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Vitol bolsters electric transportation footprint with BYD, Singapore deals

22 September 2021 Keiron Greenhalgh

Commodity trader Vitol, best known for its crude oil and petroleum products activity, added to its footprint in electric transportation in the past few days. The company has growing investments elsewhere in the energy transition too, including in wind, solar, renewable natural gas, and hydrogen.

The Geneva, Switzerland-headquartered Vitol and Chinese electric vehicle (EV), rechargeable battery, and energy storage system manufacturer BYD said 22 September they had formed a partnership to provide electric fleet mobility in various unnamed markets.

The companies are promising to offer municipal, corporate, and other fleet operators "a comprehensive solution including [EVs], charging infrastructure and depot design."

Vitol and BYD have committed an initial $250 million to the initiative. "Fleet owners are looking to minimize emissions and our proposition enables them to do so with minimal capital outlay and outsourced operational risk," said Vitol Head of Renewables Andrew de Pass.

The partners intend to grow their EV fleet "tenfold in the coming years," de Pass said.

When announcing the partnership, Vitol said it was also in the process of deploying more than 300 electric buses in Bogota, Colombia, and "is seeking additional opportunities in South America and further afield."

The BYD deal "is the strongest indication yet that Vitol is seeking exposure to all forms of low-carbon transportation, having already invested in projects in sustainable aviation and shipping fuels," IHS Markit Associate Director Christopher Elsner said.

"The deal with BYD marks a dramatic escalation in capital commitment from its current EV portfolio," he added.

Bunkering

In Singapore, meanwhile, Vitol's bunker operations company, V-Bunkers, placed an order to build two electric-hybrid bunker tankers. Bunker tankers provide fuel to maritime vessels before voyages transporting cargo across the globe.

V-Bunkers intends to deploy the two bunker tankers for harbor operations in Singapore, which is the world's busiest bunkering location. Delivery of the first of the two bunker tankers is expected in the second half of 2022, Vitol said. The company said its bunker tankers would be the first of their kind deployed in Singapore.

The bunkering announcement is consistent with previous energy transition investments in shipping, including the launch of carbon offsets for marine customers, said IHS Markit's Elsner.

The fuel provided by bunker tankers to ships has been undergoing its own transformation in recent years.

Starting 1 January 2020, the global upper limit on the sulfur content of ships' fuel oil was reduced to 0.50% from 3.50% for vessels operating outside certain designated Emission Control Areas. In those areas, though, the limit was already 0.10%.

And tougher regulations may be on the way, especially in Europe.

Shipping companies operating in the EU would need to start buying a meaningful level of emissions allowances for the first time under the proposed "Fit for 55" legislation. Shipping operators would be required to obtain EU emissions trading system allowances for a portion of their emissions for intra-EU voyages starting in 2023, but they would ultimately need to obtain them for all emissions after a four-year phase-in period.

A major European shipping trade body is among those lobbying against the EU's proposed Paris Agreement-aligned net-zero pathway.

The changes hold the potential for a speedier switch to hydrogen, biofuels, ammonia, methanol and perhaps LNG as the fuel for vessels instead of fuel oil.

Energy transition

Transportation accounts for over 60% of oil demand, Vitol said in its first annual environmental, social and governance (ESG) report, released in May.

In 2020, Vitol traded 7 million barrels of crude oil and refined products traded each day. The company calls itself the world's largest independent trader of energy, trading more than 1,000 TWh of power, 838 TWh of natural gas, 10 million metric tons (mt) of LNG, and 106 million mt of carbon in 2020, according to Vitol documents.

Some 47% of the company's sales in 2020 were crude and at least 40% were petroleum products including distillates, gasoline, and fuel oil.

However, the company noted in its 2020 results statement in April that public transport is "likely to be electrified in the near future" and so Vitol is investing in EV fleets such as municipal buses, corporate fleets and taxis, in developed and emerging markets.

Vitol said it anticipates a shift in energy demand away from liquid hydrocarbons towards power, and, as a result, its renewable power investments are growing. "To date we have committed over $1 billion of new capital to identified projects in this sector," it said.

"The energy transition requires our business to change. We continue to believe that demand for oil will not peak for another decade, but nonetheless we must position our business for a lower emissions world," it added.

The company owns a 240-MW wind farm in Illinois and has invested in opportunities in the sector in Europe, including in Ukraine. It also has solar, LPG, renewable natural gas, and biofuels interests.

In addition, the company owns the Immingham natural gas-fired power plant on the east coast of England that is part of carbon capture and storage efforts in the Humber region.

Developing countries, where Vitol already has a substantial footprint, are also in the company's energy transition sights.

In August, Sudan's minister of energy and oil, Jaden Ali Obaid, met with Vitol to discuss renewable energy investments in the country and expanded petroleum product deliveries, according to Suna, the state-owned news service. Vitol wants to build 100-200 MW of solar capacity in Sudan, Suna said. Vitol is the largest supplier of imported diesel in Sudan.

And in Morocco, Vitol is to manage the HEVO project's offtake of green ammonia. HEVO is the country's largest green hydrogen and green ammonia project to date. In addition to the green ammonia, the $850-million facility is expected to produce up to 31,000 mt/year of green hydrogen.

Also in the green hydrogen space, Vitol in April acquired a 10% stake in Gen2 Energy. The Norwegian project developer will use hydropower in its homeland to produce green hydrogen. The company's first site in northern Norway, which is scheduled to be online by December 2023, will have an electrolysis capacity of at least 80 MW and a hydrogen output of 11,700 mt/year. A facility with a 300-MW capacity in the southwest of Norway is on the drawing board.

Rivals

Some of Vitol's commodity trading rivals are heading down a similar path as entrepreneurs sensing the opportunities in the energy transition.

Mercuria, which is also based in Geneva, said in March that 50% of its new investments over the next five years will involve the energy transition.

The trader made the commitment as it announced an investment of undisclosed size in The Mobility House, which Mercuria said integrates EVs "intelligently" into the energy system.

Then, on 2 September, Mercuria acquired a 20% stake in New Zealand's largest EV charging network, ChargeNet, for an undisclosed figure. Steve West, ChargeNet's CEO, said in a statement announcing the deal that Mercuria's investment would provide it with the capital required to "significantly accelerate its growth strategy."

Another of Vitol's commodity trading rivals, Trafigura, is focusing on solar and hydrogen in its energy transition investments so far.

Trafigura's Nala Renewables joint venture aims to develop 2 GW of solar, wind and power storage projects globally. The foundation stone of the plan is 250 MW of Trafigura Group renewable energy projects currently in the pipeline. Trafigura also owns part of renewable energy developer PASH Global.

In the hydrogen sector, Trafigura has an equity stake in start-up Hy2gen. The German-based company brings together specialists with experience of developing, building, and operating plants for the production of green hydrogen and hydrogen-based e-fuels, according to Trafigura.

Trafigura invested in H2 Energy, which is working on use of hydrogen in heavy duty transportation. Trafigura also invested in in OneH2, a US provider of hydrogen fuel supply and logistics solutions.

Posted 22 September 2021 by Keiron Greenhalgh, Editor, Climate & Sustainability Group, IHS Markit

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