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Last Updated: August 18, 2017
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Last Week in World Oil

Prices

  • Oil prices took a tumble as rising worries over demand in China offset another disruption in Libya. Output at Sharara, Libya’s largest field, fell by 30% on security threats, but sliding refinery runs in China are spooking traders that the gap between demand supply might widen even further. Brent started the week at US$50/b, with WTI at US$48/b.

Upstream & Midstream

  • Encouraged by discoveries in Israel and Cyprus, Greece wants to get in on the hydrocarbon party, launching two tenders for offshore exploration. A consortium of Total, ExxonMobil and Hellenic Petroleum wants to explore two sites off Crete and local player Energean wants to search a block in the western Ionian Sea. Energean is the only current offshore producer at a miniscule 3,500 bpd.
  • Zambia has allowed the UK’s Tullow Oil to begin exploring for oil in the northern part of the landlocked country, as it attempts to diversify its economy away from copper. This, however, will be a long game as Tullow warns that production could be as far away as 20-50 years away.
  • The US rig count fell again, losing a net six rigs. This was entirely down to inland gas rigs, which fell by 8. In contrast, oil rigs actually gained, up by 3, mainly in the Cana-Woodford shale play in Oklahoma.

Downstream

  • Shell’s Pernis refinery in Rotterdam will only be returning to full operation at the end of August, after a fire knocked out the site’s two crude units in late July. Some smaller units have been brought back online, but full operations will only resume by early September, leaving gasoil and diesel in northwestern Europe, prompting increased imports.
  • Uganda has chosen a group led by General Electric to build and operate a US$4 billion 60 kb/d refinery, processing crude produced by Total and Tullow Oil. Including Yaatra Ventures, Intracontinent Asset Holdings and Italy’s Saipem, the consortium is a successor to a Russian-Korean venture, with a target of 2020 to begin operations.

Natural Gas and LNG

  • BP has started production from a natural gas well in the Mancos shale play in New Mexico that is revealing itself to be far more significant than previously thought. Output average 12.9 million cubic feet per day in the first month, the highest in the San Juan basin in 14 years, possibly unlocking the gate to one of the largest untapped reserves of shale gas in the US, in an area where acreage is still relatively cheap.
  • Plans to deliver gas from the Israel’s Leviathan field may be routed through Jordan to avoid the direct route through Egypt’s Sinai desert that is mired in unpaid fines owed to Israel over cancelled gas contracts. The pipeline issue is holding up talks between Egypt’s Dolphinus with Delek Group and Noble Energy to purchase 3 bcm/year of gas.
  • Brazil’s government has authorised Petrobras to export idle LNG cargoes on the spot market of up to 6.6 million cubic metres. The volumes are coming from Petrobras’ three regas terminals, built in the good times but now stuck in a glut. As a state company, Petrobras requires state approval to proceed with the sale of what are essentially state assets.


Last Week in Asian Oil

Upstream

  • Abu Dhabi will be splitting its massive ADMA-OPCO offshore oil concession into at least two, aiming to ‘unlock greater value and increase opportunities for partnerships.’ The current concession produces some 700,000 b/d of oil, rising to a projected 1 mmbpd by 2021, held by Adnoc along with BP (14.67%), Total (13.33%) and Japan Oil Development (12%). The existing partners will be joined by new firms in the newly split fields, with Adnoc holding 60% in all new concession areas.
  • Also in Abu Dhabi, Japan’s Cosmo Energy Holdings announced that production at the offshore Hail field will begin in October, slightly delayed from the original projection of June 2017. Cosmo, which is owned partly by Abu Dhabi’s state investment firm, holds a 63% joint stake in the field with other Japanese firms, with a target production of 20,000 b/d at peak.

Downstream

  • A new refinery has been announced in Malaysia, spearheaded by Hong Kong’s NewOcean Energy Holdings. To be located on Peninsular Malaysia’s east coast in Kuantan – with has easy access to Northeast Asia – the US$1.2 billion project will be a joint venture with Kuantan Port Consortium and the Malaysian east coast development body. Size, capacity and timeline have not yet been confirmed, but the development price suggests that it will be on the smaller side, at least than 100 kb/d.
  • India is finalising a new biofuels policy that is aimed at slashing carbon emissions in the world’s third-largest emitter as well as cut imports of fossil fuels. The policy will compel state companies to expand their network of ethanol and biodiesel plants, which could impact long-term projections of India’s transport fuel growth.

