Easwaran Kanason

Co - founder of NrgEdge
Last Updated: June 12, 2018
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Business Trends
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The magic number seems to be 1 million barrels. At least, that is what has been requested by the US to Saudi Arabia and some other OPEC producers in an unofficial appeal. After President Donald Trump publicly complained on Twitter that ‘OPEC is at it again!’ when US crude prices surged to their highest levels in three years – induced in no small part by the re-imposition of sanctions on Iran – the request strikes a more conciliatory note as the oil titans of the world seek to bring some order to the market.

It is not known how the request was made, but it is known that it was made individually to a select group of oil producers – likely Saudi Arabia and its closest OPEC allies Kuwait, the UAE and Algeria, and most definitely not Iran. News of the request raised eyebrows. The US tends to shy away from involvement or engagement with OPEC, and that this happened an unprecedented situation. The USA is less worried about surging shale production in response to higher prices, but something more short-term – retail gasoline prices have jumped to their highest levels in more than three years, and with the summer driving season coming, the US fears high pump prices will trigger dissatisfaction, particularly with mid-term elections coming in November. Requesting the American shale industry to restrict output goes against US policy, so it has to go to OPEC, cap in hand, to ask for help.

Can OPEC help? Will OPEC help? The answer is very likely to be a yes. Between Saudi Arabia, Kuwait and the UAE alone, there is almost 2 mmb/d of spare capacity that could theoretically be activated quickly. Those three – along with Algeria and non-OPEC member Oman – reportedly met up prior to the US request to their position in raising output. Russia too has significant spare capacity – some 500,000 b/d – that Rosneft is said to be gearing up to utilise. It is not known whether the US request included one to Russia, but OPEC and Russia were always going to head into the June 22 meeting in Vienna with the target of raising output regardless of America. The past three weeks has been characterised by a united Saudi-Russia front aimed to marshalling support for an output increase to convince other members of the OPEC-NOPEC alliance to fall in line.

From its ‘the higher the better’ attitude seen earlier this year, OPEC has now moved to a desire to contain prices within the US$70-75/b range. To do that, it has publicly stated that it will move to replace any volumes lost from Iran and Venezuela. No numbers have officially stated, but 1 million barrels per day was always seen as a significant enough figure by analysts worldwide. And now, it seems, the US believes that is the magic number as well. OPEC meets in two weeks and I believe it is very likely that they too will agree. 


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EIA projects less than a quarter of the world’s electricity generated from coal by 2050

According to the U.S. Energy Information Administration’s (EIA) International Energy Outlook 2019 (IEO2019), global electric power generation from renewable sources will increase more than 20% throughout the projection period (2018–2050), providing almost half of the world’s electricity generation in 2050. In that same period, global coal-fired generation will decrease 13%, representing only 22% of the generation mix in 2050. EIA projects that worldwide electricity generation will grow by 1.8% per year through 2050.

EIA projects that total world electricity generation will reach nearly 45 trillion kilowatthours (kWh) by 2050, almost 20 trillion kWh more than the 2018 level. Although growth occurs in both OECD and non-OECD regions, the growth in electricity demand in non-OECD regions far outpaces those in OECD regions. Even though electricity demand growth contributes to a region’s fuel share of generation, the scale and scope of that region’s policies provide different incentives and play an important role as well.

Throughout the projection period, some regions have high electricity demand growth, some have aggressive emission reduction policies, and some have relatively little change in both. Varying demand growth and policies across regions lead to different distribution of fuel shares for electricity generation within each region. However, the power sector’s share of generation from renewables tends to increase and the share of coal tends to decrease.

High electricity demand growth

net electricity generation by fuel, India

Source: U.S. Energy Information Administration, International Energy Outlook 2019

India has the most rapid regional electricity demand growth (4.6% per year) in the IEO2019 Reference case. Although India has developed target levels for solar and wind capacity, it does not have an aggressive emissions reduction policy in place, so EIA projects coal-fired generation growth in addition to growth in solar and wind generation. Combined, solar, wind, and coal will account for 90% of India's electricity generation mix in 2050. Combined wind and solar generation increases from less than 10% of India's generation mix in 2018 to more than 50% of the generation mix in 2050. The level of coal-fired generation increases during that same time period, but coal’s share of India's electricity generation mix falls from about 75% of the mix in 2018 to less than 40% in 2050.

Aggressive emissions reductions policy

net electricity generation by fuel, OECD Europe

Source: U.S. Energy Information Administration, International Energy Outlook 2019
Note: OECD is the Organization for Economic Cooperation and Development. International Energy Outlook regional definitions.

New capacity additions for renewable technologies are economically competitive with fossil technologies worldwide. But without policy incentives, growth in generation from renewable sources is limited in regions with slow demand growth. OECD Europe electricity demand is projected to grow at about 1% per year through 2050; however, EIA expects that a regional carbon dioxide cap will contribute to a reduction in fossil-fired generation and an increase in renewables generation to meet demand. Throughout the projection period, EIA expects that the share of wind and solar generation in OECD Europe will increase from 20% to almost 50% by 2050. In that same period, EIA projects that fossil-fired generation will decrease from about 37% to 18% of the generation mix. By 2050, coal-fired generation comprises only 5% of the region’s generation mix.

Low electricity demand growth/No emissions reductions policies

net electricity generation by fuel, other non-OECD Europe and Eurasia

Source: U.S. Energy Information Administration, International Energy Outlook 2019
Note: International Energy Outlook regional definitions.

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U.S. annual carbon emissions by source

Source: U.S. Energy Information Administration, Short-Term Energy Outlook, January 2020
Note: CO2 is carbon dioxide.

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This issue focusses on oil and gas exploration in frontier regions within Europe, with stories and articles discussing new modelling and mapping technologies available to the industry. This issue also presents several articles discussing the discipline of geochemistry and how it can be used to further enhance hydrocarbon exploration.

You can download the PDF of GEO ExPro magazine for FREE and sign up to GEO ExPro’s weekly updates and online exclusives to receive the latest articles direct to your inbox.

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