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Last Updated: May 31, 2018
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Headline crude prices for the week beginning 28 May 2018 – Brent: US$75/b; WTI: US$66/b

  • Oil prices have retreated from their highs, as it becomes evident that OPEC and its NOPEC allies are moving to raise output, to counter potential supply shortfalls from Iran and Venezuela.
  • With fresh sanctions levied on Iran and Venezuela, crude prices had been riding a wave of risk-associated gains, with the market particularly worried about the ongoing ‘implosion’ in Venezuela.
  • With Russia and Saudi Arabia claiming a ‘common position on the future of the oil output cut deal’, both producers have signalled that their taps will open up to ensure a steady supply, calming fears in the market.
  • The new OPEC meeting is on June 22; this was originally supposed to be where OPEC would set out its ‘exit strategy’ from the current production freeze deal, but it seems that attention will be instead focusing on rejigging the numbers to keep prices in their current range.
  • Energy ministers from Saudi Arabia, the UAE and Kuwait will be meeting later this week ahead of the OPEC meeting to discuss a common position.
  • Spooked by OPEC’s move, hedge funds have reduced their net long position in Brent and WTI contracts by over 169 million barrels, sapping the strength in the long-term futures rally
  • The spread between Brent and WTI is now at its largest since 2015, potentially becoming a boon for US producers promoting exports.
  • After a brief pause, US drillers added 15 new oil rigs last week, the largest increase since February, with 859 active oil rigs taking advantage of the current high crude price environment.
  • American oil drillers took a pause in adding new units, with the US oil rig count holding steady last week after six consecutive weeks of gains, where the current total standing is 844 and 4 gains in the Permian offset by losses elsewhere.
  • Crude price outlook: OPEC’s moves may have calmed the market down slightly, but the ongoing issues in Iran and Venezuela are very real and tangible. Prices are unlikely to climb back to US$80/b for Brent, but will stay around US$77-78/b, or US$68-69/b for WTI. 

Headlines of the week

Upstream

  • Shell has made a large and significant deepwater discovery in the US Gulf of Mexico with its Dover well, its sixth in the offshore Norphlet play.  
  • CNOCC is anticipating production at its Kingfisher crude oil fields in Uganda – co-developed with Total – to begin in 2021, with FID in 2018.
  • Peru has cancelled five offshore oil contracts awarded to Tullow Oil, citing insufficient consultations made with coastal residents in the area.
  • Egypt has set October 1 and 8 as deadlines for two major international tenders for oil and gas blocks, which would offer 27 onshore and offshore blocks in a country riding a wave of successful discoveries.

Downstream

  • US refiner Valero and Supply de Mexico has signed long-term agreements to import fuel products from the Corpus Christi and Three Rivers refineries in Texas via pipeline into Nuevo Laredo, northern Mexico.
  • After entering operation in April, Vietnam’s second refinery – Nghi Son – has sold its first batch of diesel, with gasoline sales beginning earlier.
  • Indonesia is reportedly looking for a partner to finish the ongoing upgrade of its Balikpapan refinery in East Kalimantan.
  • Despite facing issues in meeting its current B20 biodiesel mandate, Indonesia is aiming to introduce a new B25 mandate next year.
  • The private 400 kb/d Hengli refinery in Dalian, China, is gearing up for trial operations in October, having purchased 2 million spot barrels of Saudi Arabia Medium crude for delivery in July.
  • The suit by Shell against five former employees of its Singapore refinery is ongoing, with Shell raising the value of fuel products allegedly stolen from its Pulau Bukom refinery to US$40 million.

Natural Gas/LNG

  • Total is taking a 10% stake in the upcoming Novatek-led Arctic LNG-2 project in Russia, with an option to raise its stake by a further 5%.
  • Curadrilla Resources has applied to the UK government to drill the country’s first ever horizontal shale gas well in Lanchashire.
  • ExxonMobil and Total has agreed on the capacity of three LNG trains to be built for PNG LNG, with capacity planned for 2.7 mtpa per train.
  • India’s ONGC is aiming to quadruple output from its offshore Deendayal natural gas block in the Bay of Bengal to some 1 mcf/d by January 2019.
  • BP has agreed to buy 2 mtpa of LNG over 20 years on a FOB basis from Venture Global, which is developing Calcasieu Pass LNG in Louisiana.
  • Rosneft has signed a deal to aid the semi-autonomous Kurdistan region in Iraq to develop its gas resources and build a major gas pipeline.
  • India’s GAIL is reportedly switching focus to short-term and spot deals for its LNG purchases, as a hedge against price volatility.
  • Cheniere has approved construction of a third liquefaction unit at its Corpus Christi LNG terminal, with the first two trains starting in 2019.

Corporate

  • Saudi Aramco’s planned IPO has been delayed to 2019, according to the firm at the St. Petersburg International Economic Forum.
  • Australia’s Santos has rejected a final US$10.8 billion takeover offer from US-based Harbour Energy, which failed in its fifth attempt to buy Santos.

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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