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Last Updated: September 15, 2017
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Last week in World oil:

Prices

  • Oil prices remained mixed at the start of this week, with Brent at US$53/b and WTI at US$48/b. The aftermath of Hurricane Irma hitting the Caribbean and Florida has stoked fears over demand, while there has been some delay in Texas refineries restarting post-Hurricane Harvey. Rumblings that Saudi Arabia and the UAE were pushing for a new extension in the OPEC supply cut agreement did provide some lift.

Upstream

  • Azerbaijan’s Socar is playing hardball as it negotiates new production sharing agreements with BP and the consortium for the Azeri-Ciraq-Gunashli oil fields. Originally signed in 1994, all parties want to extend it beyond expiration in 2024, but Azerbaijan is reported demanding its share to be increased to 20% from 11.6%. BP would be the major loser under this proposition, having its share reduced from 35.8% to 30%.
  • After gaining approval to move ahead with the Karish-Tanin natural field gas in Israel last week, Greece’s Energean Oil and Gas has also gained approval for Kataloko oil field in Western Greece. This will be Energean’s third project in the eastern Mediterranean, with a target of producing 11 million barrels of oil by 2020 and FID expected in 2018.
  • The rebalancing in Canadian heavy oil sector continues, as Canadian Natural Resources purchased Cenovus Energy’s Pelican Lake project in northern Alberta for US$788 million. Cenovus has been selling off assets acquired from ConocoPhillips in March to optimise its portfolio, allowing Canadian Natural to pick up its second major purchase this year, having bought Shell and Marathon Oil’s oil sands production for US$10.3 billion.
  • The US lost 3 oil rigs last week – the third fall in the past four weeks – although this was offset by a gain of 4 gas rigs, leading to a net gain of one.

Downstream & Midstream

  • Shell has joined the race for Mexico’s fuel retail sector, opening its first gas station last week as Pemex’s monopoly ends. The inaugural station is located in Mexico City, with Shell reporting that more will come as investments of up to US$1 billion are planned over the next decade.
  • Magellan Midstream Partners will be expanding its refined products pipeline system to handle emerging demand for gasoline, gasoil and jet fuel in Central and North Texas. A new 216-km pipeline will be build from Magellan’s terminal to Hearne, in partnership with Valero Energy, while an existing pipeline will be reversed and linked to the new segment.

Natural Gas and LNG

  • Angola will be selling LNG from its sole export facility to Vitol in its first long-term deal. Prior to this, Angolan LNG had been sold entirely via competitive tenders on the spot market, as concerns over plant reliability and consistent supply failed to create multi-year deals. Details of the agreement are confidential, but are part of a growing trend of traders securing long-term deals with producers to create a global LNG portfolio.

Corporate

  • Chinese conglomerate CEFC will buy a 14.16% stake in Russia’s Rosneft from Glencore and the Qatar Investment Authority for US$9.1 billion, boosting energy partnership between China and its largest supplier.

Last week in Asian oil

Upstream

  • The latest revisions to Indonesia’s new oil and gas production sharing contracts are seen as positive steps to attract investors. The latest tweaks keeps the government’s share at 52% for gas and 57% of oil production, but increase other components such as contractors’ share of output in the second and third stages of production or where assets have higher sulphur content. The Indonesian Petroleum Association described the revisions as ‘encouraging’, also praising the new tax incentives being drafted to make new energy contracts more attractive.

Natural Gas & LNG

  • India’s Reliance and BP have revived investment plans for the gas-rich NEC-OSN-97/2 block in the Bay of Bengal, within the offshore Mahanadi basin. Plans to develop the block were originally hindered by objections from the Defence Ministry due to its proximity to the Chandipur missile test base. These objections appeared to have been assuaged, and Reliance is now proceeding with development. This would be the second major project for Reliance and BP, which recently signed off on a US$6 billion plan to develop the Krishna-Godavari offshore basin, part of the India government’s plan to revive and boost domestic natural gas production.
  • BP has begun drilling its first shale gas well in the Neijiang-Dazhu block in China’s Sichuan basin, under a PSC with CNPC. This will be the first shale gas well to be drilled by a foreign major in China in several years, although CNPC is technically the block’s operator under the PSC terms. The block is one of two PSCs signed by BP with CNPC in the Sichuan basin, the other being Rongchangbei. Both blocks are understood to contain shale gas and conventional natural gas, but recent disappointments by Shell, Chevron and Hess in Sichuan and Guizhou may mean that the assets may not be commercially viable.
  • Australia’s Senex Energy will be developing a new gas field in the Surat Basin in Queensland, aiming to offer first gas to a tight local market by 2019. Senex gained the acreage for free on the condition that it be used to supply the Australian east coast market, and is next to Shell’s QGC acreage and close to existing gas pipeline infrastructure.
  • India’s Petronet LNG has announced a joint venture with Japanese and Sri Lankan partners to build an LNG terminal in Colombo. The plant is aimed at supplying gas to Sri Lanka’s power and transport sector, with initial design and capacity still under discussion. Completion is expected within two years of FID.
  • Western Australia has temporarily banned onshore hydraulic fracturing as it assesses environment risks associated. The state joins Victoria in banning fracking, with other Australian state also having moratoriums.

