Libyan economic experts will study the distribution of crucial oil revenue as efforts continue to solve the war-ravaged OPEC member’s political crisis, the United Nations said.

The decision to assign the economic commission to work “on issues of immediate concern,” which also include a banking crisis, came after meetings in Cairo this week attended by representatives from across Libya’s political spectrum as well as economists and other academic experts. The experts agreed to meet again in early March, the UN mission in Libya said Tuesday in a statement.

The oil market had been closely monitoring the talks for any sign of a deal to restore output in the North African nation after supporters of eastern commander Khalifa Haftar forced ports to close mid-January, driving daily output down to about 180,000 barrels, its lowest since the 2011 uprising against long-time leader Moammar Qaddafi.

Imminent large-scale resumption, although unlikely, could add over 1 million barrels per day to the international market, complicating OPEC’s efforts to assess the impact of the coronavirus on demand.

The talks were the latest in a series of global efforts to end the conflict between the internationally recognized government in Tripoli and Haftar, whose forces control the oil-rich east and south and in April turned their sights on the capital.

OPEC slashed forecasts for global oil demand as the coronavirus hits fuel use in China, leaving the group facing a renewed glut despite its recent production cuts.

The cartel reduced projections for demand growth in the first quarter by 440,000 barrels a day, or about a third, in its monthly report. Oil prices sank to a one-year low on Monday as the infection leaves businesses idle and millions quarantined in the world’s biggest crude importer.

Oil’s slump has spurred the Organization of Petroleum Exporting Countries’ biggest exporter, Saudi Arabia, to press fellow members and allies to hold an emergency meeting and consider new output cutbacks. Yet the proposal has so far met resistance from Russia, the group’s most important ally, which is able to weather lower prices more easily.

The report showed that, even though many OPEC members made a strong start with fresh output curbs that took effect last month, the virus’ impact on consumption will leave them with a new overhang.

The group collectively pumped 28.86 million barrels a day in January, and if it maintains that rate there will be a surplus of 570,000 barrels a day during the second quarter, when consumption slows down seasonally. The monthly report is compiled by OPEC’s Vienna-based research department.

OPEC doesn’t see the effects of the disease confined to the start of the year, bringing down its growth estimate for global oil demand in 2020 as a whole by about 230,000 barrels a day to just under 1 million a day. Still, the increase remains slightly higher than last year’s.

Though crude futures have recovered on speculation the spread of the disease could be nearing its peak, prices of about $55 a barrel in London remain well below the levels most OPEC members need to cover government spending.

Since the producer group formed an alliance with non-members such as Russia three years ago, the coalition has restrained supplies to offset a surge of production from the U.S. shale industry, and keep prices supported. They embarked on a new round of cutbacks in January.

Last week, a committee of technical experts from the alliance, known as OPEC+, recommended reducing output by a further 600,000 barrels a day to offset the impact of the coronavirus. Russia, however, says it’s “studying” the proposal and its energy minister, Alexander Novak, is consulting with oil companies today.

OPEC’s latest outlook may encourage them to give greater consideration to taking additional measures.

“Clearly, the ongoing developments in China require continuous monitoring and assessment to gauge the implications,” the report said.

The burning and releasing of vast amounts of natural gas into the atmosphere in America’s top shale basin is much bigger than previously thought when processing plants are included, Rystad Energy found.

Research on the controversial practices of flaring and venting — described by shale pioneer Scott Sheffield as a “black eye” for the Permian Basin — has typically focused on emissions by oil producers at the wellhead.

But gas-processing facilities in the region are receiving more gas than they can handle, so they burned off or released about 190 million cubic feet per day of the fuel last year, raising the total by 30% to roughly 810 million, data from Oslo-based Rystad shows. That’s almost enough gas to supply 5 million U.S. homes.

“With the inclusion of estimates for gas plant-related flaring, we observe a significant increase in total Permian flaring and venting compared to our previous update,” the consultancy said in a report.

The silhouette of an electric oil pump jack is seen near a flare at night in the oil fields surrounding Midland, Texas.

