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Last Updated: March 8, 2018
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Short-Term Energy Outlook

March 6, 2018 Release

 

Highlights   

 

Global liquid fuels

·         North Sea Brent crude oil spot prices averaged $65 per barrel (b) in February, a decrease of $4/b from the January level and the first month-over-month average decrease since June 2017. EIA forecasts Brent spot prices will average about $62/b in both 2018 and 2019 compared with an average of $54/b in 2017.

 

  • EIA expects West Texas Intermediate (WTI) crude oil prices to average $4/b lower than Brent prices in both 2018 and 2019. NYMEX WTI contract values for May 2018 delivery traded during the five-day period ending  March 1, 2018, suggest a range of $51/b to $76/b encompasses the market expectation for June 2018 WTI prices at the 95% confidence level.
  • EIA estimates that U.S. crude oil production averaged 10.3 million barrels per day (b/d) in February, up 230,000 b/d from the January level, when there were some well freeze-offs in the Permian and Bakken. EIA has reported that total U.S. crude oil production averaged 9.3 million b/d in 2017, ending the year with production of 9.9 million b/d in December. EIA projects that U.S. crude oil production will average 10.7 million b/d in 2018, which would mark the highest annual average U.S. crude oil production level, surpassing the previous record of 9.6 million b/d set in 1970. EIA forecasts that 2019 crude oil production will average 11.3 million b/d.
  • EIA estimates that inventories of global petroleum and other liquid fuels declined by 0.6 million b/d in 2017. In this forecast, global inventories grow by about 0.4 million b/d in 2018 and by another 0.3 million b/d in 2019.

Natural gas

·         EIA estimates that U.S. dry natural gas production averaged 73.6 billion cubic feet per day (Bcf/d) in 2017. EIA forecasts that natural gas production will average 81.7 Bcf/d in 2018, establishing a new record. That level would be 8.1 Bcf/d higher than the 2017 level and the highest annual average growth on record. EIA expects natural gas production will also increase in 2019, with forecast growth of 1.0 Bcf/d.  

 

·         In February, the U.S. benchmark Henry Hub natural gas spot price averaged $2.66 per million British thermal units (MMBtu), down $1.03/MMBtu from January. Winter weather moderated in February after extremely cold temperatures in much of the country during the first half of January. U.S. heating degree days were an estimated 17% lower than the 10-year average for February, which contributed to lower consumption and prices.

 

·         EIA expects natural gas prices to moderate in the coming months, based on a forecast of record natural gas production levels. EIA expects Henry Hub spot prices to average $2.72/MMBtu in March and $2.99/MMBtu for all of 2018. In 2019, EIA forecasts prices will average $3.07/MMBtu. NYMEX contract values for June 2018 delivery that traded during the five-day period ending March 1, 2018, suggest that a range of $2.16/MMBtu to $3.49/MMBtu encompasses the market expectation for June Henry Hub natural gas prices at the 95% confidence level.

Electricity, coal, renewables, and emissions

  • EIA expects the share of U.S. total utility-scale electricity generation from natural gas-fired power plants to rise from 32% in 2017 to 34% in both 2018 and 2019. The forecast generation share from coal in both 2018 and 2019 averages 29%, down from 30% in 2017. The nuclear share of generation was 20% in 2017 and is forecast to average 20% in 2018 and 19% in 2019. Nonhydropower renewables provided slightly less than 10% of electricity generation in 2017 and are expected to provide 10% in 2018 and nearly 11% in 2019. The generation share of hydropower was over 7% in 2017 and is forecast to fall below 7% in both 2018 and 2019.

 

  • EIA forecasts coal production to decline by almost 5% to 736 million short tons (MMst) in 2018 and then increase by 1% to 745 MMst in 2019. Lower expected global demand for U.S. coal exports (down 17% in 2018 and another 5% in 2019) and lower forecasts of coal use in the electric power sector (down 5% in 2018) contribute to the forecast of lower coal production.
  • U.S. coal exports were 97 MMst in 2017, a 61% increase from the previous year, but they are expected to decrease in both 2018 and 2019. Exports of metallurgical coal, which are used in the steelmaking process, remain at 55 MMst in 2018 and decline to 54 MMst in 2019.  Steam coal exports, which were an estimated 42 MMst in 2017, are expected to decline to 26 MMst and 23 MMst in 2018 and 2019, respectively.
  • In 2017, EIA estimates that wind generated on average 697,000 megawatthours per day (MWh/d). EIA projects that generation from wind will rise to 722,000 MWh/d in 2018 and to 778,000 MWh/d in 2019.  If factors such as precipitation and snowpack remain as forecast, conventional hydropower is projected to generate 747,000 MWh/d in 2019, which would make it the first year that wind generation exceeds hydropower generation.
  • Total solar electricity generation averaged an estimated 211,000 MWh/d in 2017.  EIA projects that it will reach 246,000 MWh/d in 2018 and 294,000 MWh/d in 2019.
  • After declining by 0.6% in 2017, EIA projects that energy-related carbon dioxide (CO2) emissions will increase by 1.0% in 2018 and by another 0.8% in 2019. Energy-related CO2 emissions are sensitive to changes in weather, economic growth, and energy prices.

https://www.eia.gov/outlooks/steo/

 

Contact:

Angelina LaRose

[email protected]

phone: 202-586-6135

 

or

 

Tyler Hodge

[email protected]

phone (202)  586-0442

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December, 01 2021
Royal Dutch Shell Poised To Become Just Shell

On 10 December 2021, if all goes to plan Royal Dutch Shell will become just Shell. The energy supermajor will move its headquarters from The Hague in The Netherlands to London, UK. At least three-quarters of the company’s shareholders must vote in favour of the change at the upcoming general meeting, which has been sold by Shell as a means of simplifying its corporate structure and better return value to shareholders, as well as be ‘better positioned to seize opportunities and play a leading role in the energy transition’. In doing so, it will no longer meet Dutch conditions for ‘royal’ designation, dropping a moniker that has defined the company through decades of evolution since 1907.