Natural Gas & LNG

  • Efforts to ease the gas crunch on Australia’s populous east coast are continuing. Producer Santos is redirecting natural gas earmarked for LNG export and other purposes to Engie’s Pelican Point power plant in South Australia in a contract for 14.1 bcf of gas. The short term is necessary leading up to the Australia summer, with Pelican Point plant identified as ‘critical’ to South Australia’s energy needs. For the longer run, AGL Energy has selected a site for its Crib Point LNG import terminal in Victoria. Construction is planned to begin in 2019 with completion in 2021, which will help ease the growing shortage in Australia’s largest gas market.

Corporate

  • India’s upstream giant ONGC is tapping the debt market for the very first time, to pay for the purchase of the Indian government’s stake in HPCL and to bankroll an extensive slate of projects aimed at boosting domestic and overseas asset production. The bond issuance is expected to be blockbuster, given ONGC’s strong fundamentals. HPCL’s own US$500 million offering in July attracted bid six times the initial amount.

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EIA projects less than a quarter of the world’s electricity generated from coal by 2050

According to the U.S. Energy Information Administration’s (EIA) International Energy Outlook 2019 (IEO2019), global electric power generation from renewable sources will increase more than 20% throughout the projection period (2018–2050), providing almost half of the world’s electricity generation in 2050. In that same period, global coal-fired generation will decrease 13%, representing only 22% of the generation mix in 2050. EIA projects that worldwide electricity generation will grow by 1.8% per year through 2050.

EIA projects that total world electricity generation will reach nearly 45 trillion kilowatthours (kWh) by 2050, almost 20 trillion kWh more than the 2018 level. Although growth occurs in both OECD and non-OECD regions, the growth in electricity demand in non-OECD regions far outpaces those in OECD regions. Even though electricity demand growth contributes to a region’s fuel share of generation, the scale and scope of that region’s policies provide different incentives and play an important role as well.

Throughout the projection period, some regions have high electricity demand growth, some have aggressive emission reduction policies, and some have relatively little change in both. Varying demand growth and policies across regions lead to different distribution of fuel shares for electricity generation within each region. However, the power sector’s share of generation from renewables tends to increase and the share of coal tends to decrease.

High electricity demand growth

net electricity generation by fuel, India

Source: U.S. Energy Information Administration, International Energy Outlook 2019

India has the most rapid regional electricity demand growth (4.6% per year) in the IEO2019 Reference case. Although India has developed target levels for solar and wind capacity, it does not have an aggressive emissions reduction policy in place, so EIA projects coal-fired generation growth in addition to growth in solar and wind generation. Combined, solar, wind, and coal will account for 90% of India's electricity generation mix in 2050. Combined wind and solar generation increases from less than 10% of India's generation mix in 2018 to more than 50% of the generation mix in 2050. The level of coal-fired generation increases during that same time period, but coal’s share of India's electricity generation mix falls from about 75% of the mix in 2018 to less than 40% in 2050.

Aggressive emissions reductions policy

net electricity generation by fuel, OECD Europe

Source: U.S. Energy Information Administration, International Energy Outlook 2019
Note: OECD is the Organization for Economic Cooperation and Development. International Energy Outlook regional definitions.

New capacity additions for renewable technologies are economically competitive with fossil technologies worldwide. But without policy incentives, growth in generation from renewable sources is limited in regions with slow demand growth. OECD Europe electricity demand is projected to grow at about 1% per year through 2050; however, EIA expects that a regional carbon dioxide cap will contribute to a reduction in fossil-fired generation and an increase in renewables generation to meet demand. Throughout the projection period, EIA expects that the share of wind and solar generation in OECD Europe will increase from 20% to almost 50% by 2050. In that same period, EIA projects that fossil-fired generation will decrease from about 37% to 18% of the generation mix. By 2050, coal-fired generation comprises only 5% of the region’s generation mix.

Low electricity demand growth/No emissions reductions policies

net electricity generation by fuel, other non-OECD Europe and Eurasia

Source: U.S. Energy Information Administration, International Energy Outlook 2019
Note: International Energy Outlook regional definitions.

