Brookfield to invest up to $1.1bn in e-fuels start-up Infinium #NewsMarket

Good morning and welcome back to Energy Source, coming to you from New York and Oslo.

It is a big day in the US, where Donald Trump and Kamala Harris will face off in a presidential debate that could set the tone for the final eight weeks of the campaign. Energy and climate policies are unlikely to get top billing, despite Trump’s attempts to paint Harris as a policy “flip-flopper” due to her U-turn over a fracking ban, according to my Financial Times colleagues, who have written this helpful guide. But energy executives across the world are sure to tune in to see if they can get any more details on the two candidates’ platforms and how it could have an impact on their businesses.

Today’s item by our Nordic and Baltic correspondent Richard Milne poses the question: when should Norway cease oil and gas production?

But first we have an exclusive story on how Canada’s Brookfield is investing in e-fuels, an innovative technology that holds potential in decarbonising the heavy-duty transport sector.

Thanks for reading,

Jamie

Brookfield investment marks ‘big milestone’ for e-fuels market

Brookfield is venturing into the fledgling e-fuels market, ploughing up to $1.1bn into California-based start-up Infinium, among the largest financial backings to date for sector.

Under the deal, the Canadian asset manager will invest $200mn into Infinium and its e-fuels project in West Texas called Roadrunner, with up to an additional $850mn available for future projects from the start-up.

E-fuels, created by combining hydrogen produced via renewable electricity and captured carbon dioxide, are chemically identical to traditional fossil fuels and can help decarbonise shipping and aviation.

Robert Schuetzle, chief executive of Infinium, called Brookfield’s investment a “big milestone” for the e-fuels market “to show that this type of capital can commit to projects that are of this flavour.”

Infinium operates one of the first e-fuels projects in Corpus Christi, Texas. Roadrunner, its second project, is also backed by Bill Gates and aims to start operations in late 2026.

The e-fuels market has faced a bruising year as slow demand and steep costs for production force developers to scrap projects. S&P Global Ratings estimates that e-fuels are two to six times more expensive to produce than their biofuel and traditional fossil fuel counterparts. Earlier this year, Shell and Ørsted pulled out of their e-fuels projects in Europe.

“This was an area we’ve always been interested in. The challenge has been, historically, the output,” said Jehangir Vevaina, managing partner at Brookfield. “Folks were unable to find contracts.”

Infinium must meet certain metrics to receive funding under the deal, including securing long-term offtake agreements. The company has already entered a contract with American Airlines for e-sustainable aviation fuels, or e-SAFs, produced from Roadrunner.

Policy mandates in the EU and incentives in the US Inflation Reduction Act have helped boost the development of e-fuels. BloombergNEF expects 1bn gallons of capacity to come online in Europe and North America by the end of the decade, the vast majority of global forecasted supply.

“Renewable fuels, in particular e-fuels, come at a cost premium, so they will need to rely on regulatory support to make them affordable,” said Rose Oates, an analyst at BNEF.

The International Energy Agency called on governments to take “bolder action” to stimulate demand for e-fuels and close the cost gap, estimating last year that only 4 per cent of projects had reached final investment decisions.

“It’s going to be difficult to get project financing generally for hydrogen projects. As an e-fuels project, that’s not going to make it any easier, unless you’ve managed to source an offtaker with a very high willingness to pay,” said Murray Douglas, vice-president of hydrogen research at Wood Mackenzie. “Everyone’s looking for the same unicorn.” (Amanda Chu)

Norway debates when it should stop oil and gas production

Should Norway be one of the first or one of the last countries to stop producing oil and gas?

That is the fevered debate taking place in the rich Scandinavian country amid business, political and environmental pressures facing western Europe’s leading petroleum producer.

The case for pumping as much as possible as long as possible is, unsurprisingly, made by the industry as well as many politicians.

“We need to explore more, find more [oil and gas]and build out more,” Karl Johnny Hersvik, chief executive of Aker BP, said late last month at Norway’s biggest petroleum trade fair.

Norway’s largest independent oil producer is investing $19bn with partners in new projects until 2028, but Hersvik is also calling for a “crisis package” to increase activity and provide enough work for suppliers in the oil services industry.

In the other camp, of equally little shock, are environmentalists who argue that Norway should show the world how to phase out oil and gas and move to greener industries.

The Green party, a relatively small force in Norway compared with neighbouring Sweden or Germany, want to stop all petroleum production by 2040 and end new exploration today.

Arild Hermstad, leader of the Greens, has said that the petroleum industry has a clear strategy: to “slurp up the last drop of oil in all the fields on the Norwegian continental shelf”.

At stake are considerable sums of money, Norway’s future business model and its reputation.

Phasing out oil and gas by 2040 could cost Norway up to NKr2,000bn ($185bn) in the next quarter-century in the worst-case scenario, according to newspaper Dagens Næringsliv. That is a price worth paying, counters Hermstad, for being “part of the climate solution, rather than the problem”.

Both production and investments are expected to fall gradually in Norway in the coming years. But the exact pace of that decline has enormous consequences for Norway.

The Norwegian Offshore Directorate, the state body designed to extract the most value from oil and gas, estimates that in a low price/low activity scenario just NKr3,000bn would be produced from petroleum activities by 2050; a high price/high activity setting would result in NKr18,000bn. The difference of $1.4tn is not far off the size of Norway’s giant sovereign wealth fund, itself built on 30 years of petroleum revenues.

That in turn hints at the difficulties in weaning Norway off oil. The Norwegian government is allowed to take about 3 per cent of the oil fund each year in its annual budget. The fund’s huge size means that current contributions account for more than a fifth of Norway’s state budget.

Oslo has been mostly successful in avoiding “Dutch disease” — the crowding out of other industries by the petroleum sector — but many worry about something more insidious. Norway spends more money on sickness and disability benefits than any other developed country and three times more than the average among OECD nations, according to the Paris-based organisation.

“I’m worried about ‘Norwegian disease’. What comes after oil? What damage do we do before that?” asks one leading Norwegian business person.

There is also the reputational issue. Norway argues that its oil and gas are produced with the lowest emissions per barrel, and that in a world where much energy is under the control of autocrats from Russia to the Gulf, it is the “democratic” supplier of choice. It also promotes its own green spending, including generous incentives for consumers that led to 94 per cent of new cars sold in August being electric.

But the country remains vulnerable to charges that becoming more aggressive in oil exploration and production now — even as the International Energy Agency says no new petroleum fields are needed — risks being viewed negatively in the global court of opinion. Insisting that poorer but dirtier producers of oil stop production first rather than wealthy Norway could also be a tough sell.

Norway’s balancing act between being a leading petroleum producer and an advocate for the green transition is likely to get tougher with time. (Richard Milne)

Power Points

Energy Source is written and edited by Jamie Smyth, Myles McCormick, Amanda Chu, Tom Wilson and Malcolm Moore, with support from the FT’s global team of reporters. Reach us at [email protected] and follow us on X at @FTEnergy. Catch up on past editions of the newsletter here.