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Last Updated: December 27, 2019
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Headline crude prices for the week beginning 23 December 2019 – Brent: US$66/b; WTI: US$60/b

  • Oil prices remain rangebound, as supply-side developments kept a lid on optimism that a phase 1 US-China trade deal could support oil demand
  • Kuwait and Saudi Arabia reported that they were near an agreement on their shared neutral zone, where crude production has been halted for at least four years due to territorial disputes; if output from this region returns, estimates suggest that it could bring as much as 500,000 b/d back to the market
  • This will be of use to Saudi Aramco, whose shares have slide after an initial week of euphoria, as investors locked in profits, moving to lock in additional supplies and secure critical downstream refining centres worldwide
  • Going into 2020, the US is looking to strengthen enforcement of its sanctions on Iran, targeting global shippers, Chinese state enterprises and exporters of metal to further ‘tighten the screws’ on Iranian crude exports
  • An attack, and subsequent crew kidnapping, of an oil tanker in West Africa’s Gulf of Guinea didn’t move the crude market much, but does highlight the growing incidence of piracy in the region
  • Expectations that US shale output will slow down in 2020 and beyond have been rebuffed by the new US Energy Secretary Dan Brouilette, who expects the slowdown to be temporary
  • The active US rig count rose ahead of Christmas, adding 18 oil rigs (but losing 4 gas rigs) for a net increase of 14, bringing the total count back above the 800 mark at 813 sites, or 267 fewer year-on-year
  • In the quiet period between Christmas and New Year, crude oil prices should remain rangebound, shifting within the following ranges: US$65-67/b for Brent and US$61-63/b for WTI


Headlines of the week

Upstream

  • Total is looking to acquire interests in two offshore licenses in Angola – Block 20/11 and Block 21/09, shared with Sonangol and BP – in line with its ambition to build a new crude production hub in the south central African Kwanza Basin
  • Devon Energy has sold its assets in the US Barnett shale area – including 320,000 acres and 4,200 producing wells – to BKV Oil & Gas Capital Partners for US$770 million, the latter’s first acquisition in Barnett
  • Eni is returning to Albanian upstream, signing a production sharing contract with the government to explore the onshore Dumre block
  • Canadian-based Touchstone Exploration reports that it has made a ‘significant’ onshore oil discovery in Trinidad and Tobago, with the Cascadura-1ST1 well in the Ortoire block yield flows ‘beating expectations’
  • Fiji has awarded two onshore exploration acreage on its main island of Viti Levu to private player Akura, which could yield the Pacific island’s first crude

Midstream/Downstream

  • Chinese refineries processed some 13.65 mmb/d of crude oil in November, up 10.1% y-o-y to the second-highest level on record, bolstered by 3 new mega refineries and increase teapot output that is also causing a fuels supply glut
  • Reliance and BP will be moving ahead with their fuel retail partnership, which aims to increase Reliance’s Indian network from 1,400 stations and 30 aviation fuel sites to 5,500 stations and 45 aviation fuel sites by 2025
  • Sinopec has completed the central CDU unit of its Al-Zour refinery project in Kuwait, with an eventual total of 615 kb/d capacity processing Kuwaiti crude that will also be the largest clean fuel refinery in the Middle East
  • Petrobras’ attempts to sell four of its Brazilian refineries has attracted a number of international bids, with Sinopec and US-based EIG Energy Partners delivering bids for the 150 kb/d REGAP site in Minas state
  • Saudi Aramco has acquired 17% of Korean oil refinery Hyundai Oilbank for US$1.2 billion, a critical node in Aramco’s global downstream portfolio
  • Mexico has deferred a rule requiring Pemex to produce and sell ultra-low-sulfur diesel domestically for five years to 2024, with Pemex citing severe infrastructure and technical limitations to supply the clean fuel
  • Chevron will be returning to the downstream retail market in Australia, purchasing the fuel retail arm of Puma Energy for some US$288 million, which includes 270 retail stations, 20 depots and 3 bulk sea terminals

Natural Gas/LNG

  • After speeding ahead rapidly, an Israeli court has placed the brakes on the Leviathan natural gas project, issuing a temporary injunction on all operations on grounds of pollution endangering public health
  • PetroChina has offered a spot LNG cargo on the cheap – submitted for a Pakistan tender – a sign that China may have overstocked ahead of a warmer winter, and indicative of the current global LNG supply glut
  • The US has conceded defeat on its bid to prevent the Russia-Germany Nord Stream 2 pipeline from being completed, saying it has ‘little leverage’; US sanctions have caused a delay in the project, but German officials report that the natural gas pipeline should be completed in 2H 2020
  • BP reported success in its three-well drilling campaign in Mauritania and Senegal, with the GTA-1, Yakaar-2 and Orca-1 wells yielding high-quality reservoirs of natural gas

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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