With annual demand growth slower than 1% and no firm policies aimed at reducing carbon dioxide emissions, the mix of generation resources in the non-OECD Europe and Eurasia region (which excludes Russia) will change only marginally. Through 2050, wind and solar generation increases marginally and accounts for less than 10% of the generation mix in 2050, leaving hydroelectric power as the main source of renewables generation for this region. Growth in natural gas generation will displace some coal-fired generation—which falls from 31% in 2018 to 15% in 2050—but the overall share of fossil generation will change relatively little throughout the projection period.

January, 23 2020
EIA expects U.S. energy-related CO2 emissions to decrease annually through 2021

In its latest Short-Term Energy Outlook (STEO), released on January 14, the U.S. Energy Information Administration (EIA) forecasts year-over-year decreases in energy-related carbon dioxide (CO2) emissions through 2021. After decreasing by 2.1% in 2019, energy-related CO2 emissions will decrease by 2.0% in 2020 and again by 1.5% in 2021 for a third consecutive year of declines.

These declines come after an increase in 2018 when weather-related factors caused energy-related CO2 emissions to rise by 2.9%. If this forecast holds, energy-related CO2 emissions will have declined in 7 of the 10 years from 2012 to 2021. With the forecast declines, the 2021 level of fewer than 5 billion metric tons would be the first time emissions have been at that level since 1991.

After a slight decline in 2019, EIA expects petroleum-related CO2 emissions to be flat in 2020 and decline slightly in 2021. The transportation sector uses more than two-thirds of total U.S. petroleum consumption. Vehicle miles traveled (VMT) grow nearly 1% annually during the forecast period. In the short term, increases in VMT are largely offset by increases in vehicle efficiency.

Winter temperatures in New England, which were colder than normal in 2019, led to increased petroleum consumption for heating. New England uses more petroleum as a heating fuel than other parts of the United States. EIA expects winter temperatures will revert to normal, contributing to a flattening in overall petroleum demand.

Natural gas-related CO2 increased by 4.2% in 2019, and EIA expects that it will rise by 1.4% in 2020. However, EIA expects a 1.7% decline in natural gas-related CO2 in 2021 because of warmer winter weather and less demand for natural gas for heating.

Changes in the relative prices of coal and natural gas can cause fuel switching in the electric power sector. Small price changes can yield relatively large shifts in generation shares between coal and natural gas. EIA expects coal-related CO2 will decline by 10.8% in 2020 after declining by 12.7% in 2019 because of low natural gas prices. EIA expects the rate of coal-related CO2 to decline to be less in 2021 at 2.7%.

The declines in CO2 emissions are driven by two factors that continue from recent historical trends. EIA expects that less carbon-intensive and more efficient natural gas-fired generation will replace coal-fired generation and that generation from renewable energy—especially wind and solar—will increase.

As total generation declines during the forecast period, increases in renewable generation decrease the share of fossil-fueled generation. EIA estimates that coal and natural gas electric generation combined, which had a 63% share of generation in 2018, fell to 62% in 2019 and will drop to 59% in 2020 and 58% in 2021.

Coal-fired generation alone has fallen from 28% in 2018 to 24% in 2019 and will fall further to 21% in 2020 and 2021. The natural gas-fired generation share rises from 37% in 2019 to 38% in 2020, but it declines to 37% in 2021. In general, when the share of natural gas increases relative to coal, the carbon intensity of the electricity supply decreases. Increasing the share of renewable generation further decreases the carbon intensity.

U.S. annual carbon emissions by source

Source: U.S. Energy Information Administration, Short-Term Energy Outlook, January 2020
Note: CO2 is carbon dioxide.

January, 21 2020
Latest issue of GEO ExPro magazine covers Europe and Frontier Exploration, Modelling and Mapping, and Geochemistry.

GEO ExPro Vol. 16, No. 6 was published on 9th December 2019 bringing light to the latest science and technology activity in the global geoscience community within the oil, gas and energy sector.

This issue focusses on oil and gas exploration in frontier regions within Europe, with stories and articles discussing new modelling and mapping technologies available to the industry. This issue also presents several articles discussing the discipline of geochemistry and how it can be used to further enhance hydrocarbon exploration.

You can download the PDF of GEO ExPro magazine for FREE and sign up to GEO ExPro’s weekly updates and online exclusives to receive the latest articles direct to your inbox.

Download GEO ExPro Vol. 16, No. 6

January, 20 2020