Wednesday, 11 September, 2024 / Edition 24

Last week, I got to spend some time visiting Thomas Jefferson’s home, Monticello and University of Virginia. It was so fun to learn about Jefferson’s life and many of his achievements, including being the lead author for the Declaration of Independence.

Let’s dig into two pieces of energy news.

Shangyou Nie

Editor, Well Read

Bank of America Pays $205 Million For Carbon Credit Financing

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North Dakota-based Harvestone Low Carbon Partners announced last week that it has sold its future carbon credits to Bank of America for $205 million. The Wall Street Journal calls the deal “first-of-its-kind” and “one of the largest-ever investments in carbon capture.”

About the deal:

• BoA will provide Harvestone Low Carbon Partners with $205 million in exchange for future tax credits generated by carbon captured from biofuel production at a North Dakota plant.

• BoA is betting Harvestone Low Carbon Partners' North Dakota plant will continue to operate for at least a decade.

• This is the first deal of its kind since the Inflation Reduction Act went into law in August 2022.

• BoA’s support for a biofuels and carbon capture project shows increasing confidence from the financial community in CCS policy continuity, even as the U.S. presidential election approaches.

About Harvestone:

• Harvestone Low Carbon Partners is a private company, formed in 2022 by Harvestone Group and Energy Capital Partners.

• The company aims to combine biofuel production with CCS. It currently has three corn-based ethanol plants: two in North Dakota and one in Indiana.

• Harvestone Low Carbon Partners collects the CO2 and compresses it into a liquid state. It then injects and stores the liquid CO2 permanently in a deep underground geological formation via a Class VI injection well.

• Harvestone Low Carbon Partners claims it can capture all of its carbon emissions, totaling around 200,ooo tons annually, the equivalent of 42,000 gas-powered cars.

Project details:

• The deal with BoA relates to the Blue Flint Ethanol plant and CO2 capture near Underwood, North Dakota.

• Harvestone Low Carbon Partners started to capture carbon from the Blue Flint plant in October 2023 and has captured 125,000 tons of CO2 to date.

• North Dakota is one of the few states that the EPA has allowed to issue its own permits, so it can act quickly.

• The state also has favorable geological conditions close to the biofuel plants.

BoA incentives:

• Section 45Q of the IRA provides tax credits to companies that can capture and store CO2.

• 45Z provides tax credits for clean fuel, such as the biofuel produced by Harvestone Low Carbon Solutions. BoA has the option to acquire 45Z tax credits, too.

• Banks are allowed to act as brokers for tax credits.

• BoA announced in 2021 that it would join Morgan Stanley and JPMorgan Chase to achieve net-zero emissions from its financing activities by 2050.

Betting on bipartisan support:

• According to the WSJ, many carbon credit policies are likely to survive a second Trump presidency, as they enjoy broad bipartisan support.

• Much of the CCS-related tax credits go toward supporting energy and other businesses in red states.

What to watch:

• This deal might set a precedent for a new type of carbon credit market.

• Harvestone Low Carbon Partners might sign more deals for its other biofuel and CCS projects.

• Other banks/companies might follow BoA lead in tax credit financing.

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Harbour Energy Acquires Upstream Assets from Wintershall Dea

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LSE-listed Harbour Energy announced it has completed its acquisition of German company Wintershall Dea’s upstream assets, excluding those in Russia.

About the deal:

• The $11-billion deal, announced in June 2023, was financed by $4.2 billion in new Harbour Energy shares, $4.9 billion in bonds, and $2.2 billion in cash.

• The effective date for the deal is 30 June 2023.

• After the deal closes, Harbour Energy will gain 1.1 billion boe of proven and probable reserves. It will also increase its production capacity to 475,000 boed.

• Harbour Energy has upstream operations in the U.K., Norway, Argentina, Germany, Egypt, Libya, and Algeria.

About Harbour Energy:

• Harbour Energy was formed in 2014 and has a market cap of 5.3 billion British pounds (or $6.9 billion).

• The latest acquisition represents the fourth and “most-transformational acquisition,” said Linda Cook, Harbour Energy CEO.

• Harbour Energy acquired U.K. assets from Shell in 2017, ConocoPhillips’ U.K. assets in 2019, and U.K. independent oil company Premier Oil in 2021.

• Harbour Energy is the U.K.’s largest oil and gas producer.

• Harbour Energy has updated its full 2024 production guidance to 265,000 boed. This includes four months of contribution from Wintershall’s assets.

• Going forward, Harbour Energy will have 475,000 boed production.

• With the acquisition, Harbour Energy’s portfolio will be 55 percent gas, a 13-percent gain in gas.

About Wintershall Dea:

• Wintershall Dea is owned by German chemicals giant BASF and Luxembourg holding company LetterOne.

• Wintershall Dea said that about 800 employees will be affected by the deal.

• After the transaction, BASF will own 46.5 percent of Harbour Energy shares. It owned 72.7 percent of shares in Wintershall Dea.

Why it matters:

• This is one of the largest upstream M&A deals in Europe over the last three years.

• The U.K. government has introduced a windfall tax of 75 percent for U.K. producers in the North Sea, leading some upstream companies to exit the U.K. or consolidate.

• Chevron is reportedly divesting its remaining assets in the U.K.’s North Sea.

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✉️ To get in touch with Shangyou, send an email to editorial@aapg.org.