TheChek News Flow

DAX:

MDAX:

SDAX:

Donald Trump’s EU oil and gas deal is ‘pie in the sky’, energy experts warn

Analysts dismiss plan but executives welcome sign of more support for fossil fuel exports

Brussels’ vow to buy $750bn of American energy as part of a new US-EU trade deal will be impossible to meet and is based on “pie in the sky” numbers, experts have warned, even as producers said it could boost sales.

The deal, announced by President Donald Trump and European Commission president Ursula von der Leyen on Sunday, requires EU companies to buy $250bn worth of US oil, natural gas and nuclear technologies for each of the next three years.

Analysts were puzzled by a target that would involve decisions by shareholder-owned companies in a continent also trying to decarbonise its economy.

“Even if Europe did want to increase its imports, I don’t know the mechanism by which the EU goes to these companies and tells them to buy more US energy,” said Matt Smith at energy consultancy Kpler.

The numbers were “pie in the sky”, he added. “Companies are beholden to their shareholders and have a duty to buy the cheapest feedstock.”

The announcement on Sunday put energy at the heart of a trade deal Trump claimed was one of the most significant ever, averting a looming tariff war between two of the world’s biggest economies.

Trump has touted an era of American “energy dominance” based on “unleashing” fossil fuel output, although drilling in the prolific shale oil and gas sector has slowed since he returned to the White House.

Shares in US energy companies rose on Monday on news of the EU deal, which could buoy liquefied natural gas and oil exporters that have already benefited from Europe’s efforts to cut Russian energy imports.

But the rally faded as the reality of the Trump plan, which was light on details other than the top-line number, sank in.

Last year, the EU imported more than $435.7bn worth of energy — but US fossil fuel supplies to the bloc accounted for just $75bn.

Brussels still has a plan to phase out purchases of Russian gas altogether by 2028, including LNG, which would open another gap for US exporters.

But analysts say the $250bn target would be impossible to meet while ensuring Europe’s — and Trump’s — desire for cheap, secure energy supplies.

“This would require Europe to import a lot more volumes of gas and oil from the US, diverting away from other suppliers, while assuming oil and gas prices would remain high or even increase to reach the $250bn target,” said Anne-Sophie Corbeau, an energy analyst at Columbia University’s Center on Global Energy Policy.

“We want to reduce energy bills and President Trump wants to reduce oil prices — so this agreement makes no sense.” 

American producers were more enthusiastic about the deal, saying it would help European companies that import energy to sign more US supply deals.

The American Petroleum Institute, Big Oil’s powerful Washington lobby group, said the agreement would “solidify America’s role” as a critical supplier to Europe.

LNG executives said it could help developers secure more financing to build a new wave of liquefaction plants in the Gulf of Mexico — the heart of the US’s bustling gas-export industry.

“This is a catalyst that certainly supports continued offtake contracting,” said Ben Dell, chair of Commonwealth LNG, referring to long-term purchase agreements. His company is developing a new liquefaction facility in Louisiana.    

Hours after Trump and Von der Leyen announced the trade deal, Venture Global, an US LNG exporter with multiple European contracts, said it was moving ahead with a $15bn project to produce 28mn tonnes of LNG a year — equivalent to almost half of Germany’s current gas demand.

“We applaud President Trump’s trade deal,” said Venture Global chief executive Mike Sabel, although he acknowledged the financing for the project was arranged earlier. Venture Global would “quickly deliver . . . abundant LNG supply”.

Shares in Venture Global jumped by almost 8 per cent early on Monday, while those of rival LNG producers Cheniere Energy and NextDecade rose by almost 5 per cent. Venture Global closed up 4 per cent and Cheniere and Next Decade were both up by about 1 per cent.

The S&P 500 energy sector, which includes the oil and gas companies that would supply the extra energy for a new export boom, closed just over 1 per cent higher.

Analysts pointed to Trump’s history of big-ticket announcements that also failed, including a 2020 deal with China in his first term. Beijing was supposed to buy an extra $200bn worth of US exports, but did not.

“The first-term history of phase one, managed trade with China offers an inauspicious precedent for the $750bn EU energy pledge,” said Kevin Book, managing director at ClearView Energy Partners, a Washington consultancy.

Bill Farren-Price, head of gas research at the Oxford Institute for Energy Studies, said it was hard to see how the EU could mount a fivefold increase in the value of energy imports from the US while it pivoted to renewables.

“European gas demand is soft and energy prices are falling. In any case, it is private companies not states that contract for energy imports,” he said. “Like it or not, in Europe the windmills are winning.”

Baker Hughes nears $13.6bn deal to buy Chart Industries over the head of rival suitor

Potential acquisition displaces earlier agreement to merge with competitor Flowserve

Oil and gas equipment supplier Baker Hughes is nearing a $13.6bn all-cash deal to buy Chart Industries, gatecrashing an earlier agreement to merge with rival Flowserve, according to people familiar with the matter.