Flaring has become a major source of negative attention for Permian oil producers in Texas and New Mexico as concerns about greenhouse-gas emissions and climate change grow among consumers and investors. Permian drillers burn or release the gas that comes out of wells as an unwanted byproduct because they lack pipelines to send it where it’s needed.

Rystad, a leading provider of flaring and venting data, uses information from the U.S. Environmental Protection Agency, the Texas Railroad Commission, which regulates oil and gas in the state, and its own estimates.

Ryan Sitton, one of the regulator’s three commissioners, plans to release a first-of-its-kind report on flaring next week to give the public better information. The commission’s reporting has been criticized as “outdated” and “difficult-to-manipulate” by the Environmental Defense Fund.

The dearth of good-quality data means that total flaring volumes are likely underreported, according to Rystad. Of the Permian’s 50 smallest operators, only seven posted any flaring at all, meaning there are “obvious gaps” in the data, the consultancy said.

“This implies energy regulators might need to enforce better waste gas reporting standards to ensure that the market has sufficient fact-based visibility on the total volume of flared gas in the Permian,” Rystad said.

Texas regulators have come under pressure from environmentalists and some larger oil producers for allowing the industry to burn off gas at record levels in the Permian. While safer and cleaner than letting methane vent unchecked into the air, flaring produces carbon dioxide and wastes a useful resource. Opponents say producers should not be allowed to flare at will, and should not be allowed to drill wells unless they have a plan for their gas.

Click here for more on the commission’s planned report

The Texas Railroad Commission says the increased flaring is primarily a result of surging crude production in the basin. The amount of gas flared as a portion of total production in Texas is much lower than other major oil producers such as Russia or states like North Dakota, Sitton said last week.

Still, if the Permian were a country, it would have ranked ninth for total volume of flared gas in 2018, ahead of Mexico and Angola and just behind Libya.

— With assistance by Rachel Adams-Heard

When a company pledges to cut its carbon emissions, how big a deal is it? That depends on what’s being counted. An oil company’s direct emissions – those from its trucks, drills and facilities – are only a sliver of the carbon released when the fuel it sells is burned, and an airport vowing to use wind power for its runway lights is making a much smaller commitment than if its promise covered the flights that take off there. As more investors take environmental factors into account, what had been a technical debate is taking on increased importance, as a matter of “scope.”

1. What does scope mean?

As the effort to boost green investment has grown, so have efforts to create metrics and standards for accounting and disclosure. Counting emissions isn’t as simple as tracking what comes out of a smokestack. Under what’s known as the Greenhouse Gas Protocol Standard, emissions are classed as Scope 1, 2 or 3. Scope 1 covers “direct emissions” – those from sources that are owned or controlled by a company, like those oil company trucks. Scope 2 covers emissions from the generation of energy the company buys, such as electricity or heat. Scope 3 is everything else: the emissions that come from the entire value chain.

2. What does that mean?

Scope 3 covers emissions from all of a company’s non-energy inputs, like steel for a drilling rig or cement for its buildings, and from all the uses to which a company’s products are put, like the fuel an oil company sells. It’s the complete supply chain, which means that for almost all companies, Scope 3 is far bigger than the other two scopes combined.

3. What’s the purpose of breaking it down this way?

To add meaning to company pledges about becoming more climate friendly, and to give investors more objective measures for evaluating how a company or sector is doing on going green. The hope is that disclosure will give the market the opportunity to reward or pressure companies depending on their performance.

4. Where did this approach come from?

The first investor to measure the carbon footprint of a portfolio may have been Henderson Global Investors in 2005, but the idea gained momentum following the 2015 Paris Agreement on climate change, in which countries pledged to set specific targets for emissions cuts to slow down the threat of global warming. The Task Force on Climate-Related Financial Disclosures, an industry-led group set up that year to encourage companies to put details about their environmental risks in the public domain. It encourages investors and executives to disclose the scope 1 and scope 2 emissions of their portfolios, and scope 3 “if appropriate.” (The task force was founded and is chaired by Michael R. Bloomberg, the majority owner of Bloomberg LP, the parent company of Bloomberg News.)