Corporate

  • Fresh of China’s acquisition of a stake in Rosneft by CEFC, Japan has also expressed interest in investing in energy companies, specifically citing Rosneft. The expressions of interest are by the Japan Oil, Gas and Metals National Corporation (JOGMEC), and can be seen as an attempt to not be left behind by China’s drive to acquire strategic stakes in key producers.

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The United States consumed a record amount of renewable energy in 2019

In 2019, consumption of renewable energy in the United States grew for the fourth year in a row, reaching a record 11.5 quadrillion British thermal units (Btu), or 11% of total U.S. energy consumption. The U.S. Energy Information Administration’s (EIA) new U.S. renewable energy consumption by source and sector chart published in the Monthly Energy Review shows how much renewable energy by source is consumed in each sector.

In its Monthly Energy Review, EIA converts sources of energy to common units of heat, called British thermal units (Btu), to compare different types of energy that are more commonly measured in units that are not directly comparable, such as gallons of biofuels compared with kilowatthours of wind energy. EIA uses a fossil fuel equivalence to calculate primary energy consumption of noncombustible renewables such as wind, hydro, solar, and geothermal.

U.S. renewable energy consumption by sector

Source: U.S. Energy Information Administration, Monthly Energy Review

Wind energy in the United States is almost exclusively used by wind-powered turbines to generate electricity in the electric power sector, and it accounted for about 24% of U.S. renewable energy consumption in 2019. Wind surpassed hydroelectricity to become the most-consumed source of renewable energy on an annual basis in 2019.

Wood and waste energy, including wood, wood pellets, and biomass waste from landfills, accounted for about 24% of U.S. renewable energy use in 2019. Industrial, commercial, and electric power facilities use wood and waste as fuel to generate electricity, to produce heat, and to manufacture goods. About 2% of U.S. households used wood as their primary source of heat in 2019.

Hydroelectric power is almost exclusively used by water-powered turbines to generate electricity in the electric power sector and accounted for about 22% of U.S. renewable energy consumption in 2019. U.S. hydropower consumption has remained relatively consistent since the 1960s, but it fluctuates with seasonal rainfall and drought conditions.

Biofuels, including fuel ethanol, biodiesel, and other renewable fuels, accounted for about 20% of U.S. renewable energy consumption in 2019. Biofuels usually are blended with petroleum-based motor gasoline and diesel and are consumed as liquid fuels in automobiles. Industrial consumption of biofuels accounts for about 36% of U.S. biofuel energy consumption.

Solar energy, consumed to generate electricity or directly as heat, accounted for about 9% of U.S. renewable energy consumption in 2019 and had the largest percentage growth among renewable sources in 2019. Solar photovoltaic (PV) cells, including rooftop panels, and solar thermal power plants use sunlight to generate electricity. Some residential and commercial buildings heat with solar heating systems.

October, 20 2020
Natural gas generators make up largest share of U.S. electricity generation capacity

operating natural-gas fired electric generating capacity by online year

Source: U.S. Energy Information Administration, Annual Electric Generator Inventory

Based on the U.S. Energy Information Administration's (EIA) annual survey of electric generators, natural gas-fired generators accounted for 43% of operating U.S. electricity generating capacity in 2019. These natural gas-fired generators provided 39% of electricity generation in 2019, more than any other source. Most of the natural gas-fired capacity added in recent decades uses combined-cycle technology, which surpassed coal-fired generators in 2018 to become the technology with the most electricity generating capacity in the United States.

Technological improvements have led to improved efficiency of natural gas generators since the mid-1980s, when combined-cycle plants began replacing older, less efficient steam turbines. For steam turbines, boilers combust fuel to generate steam that drives a turbine to generate electricity. Combustion turbines use a fuel-air mixture to spin a gas turbine. Combined-cycle units, as their name implies, combine these technologies: a fuel-air mixture spins gas turbines to generate electricity, and the excess heat from the gas turbine is used to generate steam for a steam turbine that generates additional electricity.

