Last week in the world oil:
- There are no clear trends in crude prices, with Brent and WTI stuck in
their respective ranges of US$57/b and US$52/b. Reductions in US
drilling rates were offset by Iraqi supply disruptions, while OPEC’s hints
that the supply freeze will persist did little to move the market.
- Mexico is planning a third auction in 2018, hiking up the pace as the
country seeks to exploit new-found private interest in its hydrocarbons in
a election year. The auction will focus on conventional onshore oil and gas
blocks, with terms to be announced early 2018 and awarded by mid-
2018. This joins the planned deepwater Gulf auction scheduled by
January 2018 and a shallow water auction in March 2018.
- BP and SOCAR will sign a new production-sharing agreement for a new
block, D-230, in the North Absheron basin of the Caspian Sea. With equal
stakes, this cements BP as the main international player in Azerbaijan,
with existing stakes in the Azer-Chirag- Guneshli and Shah Deniz fields.
- Thailand’s PTTEP is delaying the FID for the Mariana Oil Sands project in
Canada, the latest holdup in the region’s once booming oil sands sector.
There is a high likelihood that the project, 100% owned by PTTEP, may be
dropped, given the company’s recent focus on midstream and gas.
- The US active rig count dropped by 15 last week – 7 oil and 8 gas – as
drilling activity retreats against stagnant oil prices. All rig losses were
onshore, with the most declines in the Haynesville and Permian basins.
Downstream & Midstream
- Nigeria has announced that the planned 650 kb/d Dangote refinery, being
built by Africa’s richest man Aliko Dangote, will come onstream by end-
2019, which would help ease the country’s growing dependence on
imports. Envisioned as Nigeria’s own Jamnagar refinery, an operational
Dangote refinery will also ease the pressure on NNPC, which has been
struggling to find partners to help revamp its three existing refineries.
Natural Gas and LNG
- Natural gas action in the Eastern Mediterranean is heating up. With Egypt,
Israel, Greece and Cyprus already exploiting resources, Energean Oil &
Gas is backing a new player: Montenegro. Two blocks explored by the
Greek company hold an estimated 1.8 trillion cubic feet of recoverable gas
reserves, with Energean CEO Mathios Rigas saying that Montenegro is
sitting in the ‘sweet spot of untapped potential in the eastern Adriatic.’
Energean was awarded a 30-year licence for the blocks in March 2017.
- Russia’s Novatek is planning to expand the Yamal LNG by one more train.
With an additional capacity of 1 mtpa, the smaller fourth train is planned
for end-2019, with Yamal Trains 2 & 3 tracking ahead of schedule.
- BP’s Chariman Carl-Henric Svanberg has announced his retirement after
steering the supermajor through the Deepwater Horizon disaster just
months after he assumed his position. Svanberg will remain in his
position until a successor is identified.
Last week in Asian oil
- China will continue to be more and more dependent on imported crude,
as domestic production fell by 2.9% y-o- y to 3.78 mmb/d in September.
Low oil prices have made some marginal and ageing fields uneconomic,
exacerbating the country’s declining trend. Domestic natural gas output,
however, was up 10.7% y-o- y to 11.15 bcm, bringing YTD gas production
up by 9.1% y-o- y. With China’s private sector shying away from
developing the country’s ast shale oil and gas reserves after yeas of
limited success, the outlook is poor. Which makes recent deals like CEFC
China Energy’s US$9.1 billion investment in Rosneft more important, as it
gives China access to up to 260,000 bpd of Russian oil. China has also
apparently offered to purchase outright 5% of Saudi Aramco, potentially
circumventing the Saudi Arabian firm’s IPO ambitions.
- As Iraq’s strife with its rebel Kurdish province wanes following the
capture of Kirkuk, the country has wasted no time in making plans to
exploit the region’s large oil reserves. Iraqi Oil Minister announced plans
to collaborate with international investors to double oil production at the
northern Kirkuk fields to exceed one mmb/d. However, Iraq is unlikely to
work with Rosneft – as the Russia producer announced a deal with Iraqi
Kurdistan authorities to operate an oil export pipeline and purchase
stakes in five oil blocks for up to US$400 million. It may have lost Kirkuk,
but Iraqi Kurdistan still controls three northern provinces, and its only
outlet to export its crude is through a pipeline through Turkey, which is
under jeopardy from the recent independence referendum. The Rosneft
pipeline project, together with current Kurdish pipeline operator Kar
Group, would provide an alternative supply route… but continue to stoke
domestic tensions with the central Iraqi government.