5. Is it working?

To an extent. Some companies are beginning to clean up supply chains that they’ve left to their own devices for decades. They’re questioning how their raw materials are manufactured and, among other things, are moving to develop greener, cleaner ways of making steel or cement and transporting goods. Vestas Wind Systems A/S, the world’s largest maker of wind turbines, promised to eliminate all waste in the production of its machines by 2040 as part of its drive to hit carbon neutrality by the start of the next decade. Big emitters like Royal Dutch Shell Plc, BP Plc and Equinor ASA have committed to carbon-emissions targets that include Scope 3, that is, the end use of the products they sell, while Repsol SA pledged to eliminate all emissions from its operations and fuel sold to customers by 2050.

6. What kind of problems are there?

Climate disclosure is voluntary, and among the companies that are making pledges on emissions, there are no requirements about what kind of scope needs to be covered. For instance, last year National Grid Plc, the U.K.’s power network operator, unveiled a plan to hit net zero emissions by 2050, but the plan only covered Scope 1 and 2, which together made up only 18% of emissions when Scope 3 was included.

7. Can that change?

Maybe. The Science-Based Targets Initiative, a non-profit group that encourages companies to set emissions targets based on the latest available scientific pathways, has said that if any member company’s scope 3 emissions account for 40% or more of its total emissions, it should set a target covering scope 3. Companies also face growing pressure from asset owners, such as pension plans and sovereign wealth funds, as well as their employees, lawmakers and activists. Money managers from Amundi SA to BlackRock Inc have pledged to use their vast resources to combat climate change. Non-profits like CDP, a U.K.-based group, are pushing for increased transparency, working with thousands of companies around the world including Bloomberg to help them be more open and better understand their environmental impact.

Europe’s second-largest gas supplier plans to keep pumping natural gas even after prices dropped to their lowest in more than a decade. The region’s benchmark slid 50% in the past year after a mild winter left inventories brimming and more cargoes of liquefied natural gas flooded the market. Yet that’s not putting off Equinor ASA, the Norwegian state-owned producer, which delivers about a fifth of the European Union’s pipeline gas imports. “If someone is hoping for supply relief coming from Norway, we will have to disappoint them,” Tor Martin Anfinnsen, the state-owned company’s senior vice- president for marketing and trading, said in an interview in Essen, Germany. “We will be the last ones to turn off the taps. We are far away from reducing flows.” The unwillingness to cut flows may seem surprising, considering that Equinor is one of the most exposed oil companies to European and US spot natural gas prices, according to Sanford C Bernstein & Co, which sees the company’s gas earnings fall by about €300mn ($326mn) in 2020 if prices don’t change from current levels. But both Equinor and its larger Russian rival Gazprom PJSC may be focusing on preserving market share as competition heats among LNG suppliers. Equinor’s gas production “is very cost-competitive,” Anfinnsen said. The company said it continues its normal practice, which is to optimize prompt versus forward markets according to demand signals within the flexibility limits under its license permits. Norway’s pipeline exports of natural gas to continental Europe and the UK fell to 107bn cubic meters in 2019 from 114bn cubic meters the year before as Equinor and other producers choose to hold back volumes amid the bad market conditions, according to Norwegian Petroleum Directorate. Benchmark next-month gas in the Netherlands has dropped to about €8.70 a megawatt-hour ($2.75 a million British thermal units), the lowest since August 2009. Norway’s marginal production cost is about €6 a megawatt-hour and Russia’s is around €8, according to six traders and analysts consulted by Bloomberg since Tuesday at the E-World conference in Essen, Germany. “Even if prices achieve levels below Norway and Russia’s marginal cost of production, these countries usually have long-term strategies for gas supply,” Frank van Doorn, head of trading at Sweden’s Vattenfall AB, said in an interview in Essen. “I am not sure if they would have a quick answer to low prices.” Even the coronavirus may weigh down on European gas if more Chinese buyers declare force majeure on LNG supplies, leaving the potential for increased imports of the chilled fuel into the region, van Doorn said. “It is hard to find a bullish factor for natural gas right now,” he said. “It can take more than two years until we see an upside move.”

