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Headline crude prices for the week beginning 28 January 2019 – Brent: US$61/b; WTI: US$53/b

  • Oil prices continue to tread water in a tight range, with the market weighing the effectiveness of OPEC’s new supply deal with the looming spectre of growing American shale output
  • In an effort to shore up prices and prove its commitment, Saudi Arabia said it would reduce its oil output again in February and pump oil ‘well below’ its production limit for six months; January output was 10.2 mmb/d while February output is likely to be 10.1 mmb/d
  • The pledge comes as Saudi Arabia and Russia called off talks at the World Economic Forum in Davos, spurring rumours of a growing rift between the two oil giants
  • On the Iranian front, the EU is looking at ways of circumventing American sanctions on Iranian crude while Japanese refiners loaded their first Iranian crude cargo since October, following the footsteps of China, India, Turkey and South Korea
  • In another front opening on the American trade warpath, new US sanctions on Venezuelan crude look set to hurt American Gulf refiners – who depend on heavy crude from PDVSA – to the benefit of China and India
  • After a sharp drop the previous week, the active American drill count bounced back, gaining 10 oil rigs while losing one gas rig for a net gain of 9 sites to 1,059.
  • Crude price outlook: Crude oil will continue to hover in their present levels – Brent at US$60-62/b and WTI at US$52-54/b – with little on the horizon that could shake the benchmarks out of their current entrenched ranges


Headlines of the week

Upstream

  • Eni has started up production at a new well in the Vandumbu field offshore Angola, with the VAN-102 well achieving initial performance of 13,000 b/d; coupled with the recent start-up of the Mpungi field, Eni’s Block 15/06 should reach a new production level of some 170,000 boe/d
  • Even as Saudi Aramco plans to embark on an IPO and the Kingdom open up to foreign investment, Saudi Arabia will keep exclusive rights to develop its vast oil reserves with Aramco, with no plans to chip away as its monopoly
  • Total is looking to take FID on its Ikike and deepwater Preowei oil projects in Nigeria in the first half of 2019, bringing onstream assets with projected output of 60,000 b/d and 70,000 b/d respectively
  • Turkey’s Genel Energy has acquired stakes in the Sarta and Qara Dagh blocks in the Kurdistan region of Iraq, with Chevron retaining operating stakes
  • Ineos remains committed to developing a solution for the challenging high-pressure, high-temperature Hejre oil and gas field in the Danish North Sea
  • BHP has struck oil at the deepwater Trion field in the Gulf of Mexico, after becoming the first non-Pemex deepwater driller in the country last year
  • Chevron has sold its 51.74% stake in Brazil’s Frade field in the offshore Ceara basin to independent PetroRio for an undisclosed amount

Midstream & Downstream

  • The port of Fujairah in the UAE has joined other major ports like Shanghai and Singapore in banning open-loop scrubbers, forcing ships in the East of Suez to comply with IMO’s new 2020 regulations requiring ships to burn fuels with a sulfur content of less than 500ppm, down from 3500ppm
  • President Donald Trump’s administration is taking steps to limit the ability of American states to block interstate oil and gas pipeline, targeted at boosting limited pipeline capacity in the US Northeast
  • Tallgrass Energy Partners and Kinder Morgan have agreed to expand transport capacity from Wyoming and Colorado to Cushing, combining the Pony Express, Wyoming Interstate and Cheyenne Plains Gas pipelines to boost delivery to 800,000 b/d of light crude and 150,000 b/d of heavy crude
  • ExxonMobil has joined forces with Plains All American Pipeline and Lotus Midstream in a 1 mmb/d crude pipeline project meant to deliver Permian shale crude to Houston by 2021
  • Citgo has idled its small gasoline producing unit at the 157,500 bd Corpus Christi refinery, in a sign of a growing global gasoline glut

Natural Gas/LNG

  • Saudi Aramco has announced its intention to spend ‘billions of dollars’ to acquire natural gas assets in the US in its ambitions to diversify away from crude to become a global natural gas/LNG player
  • Lithuania’s Klaipeda LNG terminal will double its LNG capacity by 2021 when pipelines to Poland and Finland are completed, delivering Norwegian gas to the Baltic countries in an effort to reduce Russia’s dominance over gas supplies
  • CNOOC and Total have announced a new natural gas discovery in the Glengorm prospect in the UK Central North Sea; at 250 million boe of recoverable resources, it is the largest UK gas find in more than a decade
  • Shell’s Kitimat LNG project in Canada’s British Columbia is gaining steam, with contracts and subcontracts worth almost US$1 billion already handed out
  • Anadarko and PTTEP will take FID on the Mozambique Area 1 natural gas project in the Rovuma basin in 1H2019, targeting eventual LNG production

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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.

