Last Week in World Oil:
- Oil prices inched up at the start of the week, buoyed by the effective implementation of the OPEC producer cuts. However, the rising prices have also encouraged rising production in the US, keeping gains in check along with stubbornly high US stockpile levels.
- The Brent crude benchmark, which forms the bulk of global oil trade, is being overhauled for the first time in a decade to account for declining production in the North Sea. Effective immediately, pricing agency Platts has added the Norwegian Troll crude grade to the basket of four British and one Norwegian crudes (Brent, Forties, Oseberg and Ekofisk) that form Brent to expand the physical volume of crude underpinning the benchmark, making it less vulnerable to manipulation.
Upstream & Midstream
- TransCanada has re-filed an application with Nebraska to route the proposed Keystone XL pipeline through the state. The original application was withdrawn after President Obama vetoed the pipeline project, but with a friendlier administration in the White House, this brings Keystone XL one step closer to implementation and operational reality.
- Iraq and Iran have agreed to explore the possibility of a pipeline linking the two nations, expanding export options for Kirkuk crude in northern Iraq as well as provide crude for the Abadan refinery in Iran. Currently Kirkuk crude is transported through Kurdish territory, complicating matters as the Kurds have interrupted Kirkuk transit in the past.
- Thirteen new onshore oil and gas rigs were added to the US rig count last week, offsetting a loss of three offshore rigs to bring the total active rig count up to 751. It is the fifth consecutive week of rises, leading to the EIA forecasting a rise in domestic oil output to 4.87 mbpd in March, which would be the fastest rise since October, underpinned by shale oil plays.
- The Ras Laffan Refinery 2, which began production in late 2016, will be geared towards producing aviation fuel, with a dedicated pipeline connecting it to the Doha International Airport expected to be completed in 2018. Ras Laffan 2 runs on condensate, with a capacity of 146 kb/d, and will also produce naphtha for petrochemical processing and ultra low-sulphur diesel for export to Europe.
Natural Gas and LNG
- Petronas and the government of British Columbia are offering an additional C$145 million to two First Nation groups that would allow a US$27 billion LNG project to go ahead. Federal approval for the project was given last September for the Pacific Northwest LNG, but additional amendments are proposed to quell environmental and native group opposition to the project. Politics is now also in the fray, with the opposition candidate for the BC premiership opposing the current site of the planned facility, with elections due in May 2017.
Last Week in Asian oil:
Upstream & Midstream
- Petronas may be selling a large minority stake in a prized upstream gas asset in Sarawak, to raise cash and cut development costs as the Malaysian state player seeks to improve its financials. Petronas will retain a majority stake in the SK316 offshore gas block, but up to 49% of the asset may be sold off. The block is currently home to the NC3 field, which feeds the LNG9 joint venture export project with JX Nippon, as well as the Kasawari field. Likely buyers would be Japanese and Korean gas importers.
- Chevron has secured an offshore permit in Western Australia for AUS$3 million, the first cash bid permit to be awarded since 2014. The cash bid permit was reintroduced to drive interest‘in mature areas or areas known to contain petroleum accumulations’, essentially a cost-effective way of driving interest in areas that have a high percentage of recoverable resources. The WA-526-P permit is in a gas-rich area of the Northern Carnarvon basin close to the Gorgon and Pluto LNG projects, and is the first success of a series of disappointing cash bid auction results.
Downstream & Shipping
- Thailand’s largest oil refiner ThaiOil set out its operational plans for 2017 last week, aiming to runs its 275 kb/d refinery at within 100-103% capacity with no major maintenance shutdowns planned. Productivity rates exceeding 100% are common in Thailand where official refinery capacity is underestimated, with the Sriracha refinery reaching rates of 108% last year, almost all of which was consumed domestically.
Natural Gas & LNG
- More LNG will be entering Singapore as natural gas contracts supplied via pipeline from Malaysia and Indonesia near expiration. To mitigate this, Shell and Pavilion Gas will deliver their first LNG cargoes to Singapore later this year, under contracts awarded in October 2016 for three years or a maximum of 1 million tons per year. Singapore will also be allowing for up to 10% of imports coming from the spot market, to even out supply and bolster its ambitions of becoming the LNG trading hub for Asia
- Weak LPG prices are boosting demand in South Korea. Traditionally used as a transport fuel, LPG consumption in South Korea has declined significantly since 2010 as vehicles switched to gasoline and diesel, leaving major importers SK Gas and E1 scrambling for new customers. With a glut in natural gas liquids leading to low prices and a recovery in consumer plastics strengthening Asian petrochemical margins, LPG demand has jumped, benefitting American exporters. In 2016, South Korea’s LPG demand rose to 9.4 million tons while imports jumped to 7 million tons, more than half of which was supplied by US Gulf exporters. LPG usage in petrochemicals more than doubled to 3.3 million tons.
- The Elk-Antelope LNG project in Papua New Guinea is now targeted at the end of 2018, a delay from its original date of late 2017. One of the largest undeveloped gas assets in Asia, the Elk and Antelope fields are operated by Total, partnering with InterOil on the LNG export project. The ExxonMobil acquisition of InterOil would have streamlined the natural gas scene in PNG, but some ownership quibbles have delayed the acquisition until the Supreme Court of Yukon confirmed that the sale could go ahead on Sunday.
