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Last Updated: March 22, 2018
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Headline crude prices for the week beginning 19 March 2018 – Brent: US$66/b; WTI: US$62/b

  • While swelling shale output continues to weigh on crude prices, geopolitical trends have taken over to add some volatility to the market.
  • With ex-ExxonMobil chief Rex Tillerson fired as the US Secretary of State and Venezuela’s alarming drop in crude oil, the market injected some risk premiums in crude prices over last week.
  • Tensions between Saudi Arabia and Iran has also heightened, with Saudi Arabia criticising the Iranian nuclear deal in 2015 as ‘flawed’ as President Donald Trump meets with the Saudi King.
  • Coupled with Trump’s pronouncements possibly leading to a trade war – especially with China and the EU – and Saudi Aramco’s planned IPO on shaky ground, macro elements have created a more unpredictable environment for oil to trade in.
  • While this has bounced prices up, continued gains in US crude have capped the rise. US crude production is now at 10.38 mmb/d, and could hit 11 mmb/d by 3Q18. Output from Canada and Brazil has also risen.
  • American oil and gas rigs gained 6 active sites last week, growing to 967. Oil rigs hit 800 again, with 4 additions, helping to contributing to the growth in American crude stock last week, according to the EIA.
  • Crude price outlook: With geopolitical tensions aflame and data pointing to a surprise drop in US crude stocks, the direction for prices this week should be upwards. Brent could end the week at US$69/b, with WTI trailing behind at US$65/b.

Headlines of the week

Upstream

  • Indonesia is reportedly expecting strong interest for its upcoming auction round – which includes blocks that failed to find a buyer over the last three years – as its new revenue split model, which switches from cost-recovery to gross-split, has heightened interest among companies.
  • Egypt’s upstream fortunes continue to grow, as SDX Energy announce a heavy oil discovery at the onshore Rabul 5 well in West Gharib.
  • Iraq is ramping up efforts to expand its crude output, with an ambitious US$4 billion plan to seawater into its fields to dislodge crude and a man-made island in the Persian Gulf to serve as an export facility hub.
  • Production has begun at the Ochigufu deepwater project in Block 15/06, Angola, with Eni and Sonangol expecting production to hit 25,000 b/d. Eni also has the UM8 reservoir, Mpungi field subsea system and the Vandumbu field in development for 2019, adding another 30,000 b/d.
  • PetroVietnam has sold a 5% working interest in the 15-1/05 PSC in the offshore Cuu Long basin to Murphy Oil, who will jointly develop the small field with PetroVietnam and South Korea’s SK Innovation.
  • Colombia will launch a new fiscal framework next month, designed to make its oil and gas contracts more attractive to investors.

Downstream

  • With a stated goal of reducing oil product imports by 25%, Iraq is mulling over several projects to boost domestic refining output, including an NGL-to-liquids plan, a new 70 kb/d refinery in Anbar and boosting crude volumes in stabilised Kirkuk to refineries in the centre and south.
  • Another competitor joins the downstream race in Mexico, as Spain’s Repsol announce it would be opening 200 fuel stations over 2018 with an eventual goal of reaching 10% market share by 2022.
  • Austria’s OMV will be spending €10 billion to focus on gas and refined products, as well as expand its business outside of Europe.

Natural Gas/LNG

  • All major construction milestones have been hit at Shell’s Prelude LNG project, and will join Ichthys as the final two of Australia’s current giant LNG projects when it begins producing gas in the ‘next couple of months.’
  • Golar LNG’s floating LNG production platform in Cameroon has started up, becoming the second in the world after Petronas last year, with Gazprom having purchased the entire 1.2 mtpa output for 8 years.
  • Bangladesh’s Summit Power International and Japan’s Mitsubishi Corp has agreed to develop a US$3 billion LNG-to-power project in Bangladesh.
  • Russia and Serbia has reportedly revived a gas pipeline plan that would allow Gazprom to bypass Ukraine to send piped gas to East Europe.
  • Algeria’s Sonatrach will be spending US$250 million to boost output at its Tinhert gas field, aiming to hit 20 mcm/d, from a current 5 mcm/d.
  • ExxonMobil will be leading a consortium to build Pakistan’s third LNG expect terminal, a US$150 million site in Port Qasim expected in 2019.

Corporate

  • Statoil is proposing to change its name to Equinor, to reflect a move away from hydrocarbons to a broader energy spectrum and low-carbon targets.
  • Saudi Aramco’s planned IPO is hitting more snags, as chatter suggests it could be delayed to 2019 and has received a tepid response in the USA.

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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