Combined-cycle generators generally operate for extended periods; combustion turbines and steam turbines are typically only used at times of peak load. Relatively few steam turbines have been installed since the late 1970s, and many steam turbines have been retired in recent years.

natural gas-fired electric gnerating capacity by retirement year

Source: U.S. Energy Information Administration, Annual Electric Generator Inventory

Not only are combined-cycle systems more efficient than steam or combustion turbines alone, the combined-cycle systems installed more recently are more efficient than the combined-cycle units installed more than a decade ago. These changes in efficiency have reduced the amount of natural gas needed to produce the same amount of electricity. Combined-cycle generators consume 80% of the natural gas used to generate electric power but provide 85% of total natural gas-fired electricity.

operating natural gas-fired electric generating capacity in selected states

Source: U.S. Energy Information Administration, Annual Electric Generator Inventory

Every U.S. state, except Vermont and Hawaii, has at least one utility-scale natural gas electric power plant. Texas, Florida, and California—the three states with the most electricity consumption in 2019—each have more than 35 gigawatts of natural gas-fired capacity. In many states, the majority of this capacity is combined-cycle technology, but 44% of New York’s natural gas capacity is steam turbines and 67% of Illinois’s natural gas capacity is combustion turbines.

October, 19 2020
EIA’s International Energy Outlook analyzes electricity markets in India, Africa, and Asia

Countries that are not members of the Organization for Economic Cooperation and Development (OECD) in Asia, including China and India, and in Africa are home to more than two-thirds of the world population. These regions accounted for 44% of primary energy consumed by the electric sector in 2019, and the U.S. Energy Information Administration (EIA) projected they will reach 56% by 2050 in the Reference case in the International Energy Outlook 2019 (IEO2019). Changes in these economies significantly affect global energy markets.

Today, EIA is releasing its International Energy Outlook 2020 (IEO2020), which analyzes generating technology, fuel price, and infrastructure uncertainty in the electricity markets of Africa, Asia, and India. A related webcast presentation will begin this morning at 9:00 a.m. Eastern Time from the Center for Strategic and International Studies.

global energy consumption for power generation

Source: U.S. Energy Information Administration, International Energy Outlook 2020 (IEO2020)

IEO2020 focuses on the electricity sector, which consumes a growing share of the world’s primary energy. The makeup of the electricity sector is changing rapidly. The use of cost-efficient wind and solar technologies is increasing, and, in many regions of the world, use of lower-cost liquefied natural gas is also increasing. In IEO2019, EIA projected renewables to rise from about 20% of total energy consumed for electricity generation in 2010 to the largest single energy source by 2050.

The following are some key findings of IEO2020:

  • As energy use grows in Asia, some cases indicate more than 50% of electricity could be generated from renewables by 2050.
    IEO2020 features cases that consider differing natural gas prices and renewable energy capital costs in Asia, showing how these costs could shift the fuel mix for generating electricity in the region either further toward fossil fuels or toward renewables.
  • Africa could meet its electricity growth needs in different ways depending on whether development comes as an expansion of the central grid or as off-grid systems.
    Falling costs for solar photovoltaic installations and increased use of off-grid distribution systems have opened up technology options for the development of electricity infrastructure in Africa. Africa’s power generation mix could shift away from current coal-fired and natural gas-fired technologies used in the existing central grid toward off-grid resources, including extensive use of non-hydroelectric renewable generation sources.
  • Transmission infrastructure affects options available to change the future fuel mix for electricity generation in India.
    IEO2020 cases demonstrate the ways that electricity grid interconnections influence fuel choices for electricity generation in India. In cases where India relies more on a unified grid that can transmit electricity across regions, the share of renewables significantly increases and the share of coal decreases between 2019 and 2050. More limited movement of electricity favors existing in-region generation, which is mostly fossil fuels.

IEO2020 builds on the Reference case presented in IEO2019. The models, economic assumptions, and input oil prices from the IEO2019 Reference case largely remained unchanged, but EIA adjusted specific elements or assumptions to explore areas of uncertainty such as the rapid growth of renewable energy.

Because IEO2020 is based on the IEO2019 modeling platform and because it focuses on long-term electricity market dynamics, it does not include the impacts of COVID-19 and related mitigation efforts. The Annual Energy Outlook 2021 (AEO2021) and IEO2021 will both feature analyses of the impact of COVID-19 mitigation efforts on energy markets.

Asia infographic, as described in the article text


Source: U.S. Energy Information Administration, International Energy Outlook 2020 (IEO2020)
Note: Click to enlarge.

With the IEO2020 release, EIA is publishing new Plain Language documentation of EIA’s World Energy Projection System (WEPS), the modeling system that EIA uses to produce IEO projections. EIA’s new Handbook of Energy Modeling Methods includes sections on most WEPS components, and EIA will release more sections in the coming months.

October, 16 2020