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Last Updated: March 29, 2019
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Market Watch

Headline crude prices for the week beginning 25 March 2019 – Brent: US$67/b; WTI: US$59/b

  • Global crude oil prices saw a mixed start to the week, trading in a narrow range, as fears of a global recession subdued the market, offsetting continued concerns over tensions in Venezuela and Iran
  • Slowing manufacturing and bond indicators in the USA, France and Germany have hinted that a recession might be in the offing, spooking markets; but of greater concern is the tangible slowdown in Chinese economic growth, raising fears over global oil demand
  • Traders are also disappointed in a lack of progress in US-China trade war, as well as apparent fissures appearing between Saudi Arabia and Russia that postponed the OPEC+ meeting due in April to review the supply deal
  • The situation with US sanctions on Venezuelan crude continues to bite, as Nicolas Maduro clings on to power and attempts to isolate opposition leader Juan Guaidó; although a reprieve was given to Citgo, American refiners took no Venezuelan crude for the first time since 2010 last week
  • As US waivers on Iranian crude exports ticks down to expiry in May, the Petroleum Association of Japan is looking to avoid any imports of Iranian oil in April unless it gets clarity on a waiver extension
  • Despite WTI prices inching up towards US$60/b, US drillers continue to drop rigs; the Baker Hughes active rig count fell by 10 rigs – 9 oil, 1 gas – for a fifth consecutive week, to an overall 1,106
  • We expect crude prices to remain in their tight ranges, buffeted between OPEC’s attempts to stabilise supply and global unease over economic growth. Brent should be at US$66-68/b and WTI at US$58-60/b 

Headlines of the week

Upstream

  • Upstream independent Murphy Oil is exiting Malaysia after 20 years, selling its two primary Malaysian subsidiaries – Murphy Sabah Oil and Murphy Sarawak Oil – to Thailand’s PTTEP for some US$2.127 billion
  • Adnoc has awarded 35-year exploration rights for the Abu Dhabi onshore Block 4 to Japan’s Inpex, with Adnoc holding an option for a 60% stake if the project reaches commercial production phase
  • Spirit Energy has started production at its North Sea Oda field five months earlier than planned, with peak production estimated at 35,000 b/d
  • Canada’s state government of Alberta gas will increase crude production limits by 25,000 b/d per month over May and June to match distribution capacity
  • Nigerian President Muhammadu Buhari has ordered Shell to hand over operatorship of the prized OML 11 concession in Ogoniland to state firm NPDC

Midstream & Downstream

  • Refurbishment works on Aruba’s 209 kb/d refinery will continue after the US Treasury gave PDVSA’s American subsidiary Citgo a reprieve from sanctions
  • Ecuador has started plans to build a new 300 kb/d refinery with bidding on construction beginning in May 2019, which will also include a concession to upgrade the under-performing 110 kb/d Esmeraldas refinery
  • Despite some denials from Oman, it appears that Sri Lanka will be getting a new US$3.85 billion, 200 kb/d refinery near the Hambantota port through the combination of India’s Accord Group and Oman’s Ministry of Oil and Gas
  • Peru will be halting operations at its 65 kb/d Talara refinery for a year beginning November 2019 to complete a 5-year, US$5 billion expansion plan that will expand capacity to some 95 kb/d
  • Nigeria’s NNPC has recommitted to its plan to upgrade its four refineries, with the initial focus on revamping the ageing 210 kb/d Port Harcourt refinery
  • Mechanical completion of Sasol’s Westlake petrochemical complex in Louisiana – including a 1.5 mtpa ethane cracker – has been completed by Fluor

Natural Gas/LNG

  • Yet another US Gulf LNG project has received environmental approval to go ahead, with the 4 mtpa Texas LNG Brownsville LNG export terminal now looking to commence production by 2024
  • Gazprom has launched full-scale development of the Karasaveyskoye field in Russia’s Yamal Peninsula, which is expected to start production in 2023 as the second most important node in Yamal gas production after Bovanenkovskoye
  • Vietnam is looking to up its consumption of LNG through a US$7.8 billion investment in four gas-fired power plants, as the country hastens its transition away from coal through the US$ Ca Na LNG complex planned in Ninh Thuan
  • Egypt will now only begin to receive gas from Israel under a US$15 billion deal by late 2019 at the earliest, as ‘unexpected issues’ with the pipeline connecting the two countries forced a delay from the initial timeline of mid-2019
  • Tanzania is looking to finalise details and partners for its US$30 billion LNG project by September 2019, with Equinor, Shell and Ophir Energy involved
  • The Canada Pension Plan Investment Board (CPPIB) agreed to form a US$3.8 billion joint venture with pipeline infrastructure firm Williams, that will include the Ohio Valley Midstream and Utica East Ohio Midstream gas systems
  • Shell and Energy Transfer are moving forward with their 16.45 mtpa Lake Charles LNG project in Louisiana, kickstarting bids for EPC contracts

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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