PM — How much can carbon capture do for net zero targets?

Good afternoon, friends, and happy almost-THURSDAY. It’s another busy news day on the home and international fronts.

THE BIG STORY TODAY

Shell subsidiary BG Egypt is acquiring a 100% stake in ExxonMobil’s North East El Amriya offshore block, according to a press release (pdf) from Shell. BG will become the sole operator of the block once the acquisition is complete. It plans to begin drilling the first well during 1H2023.

^^We’ll have more on this story and others in tomorrow’s edition of EnterpriseAM.

THE BIG STORY ABROAD

It’s official: Finland and Sweden handed in formal applications to join NATO this morning. In a dramatic turn of events, Russia’s invasion of Ukraine has pushed the two countries to abandon their longtime military neutrality in a move that could reshape the European security architecture for decades to come. “This is a historic moment, which we must seize,” NATO Secretary-General Jens Stoltenberg said, according to Reuters. “I warmly welcome requests by Finland and Sweden to join NATO. You are our closest partners, and your membership in NATO will increase our shared security," he added.

But will Turkey block their bid? Turkish President Tayyip Erdogan has surprised the allies by saying he would not approve the two countries’ membership, in objection to them hosting members of groups deemed terrorists by Turkey — namely, the Kurdistan Workers’ Party (PKK). The potential enlargement needs to be unanimously approved by all 30 of NATO’s members, a process that could take up to a year.

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HAPPENING NOW-

The European Commission is about to unveil its EUR 210 bn plan to phase out Russian gas over the next four years by looking to other suppliers (like Egypt) and quickening its transition to green energy, Reuters reports, citing draft documents it has seen. The plan should outline where the EU plans to get its alternative fuel, whether from Egypt, Israel, or Nigeria, as well as the infrastructure needed to circumvent Russia, according to the newswire. The EU has been rethinking its reliance on Russian energy sources since its invasion of Ukraine, but some hurdles — including Hungary’s refusal to back the embargo — have left the phase-out plan’s fate uncertain.

Egypt has been in talks with the EU over increasing LNG imports for months now, and Italian energy firm Eni has already signed an agreement to boost Egyptian LNG exports to Europe by boosting its gas production here. We’re a strong option given our prime location just across the Med; our 2018 discovery of the largest gas field in the region; two operating liquefaction plants; and a pact to bring in Israeli gas from our neighbors’ massive offshore fields.

SEPARATELY- UN chief Antonio Guterres is expected to disclose later today his efforts to bring Ukrainian grain back to global markets after months of disruption due to the war, Reuters reports, citing UN officials. Guterres is reportedly in talks with Russia, Ukraine, Turkey, the US, and the EU to restore grain shipments from Ukraine and revive fertilizer exports from Russia and Belarus. Guterres is expected to discuss this at the Global Food Security Call to Action ministerial meeting hosted by US Secretary of State Antony Blinken later today. Blinken is also set to chair a Security Council meeting on conflict and food security tomorrow.

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** CATCH UP QUICK on the top stories from today’s EnterpriseAM:

• The draft of the government’s ownership policy just leaked: The government intends to fully withdraw from as many as 79 industries over the next three years as part of plans to restructure the economy in favor of the private sector, according to a leaked draft of its state ownership policy.
• Software startup Instabug has raised USD 46 mn in series B funding to build a mobile observability and performance monitoring platform to help provide more complex insights into mobile bugs for app developers.
• Automobile manufacturer Stellantis is interested in assembling electric vehicles in Egypt and is considering establishing a factory to produce EVs for the local and overseas markets.

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FOR TOMORROW- The Central Bank of Egypt will likely raise interest rates when it meets tomorrow, according to a near consensus of analysts and economists we surveyed last week. Six of the seven respondents see the Monetary Policy Committee going ahead with a rate hike to combat inflation and stem portfolio outflows, with five forecasting rates to rise by up to 200 bps.

???? CIRCLE YOUR CALENDAR-

Work on the Grand Egyptian Museum will be fully complete by September: Construction of the long-awaited Grand Egyptian Museum (GEM) is set to finish by 30 June, the Tourism Ministry said earlier this week. Work on the interior of the EGP 20 bn museum will be finalized by the end of September, it added. It stopped short of naming an inauguration date, but a tourism official said last month that the GEM would launch in the fourth quarter of this year.

PSA: Tourism registration for Hajj has been extended: You can now register for this year’s Hajj through tourism companies until next Monday, 23 May, after the deadline was pushed from this Friday, 20 May, the Tourism Ministry said in a statement.

The Islamic Development Bank will hold its 2022 annual meetings in Sharm El Sheikh from 1-4 June under the slogan “post-pandemic recovery: resilience and sustainability,” according to a statement from the Planning Ministry. Several Egyptian ministries and representatives from the bank’s 57 member countries and other financial institutions are set to attend the meetings.

