Emerging Markets Daily - May 18

IEA Says No New Oil or Gas Projects to Reach Net Zero, China Oil Town Going Green, China Mobile to List in Shanghai After NYSE Eviction, Invesco Sees EM Recovery, Argentina Natural Gas

The Top 5 Emerging Markets Stories from Global Media - May 18

  1. Energy Firms Must Stop All New Oil, Gas Projects to Go Net Zero by 2050, IEA Says - “A Knife in the Fossil Fuel Industry”: Analyst

    Financial Times

    Energy groups must stop all new oil and gas exploration projects from this year if global warming is to be kept in check, the International Energy Agency said. The proposal is part of a scenario outlined in a report on ways to achieve net zero carbon dioxide emissions by 2050, a prerequisite to meet the Paris climate accord goal of limiting global warming to 1.5C above pre-industrial levels.”

    “Aside from drastically cutting fossil fuel consumption, an unprecedented jump in spending on low carbon technologies would also be required — around $5tn in energy investments per year by 2030, up from around $2tn today, the report said.  ‘We need a historical surge in investment,’ said Fatih Birol, head of Paris-based IEA on Tuesday, adding that this would add 0.4 per cent annually to GDP growth. ‘The bulk of it needs to be in clean energy.’”

    “The IEA’s Net Zero report comes as the institution founded in 1974 as the oil watchdog for Western countries has faced pressure from climate activists to produce a road map to the target. It details an overhaul of energy supply and demand whereby coal demand would plunge by 90 per cent, gas demand would halve and oil demand would shrink nearly 75 per cent by 2050.” 

    “Dave Jones, analyst at the climate think-tank Ember, said the report’s call to halt new oil and gas exploration was extremely surprising given the agency’s history.  ‘I don’t think anyone expected this from the IEA. It is a huge turnround on their part,’ he said. ‘It has been very pro-fossil, so to come out with something like this is just amazing . . . This is truly a knife in the fossil fuel industry.’

    “The majority of the global economy is subject to some form of net zero emissions target, which means eliminating virtually all carbon dioxide emissions and compensating for the rest through carbon removal programs.” Leslie Hook and Anjli Raval report.

  2. The Birthplace of China’s Petroleum Industry is Going Green

    Bloomberg

    “In a town on the edge of the Gobi desert is a sign in English and Chinese that reads ‘Oil Holy Land.’ Nearby, a preserved drilling rig marks the spot of China’s first commercial oil well.”

    “All around, coated in snow on an April morning, are streets of abandoned buildings, their rooms littered with trash, torn wallpaper and broken furniture and smashed window panes.”

    “This is Yumen, ‘the cradle of China’s oil industry’” that has become a totem for China’s changes over the past four decades—from a time of sacrifice and ideology to one of entrepreneurs and the pursuit of wealth, from the old economy to the new, from fossil fuels to renewable energy.”

    As the old town dies, a new city center is rising an hour and a half’s drive to the west, on a fertile oasis by the old Silk Road. Here are wide streets, new schools and apartment blocks and optimism. Instead of oil derricks and nodding donkeys, the flat plains around New Yumen are covered with rows of wind turbines and fields of solar panels.”

    “The contrast has made Yumen a byword for energy transformation, a town that shrugged off the mantle of oil and embraced the future. But the reality is not so simple.” Bloomberg News reports

  3. China Mobile to List in Shanghai as NYSE Eviction Takes Effect

    Nikkei Asia

    “China Mobile, the largest telecommunications carrier in the world by subscribers, said it will list its shares in Shanghai following the company's forced delisting from the New York Stock Exchange.”

    “The company, whose shares also are listed in Hong Kong, announced late on Monday that its board had approved a plan to issue new yuan-denominated shares that will trade on the main board of the Shanghai Stock Exchange. The company is planning to issue up to 964.81 million shares, or 4.5% of the expanded shareholder base.”

    “…Given that the pricing mechanism in mainland China is structurally different from Hong Kong, the eventual issue size could vary, but China Mobile's listing could be the largest in years in the mainland and compete with a listing being prepared by rival China Telecom.” Kenji Kawa Se reports

  4. EM Will Overcome Covid Spike, Invesco Says

    “Some relief may be in sight for countries battling spikes in Covid. A major Wall Street firm expects vaccines will be a game changer for emerging markets and help them participate in a broad-based economic rebound by next year.”

    ‘It’s all a matter of timing. Certainly, these are obstacles. But they are short-term in nature,’ Invesco chief global market strategist Kristina Hooper told CNBC’s ‘Trading Nation’ on Monday. ‘We should see a strong reopening trade because of emerging markets countries.’”

    “While the U.S. and Europe rev up vaccinations, other countries are struggling to keep Covid-19 and its new strains at bay. India and Singapore are among the latest hot spots. ‘This reopening is going to occur around the world. It’s just happening sequentially depending upon how countries have been able to control Covid-19,’ said Hooper.”

    Near term, she sees the United States’ economic rebound as the strongest globally. In the second half of the year, she believes, other developed nations will strengthen. ‘We’re already starting to see signs of European stocks performing better and outperforming other parts of the world,’ added Hooper. ‘I think that continues over the next several months as a strong reopening is anticipated and as these economies accelerate.’”

    “She considers Carnival’s plan to resume cruises in Europe and the Caribbean this summer as a bullish sign of a sustainable global economic rebound. Hooper believes elevated household savings paired with pent-up demand will fuel the expansion.” Stephanie Landsman reports.

  5. Argentina's Natural Gas Producers Seeking to Expand Regional Exports Before Going Global

    S&P Global

    Argentina's natural gas producers are looking to step up output to increase exports to neighboring countries over the next few years, but exporting large amounts of LNG globally may take another decade as the country's economic crisis deters investment, senior executives said May 17.”

    “Argentina has about 20 million cu m/d of cross-border pipeline capacity built in the late 1990s and early 2000s to deliver gas to Brazil, Chile and Uruguay, which ran at nearly maximum use in those years. A subsequent decline in production, however, stifled the exports for more than a decade until output growth resumed in 2014. Exports averaged 2.8 million cu m/d on average in 2020, down from 4.2 million cu m/d in 2019, according to Energy Secretariat data.” Charles Newbery reports