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Last Updated: May 31, 2019
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Headline crude prices for the week beginning 27 May 2019 – Brent: US$68/b; WTI: US$58/b

  • After tumbling down last week on the escalation of the US-China trade war, global crude oil prices have steadied up although the downside risk remains vast as the health of the global economy has become fragile
  • Beyond just China, US President Donald Trump launched a new front in his trade war, imposing tariffs on all Mexican imports over ‘facilitating illegal immigration’; in between the trade tiffs with allies, sanctions on rogue-ish states and possible military action towards Iran, the global geopolitical situation is dicey and crude prices have tumbled in response.
  • Ahead of its meeting in Vienna next month, OPEC and the wider OPEC+ group is adamant about controlling supply over the remainder of 2019; but while the Middle Eastern members are adhering, Russia is lagging and has seen sales of its crude to the USA increase dramatically
  • Also on the supply side, the chronic political turmoil has taken its toll on Venezuela, where production fell to 740,000 b/d in March, making the founding member of OPEC only the fourth current largest Latin American oil producer behind Brazil, Mexico and Colombia
  • But while the oil world frets about the health of global demand, American drillers reduced active rigs for the third consecutive week, cutting five oil rigs and starting up one gas rig for a net loss of 4 to a total of 983
  • With trouble brewing on the horizon on several macro-economic fronts – and seemingly happily fanned by US belligerence – the trend for crude oil price is downwards; we expect Brent to drop down to a trading range of US$63-65/b and WTI to US$55/57/b while the situations (attempts) to calm down


Headlines of the week

Upstream

  • Shell has started up its Appomattox floating production system in deepwater US Gulf of Mexico several months ahead of schedule, with expected production of 175,000 boe/d from the Norphlet formation
  • Ukraine will be launching a third licensing round for 2019 in June, covering nine blocks across three regions for a period of 20 years, as well as a public tender for nine onshore and one offshore block for 50 years
  • Canada’s controversial Trans Mountain pipeline expansion that will move oil sands from Alberta to British Columbia has been given a boost as a BC Appeals Court ruled that the province does not have the jurisdiction to restrict the project
  • Shell has announced a small upstream success in Albania, with the Shpirag 4 onshore well showing flow of ‘several thousand barrels per day’ of light oil
  • A consortium led by Italy’s Eni has won the offshore block MLO 124 in Argentina’s Malvinas Basin near Tierra del Fuego
  • Polish refiner Lotos is reportedly looking at purchasing upstream assets to reduce its dependence on Russian crude given the recent toxic crude situation
  • There might be turmoil in Guyana, as its anti-corruption agency is investigating how exploration rights were awarded to ExxonMobil and Tullow

Midstream & Downstream

  • China’s Jinling refinery exported its first cargo of gasoline from Nanjing, shipping it to Singapore as Chinese players expand their export operations on swollen domestic inventories and a new round of higher export quotas
  • A month after South Africa’s Strategic Fuel Fund acquired 90% of the B2 Block in South Sudan, the state-backed fund is looking to expand its scope to include midstream facilities and a possible 60 kb/d refinery in Pagak
  • The toxic crude situation across Russia’s Druzhba pipeline appears to have been mostly rectified, with refineries in Poland and Slovakia now receiving clean oil
  • Russia’s 180 kb/d Antipinsky refinery has officially filed for bankruptcy, with a London court ordering its assets to be frozen in favour of VTB Trading
  • Despite being a major crude producer, Angola has been facing severe fuel shortages domestically and has signed Trafigura and Total to supply gasoline, diesel and marine gas oil by tender through May 2019

Natural Gas/LNG

  • Gazprom has confirmed its recent giant gas discoveries in Russia’s Yamal peninsula, with the Dinkov and Nyarmeyskoye fields in the Kara Sea estimated to hold up to a collective 17.9 tcf of recoverable resources
  • Russia’s Novatek has unveiled plans to build the new Ob LNG plant near the port of Sabetta in the Yamal Peninsula, which is planned to have capacity for 4.8 million tons per year and come into operation in 2023 for US$5 billion
  • The US$20 billion Abadi LNG project in the Arafura Sea might actually be progressing as Japan’s Inpex has reportedly reached an agreement with the new Widodo government on the development plan for the giant gas field
  • Australia’s Woodside is on the hunt to expand its LNG portfolio with a particular focus on foreign opportunities along with domestic brownfield assets
  • The little known Cynergy Group from Cyprus has announced plans to spend up to US$10 billion to buy and unite under-utilised gas assets in the East Mediterranean with the intent of cutting through bureaucratic red tape

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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