BP’s pledge to zero out all its carbon emissions by 2050 deepens the divide between major European and American oil producers on climate change, increasing the pressure for Exxon Mobil Corp. and Chevron Corp. to do more.

The U.S. giants have committed only to reducing greenhouse gases from their own operations. On Wednesday, BP followed Royal Dutch Shell and Equinor in pledging to offset the carbon emissions from the fuels they sell. Known as Scope 3, the emissions from cars, homes and factories are responsible for 90% of fossil fuel pollution.

“If we do see capital flowing into BP, that may force the U.S. majors to rethink the speed at which they move on carbon reduction targets,” said Noah Barrett, a Denver-based energy analyst at Janus Henderson, which manages $356 billion.

The growing outcry against human-made global warming is increasingly making its way into mainstream business and investment strategies. It has already reshaped the way European oil producers operate by actively engaging in the transition to cleaner energy sources.

Exxon and Chevron agree with the goals of the Paris Climate Agreement, support a carbon tax and are committed to cleaning up emissions from their vast network of wells, refineries and pipelines. They joined the Oil and Gas Climate Initiative later than their European rivals but are still fully paid-up members. They even lobbied against President Trump’s plan to roll back Obama-era emission standards.

But the fundamental difference with European peers is that neither has any plan to allocate a chunk of their multibillion-dollar capital budgets toward proven low-carbon energy sources where they have no competitive advantage. The chief executives of both companies said last year that they remain committed to their core oil and gas businesses and have no plans to chase the crowd into lower-margin renewables such as wind and solar.

That puts them in an increasingly isolated position when compared with BP and Shell, whose executives have vowed to lead the energy transition.

BP went further than any other oil giant by pledging to become net zero, meaning it’s aiming to completely offset its emissions with renewable energy. Spain’s Repsol recently made a similar commitment.

Even so, environmentalists shouldn’t get their hopes up. “I don’t see Chevron or Exxon adopting a BP-like strategy in the near future,” Janus’ Barrett said. “The U.S. majors have historically been less aggressive in their shift away from traditional oil and gas.”

When asked about potentially following Shell into the power sector, Chevron CEO Mike Wirth was clear.

“It’s a business we haven’t chosen to go in,” he said in a February 2019 interview. “And it’s inherently lower-return than the other things we could invest money in.”

Chevron is investing in early-stage technologies that could aid carbon capture and energy storage, but they are small fraction of its budget.

Effectively reducing Scope 3 emissions requires a combination of well-designed policies and carbon pricing mechanisms, Chevron said in a response to questions. Exxon said Scope 3 emissions are not within its direct control, but rather a function of energy demand and consumer choices.

Exxon CEO Darren Woods sees the answer to climate change as essentially a technology problem that has not yet been solved.

The oil giant is working on proprietary technologies that would reduce emissions in areas such as aviation, heavy-duty vehicles and industrial processes. “We can bring more value in the space where we don’t know what the solution is but we need one,” Woods said in an April interview.

This approach probably will come under attack at this year’s round of annual general meetings in May. Both companies are being asked by Dutch activist shareholder group Follow This to align their strategies with the Paris agreement. Exxon is asking the Securities and Exchange Commission to exclude the proposal from the ballot, arguing it “seeks to micromanage” the company.

Chevron shares rose 0.7% on Wednesday. Exxon shares climbed 1.2%.

ABERDEEN/SINGAPORE (Reuters) – French oil major Total rejected a force majeure notice from a liquefied natural gas (LNG) buyer in China, the first global energy supplier to push back publicly against a firm trying to back out of a contract amid the coronavirus outbreak.

The move by the Chinese buyer is likely to increase concerns that Chinese importers, or even exporters of product parts to global firms, could use force majeure certificates to get out of long-term contracts, trade sources said.

Companies invoke force majeure when they cannot meet their contractual obligations because of circumstances beyond their control.

The effect is being felt in the spot crude oil and LNG market as sales have slowed into China, the world’s top energy consumer, increasing supplies and depressing energy prices.

