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Last Updated: September 20, 2019
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Headline crude prices for the week beginning 16 September 2019 – Brent: US$69/b; WTI: US$63/b

  • Global crude oil prices surged at the start of the week as news that a successful drone strike on the Abqaiq processing plant and the Khurais oil field in Saudi Arabia took out over half of the Kingdom’s crude production capacity
  • Brent prices jumped above US$70/b at one point on fears on global supply disruption, but abated as President Donald Trump authorises the release of US strategic petroleum reserves to cover the market
  • Initial fears that the Saudi Arabian crude output would be crippled for months proved to be extreme, with Saudi Aramco announcing that some 70% of capacity at Abqaiq had been restored within days
  • But more worryingly is that this incident escalates the risk of a full-blown military confrontation with Iran; the US was quick to accuse Iran of the attack, citing data on the attack, which was denied by Iran
  • Yemen’s Iran-backed Houthi rebels claimed responsibility for the attack, although initial results of a Saudi investigation pointed to the weapons originating from Iran
  • For now, crude oil prices have retreated as the risk of widespread supply disruption abated, but tensions are still high in the region
  • This comes after President Trump signals that he was considering easing sanctions in an apparent thaw in the US-Iran relationship; this opportunity now appears to have evaporated
  • Saudi Arabia’s new oil energy minister, Prince Abdulaziz bin Salman, made a positive impression at the recent OPEC+ meeting, with errant members of the group signalling that they were now ready to adhere to the supply deal
  • In Venezuela, the oil crisis continues as ongoing US sanctions now mean that the country cannot find enough vessels to transport its crude, as shippers fear losing insurance coverage if they transport Venezuelan oil
  • Iran has released the UK-flagged Stena Impero vessel that it had impounded, a lone bright spot in a region now clouded by geopolitical tensions
  • Against this backdrop, the US active rig count recorded yet another fall, losing five oil and seven gas rigs for a net drop of 12 to a new total of 886 rigs
  • With the shock of the Saudi drone attacks abating, crude oil prices are retreating back to their previous range – US$60-63 for Brent and US$56-59/b for WTI – as the impact of global supply was minimised; another attack, however, might cause a more permanent shift in prices


Headlines of the week

Upstream

  • Equinor has received consent from the Norwegian Petroleum Directorate to continue operations at the Tordis and Vigdis fields through 2036 and 2040, respectively, extending the life of the North Sea fields by 34 years
  • BP has announced that it will deploy continuous measurement of methane emissions for all future oil and gas projects in a bid to reduce emissions
  • CNOPC and Niger have agreed to collaborate on a 1,892km pipeline to carry oil from Niger’s Agadem rift basin to port facilities in Benin
  • The South African government is tabling a new law that will allow the state to take a free stake of up to 10% in all new oil and gas ventures, hoping to capitalise on a surge in upstream interest after Total’s Brulpadda discovery

Midstream/Downstream

  • As the IMO deadline for low-sulfur marine fuels approaches, refiners have begun stockpiling supplies of very low-sulfur fuel oil to ensure adequate supply; this includes Japan’s Cosmo Oil that aims to begin supplying VLSFO to the domestic marine market by October 2019
  • IndianOil’s Gujarat refinery stated it ready to produce 12,900 b/d of VLSFO by October while its Haldia refinery will start producing 5,500 b/d of VLSFO by December; this should be adequate to cover the India’s marine fuel demand
  • India is considering selling a stake in BPCL, the country’s second largest refiner, to an international firm to boost competition in downstream fuel retailing that has historically been dominated by state firms
  • Valero Energy and Darling Ingredients are launching the first renewable gasoil plant in Texas, focusing on producing renewable diesel and naphtha
  • In the UK, Essar Oil’s Stanlow refinery aims to increase its diet of US crude from a current 35% to 40%, leveraging on cheaper American oil
  • The after-effects of Russia’s contaminated crude through the Druzhba pipeline continues as Total issues a tender to sell 1.3 million barrels of tainted Ural crude through Rotterdam after failing to process it

Natural Gas/LNG

  • Poland has won a ruling from the EU courts to reduce Russian control over the key EU Opal pipeline that carries Russian gas from the Nord Stream link to Germany, preventing Gazprom from using most of Opal capacity in a bit to increase energy security for Eastern European countries
  • Vitol and Mozambique’s state player ENH have set up a new joint venture in Singapore to capitalise on trading opportunities for LNG, LPG, and condensate
  • Australia’s Liquefied Natural Gas Ltd and Delta Offshore Energy will supply gas from the Magnolia fields to an LNG-to-power project in Bac Lieu, Vietnam
  • Eni’s Baltim South West gas field offshore Egypt has started up production, only 3 years after discovery, producing an initial 100 mscf/d of gas
  • US gas player Sempra is looking to take FID on its Energia Costa Azul LNG project in Mexico’s Baja California region by the end of 2019
  • Egypt has announced that it expects to receive first natural gas from Israel by end-2019 through the East Mediterranean Gas pipeline, with initial supplies of 200 mscf/d that will rise to 500 mscf/d by 2020
  • The Independence floating LNG terminal in Lithuania – built to reduce the Baltic region’s dependence on Russian gas – is set to receive its first-ever cargo from Siberia, likely from Novatek’s LNG projects in Yamal

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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