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Hello readers,
This month is a bumper edition of the newsletter, rounding up the biggest stories covering oil and gas in the energy transition from September and October. Apologies for the lack of an update from me last month, I discovered that covid is not a thing of the past and had to take a couple of weeks off to recover.
Some of the biggest stories have been the reported agreement on a potential new gas pipeline from Russia to China that could reshape the LNG market, and the Trump administration’s sabotage of an international agreement to tackle emissions from shipping. Taken together with the collapse of Plastics Treaty talks earlier this year, the prospects for major progress at COP aren’t looking brilliant. On the topic of COP, only 23 of the 63 Nationally Determined Contributions (NDCs) submitted so far express support for transitioning away from, phasing out or phasing down the use of fossil fuels. There’s still a long way to go to make that commitment from COP28 a reality.
One piece I would recommend reading is by the influential Bloomberg columnist Javier Blas, whom I don’t often agree with (in Bloomberg, or without a paywall here). In it, he questions the traditional argument that gas and LNG is the “bridge fuel” between the phaseout of coal and the rise of renewables so many expected. As Blas puts it, “the shores that LNG was meant to bridge — coal and renewables — are a lot closer than anyone thought; a viaduct may still be needed, but it’s much shorter than expected.”
Please share this newsletter with your colleagues and contacts who can subscribe here. It’s always great to hear from you, so do email me any feedback or suggestions.
Thanks,
Murray
Oil and gas in the transition
The Russia-China pipeline that could upend the LNG market
Russia announced that it has signed an agreement with China to build the Power of Siberia 2 pipeline, which would transport 50 billion cubic metres a year of gas to Northern China. This triumphant announcement overlooked that the fundamentals of any deal on the building of a pipeline – the gas pricing and construction cost sharing – have not been agreed. Until this is agreed, the pipeline will remain on paper. The South China Morning Post reported that Russia was looking to set a price for its gas nearly six times higher than the price the Chinese were looking to buy it for – a very large gap to close.
If built, the pipeline would account for around a third of the expected growth in gas demand from China, which had previously been assumed would be met by increasing LNG demand, largely from growing US exports. If China no longer needs this LNG, that leaves a huge amount of gas with no clear buyer – the FT’s Lex estimates that the US could lose out on USD 90 billion a year in lost revenue from LNG exports.
OPEC keeps turning on the taps, into a world awash with oil
OPEC members surprised oil market watchers in September by announcing yet another production hike, following months of rises that have increased the group’s production by an additional 2.2 million barrels per day. However, raising the production threshold is not the same as expanding production, with most OPEC+ members already near capacity. Saudi Arabia, however, has significant ability to increase production, meaning it stands to reap the biggest benefit as it aims to secure a greater share of the market.
The recent ramping up of production has led the IEA to say that “something has to give” in the market, with supply set to significantly exceed demand. Increasing oil going into storage, mostly in China, has stopped prices from falling further this year, but there’s a limit to how much oil can be stored. As that threshold approaches, the downward pressure on prices next year is set to become even greater. OPEC has now said it won’t increase production again in the first quarter of 2026, but that won’t be enough to stop the expected oil glut.
Oil and gas oversupply enables Western sanctions on Russia
One geopolitical twist is that the huge amount of supply means that the Trump administration has felt able to introduce more stringent sanctions on the Russian oil industry. Previously, the US had been concerned that any sanctions on Russian oil could limit global supply, pushing up prices for US consumers. With more oil supply, the US has a freer hand to curb Russia’s exports.
The same is happening in the gas market, with the expansion of US (and Qatari) LNG leading to fears of a significant supply glut. Even TotalEnergies CEO has said he thinks the US is building too many LNG export terminals, with no sign of an uptick in demand from major importers like China. Under pressure from the US, the EU is now aiming to end imports of Russian LNG by the start of 2027, a year earlier than previously planned. This decision stands to benefit the US, with the EU likely to replace much of those Russian LNG imports by buying up the huge wave of new supply coming from the US.
The twilight of US shale?
The oversupply of oil isn’t good news for the US though – low oil prices are starting to hurt domestic producers. As one US oil executive commented, “We have begun the twilight of shale. The US isn’t running out of oil, but she sure is running out of $60-per-barrel oil.” After years of booming growth, it appears that the low prices are about to push US oil production into decline. The US government isn’t giving up on the fossil fuel industry – new analysis shows that it is now handing out USD 35 billion a year in subsidies.