Last week, a Chinese international trade promotion agency said it would offer force majeure certificates to companies struggling with the epidemic to give to their overseas partners.

So far, most of the applications for the certificates had been from Chinese exporters, although there were a few inquiries from importers, a source familiar the matter said.

The outbreak, which has claimed more than 630 lives and infected over 31,000 people, has forced companies to shut factories and stores across China and led to flight cancellations as governments and firms curb travel.

“Some Chinese customers, at least one, are trying to use the coronavirus to say I have force majeure,” Philippe Sauquet, head of Total’s gas, renewables and power segment, said on Thursday.

“We have received one force majeure that we have rejected.”

Sauquet did not disclose the name of the buyer.

Total has about 10 LNG cargoes due to land in China this month and at risk of force majeure, according to a person familiar with the matter. Among 35 LNG tankers scheduled to land this month, Royal Dutch Shell and Qatargas, a unit of Qatar Petroleum, also have large Chinese exposures, the person said.

Total, Shell and Qatargas did not immediately reply to requests for comment on the cargoes at risk.

China National Offshore Oil Corporation (CNOOC), which sources said is among Total’s biggest LNG customers, declared force majeure on some prompt deliveries with at least three suppliers, Reuters reported on Thursday.

CNOOC did not respond to a request for comment.

“This rift has the potential to become quite ugly because of the contractual precedent it threatens to set,” said Ira Joseph, head of global gas and power analytics at S&P Global Platts.

Guangxi Nanguo Copper, a smelter in Southwest China, on Friday also declared force majeure on copper concentrate shipments, two sources briefed on the matter told Reuters.

MISUSE?

Prices of LNG supplied from long-term contracts are currently more than double the cost of spot cargoes.

Chinese companies including CNOOC were offering to resell LNG cargoes in the spot market even before the outbreak, as they struggled to shift high inventory amid weak demand due to a slowing economy and a milder winter.

“There is a strong temptation from some long-term customers to try to play with the force majeure concept,” Total’s Sauquet said. “To say I cannot take my cargo under the long-term contract, but I would like to buy spot is contradictory.”

LNG contracts are typically governed by English law which spell out events constituting a force majeure and some may include the epidemic clause, lawyers told Reuters. Serving the force majeure notice is the first step in a drawn out process, they said.

Also, the onus to demonstrate a force majeure is on buyers to prove that they are not physically able to receive the cargo. For instance, if there are port closures or if workers are unable to get to the ports due to the virus.

“Force majeure is usually aimed at dealing with events such as unforeseen operational outages, rather than changes in broader economic circumstances, such as LNG demand or exchange rates,” said Rob Patterson, partner at law firm Haynes and Boone.

SINGAPORE: The turmoil engulfing global commodity markets deepened as China’s biggest buyer of liquefied natural gas (LNG) told suppliers it won’t honour some contracts because of the coronavirus.

In a dramatic and rare step, China National Offshore Oil Corp (CNOOC) declared what’s known as force majeure, meaning it won’t take delivery of some LNG cargoes, because the virus is constraining its ability to import the fuel. It’s among the first known cases of the legal clause being invoked in commodity contracts as a result of the epidemic.

While global markets bounce back from initial fears over the impact of the virus, CNOOC’s move shows the fallout is only deepening in the world of raw materials, which is dominated by China’s enormous appetite. Beijing’s efforts to contain the disease by shutting down swathes of the country and restricting travel are disrupting supply chains and hammering demand in the world’s biggest consumer.

The impact is reverberating around the world. Copper buyers are requesting Chilean miners postpone shipments because of port shutdowns while China’s biggest oil refiner, Sinopec Group, is likely to ask Saudi Arabia to reduce supplies of crude oil next month. Soybeans from Brazil and the United States are being held up on arrival in eastern China and Indonesian palm oil shipments are also being delayed.

For LNG, CNOOC’s force majeure hurts a market already buffeted by rising US supplies and weak demand after a mild winter in Europe and Asia. Even before Chinese buyers walked away from supply contracts, spot prices have fallen to a record low, crippling the profitability of energy giants like Royal Dutch Shell Plc and Exxon Mobil Corp.