The acquisition will give Baker Hughes, the $46bn oilfield services group, a stronger foothold serving crucial industries such as liquefied natural gas, nuclear energy and data centres and help to boost its fast-growing industrial and energy technology division.

The deal to buy Chart, which specialises in handling gas and liquids at extremely low temperatures mainly for industrial clients, would displace an agreement the company made earlier this year with rival Flowserve to combine in a $19bn all-stock merger, the people said. That agreement, which was framed as a merger of equals, had now been terminated, they added.

The deal values Chart’s equity at $210 a share, a 22 per cent premium to its market capitalisation, giving it an equity value of about $10bn, the people said. Shares in Chart jumped by 16.5 per cent to $200 in after-hours trading on Monday following the Financial Times report about the deal, after closing at $171.65 on Monday.

Baker Hughes, Chart and Flowserve did not immediately respond to requests for comment. The deal was likely to be announced in the coming days, the people said, warning that the agreement was not final and the plans could change.

Chart had initially agreed to a merge with Flowserve as part of an effort to strengthen its position as a supplier of equipment and services that manage the flow of liquids and gases across several industries.

Baker Hughes’ decision to make a higher bid for Chart forced the company’s board to reconsider its deal with Flowserve, the people said. Shares in Flowserve jumped by 5.2 per cent in after-hours trading.

Best known as a supplier for US oilfields, Baker Hughes expects the deal will aid its pivot towards serving industrial companies.

Analysts project that its industrial and energy technology division will generate about 47 per cent of its nearly $27.1bn total revenues this year, up from 37.1 per cent five years ago, according to Bloomberg.

Baker Hughes has largely focused on bolt-on acquisitions under the leadership of chief executive and chair Lorenzo Simonelli.

On an earnings call earlier this month, Simonelli said the company would “continue to target opportunities that strengthen our industrial footprint and unlock meaningful synergies”. Shares in Baker Hughes are up 21 per cent over the past year.

Brussels aims to spend €17bn on upgrading transport networks to be prepared for conflict

Europe’s roads, bridges and railways are unfit for moving tanks, troops and military supplies quickly across the continent in case of war with Russia, the EU’s transport chief has warned.

If Nato’s tanks were called to respond to an invasion by Moscow’s forces across the EU’s eastern border, they would get stuck in tunnels, cause bridges to collapse and get snarled up in border protocols, Apostolos Tzitzikostas told the Financial Times. He is aiming to spend €17bn on overhauling the continent’s infrastructure to boost military mobility.

“We have old bridges that need to be upgraded,” Tzitzikostas said. “We have narrow bridges that need to be widened. And we have nonexistent bridges to be built.”

The Greek commissioner said it would be impossible to defend the continent if Europe’s armies were not able to move around swiftly. “The reality today is that if we want to move military equipment and troops from the western side of Europe to the eastern side, it takes weeks and in some cases months,” he said. 

Much of the existing infrastructure was not built with the idea of transporting armies across the bloc. Trucks on European roads generally weigh up to 40 tonnes, while a tank weighs up to 70 tonnes.

The bloc is now drawing up a strategy to ensure troops can move “in a matter of hours, maximum a matter of days” in response to an attack, by upgrading 500 infrastructure projects along four military corridors that sweep across the continent.

The projects, which were identified in conjunction with Nato and the alliance’s military commanders, are being kept confidential for security reasons.

Brussels would also reduce red tape to avoid “tanks being stuck in paperwork” when they crossed borders, Tzitzikostas said.

The strategy, which the transport chief will present later this year, is part of a wave of war preparations across the continent amid warnings of a possible broader confrontation with Moscow, and the planned-for reduction in the US security presence in Europe.

Mark Rutte, Nato secretary-general, warned the alliance’s members in June that Russia could attack one of them by 2030.

The EU is embarking on a rearmament plan of up to €800bn as it tries to become more self-sufficient in defence in response to demands from US President Donald Trump, and to deter Russian aggression as President Vladimir Putin’s full-scale invasion of Ukraine enters its fourth year.

While the European Commission said in its proposal for the bloc’s upcoming 2028-34 budget that it aimed to invest €17bn in military mobility, senior EU diplomats have warned that figure will probably be watered down in fraught negotiations between EU countries before the budget is adopted.

Tzitzikostas said the military mobility plan would complement the agreement by Nato allies to increase the defence spending target to 5 per cent of GDP, including 1.5 per cent for security and defence-related infrastructure.

“We cannot afford anymore not to be ready or be dependent,” Tzitzikostas said.

Can Botswana mount a takeover of De Beers?

Diamonds transformed the African nation’s economy — is it serious about taking control of Anglo American’s business?

When De Beers found diamonds in Botswana in 1967, it set a newly independent nation on a course to become one of Africa’s wealthiest countries.

