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Last Updated: October 13, 2017
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Last week in World oil:

Prices

  • Despite OPEC’s best efforts to insist the ‘supply freeze is working’, crude oil prices continue to dawdle as the market instead focuses on continued oversupply, particularly with US production returning from Hurricane Harvey closures. Brent is trading at US$55/b, and WTI at US$49/b.

Upstream

  • In a potential landmark decision, Brazil’s oil regulator ANP approved Petrobras’ request to source a rig platform from abroad, skirting the country’s obligation to source from domestic producers. Meant to explore the oil-rich pre-salt Libra area, the waiver to strict local content rules was granted due to a lack of domestic capacity, potentially paving the way to opening up the Brazilian services sector to international competition.
  • Total, Eni and Statoil are courting buyers for their stake in the Teesside oil terminal, which receives crude from Norway’s Ekofisk fields. A price of up to US$400 million is expected for the trio’s joint 70.5% stake, with ConocoPhillip intent on remaining as operator through its 29.3% stake.
  • Ties between Venezeula and Russia continue to deepen out of necessity as the former moves to stave off a domestic financial crunch by consorting with Rosneft. The Russian energy firm currently holds 49.9% collateral in PDVSA’s American refining subsidiary Citgo, and Venezuela is negotiating to swap that for shares in its oilfield assets and a fuel supply deal to provide some much need energy products for the cash-strapped nation.
  • US drillers reduced active rigs by 4 – two oil, two gas – with energy firms delaying spending plans as prices remain weak.

Downstream & Midstream

  • TransCanada has given up on the Energy East pipeline, which would have delivered oil sands crude from landlocked Alberta to Canada’s eastern seaboard ports. Facing stiff opposition from environmental groups, the C$15 billion project is less important than it once was, now that the Keystone XL pipeline – which will send Alberta crude down to the US Gulf Coast – is resuming.
  • Shell and Vitol subsidiary Varo Energy have agreed to discontinue talks to sell Shell’s 37.5% stake in the 220 kb/d PCK refinery in Scwedt, Germany to the latter. The deal would have included the Arhem terminal in the Netherlands, then seen as part of Shell’s global divestment drive.

Natural Gas and LNG

  • Statoil and its partners on the Troll gas field, Norway’s largest, are working to increase its output. Work to allow oil and gas to be produced simultaneously from the Troll West reservoir will introduce some much-needed flexibility to a field that represents 40% of Norway’s gas resources. Output is expected to reach a record high of 36 bcm this year.
  • The BRUA natural gas pipeline in Eastern Europe is back on track after an earlier hiccough in summer when Hungary doubted the commercial viability of the pipeline that will connect Bulgaria, Romania, Hungary and Austria. All four countries have now agreed to resume the project, which will deliver an initial 1.75 bcm of gas from Bulgaria and Romania in 2019


Last week in Asian oil

Upstream

  • Reliance is selling a Marcellus shale oil and gas block it acquired in 2010 for US$126 million, almost a third of the price it paid seven years ago. It illustrates how highly competitive the US shale industry has become, and many majors that invested are now backing out due to low oil prices. Reliance sold the asset to BKV Chelsea LLC, with Carrizo Oil & Gas – the operator of the asset – also selling out. This cuts Reliance’s US shale assets to two, acquired in the 2010 US$2 billion spending spree, and Reliance is likely to cut the other two loose as well.

Downstream & Midstream

  • India’s Reliance has purchased US crude for the first time, as the widening differential between US WTI and Brent prompts the owner of the largest refining complex in the world to capitalise on crude spreads. Capable of processing even the most challenging crudes, the Jamnagar refinery bought a million barrels of West Texas Intermediate Midland crude and a smaller cargo of Eagle Ford Crude – a light, sweet mix that is slightly unusual for its configuration. Reliance itself may be giving up on upstream assets in the US, but cheaper American crude has prompted it to join IndianOil, HPCL and BPCL in buying American cargoes, with year-to-date purchases of 7.85 million barrels so far, a record high.

Natural Gas & LNG

  • LNG output has begun at Chevron’s Wheatstone in Australia, with the first cargo expected at the end of October. Operational after six years of construction, Wheatstone has faced less hurdles in achieving operation than Chevron’s larger Gorgon LNG, but also suffered a similar cost blowout. Only the first liquefaction train is operational; the second will join within eight months, with a total capacity of 8.9 mtpa of LNG, most of which is destined for East Asia. Wheatstone is the sixth of Australia’s mammoth LNG projects to start up, with the only two remaining being Shell’s Prelude floating LNG unit and Inpex’s Ichthys project.
  • Kazakhstan will begin exporting natural gas to China by pipeline on October 15, shipping an initial 5 bcm to PetroChina over a year for a reported price of US$1 billion. It is the first such deal between China and Kazakhstan, which has until now shipped its gas to Russia as additional pipelines were required to connected to the main pipeline linking China and the three main Central Asia energy producers.
  • Shell has cancelled its US$900 million deal to sell its Thai gas field stakes to the Kuwait Foreign Petroleum Exploration Company. Originally announced in January this year as part of Shell’s ongoing divestment drive to reduce debt, the collapse of the sale looks to be linked to Shell having reached its US$30 billion divestment target early, which has led it to retain some of the smaller jewels it had put on sale. Through its local subsidiaries, Shell has a 22.22% stake in the Bongkot natural gas field, whose concession is set to expire in 2023.  

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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