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Pioneering technology expert tells ADIPEC Energy Dialogue up to 80 per cent of plant shutdowns could be mitigated through combination of advanced electrification, automation and digitalisation technologies
Greater use of renewables in power management processes offers oil and gas companies opportunities to create efficiencies, sustainability and affordability when modernising equipment, or planning new CAPEX projects
Abu Dhabi, UAE – XX August 2020 – Leveraging the synergies created by the convergence of electrification, automation and digitalisation, can create significant cost savings for oil and gas companies when making both operational and capital investment decisions, according to Dr Peter Terwiesch, President of Industrial Automation at ABB, a Swiss-Swedish multinational company, operating mainly in robotics, power, heavy electrical equipment, and automation technology areas.
Participating in the latest ADIPEC Energy Dialogue, Dr Terwiesch said up to 80 per cent of energy industry plant shutdowns, caused by human error, or rotating machinery or power outages, could be mitigated through a combination of electrification, automation and digitalisation.
“Savings are clearly possible not only on the operation side but also, using the same synergies between dimensions, you can bring down the cost schedule and risk of capital investment, especially in a time when making projects work economically is harder,” explained Dr Terwiesch.
A pioneering technology leader, who works closely with utility, industry, transportation and infrastructure customers, Dr Terwiesch said despite the increasing investment by oil and gas companies in renewables and the growing use of renewables to generate electricity, both for individual and industrial uses, hydrocarbons will continue to have an important role in creating energy, in the short to medium term.
“If you look at the energy density constraints, clearly electricity is gaining share but electricity is not the source of energy; it is a conduit of energy. The energy has to come from somewhere and that can be hydrocarbons, or nuclear, or renewables.” he said.
Nevertheless, he added, the greater use of renewables to generate electricity offers oil and gas companies the option of integrating a higher share of renewables into power management processes to create efficiencies, sustainability and affordability when modernising equipment, or planning new CAPEX projects.
The ADIPEC Energy Dialogue is a series of online thought leadership events created by dmg events, organisers of the annual Abu Dhabi International Exhibition and Conference. Featuring key stakeholders and decision-makers in the oil and gas industry, the dialogues focus on how the industry is evolving and transforming in response to the rapidly changing energy market.
With this year’s in person ADIPEC exhibition and conference postponed to November 2021, the ADIPEC Energy Dialogue, along with insightful webinars, podcasts and on line panels continue to connect the oil and gas industry, with the challenges and opportunities shaping energy markets in the run up to, and following, a planned three-day live stream virtual ADIPEC conference taking place from November 9-11.
An industry first of its kind, the online conference will bring together energy leaders, ministers and global oil and gas CEOs to assess the collective measures the industry needs to put in place to fast-track recovery, post COVID-19.
To watch the full ADIPEC Energy Dialogue series go to: https://www.youtube.com/watch?v=QZzUd32n3_s&t=6s
Utility-scale battery storage systems are increasingly being installed in the United States. In 2010, the United States had seven operational battery storage systems, which accounted for 59 megawatts (MW) of power capacity (the maximum amount of power output a battery can provide in any instant) and 21 megawatthours (MWh) of energy capacity (the total amount of energy that can be stored or discharged by a battery). By the end of 2018, the United States had 125 operational battery storage systems, providing a total of 869 MW of installed power capacity and 1,236 MWh of energy capacity.
Battery storage systems store electricity produced by generators or pulled directly from the electrical grid, and they redistribute the power later as needed. These systems have a wide variety of applications, including integrating renewables into the grid, peak shaving, frequency regulation, and providing backup power.
Most utility-scale battery storage capacity is installed in regions covered by independent system operators (ISOs) or regional transmission organizations (RTOs). Historically, most battery systems are in the PJM Interconnection (PJM), which manages the power grid in 13 eastern and Midwestern states as well as the District of Columbia, and in the California Independent System Operator (CAISO). Together, PJM and CAISO accounted for 55% of the total battery storage power capacity built between 2010 and 2018. However, in 2018, more than 58% (130 MW) of new storage power capacity additions, representing 69% (337 MWh) of energy capacity additions, were installed in states outside of those areas.
In 2018, many regions outside of CAISO and PJM began adding greater amounts of battery storage capacity to their power grids, including Alaska and Hawaii, the Electric Reliability Council of Texas (ERCOT), and the Midcontinent Independent System Operator (MISO). Many of the additions were the result of procurement requirements, financial incentives, and long-term planning mechanisms that promote the use of energy storage in the respective states. Alaska and Hawaii, which have isolated power grids, are expanding battery storage capacity to increase grid reliability and reduce dependence on expensive fossil fuel imports.
Source: U.S. Energy Information Administration, Form EIA-860, Annual Electric Generator Report
Note: The cost range represents cost data elements from the 25th to 75th percentiles for each year of reported cost data.
Average costs per unit of energy capacity decreased 61% between 2015 and 2017, dropping from $2,153 per kilowatthour (kWh) to $834 per kWh. The large decrease in cost makes battery storage more economical, helping accelerate capacity growth. Affordable battery storage also plays an important role in the continued integration of storage with intermittent renewable electricity sources such as wind and solar.
Additional information on these topics is available in the U.S. Energy Information Administration’s (EIA) recently updated Battery Storage in the United States: An Update on Market Trends. This report explores trends in battery storage capacity additions and describes the current state of the market, including information on applications, cost, market and policy drivers, and future project developments.