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Last Updated: February 22, 2018
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Headline crude prices for the week beginning 19 February 2017 – Brent: US$65/b; WTI: US$62/b

  • Crude prices enjoyed a series of gains last week, boosted by a return of confidence to equity markets and the dollar continuing to remain weak.
  • Signs that crude inventories in the key storage hub in Cushing, Oklahoma were being drawn away to coastal shipping terminals for export have been taken as a sign that increasing American production is being met by increasing demand for American production.
  • This has allowed the Brent-WTI spread to narrow to its smallest level in six months, as Cushing inventories shrank by some 3.64 million barrels and 2.5 million barrels over the last two weeks.
  • Analysis by OPEC and its NOPEC allies have concluded that the supply glut is dissipating faster than expected on strong demand, expecting a rebalancing in 2Q or 3Q18.
  • This lays the ground for OPEC to announce the phase out of the supply freeze deal at its upcoming June meeting in Vienna; more cooperation with the NOPEC block is expected, with UAE Energy Minister Suhail Al Mazrouei stating he hoped the alliance would ‘last forever’.
  • A continued alliance would be necessary, in case surging US shale production thwarts plans and causes a global pivot back to over-supply.  
  • Further output growth is expected; the US is on course to hit 11 mmb/d production levels faster than expected this year, while major firms noted in their financial statements that global oil demand could reach 100 million barrels this year.
  • The latest US budget deal also includes a little noticed tripling of carbon tax credit for carbon dioxide re-injection to increase crude output, which could accelerate shale production. The tax credit has been permanently increased to US$35/ton of carbon dioxide, up from US$10/ton.
  • The US active oil and gas rig count was unchanged last week, as 7 new oil rig additions was offset by the loss of 7 gas rigs.   
  • Crude price outlook: Crude prices are set for a steady week, with Brent staying in the US$64-65/b range, while WTI settles within the US$61-62/b range.

Headlines of the week

Upstream

  • A standoff occurred in the eastern Mediterranean as the Turkish military allegedly blocked a drillship headed for an Eni wildcat in Cypriot waters; Turkey does not maintain diplomatic relationships with Cyprus and claims some of its waters, adding complexity in the rush to explore there.
  • The US is set to launch its largest offshore auction in history on March 21, offering some 77.3 million acres in the Gulf of Mexico, hoping that interest will perk up after a similar sale last year attracted little attention.
  • In the diplomatic quagmire that is the South China Sea, the Philippines and China have agreed to set up a special panel to address cooperation to jointly exploit oil and gas resources in the area.
  • Bolstered by the discovery of the giant Zohr field, Egypt is turning its sights to the Gulf of Suez, partnering with Schlumberger to launch a seismic survey in the area to gauge hydrocarbon potential.
  • Ahead of next month’s crude oil futures contract launch on the Shanghai International Energy Exchange, the bourse has approved the use of six bonded storage warehouses across eight sites in China.

Downstream

  • In a surprise move, President Donald Trump indicated that he would support a US$0.25/gallon increase federal gasoline and diesel taxes to pay for infrastructure upgrades, the first increase in the tax since 1993.
  • A fire broke out at the Isla refinery in Curacao, halting production at the catalytic cracker, complicating the situation as the island chooses between extending its deal with PDVSA or go with new Chinese investors.

Natural Gas/LNG

  • Even as Egypt makes steps to becoming natural gas self-sufficient, Israel has agreed to supply some 64 bcm of gas from the Tamar and Leviathan fields to Egypt’s Dolphinus Holdings to create greater energy security.
  • Woodside has bought ExxonMobil’s 50% stake in Australia’s Scarborough field for US$744 million, and aims to raise some US$1.96 billion to develop the remote location that could fuel expansion at Pluto LNG.
  • Just as Eni speeds ahead with plans for Zohr, BP has begun gas production at Egypt’s Atoll Phase One, producing some 350 mcf of gas and 10,000 barrels of condensate seven months ahead of schedule.
  • BP has also moved closer to developing the Tortue gas field in West Africa with Kosmos Energy, after Mauritania and Senegal agreed to a production split deal to govern output from the cross-border field, expected in 2021.
  • LNG exports from Peru’s Pampa Melchorita facility have resumed after a pipeline rupture suspended supplies from the onshore Camisea fields.
  • Kogas is seeking arbitration to amend its LNG contract with the NW Shelf Australian venture, a bold move that could encourage other Asian buyers.

Corporate

  • Saudi Aramco’s impending IPO has attracted the attention of Russian banks and a joint Russia-China investment fund in a move that could deepen ties between the two giant oil producers.

Petronas CEO Wan Zulkiflee Wan Ariffin has had his contract renewed for a second 3-year term, underscoring his success in leading the firm.

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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