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Last Updated: November 25, 2019
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Headline crude prices for the week beginning 18 November 2019 – Brent: US$63/b; WTI: US$57/b

  • The overarching narrative in the oil markets remains the ongoing trade war between the US and China, and its implications on the rest of the global economy and global oil demand
  • While both sides remain a ways off a concrete ‘phase one’ deal that is meant to freeze any additional escalation of tariffs, reports suggest that both sides are in ‘constructive discussions’ and are committed to seeking a solution after several acrimonious months
  • Officially, China is ‘pessimistic’ about the swift resolution – as the US has so far refused to budge on its request to roll back tariffs that China insists is key to striking a deal
  • Realistically, the trade war is inflicting damage on both sides, with President Trump likely keen on striking a deal given that impeachment proceedings against his Presidency have begun
  • Meanwhile, Saudi Aramco has been valued at between US$1.6-1.7 trillion – short of the US$2 trillion target sought – with only 1.5% of its shares to be listed on the Saudi stock exchange; this is likely to colour Saudi Arabia’s stance going into the December OPEC+ meeting in 2 weeks
  • In its prospectus for its IPO, Saudi Aramco predicts that global oil demand will peak in 2035, levelling off then falling after 2040
  • In Venezuela, new reports suggest that the country’s crude export situation is less dire than it seems, as a number of oil tankers have turned off their location signals in order to pick up Venezuelan crude to be shipped mainly to Russia and China
  • A fifth consecutive drop for the active US rig count saw the total count fall to 806 from a loss of 10 oil and 1 gas rig – bringing the active site total to its lowest level in 32 months
  • Crude prices are unlikely to budge from their entrenched range, given the lack of progress on the major front of the US-China trade war; ahead of the OPEC meeting in Vienna, prices will stay rangebound at US$60-63/b for Brent and US$56-59/b for WTI


Headlines of the week

Upstream

  • Adnoc will be spending almost US$500 million to upgrade its giant Bab onshore field to support long-term production as it prepares to use the field’s Murban-grade output to support its efforts to establish a new Middle East benchmark
  • Despite geopolitical tensions, Qatar is joining the other Middle Eastern crude producers to price its crude under forward contract rules instead of retroactively in 2020, with Abu Dhabi also moving to a futures pricing contract for Murban
  • Tullow Oil announced that it is re-assessing the commercial viability of its recent discoveries in Guyana, as new indications show that the crude from its fields in the Orinduik and Kanuku blocks are heavy with a high sulfur content, as opposed to the light, low sulfur crude from ExxonMobil’s Liza project
  • Petrobas and its partners Shell, Total and Petrogal Brasil have begun new production in Brazil’s pre-salt Santos basin as the P-68 FPSO – with processing capacity for 150,000 b/d of crude and 6 mcf/d of gas – starts up covering the Berbigao, Sururu and West Atapu fields within the BM-S-11-A concession
  • Ithaca Energy’s US$2 billion acquisition of Chevron North Sea Limited has been completed, involving the operational transfer of the Captain, Alba, Erskine and Alder fields and stakes in the Britannia, Brodger and Enochdhu fields
  • Occidental Petroleum has formed a joint venture with Colombia’s Ecopetrol to develop 97,000 acres of shale assets in the Permian’s Midland Basin
  • BHP is aiming to make a final investment decision on developing the Trion oil field in Mexico’s offshore Perdido Fold Belt by 2022

Midstream/Downstream

  • IndianOil is looking to diversify its refinery crude sources, moving away from its dependence on Middle Eastern grades to consider Russian oil
  • The Indian government is also looking to accelerate its plan to privatise the country’s state-owned refiners IndianOil, BPCL and HPCL, with President Narendra Modi recently meeting with the CEOs of ExxonMobil, BP, Shell, Rosneft, Saudi Aramco and Adnoc to discuss the matter
  • Brazil will be increasing its biodiesel mandate to a B12 blend by March, after bumping it up to B11 in September 2019, with a longer-term goal to hit B15 by 2023 – a move that will reduce gasoil imports and boost soybean demand
  • As US sanctions continue to bite, Iran hiked its domestic fuel prices by at least 50% and introduced gas rationing, triggering a swathe of citizen protests

Natural Gas/LNG

  • Adnoc has inked new supply agreements with BP and Total, channelling most of its LNG through early 2021 into their global portfolio and diversifying Adnoc’s demand base away from a heavy reliance on Japanese utility clients
  • Canadian natural gas firms under Rockies LNG Partners are reportedly looking to build a floating LNG project off the British Columbia coast with up to 12 mtpa to circumvent land issues and supply gas-hungry markets in Asia
  • The current political turmoil in Bolivia has effectively halted new natural gas exploration activities in the country, with Shell stopping work on the Yapucaiti exploratory well and cutting down activity at the Jaguar well
  • BP has hit a new natural gas discovery in Trinidad & Tobago, with the Ginger well in the Cashima field yielding ‘promising’ initial results
  • Australia’s Evol LNG will be increasing capacity at its Kwinana LNG facility in Western Australia by 40% to 250 tpd by April 2020 and 300 tpd by 2021 to meet growing demand from mining companies for power generation

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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