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Headline crude prices for the week beginning 30 April 2017 – Brent: US$75/b; WTI: US$68/b

  • Crude oil remains priced at a premium over geopolitical tensions. While the sun seems to be shining on the South Korea-North Korea relationship, there are major storm clouds gathering over the Arabian Peninsula.
  • Israel’s claim that Iran has a secret plan to build nuclear weapons triggered alarm bells in the market, raising fears that US President Donald Trump may scrap the existing Iranian nuclear deal and re-impose sanctions, despite French President Emmanuel Macron’s attempts to preserve the deal.
  • President Trump is due to decide on the Iranian matter on May 12, with EU leaders pushing to preserve the landmark deal. Traders are increasingly unwilling to sign contracts for Iranian crude and products until there is clarity on the situation.
  • The situation between Saudi Arabia and Yemen remains delicate as well, playing into the larger Saudi Arabia-Iran conflict in the region.
  • However, traders are also watching for any change in the US Federal Reserve’s position, with the US dollar gaining against most major currencies to its highest level in three months.
  • Within OPEC, Venezuela’s falling crude production has raised some eyebrows that the cartel could be tightening supply too much, with output in Angola also attracting attention. Angolan production has plunged by more than three times what its supply cut pledge, highlighting structural problems in the country’s ageing fields.
  • Crude stockpiles in the US are estimated to have added some 1.23 million barrels this week, a second consecutive week of gains that points to increased American output.
  • Five new oil rigs entered service in the US again last week, with three new gas rigs as well. The total active rig count is now at 1021, its highest level since April 2015.  
  • Crude price outlook: The Iranian situation will continue to weigh on oil markets, but accelerating American production should pull things back slightly. We expect Brent to trade at US$73/b and WTI/Shanghai to US$67/b.


Headlines of the week

Upstream

  • BP and Azerbaijan’s SOCAR are deepening their ties with a new 25-year PSA covering the joint development of Block D230 in the Caspian Sea. BP is already a major stakeholder in the ACG oil and Shah Deniz gas fields.
  • An auction for 11 oil and gas blocks in Iraq’s border areas with Iran and Kuwait, turned out to be a bit of a bust, with Italy’s Eni being the only major international firm submitting a bid. Five of the blocks failed to attract any bids, with the rest going to smaller Iraqi and Chinese players – a sign of hard-to-access and sensitive position of the areas.
  • Egypt is stepping on the accelerator, aiming to complete a quick turnaround of energy importer to exporter, aiming to attracting some US$10 billion in oil and gas sector foreign investment over its 2018/19 fiscal year, focusing in particular on gas assets in the Mediterranean.
  • Also in Egypt, another onshore oil discovery has been made, at the Rabul 4 well in West Gharib, operated by SDX Energy, continuing a streak of encouraging discoveries in Egypt.
  • Mexico’s upstream regulator has allowed Pemex to tender for partners in seven onshore exploration blocks, with the stipulation that it must retain a 45% stake in the blocks.
  • Despite attracting rancour from Israel, Lebanon is preparing for a second oil and gas offshore licensing round, buoyed by the success of the first.

Downstream

  • Brazil’s Raizen Combustiveis has beaten Argentina’s YPF and PetroChina to acquire Shell’s downstream assets in Argentina for some US$950 million, which includes a 645-strong network of fuel stations, the Buenos Aires refinery, a lubricant plant and LPG/aviation fuel terminals. 
  • Abu Dhabi’s Adnoc is setting up a new trading unit to handle its crude oil and refined products business, part of a larger movement by Middle Eastern oil producers to become more commercially focused. 
  • The planned revamp of Sri Lanka’s 50 kb/d CPC refinery has been completed, the site’s first major upgrade in almost 50 years.

Natural Gas/LNG

  • India is aiming to split its state-run gas utility GAIL into two companies by next March, in an attempt to stimulate competition and boost gas consumption. GAIL will be split into a gas marketing firm and a gas pipeline operator, along the company’s existing financial structure.
  • Emphasizing ExxonMobil’s claim that production at its PNG LNG plant in Papua New Guinea were ‘back to normal’, the supermajor has offered a spot LNG cargo for delivery to the Japan, Korea, Taiwan region.
  • Inpex has purchased a cargo of LNG to cool its Ichthys LNG plant in Australia, a sign that the much-delayed export project is now entering its final start-up phase.
  • Kuwait Energy has begun producing natural gas from the Siba field in southern Iraq, with an initial rate of 25 mcf/d that is projected to rise to 100 mcf/d by the end of the year.
  • The second production unit at Eni’s Zohr gas project in Egypt has started up, bringing the total current capacity of Zohr to 800 mcf/d.

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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