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Last Updated: August 16, 2018
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Headline crude prices for the week beginning 13 August 2018 – Brent: US$72/b; WTI: US$67/b

  • Turbulence continues to buffet crude oil prices, which are being caught in between short- and long-term supply concerns and external turmoil.
  • This week, the Turkish lira went into meltdown, with the contagion spreading over to other emerging currencies, including India and Indonesia; conversely, the dollar is also strengthening, placing pressure on barrels.
  • With a full month of data after the OPEC+ resolution in June, OPEC crude production for July rose by 41,000 b/d to 32.32 mmb/d, despite declines in Libya, Iran and Saudi Arabia. That’s below its 1 mmb/d increase target, and with Iranian sanctions looming, meeting that target could be challenging.
  • On the Iran situation, the US appears to have accepted that it will not be able to reduce Iranian crude exports ‘to zero’. Instead, the Trump administration is now aiming to cut Iranian volumes by half, which would be in the 700,000 kb/d to 1 mmb/d range.
  • The Trump administration is also walking back on its previous hardline stance, announcing that it would consider partial exemption from oil sanctions against Iran for some countries, which could see Total not giving up its cherished stake in the South Pars 11 project to CNPC.
  • Meanwhile in China, the new Shanghai crude futures launched in March seems to be marching to the beat of its own drum, advancing almost 5% over the first half of August against declines in Brent and WTI, the possible result of speculative activity that could diminish its potential to be a benchmark.
  • In the US, a weak trend in prices did not dissuade American drillers from adding 10 new oil rigs and 3 new gas rigs – the single largest jump in the weekly active rig count since May. The EIA is also reporting increase output at major shale plays, expecting output to rise to 7.52 mmb/d in September and bringing the US closer to the 12 mmb/d mark.
  • Crude price outlook: The persistence of a strong dollar is likely to mitigate any upward rise in oil prices, although uncertainty over trade, tariffs and Turkey could pull prices up. We expect Brent to trade at US$70-72/b and WTI at US$64-66/b.

Headlines of the week

Upstream

  • India’s Ministry of Petroleum and Natural Gas has launched its DSF Bid Round II, with 60 discoveries clubbed into 26 new contract areas located in ‘large, commercially-producing basins’.
  • Quadrant Energy and Carnarvon Petroleum has announced a major onshore oil find in Western Australia (WA), describing the Dorado as a ‘truly incredible’ reservoir that could hold some 150 million barrels of oil – which would make it the largest oil find in WA over the last 20 years.
  • Pakistan is teasing a ‘big cache’ of oil discovered by ExxonMobil and Eni in the offshore Block G, located off the Indus Delta.
  • Mozambique has finally handed out contracts for oil concessions that were awarded in 2015, allowing companies like Statoil, Eni, ExxonMobil and Sasol to begin exploring in the oil-rich Northern Zambezi basin.

Downstream

  • Vietnam’s second refinery, the 200 kb/d Nghi Son site, expects to reach full capacity in September as it begins to apply for export permits to trim down Vietnam’s existing high levels of (imported) oil products.
  • Faced with rising inflation, the Energy Ministry of the Philippines has asked oil companies to switch back to selling cheaper Euro II-standard diesel, backtracking from the Euro II standards implemented in 2016.
  • Mexico’s largest oil refinery, Pemex’s 330 kb/d Salina Cruz site, managed to restart operations two days after a power outage halted production.
  • The ambitious 650 kb/d Dangote refinery planned in Nigeria by Africa’s richest man is likely to miss its target start date of 2020, with sources stating that operations could only begin in 2022 at the earliest.
  • A major fire broke out at BPCL’s 120 kb/d Maharashtra refinery, forcing the shutdown of a hydrocracker as 40 people were injured.
  • India is aiming to save up to US$1.7 billion in oil imports by 2022 and reduce its carbon emissions through increased usage of biofuels, announcing plans to build 12 bio-refineries that will run on crop, plant waste and municipal waste.

Natural Gas/LNG

  • Exports from Yamal LNG’s second train have begun with the first shipment leaving the port of Sabetta, doubling the project’s capacity to 11 mtpa.
  • Cheniere and CPC have signed a 25-year long term deal where the Taiwanese firm will take 2 million tpa of LNG beginning 2021.
  • American LNG firm Tellurian confirmed that it is on track to begin construction of its US$27.5 billion Driftwood LNG terminal in Louisiana in 1H19, with operations planned for a 2023 start.
  • Santos is reporting a ‘significant gas field’ at its Barikewa-3 well onshore in Papua New Guinea, in the prodigious Toro and Hedinia reservoirs.
  • Tanzania is planning to build a natural gas pipeline that would run through Uganda, delivering gas harvesting from offshore Tanzania through Dar es Salaam and Tanga, then crossing over to Uganda via Lake Victoria.

Corporate

  • Apache and Kayne Anderson Acquisition Corp are forming Altus Midstream, a US$3.5 billion pipeline joint venture focusing on the Permian.
  • Kosmos Energy has acquired Deep Gulf Energy for US$1.23 bn, expanding its presence in the Gulf of Mexico and doubling output to 70,000 boe/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