Almost 60 years later, a ferocious attack by Botswana’s government on Anglo American’s sale of one of the world’s most valuable diamond producers has shown just how quickly that long relationship has hit the rocks.

The country’s mining minister told the Financial Times last week that President Duma Boko was serious about turning Botswana’s 15 per cent stake in De Beers into “full control over this strategic national asset”, as tensions rise during the worst slump in the diamond market in decades.

Boko said in a fiery July speech that Botswana, the source of most of De Beers’ diamonds and reliant on the stones for most of its exports, was “broke”, adding the company was “not doing its job. Maybe we should take over and sell them ourselves”.

Days before an Anglo deadline for initial bids for its 85 per cent stake, potential buyers are wondering if Botswana really could mount a takeover, or if it is bluster from a government that swept to power on populist promises but is now strapped for cash.

Its financial strains meant the prospect of Botswana’s government acquiring De Beers “seems far-fetched and improbable”, said Kieron Hodgson, an analyst at Peel Hunt.

Botswana would have pre-emption rights in a sale as an existing shareholder, but would need to raise funds to finance a takeover, given pressure on its foreign currency reserves, which stood at $3.5bn in May, down from $4.8bn a year earlier according to the Bank of Botswana.

Anglo is under pressure to offload De Beers quickly, as part of restructuring promised after it fought off a £39bn hostile takeover bid from rival BHP last year. Boko’s broadside has “ruffled a few feathers and will do no good in attracting funding partners” for other bids, said one industry expert.

Boko, elected last year, is the country’s first president to come from outside the Botswana Democratic Party, which had governed since the country’s independence in 1966. The BDP had steered regular negotiations with De Beers over stones produced through their 50-50 joint venture, Debswana, but relations soured in 2023, as a downturn in the global diamond market hit prices and production.

Just before he was voted out last year, Boko’s predecessor Mokgweetsi Masisi accused De Beers of having “short-changed” the country, before agreeing a new 10-year sales deal that let Botswana retain more Debswana output to sell via a state-owned firm.

The latest rhetoric from Boko “might be a negotiating tactic — you say something on the extreme and then try to negotiate it to the centre,” Ronak Gopaldas, director at Signal Risk, a consultancy, said.

People familiar with the sale process said two former De Beers bosses, Gareth Penny and Bruce Cleaver, were among those drawing up offers for the unit, whose value Anglo has written down twice in the past two years to $4.9bn, around $2bn of which is inventory. More than 10 parties have expressed interest in the unit, according to another individual with knowledge of the sale, including some of the buyers of rough diamonds from De Beers.

Competition from lab-grown alternatives and a slump in demand in markets including China and the US meant De Beers’ revenues last year were just half of what they were in 2022. Meanwhile, the group’s production in Botswana in the three months to June fell by 44 per cent year on year to 2.7mn carats.

Penny has hired Standard Chartered bank and is pulling together a bid based on restoring the appeal of natural diamonds and spending more on marketing, according to a person familiar with the matter. Penny and Cleaver declined to comment.

For Anglo a sale price of about $1bn “would be a result,” said Hodgson. The value of the diamond stocks was hard to estimate, he added.

Paul Zimnisky, an independent diamond analyst, said it would be a “mistake” for Anglo to sell De Beers “at a deep discount in the midst of the diamond market lull”. 

Anglo has said it is pursuing a “dual track” approach to the De Beers disposal, preparing for a potential initial public offering if it does not receive strong enough bids from buyers. The group has said that the process could stretch into next year and that “we are of course engaging the government of the Republic of Botswana on a regular basis.”

Since Anglo had also found buyers for coal, nickel and platinum businesses as part of its restructuring, “I don’t see the rush to unload De Beers for well under book value,” said Zimnisky.

The company could “afford to wait a couple more years in order to get a fair price”, he said, adding that Anglo may be cautious about pricing since it spun off its platinum business “right before platinum prices rallied to the highest level in a decade”.

Even before Boko’s latest comments, Botswana’s government had said it wanted to increase its 15 per cent stake in the company. But it has declined to do so in the past because of fiscal concerns.

In 2011, a need to balance the budget meant the country did not exercise pre-emption rights to raise its shareholding when the Oppenheimer family, which had owned part of De Beers since 1926, sold its 40 per cent stake, enabling Anglo to build its current position.

“That logic of 2011 still holds — but it holds even more now. The Botswana government is not as liquid as it was,” said a person with knowledge of past discussions on the stake.

Botswana recently hired a Swiss private bank, CBH, to advise it on the De Beers sale, according to two people with knowledge of the matter. CBH declined to comment and Botswana did not respond to requests for comment.

Another person familiar with official thinking said there was “no consolidated view within the government,” adding that other options also included leaning on De Beers to allow prices to soften in order to boost demand, or to give more supply to the state’s own seller.

“The view coming out of the presidency is . . . we should just sell [more diamonds from the stockpile],” the person added. But officials in the ministry of minerals, were “not so keen” on such a strategy, he said.