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Headline crude prices for the week beginning 7 May 2017 – Brent: US$76/b; WTI: US$70/b

  • WTI crude breached the US$70/b mark for the first time in four years, with the main topic being the US decision to re-impose sanctions on Iran, thereby pulling out of the nuclear deal that the EU has been trying to save.
  • Increasing trouble at PDVSA – which a former official opined could be ‘going down’ - has also stoked worries about the shock to the market.
  • By Tuesday, President Trump confirmed that he was leaving the Iran nuclear deal – calling it an ‘embarrassment’ and re-imposing sanctions, with the EU mulling moves that could insulate it from the impact of the new sanctions.
  • Though it is unknown how strict the new sanctions will be, there will be a timeline for 180 days before the strictest measure – targeting international banks – can be applied. Analysts believe Iranian exports could be cut by 200-300,000 b/d as a result.
  • In the US, production continues to surge as the EIA confirms that American output hits 10.26 mmb/d in February.
  • Meanwhile, nine new oil rigs entered service in the US last week, bringing the oil rig total up to 834, with six of the increases being in the Permian as US drillers respond to the new average price of US$70/b for crude.
  • Crude price outlook: The deteriorating outlook for the Iran deal will keep crude prices at their current levels. Expect Brent to trade at US$74-75/b and WTI/Shanghai to US$68-69/b.

Headlines of the week

Upstream

  • Spain’s Repsol has officially requested for compensation from PetroVietnam and Vietnamese authorities over the suspension of its oil project in the offshore Red Emperor block over Chinese pressure.
  • Iraq’s North Oil Company and the UK’s BP have signed an agreement to triple the output of the former’s Kirkuk oil fields to 1 mmb/d, as the Iraq central government capitalises on recapturing the fields from the KRG.
  • Brent cargoes for May and June deliveries have been delayed by a shutdown at the Sullom Voe oil terminal in the UK; some 100,000 barrels of crude scheduled for May loading are expected to be affected.
  • The hits keep coming in Egypt, as Eni announced a new oil discovery – the third in a month – at the A-2X prospect in the Western Desert’s South West Meleiha licence. Early tests point to 2,300 barrels of light oil per day.
  • Brazil has proposed September 28 for its planned fifth auction of oil blocks, which include the pre-salt offshore plays in the Saturno, Tita, Pau-Brasil and Tartaruga Verde fields in the Campos and Santos basin.
  • Between ExxonMobil and Chevron, some 50 drilling rigs by American supermajors will start up in the US Permian shale play this year.
  • Indonesia has secured operators for four of the five direct tender blocks offered earlier this year, with Eni taking the East Ganal block in the Kutei basin, while Repsol, Lion Energy and local players took the rest.

Downstream

  • US refiner Marathon Petroleum has agreed to buy rival Andeavor for US$23.3 billion, creating the largest independent refiner in the US.
  • Nigeria’s Forte Oil plans to divest its upstream and power businesses in the country as well as its downstream unit in Ghana, as the private firm reorganises to focus on retail fuel distribution in its home market.
  • Peru has revived plans for a petrochemical plant in southern Peru – fed by a natural gas pipeline – after the plan to expand its downstream industries was derailed by the corruption scandal engulfing Brazil’s Odebrecht.

Natural Gas/LNG

  • Russia’s Gazprom has unveiled a plan for a US$5 billion gas processing plant near St. Petersburg, which would serve as an alternative outlet if its proposed Nord Stream 2 gas pipeline project is axed by the EU.
  • BP expects to take FID on Phase 1 of its Tortue-Ahmeyim gas project offshore Senegal and Mauritania by the end of this year.
  • China’s CNOOC has set itself a target to increase LNG imports by 20% in 2018 – roughly 25 million tons from 20.46 million tons in 2017 – to power the country’s push to move towards cleaner energy.
  • Italy’s Eni is launching a study on a possible LNG terminal in the Barents Sea off Norway to exploit its recent gas discoveries in the Arctic region.
  • Iran has warned that Total is at risk of losing its stake in the South Pars natural gas field to Chinese partner CNPC. The French company is forced to withdraw from Iran by the US decision to re-impose sanctions.
  • Running out of gas at home, Thailand’s PTTEP is attempting exploration drills in north Australia’s Cash-Maple area to support new LNG volumes.
  • BP has set itself an ambitious target of boosting its LNG portfolio volumes to 25 million tons per year as it plays catch-up with Shell.

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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