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The furore over the drone attack on the heart of Saudi oil infrastructure which shook the oil world, glossed over another important development in the heart of the Saudi oil world. Khalid al-Falih, the public face of the Saudi Arabia’s oil riches who had presided over countless OPEC and global negotiations, has fallen. Replaced swiftly by loyalists to Crown Prince Mohammad bin Salman, the shake-up heralds a new era for Saudi Arabia’s leadership in the oil world.
To understand the gravity of the situation, you have to consider the responsibilities of Khalid al-Falih. Serving as CEO of Saudi Aramco from 2009 - 2015 and as the all-powerful Minister of Energy, Industry and Mineral Resources from 2016 (while simultaneously being the chairman of Aramco), al-Falih was possibly the most powerful person in the oil world during this period. And one of the most respected as well. Responsible to corralling quarrelsome OPEC members and crafting the OPEC+ club to lift crude prices from their 2014 nadir, al-Falih had a reputation that inspired confidence. In fact, in the fallout of the Jamal Khashoggi assassination, al-Falih was tasked with restoring assurance in the Kingdom for a restless audience immediately after at the Davos in the Desert conference in Riyadh.
That was just a year ago. And now al-Falih is gone. The affair rolled out in stages. At first, it was announced that the single Ministry of Energy, Industry and Mineral Resources would be split into two – one for energy and one for industry and mineral resources. At that point, it was assumed that al-Falih would remain the head of the new, smaller Ministry of Energy in charge of energy policy. A couple of days later, al-Falih was replaced as chairman of Saudi Aramco by Yasir al-Rumayyan, the head of the country’s powerful sovereign wealth fund. Again, it was assumed that this split had to happen due to the impending Aramco IPO that would require separation between energy policy and energy operations.
Then the axe fell.
Four days later, al-Falih was dismissed as the Minister of Energy, replaced with a member of the Crown Prince’s inner circle, Prince Abdulaziz bin Salman. The purge was complete. With members of the Crown Prince’s inner circle now occupying the key positions, the stage was set for the Vision 2030 national plan, to transform the Saudi Arabian economy away from oil dependence. To accelerate al-Falih, with his more measured approach, was seen a roadblock. Past performance was ignored, and the change came swiftly, as it does in Saudi Arabia.
But the lead-up to that change was more nuanced. Al-Falih played a key role in crafting the Vision 2030 strategy. Under him, Saudi Aramco embarked on a massive downstream expansion that included securing stakes in key refineries in strategic markets and took over petrochemicals giant SABIC. But there he also made some decisions that apparently did not go down well the Crown Prince. Chief among this was his reticence to push forward with Aramco’s planned IPO hastily, which placed him directly in opposition to the impatient Crown Prince’s demands for dynamism. And with oil prices still subdued despite al-Falih’s best efforts to whip OPEC+ into shape, al-Falih’s position had been weakened.
In a world where the Crown Prince of Saudi Arabia demands results yesterday while al-Falih was preparing for a careful tomorrow, one had to go. So, with all positions in place to accelerate Saudi Arabia’s development plans, it should be pedal to the metal now. But without more considered approach, will the Crown Prince be able to sustain control of this speeding vehicle as al-Falih did in the past?
Khalid al-Falih’s career in a snapshot:
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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.
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.
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.
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.
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.
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.
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:
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.
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.