- As Shell finalises its exit from the Iraqi upstream oil sector, Total is
gunning to fill the void left by the supermajor, which is focusing on
natural gas production in Basra. Total is reportedly aiming for the
Majnoon oilfield as well as the Nassiriya oil and gas project, both in the
south, signalling its interest to the Iraqi Oil Minister.
- Indonesia will be launching its second oil and gas licenceround for 2017
in November, despite the first auction’s deadline having been pushed
back twice. Acreage to be offered in the second round will comprise both
conventional and unconventional blocks. Delays are expected, given that
the government is still fine-tuning new upstream regulations that will
govern the gross split mechanism applicable to new E&P contracts – the
cause of the first 2017 round’s repeated postponements.
Natural Gas & LNG
- Indonesia has agreed to extend Inpex’s contract to operate the Masela
natural gas field by up to 27 years once the current contract expires in
2028. This comes after Inpex lobbied for the extension, given that
President Joko Widodo’s decision to reject a planned US$15 billion FLNG
facility in favour of an onshore facility had pushed anticipated start of
production by several years to the late 2020s. The extension – a standard
20-year extension and an additional seven years as compensation for
changing the LNG refinery development plan – was necessary assurance
for Inpex and its partner Shell to proceed with the project.
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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.
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Headline crude prices for the week beginning 13 January 2020 – Brent: US$64/b; WTI: US$59/b
Headlines of the week
Source: U.S. Energy Information Administration, Short-Term Energy Outlook, January 2020
In its latest Short-Term Energy Outlook (STEO), released on January 14, the U.S. Energy Information Administration (EIA) forecasts that generation from natural gas-fired power plants in the electric power sector will grow by 1.3% in 2020. This growth rate would be the slowest growth rate in natural gas generation since 2017. EIA forecasts that generation from nonhydropower renewable energy sources, such as solar and wind, will grow by 15% in 2020—the fastest rate in four years. Forecast generation from coal-fired power plants declines by 13% in 2020.
During the past decade, the electric power sector has been retiring coal-fired generation plants while adding more natural gas generating capacity. In 2019, EIA estimates that 12.7 gigawatts (GW) of coal-fired capacity in the United States was retired, equivalent to 5% of the total existing coal-fired capacity at the beginning of the year. An additional 5.8 GW of U.S. coal capacity is scheduled to retire in 2020, contributing to a forecast 13% decline in coal-fired generation this year. In contrast, EIA estimates that the electric power sector has added or plans to add 11.4 GW of capacity at natural gas combined-cycle power plants in 2019 and 2020.
Generating capacity fueled by renewable energy sources, especially solar and wind, has increased steadily in recent years. EIA expects the U.S. electric power sector will add 19.3 GW of new utility-scale solar capacity in 2019 and 2020, a 65% increase from 2018 capacity levels. EIA expects a 32% increase of new wind capacity—or nearly 30 GW—to be installed in 2019 and 2020. Much of this new renewables capacity comes online at the end of the year, which affects generation trends in the following year.
Forecast generation mix varies in each of the 11 STEO electricity supply regions. A large proportion of the retired coal-fired capacity is located in the mid-Atlantic area, where PJM manages the dispatch of electricity. EIA forecasts that coal generation in the mid-Atlantic will decline by 37 billion kilowatthours (kWh) in 2020. Some of this decline is offset by more generation from mid-Atlantic natural gas-fired power plants; EIA expects generation from these plants to grow by 23 billion kWh.
Source: U.S. Energy Information Administration, Short-Term Energy Outlook, January 2020
In the Midwest, where the Midcontinent ISO (MISO) manages electricity, EIA expects coal generation to fall in 2020 by 33 billion kWh. This decline is offset by an increase in natural gas electricity generation (12 billion kWh) and by nonhydropower renewable energy sources (13 billion kWh). The regional increase in renewables is primarily a result of new wind generating capacity.
The electric power sector in the area of Texas managed by the Electric Reliability Council of Texas (ERCOT) is planning to see large increases in generating capacity from both wind and solar. EIA expects this new capacity will increase generation from nonhydropower renewable energy sources by 24 billion kWh this year. EIA expects the increased ERCOT renewable generation will lead to a regional decline of natural gas-fired generation and coal generation of 14 billion kWh for each fuel source in 2020.
EIA expects these trends to continue into 2021. EIA forecasts U.S. generation from nonhydropower renewable energy sources will grow by 17% next year as the electric power sector continues expanding solar and wind capacity. This increase in renewables, along with forecast increases in natural gas fuel costs, contributes to EIA’s forecast of a 2.3% decline in natural gas-fired generation in 2021. U.S. coal generation in 2021 is forecast to fall by 3.2%.