With annual demand growth slower than 1% and no firm policies aimed at reducing carbon dioxide emissions, the mix of generation resources in the non-OECD Europe and Eurasia region (which excludes Russia) will change only marginally. Through 2050, wind and solar generation increases marginally and accounts for less than 10% of the generation mix in 2050, leaving hydroelectric power as the main source of renewables generation for this region. Growth in natural gas generation will displace some coal-fired generation—which falls from 31% in 2018 to 15% in 2050—but the overall share of fossil generation will change relatively little throughout the projection period.

January, 23 2020
EIA expects U.S. energy-related CO2 emissions to decrease annually through 2021

In its latest Short-Term Energy Outlook (STEO), released on January 14, the U.S. Energy Information Administration (EIA) forecasts year-over-year decreases in energy-related carbon dioxide (CO2) emissions through 2021. After decreasing by 2.1% in 2019, energy-related CO2 emissions will decrease by 2.0% in 2020 and again by 1.5% in 2021 for a third consecutive year of declines.

These declines come after an increase in 2018 when weather-related factors caused energy-related CO2 emissions to rise by 2.9%. If this forecast holds, energy-related CO2 emissions will have declined in 7 of the 10 years from 2012 to 2021. With the forecast declines, the 2021 level of fewer than 5 billion metric tons would be the first time emissions have been at that level since 1991.

After a slight decline in 2019, EIA expects petroleum-related CO2 emissions to be flat in 2020 and decline slightly in 2021. The transportation sector uses more than two-thirds of total U.S. petroleum consumption. Vehicle miles traveled (VMT) grow nearly 1% annually during the forecast period. In the short term, increases in VMT are largely offset by increases in vehicle efficiency.

Winter temperatures in New England, which were colder than normal in 2019, led to increased petroleum consumption for heating. New England uses more petroleum as a heating fuel than other parts of the United States. EIA expects winter temperatures will revert to normal, contributing to a flattening in overall petroleum demand.

Natural gas-related CO2 increased by 4.2% in 2019, and EIA expects that it will rise by 1.4% in 2020. However, EIA expects a 1.7% decline in natural gas-related CO2 in 2021 because of warmer winter weather and less demand for natural gas for heating.

Changes in the relative prices of coal and natural gas can cause fuel switching in the electric power sector. Small price changes can yield relatively large shifts in generation shares between coal and natural gas. EIA expects coal-related CO2 will decline by 10.8% in 2020 after declining by 12.7% in 2019 because of low natural gas prices. EIA expects the rate of coal-related CO2 to decline to be less in 2021 at 2.7%.

The declines in CO2 emissions are driven by two factors that continue from recent historical trends. EIA expects that less carbon-intensive and more efficient natural gas-fired generation will replace coal-fired generation and that generation from renewable energy—especially wind and solar—will increase.

As total generation declines during the forecast period, increases in renewable generation decrease the share of fossil-fueled generation. EIA estimates that coal and natural gas electric generation combined, which had a 63% share of generation in 2018, fell to 62% in 2019 and will drop to 59% in 2020 and 58% in 2021.

Coal-fired generation alone has fallen from 28% in 2018 to 24% in 2019 and will fall further to 21% in 2020 and 2021. The natural gas-fired generation share rises from 37% in 2019 to 38% in 2020, but it declines to 37% in 2021. In general, when the share of natural gas increases relative to coal, the carbon intensity of the electricity supply decreases. Increasing the share of renewable generation further decreases the carbon intensity.

U.S. annual carbon emissions by source

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

January, 21 2020
Latest issue of GEO ExPro magazine covers Europe and Frontier Exploration, Modelling and Mapping, and Geochemistry.

GEO ExPro Vol. 16, No. 6 was published on 9th December 2019 bringing light to the latest science and technology activity in the global geoscience community within the oil, gas and energy sector.

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.

Download GEO ExPro Vol. 16, No. 6

January, 20 2020