Venture capital 101: The Egyptian Private Equity Association (EPEA) is hosting a paid crash course in all things venture capital at the Zamalek Marriott on 21-23 May. Led by Avanz Capital Egypt MD Hany Assaad, the three-day course will cover everything you need to know about Planet VC, from fund structures and portfolio-building to due diligence and valuations.

Check out our full calendar on the web for a comprehensive listing of upcoming news events, national holidays and news triggers.

☀️ TOMORROW’S WEATHER- It’ll be a warm day tomorrow, with the mercury forecasted to rise to 36°C during the day before falling to 23°C during the night, according to our favorite weather app.

EPL fans worry that American ownership of their top clubs will lead them astray: As Chelsea’s sale to US businessman Todd Boehly nears, the English Premier League could soon see more than half of its teams backed by US owners, according to Bloomberg. American ownership of the teams has long been a contested idea, with English fans wary of the US owners who seem to prioritize their bottom line as opposed to the game itself or the success of the team. Their insistence on significant returns on investment can often lead these US-backed teams to pour less into signing expensive players and coaches and developing the team so that they rank high on the league tables, sports insiders and consultants tell the newspaper.

And the fans do have evidence to back their point: Where Arsenal and Manchester United are owned by Americans, Manchester City FC is backed by UAE Deputy Prime Minister Sheikh Mansour bin Zayed Al Nahyan and Chelsea was bankrolled by Russia’s Roman Abramovich. The two US-backed clubs have been struggling in recent years, while Chelsea and Manchester City have together taken home seven of the last 10 EPL titles. Arsenal and United have seen their fans protest in the past few years over the state of the management while an outcry waved over Europe last year over several of the US-backed teams’ idea of rolling out the Super League. There are caveats to the trend of course, with US-owned Liverpool doing well lately, now competing for the top rank during this season.

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The cost of treatment for the world’s most severely malnourished children is set to rise 16% amid the global food crisis sparked by Russia's invasion of Ukraine and pandemic disruptions, UNICEF warned. The essential treatment, named ready-to-use therapeutic food (RUTF), is a high-energy paste made of ingredients including peanuts, oil, sugar and added nutrients. UNICEF needs an additional USD 25 mn in funding in the coming six months to avoid a scenario where 600k children miss out on RUTF. Around 13.6 mn children worldwide under five years old require this type of treatment and even before the war and pandemic, two in every three did not have access to the therapeutic food needed to save their lives.

???? ON THE TUBE TONIGHT-

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Egyptian-Canadian actor Mena Massoud’s Netflix romcom makes for a light late night watch: In a Hallmark-esque romcom, The Royal Treatment follows Massoud, who plays Prince Thomas of the fictional country Lavania. The prince has his whole life arranged for him, including his upcoming wedding to the daughter of a rich Texas family. However, when he visits New York, he meets Italian hairdresser Isabella (or Izzy) and is immediately smitten. Thomas’ butler decides to play Cupid and brings Izzy and her friends to Lavania to do hair and make up for the royal wedding and while there sparks fly between the two characters. Don’t expect many surprises when it comes to the plot — the film sticks to the mainstream character archetypes that are seen in so many Netflix romance films — but the flick is a low-effort way to wind down your day.

⚽ Al Ahly faces the National Bank in the Egyptian Premier League at 8pm tonight. Al Ahly is currently in third place in the league rankings, with eight points behind leaders Zamalek but having played five fewer games.

Europa League Final: Tonight, Germany’s Eintracht Frankfurt will meet Scotland’s Rangers in the Europa League final at 9pm. The two teams had a long journey to reach the final stage of the tournament, as Eintracht Frankfurt beat Barcelona, West Ham and Real Betis, while Rangers eliminated teams such as Leipzig and Borussia Dortmund.

???? The round of 16 continues tonight at the CIB-sponsored PSA world squash championships at SODIC’s Club S Allegria and at the National Museum of Egyptian Civilization.

In the women’s category: We have two matches at 6:45pm — Hania El Hammamy (Egypt) v Georgina Kennedy (England) and Sivasangari Subramaniam (Malaysia) v Nour El Tayeb (Egypt), followed by Nour El Sherbini (Egypt) v Tinne Gilis (Belgium) and Sarah-Jane Perry (England) v Sabrina Sobhy (USA), both at 8:15pm.

In the men’s category: Egypt’s Youssef Soliman and Peru’s Diego Elias go head-to-head at 7:30pm, and we have an all-Egyptian showdown at the same time between Ali Farag and Youssef Ibrahim. At 9pm, we have Mostafa Asal (Egypt) v Saurav Ghosal (India), as well as Marwan ElShorbagy (Egypt) v Nicolas Mueller (Switzerland).