Carbon majors responsible for heatwaves
New research in Nature has found that emissions from the largest fossil fuel and cement producers contributed to half of the increase in intensity of heatwaves since pre-industrial times. The emissions from the 180 companies that make up the ‘carbon majors’ were found to be responsible for 0.7C of the 1.3C rise in global temperatures by 2023. Just 14 companies – including ExxonMobil, BP, Saudi Aramco and Shell – are responsible for 0.3C of that warming. This study adds to the growing body of literature linking the emissions of oil and gas companies to specific weather events, exactly the kind of research that’s likely to prove pivotal in future legal claims for climate damages.
Trump snatches defeat from the jaws of victory on shipping
The US government waged an unprecedented campaign of “intimidation” against countries and negotiators on the verge of agreeing an unprecedented global carbon tax on shipping at the International Maritime Organisation (IMO). Its campaign was successful, and the decision to adopt the proposed Net Zero Framework for shipping has been delayed by a year. Over that period we will see whether the overwhelming majority of countries that backed the deal are able to reassemble their coalition, or whether the US will further escalate its tactics, described by one IMO veteran as “behaving like gangsters”.
Court case lost, but the climate test for new extraction confirmed
The European Court of Human Rights sided with Norway in the long-running People vs Arctic Oil case, finding that the country’s granting of exploration licences in the Barents Sea did not violate the claimants’ human rights. Europe’s top court did, however, confirm the legal requirement for an environmental impact assessment to include the emissions from the oil and gas extracted before opening new fields, in order to comply with the European Convention on Human Rights. This follows similar rulings in the domestic courts of Norway and the UK, and cements this principle for countries across Europe.
Energy transition strategies
ExxonMobil is continuing its battle to limit shareholder and regulator efforts to scrutinise its climate policy. The SEC has approved a proposal by ExxonMobil to allow it to build a system that automates retail shareholders’ votes in line with those of the board of directors. This would build in a huge default wave of support for management, and against any shareholder activism efforts. The company is also suing the state of California over rules that would require it to report its Scope 3 emissions – those from the use of the fuel it sells – on the grounds that this disclosure would violate its free speech rights.
Clean energy investments
Only 49 of the largest 250 oil and gas companies own any renewable energy projects, totalling around 1.4% of operating capacity, according to a new study in Nature. I think that fairly definitively answers any claims that the industry is making a meaningful contribution to global renewables deployment.
BP has abandoned its plans for a biofuels plant in Rotterdam and dropped its target for producing more biofuels by the end of the decade. The move follows a similar decision earlier this year by Shell amid a wider collapse in investment in biofuels.
Equinor announced that it would invest almost USD 1 billion in offshore wind group Ørsted to maintain its 10% ownership stake, as the renewables company issues more shares to raise capital. Equinor was reported to be considering combining its renewable assets with Ørsted’s as part of the future of its stake in the firm.
ExxonMobil is increasing its investment in minerals for electric vehicles with an investment in graphite production through a Chicago-based firm. The move builds on the company’s efforts to extract lithium, another major component of EV batteries, in Arkansas.
TotalEnergies won a EUR 4.5 billion tender to build France’s largest offshore wind farm, which would be the country’s largest renewable energy project.
Carbon Capture and Storage (CCS)
The world’s potential for the storage of captured carbon is just 10% of industry estimates, according to a study published in Nature. Storing carbon should be seen as a “scarce resource” rather than “an unlimited solution to bring our climate back to a safe level”, according Joeri Rogelj, one of the authors of the study.
Finance
The giant insurance marketplace Lloyd’s of London has u-turned on its commitment to end coverage for the most polluting fossil fuels in the name of granting insurers “more freedom”.
From Zero Carbon Analytics
- Nearly a third of deals in the Japan-backed Asia Zero Emissions Community (AZEC) involve fossil fuel technologies, including 30% of new deals announced in October 2025. We’ve launched the AZEC tracker where you can find all the details of the deals.
- We updated this handy guide to ‘temperature overshoot’, explaining why it matters and the risks involved of crossing critical climate tipping points. It’s all the more relevant given UN Secretary General Guterres’ comments in October that limiting warming to 1.5C is no longer possible, and could only be achieved by overshooting that goal then bringing temperatures back down by the end of the century.
