired units, is permitted until the end of March next year under Germany's replacement power plant availability act, providing the country's gas alert level remains unchanged or steps up. Gas stocks rose above 90pc last week, and as of Monday morning were only a few percentage points below the country's 95pc storage target for 1 November,” reports Argus.

Yet gas storage sites could be depleted by the end of January if this winter is as cold as the winter of 2009/2010. A more average winter would see storage hit a minimum of 21pc, while a mild winter could see storage sit around 70pc.

This month, the country saw power demand drop below 49 GW for the first time since Covid. According to Argus, industrial gas demand has slumped below the average in 2018-202 ever single week this year.

China Ramps Up Iranian Oil Imports

China is importing more Iranian crude.

“The world’s biggest oil importer will take about 1.5 million barrels a day of crude from Iran this month, according to an estimate from Kpler,” reports Bloomberg. “That compares with an average of 917,000 barrels a day in the first seven months of the year and would be the highest in the Kpler figures that go back to 2013.”

Iranian oil is often slated as Malaysian in Chinese government data, but can also be labeled as a diluted bitumen mixture if it’s mixed with Venezuela’s heavier crude, according to an expert from Kpler who spoke with Bloomberg.

China launched a probe into bitumen mixtures, though it has not been revealed why the investigation was initiated and has since concluded. Without the probe, China can more freely import from Iran and take advantage of a more than $10 discount to Brent—that’s cheaper than Russia’s offerings.

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Indonesia Delays Climate Plan

Indonesia has pushed back a $20 billion climate investment deal with the United States.

“Efforts to hammer out the specifics of the Just Energy Transition Partnership, or JETP — which is intended to provide affordable financing to clean up the Southeast Asian nation’s coal-dependent power grid — have been hampered by disagreements over the cost of funds, and by legal and policy tangles,” reports BNN. “Half of the $20 billion intended to be mobilized was supposed to come from wealthy nations and the other half via large financial institutions like HSBC Holdings Plc and Citigroup Inc., under the Glasgow Financial Alliance for Net Zero.”

Yet, despite President Joko Widodo’s green policy ambitions, the country is skittish about shouldering the burdens of the energy transition. If even wealthy countries are struggling to pull it off, why should Indonesia be expected to jump in with both feet? Especially if its coal is supposed to be replaced with unreliable, land hungry power sources like wind and solar.

Conversation Starters

  • The Mexican government will keep helping Pemex. “The Mexican government is likely to continue supporting heavily indebted state oil firm Pemex with about $15 billion per year, Fitch ratings agency said in an a report on Wednesday, adding these will at least cover international bond debt amortizations,” reports Reuters. “However, should the government substantively increase its support for Pemex, this would have a negative credit effect on the sovereign, Fitch added. Pemex, whose financial debt surged to $110.5 billion by the second quarter of the year - the most of any state energy firm worldwide - received more than $3 billion from the government last month to help it meet its obligations.”

  • A tropical storm threatens to hit California. “Tropical Storm Hilary has spun up in the Pacific off Mexico’s coast and could pummel Southern California early next week,” reports Bloomberg. “Hilary is moving west-northwest about 470 miles (756 kilometers) from Manzanillo, Mexico, with top winds of 40 miles per hour, the US National Hurricane Center said in an 11 a.m. New York time advisory. The five-day track for the storm potentially carries it into Southern California as a post-tropical system by Monday, although forecasts that far out may be inaccurate.”

  • Saudi oil exports swing low. “Saudi Arabia's crude oil exports fell for a third straight month in June to their lowest since September 2021, data from the Joint Organizations Data Initiative (JODI) showed on Wednesday, with big Asian buyers favouring cheaper Russian oil,” reports Reuters. “The kingdom's crude exports totalled 6.8 million barrels per day (bpd) in June, down about 1.8% from May's 6.93 million bpd. Monthly export figures are provided by Riyadh and other members of the Organization of the Petroleum Exporting Countries (OPEC) to the JODI, which publishes them on its website.”

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