???? OUT AND ABOUT-

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Mazaher Ensemble is taking the stage at the Egyptian Center for Culture & Arts at 8pm tonight. The music of Mazaher is inspired by the traditional art of Zar music. Led by three women, Um Sameh, Um Hassan, and Nour el Sabah, their performance unfolds through rich poly-rhythmic drumming, with songs that are distinctly different from other types of Egyptian music.

???? UNDER THE LAMPLIGHT-

On Earth We’re Briefly Gorgeous is a raw and soul-crushingly elegant read. The coming-of-age story — written in the form of a powerful letter from a son to a mother who cannot read — of a young immigrant trying to discover his place in his new country, the love between a single mother, and a poetic exploration of race, class, and masculinity. The writing, the characters, and the setting are unrelenting in their pain, reality and loveliness. In his debut novel, poet Ocean Vuong looks into how we can heal without sacrificing who we are, and how to create joy out of our survival.

EARNINGS WATCH-

Orascom Development Egypt’s bottom line rose 5.8% y-oy in 1Q2022 to EGP 463.71 mn, according to the company’s financials (pdf). Revenues rose 32.3% y-o-y to EGP 1.93 bn.

MARKET ROUNDUP-

The EGX30 rose 0.3% at today’s close on turnover of EGP 644 mn (25.5% above the 90-day average). Local investors were net buyers. The index is down 12.4% YTD.

In the green: Ibnsina Pharma (+3.2%), Orascom Development Egypt (+2.0%) and MM Group (+1.5%).

In the red: Rameda (-1.8%), Fawry (-1.8%) and Elsewedy Electric (-1.5%).

The pros and cons of carbon capture and storage: While carbon capture and storage (CCS) is being hailed as a pathway that could help the world limit global warming to 1.5°C, the new technology can’t do the job by itself, Financial Times correspondents explain in this short film (watch, runtime: 21:31).

CSS? CSS refers to the process of capturing carbon dioxide (CO2) formed during power generation and industrial processes, and storing it underground or under the seabed where it isn’t emitted into the atmosphere.

The use of CSS needs to be expanded dramatically for it to make a difference: As of 2021, there are 27 fully operational CSS projects being operated worldwide with around 100 more in the works, according to a report (pdf) by the Global CSS Institute. These facilities captured around 40 mn tonnes of CO2 during the past year. However, if we depended on CSS alone to keep us under the 1.5°C benchmark, this figure would have to increase to 1.7 bn tonnes by 2030 — or a 40x increase over the next eight years.

This comes with a huge price tag: The needed infrastructure and technology for CCS is both complex and expensive. For example, a CCS project launched in Norway was expected to cost the country USD 2.6 bn. Add to this the operating costs as well as the cost for capturing each ton of carbon, which can range anywhere from USD 15-120 per ton depending on the CO2 source, and the costs start mounting fast.

Here’s where CCUS comes in: In order to make the economics more attractive, there’s also CCUS — or carbon capture, usage, and storage. CCUS gives the captured carbon a commercial use by reusing it in industries such as soda, fertilizers, plastics, and oil and gas.

Oil and gas are the largest implementers of CCUS, which makes the entire concept a bit counterproductive. The biggest use of captured CO2 is enhanced oil recovery which is when captured carbon is injected into a reservoir to create more fuel and releases more carbon in the process.

Which brings us to the biggest issue with both CCS and CCUS: the potential of prolonging the use of fossil fuels. It’s no surprise that the oil and gas sector is one of the biggest proponents and investors in these kinds of projects as the technology poses an expensive but effective way to reduce emissions. Fossil fuel producers could use CCS and CCUS as a quick fix and ensure they can fly under the radar during the green revolution without overhauling their operations. This could delay the transition to renewables as massive investments are poured instead into these technologies. Moreover, even if the oil and gas industry reduces enough CO2 to cover the manufacturing process of producing fuel, 90% of the sector’s emissions are derived from the consumption of hydrocarbons.

And there are question-marks over safety: With more carbon capture pipelines being proposed in the US, a report this year highlighted the potential dangers that come with transporting CO2 and cast doubt on whether current regulations are able to prevent them from endangering human health and the environment.

Nonetheless, it can be an effective solution depending on how it’s rolled out: Since the world isn’t ready to completely dispose of dirty energy, carbon capture can be an effective way to reduce emissions from polluting industries. However, it’s important to deploy carbon capture in parallel with other sustainable solutions such as blue hydrogen, green hydrogen, wind energy, and solar energy.

Egypt is on track to debut its own carbon capture projects: Egypt’s Oil Ministry and Italian energy firm Eni will announce joint CCUS initiatives at the upcoming COP27 summit in November.

And we have the perfect place for them: An efficient way to set up CCS and CCUS infrastructure is to create hubs or clusters where several highly-industrialized companies share the technology — and share the costs. In recent years, Egypt has been moving forward with the introduction of industrial zones, which could be ideal places to roll out carbon capture projects, offering a group of companies access to the technology without them having to bear the high costs of setting it up.