CNOOC sent the force majeure notice to suppliers including Shell and Total SA, according to people familiar with the matter, who asked not to be identified because the matter is confidential. Shell declined to comment while Total’s press office didn’t respond to a request for comment. The French company’s chief executive said he hadn’t received the force majeure notice.

China said last week that it would offer support to companies seeking to declare force majeure on international contracts. The clause allows a company to opt out of obligations without legal recourse because of reasons beyond its control.

CNOOC isn’t the only Chinese LNG buyer affected. The country’s largest oil and gas firm, PetroChina Co, was forced to delay discharge timings for multiple cargoes because it can’t get enough workers to its Rudong, Dalian and Caofeidian LNG terminals to run them at full capacity. The company hasn’t invoked force majeure because of the delays. — Bloomberg

Tumbling industrial production in Germany and France in December rounded off a year blighted by trade war tensions for Europe’s top economies, official data showed Friday, while the novel coronavirus outbreak threatens hopes of a 2020 revival. Growth in both nations sputtered in 2019, with output actually shrinking for Germany in the April-June quarter and for France in October-December.

German growth overall slowed from 1.5 percent in 2018 to just 0.6 percent in 2019, according to preliminary data, while France did better but still slipped from 1.7 to 1.2 percent.

In December, manufacturing output was down 3.5 percent month-on-month in Germany and off 2.8 percent in its western neighbour.

In Germany, “there are very few positive elements to find in the December industrial data,” ING bank economist Carsten Brzeski said, adding that the figures point to Europe’s top economy having shrunk in the fourth quarter.

In the final months of last year, there was still widespread uncertainty about whether the US and China would bury the trade hatchet, after months of tough negotiations and tit-for-tat tariffs.

Figures released Friday showed Germany’s trade surplus — the amount exports outweigh imports — shrank slightly from 228 billion euros ($250 billion) in 2018 to 224 billion euros in 2019.

The US and China last month signed a “phase one” trade pact, designed to ease the commercial tensions whose knock-on effects last year battered European manufacturers. Meanwhile Britain’s departure from the European Union — pushing the risk of a fresh “no deal” cliff-edge back to December — also helped brighten the mood.

More positive “soft” indicators like German business sentiment surveys in Germany have prompted some analysts to see clearer skies ahead for manufacturers.

Despite December’s data, “forward-looking indicators continue to point to a modest cyclical rebound in the near term,” said Frederik Ducrozet, strategist at Pictet Wealth Management.

With Brexit and trade tensions less prominent for now, two of the main risks to growth cited by institutions like the European Central Bank have ebbed. Against that backdrop, “the coronavirus comes at a particularly bad moment,” BNP Paribas analyst William de Vijlder said.

“The global economy was showing tentative signs of a growth pick-up and, in all likelihood, this momentum will now be stopped or even reversed”.

Global efforts to contain the coronavirus will likely brake activity at companies around the world for whom China is a vital link in global supply chains — including Germany’s massive car industry.

Given that, “we doubt this will be the last of the run of negative quarters,” said analyst Andrew Kenningham of Capital Economics.

There is also little prospect that the ECB will step in to shore up growth by further opening the money sluices, analysts said.

Policymakers are already divided over its unprecedented low and negative interest rates and “quantitative easing” (QE) bond-buying scheme, and the bank has just kicked off a year-long rethink of its strategy and goals.

Low rates and meagre inflation have “significantly reduced the scope for the ECB and other central banks worldwide to ease monetary policy,” ECB president Christine Lagarde told European Parliament lawmakers in Brussels Thursday.

Instead, governments should use tax and spending changes to buttress their economies where they can, she said.

In the ECB’s assessment of the eurozone economy, “the balance of risks to the outlook will likely remain tilted to the downside until the effects of the coronavirus are better known,” Pictet economist Ducrozet said.

That “may prompt a more cautious tone from the ECB” when policymakers meet next month, he added.