But why this and why now?

There is a complex web of reasons why, some internal and some external but the ultimate reason boils down to improving growth sustainability. Royal Dutch Shell was born through the merger of Shell Transport and Trading Company (based in the UK) and Royal Dutch (based in The Netherlands) in 1907, with both companies engaging in exploration activities ranging from seashells to crude oil. Unified across international borders, Royal Dutch Shell emerged as Europe’s answer to John D Rockefeller’s Standard Oil empire, as the race to exploit oil (and later natural gas) reserves spilled out over the world. Along the way, Royal Dutch Shell chalked up a number of achievements including establishing the iconic Brent field in the North Sea to striking the first commercial oil in Nigeria. Unlike Standard Oil which was dissolved into 34 smaller companies in 1911, Royal Dutch Shell remained intact, operating as two entities until 2005, when they were finally combined in a dual-nationality structure: incorporated in the UK, but residing in the Netherlands. This managed to satisfy the national claims both countries make on the supermajor, second only to ExxonMobil in revenue and profits but proved to be costly to maintain. In 2020, fellow Anglo-Dutch conglomerate Unilever also ditched its dual structure, opting to be based fully out of the City of London. In that sense, Shell is following the direction of the wind, as forces in its (soon to be former) home country turn sour.

There is a specific grievance that Royal Dutch Shell has with the Dutch government, the 15% dividend tax collected for Dutch-domiciled companies. It is the reason why Unilever abandoned Rotterdam and is now the reason why Shell is abandoning The Hague. And this point is particularly existentialist for Shell, since its share prices has been battered in recent years following the industry downturn since 2015, the global pandemic and being in the crosshairs of climate change activists as an emblem of why the world’s average temperatures are going haywire. The latter has already caused the largest Dutch state pension fund ABP to stop investing in fossil fuels, thereby divesting itself of Royal Dutch Shell. This was largely a symbolic move, but as religious figures will know, symbols themselves carry much power. To combat this, Shell has done two things. First, it has positioned itself to be at the forefront of energy transition, announcing ambitious emissions reductions plans in line with its European counterparts to become carbon neutral by 2050. Second, it is looking to bump up its dividend payouts after slashing them through the depths of the Covid-19 pandemic and accelerating share buybacks to remain the bluest of blue-chip stocks. But then, earlier this year, a Dutch court ruled that Shell’s emissions targets were ‘not ambitious enough’, ordering a stricter aim within a tighter timeframe. And the 15% dividend tax remains – even though Prime Minister Mark Rutte’s coalition government has been attempting to scrap it, with (it is presumed) some lobbying from Royal Dutch Shell and Unilever.

As simplistic it is to think that Shell is leaving for London believes the citizens of the Netherlands has turned its back on the company, the ultimate reason was the dividend tax. Reportedly, CEO Ben van Buerden called up Mark Rutte on Sunday informing him of the planned move. Rutte’s reaction, it is said was of dismay. And he embarked on a last-ditch effort to persuade Royal Dutch Shell to change its mind, by immediately lobbying his government’s coalition partners to back an abolition of the dividend tax. The reaction was perhaps not what he expected, with left-wing and green parties calling Shell’s threat ‘blackmail’. With democracy drawing a line, Shell decided to walk; or at least present an exit plan endorsed by its Board to be voted by shareholders. Many in the Netherlands see Shell’s exit and the loss of the moniker Royal Dutch – as a blow to national pride, especially since the country has been basking in the glow of expanded reputation as a result of post-Brexit migration of financial activities to Amsterdam from London. The UK, on the other hand, sees Shell’s decision and Unilever’s – as an endorsement of the country’s post-Brexit potential.

The move, if passed and in its initial stages, will be mainly structural, transferring the tax residence of Shell to London. Just ten top executives including van Buerden and CFO Jessica Uhl will be making the move to London. Three major arms – Projects and Technology, Global Upstream and Integrated Gas and Renewable Energies – will remain in The Hague. As will Shell’s massive physical reach on Dutch soil: the huge integrated refinery in Pernis, the biofuels hub in Rotterdam, the country’s first offshore wind farm and the mammoth Porthos carbon capture project that will funnel emissions from Rotterdam to be stored in empty North Sea gas fields. And Shell’s troubles with activists will still continue. British climate change activists are as, if not more aggressive as their Dutch counterpart, this being the country where Extinction Rebellion was born. Perhaps more of a threat is activist investor Third Point, which recently acquired a chunk of Shell shares and has been advocating splitting the company into two – a legacy business for fossil fuels and a futures-focused business for renewables.

So Shell’s business remains, even though its address has changed. In the grand scheme of things, never mind the small matter of Dutch national pride – Royal Dutch Shell’s roadmap to remain an investment icon and a major driver of energy transition will continue in its current form. This is a quibble about money or rather, tax – that will have little to no impact on Shell’s operations or on its ambitions. Royal Dutch Shell is poised to become just Shell. Different name and a different house, but the same contents. Unless, of course, Queen Elizabeth II decides to provide royal assent, in which case, Shell might one day become Royal British Shell.

End of Article 

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