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Last Updated: February 7, 2020
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Headline crude prices for the week beginning 3 February 2020 – Brent: US$54/b; WTI: US$51/b

  • The spread of the Wuhan coronavirus continues to drag global crude prices down, with global crude benchmarks at one-year lows and WTI briefly closing below US$50/b earlier this week
  • Lockdowns are continuing in the Hubei province and industrial activity across China has been curtailed, paralyzing economic activity; estimates suggest that oil demand in China has dropped by 20% - or 3 million b/d – since the full extent of the pandemic was revealed
  • Globally, oil cargoes are sitting around unsold as Chinese buying of crude, from West Africa to Latin America, has ground to a halt with Chinese refineries scale back production as the virus hits Chinese gasoline, gasoil and jet fuel demand
  • The scale of the decline has prompted OPEC to act, as it places the current supply pact at risk; OPEC may move its meeting for March 5/6 – where it was scheduled to discuss the future of its output quotas – to mid-February, in order to discuss responses to the crisis
  • Saudi Arabia is the main force behind calling for an earlier meeting for OPEC+, and even Russia has signalled that it is open to an earlier emergency meeting: signs that the group might be preparing to take more defensive measures
  • On the supply side, the Libya crisis continues as the standoff between the government and Khalifa Haftar rages on, which has virtually halted all crude exports, forcing tankers to leave Libyan ports with empty tanks
  • In Iraq, the 70,000 b/d Al Ahdab oil field has restarted after output was halted for a week by local security guard protests that blocked access to the site
  • The US active rig count fell for a second straight week, dropping 1 oil rig and 3 gas rigs for a net decline of 4 to 790 working sites in total
  • Even though the World Health Organisation has expressed confidence that China has control the outbreak, the material impact on oil demand is apparent, which will keep the lid on oil prices at US$53-54/b for Brent and US$50-52/b for WTI


Headlines of the week

Upstream

  • Pemex is claiming a majority of the giant shallow-water Zama oil field in the Gulf of Mexico, rejecting the 60% stake that Talos Energy – which made the private discovery in 2015– claims it owns in the Block 7 field
  • Equinor and Shell have taken joint ownership of 49% in the Bandurria Sur block in Argentina’s onshore Vaca Muerta shale oil play in the Neuquen province, purchasing it off Schlumberger for some US$350 million; both firms are also looking to purchase an additional 11% stake from operator YPF
  • Karoon Energy has started drilling at the Marina-1 exploration well in Block Z-38 in Peru’s offshore Tumbes basin, with potentially 256 million barrels in place
  • The US FERC has backed PennEast’s controversial US$1 billion shale gas pipeline, but the case of eminent domain may still go to the Supreme Court
  • ExxonMobil is looking to move on to starting appraisals at 2 new exploration blocks in Guyana and Suriname, hoping to repeat its Stabroek success
  • Senegal has launched its first ever offshore licensing round, offering 12 blocks in the offshore MSGBC basin, home to some recent high-profile discoveries
  • Cairn Oil & Gas is kicking off exploration in its flagship Rajasthan onshore oil and gas acreage in northwest India, with a planned drilling campaign of 23 wells
  • BP has produced first oil from its Alligin field in the West of Shetlands region in the UK, with initial output at a better-than-expected 15,000 b/d

Midstream/Downstream

  • Keen to avoid the Russian Druzbha pipeline contaminated crude fiasco from last year, Kazakhstan has made moves to contain the spread of up to 150,000 tonnes of crude tainted by organic chlorides, by reducing pipeline exports to China and altering shipment schedules to domestic refineries
  • Indonesia’s Pertamina has ended its joint venture with Eni to develop B100 palm oil-based biodiesel after Eni required sustainable certification for the feed
  • Following a row with Russia, Belarus has turned to Norway to run its Naftan refinery as Russian supplies have dried up since early January

Natural Gas/LNG

  • Eni has signed a long-term LNG supply deal with Nigeria LNG on Bonney Island, which will see it take 1.5 million tonnes per year from Trains 1, 2 and 3 that it has a 10.4% stake in, supplementing the 1.1 mtpa deal done in December
  • Abu Dhabi’s attempt to sell up to 49% of ADNOC’s gas pipeline business has attracted interest from BlackRock, KKR & Co and Global Infrastructure Partners, valuing the business at as much as US$15 billion
  • Eni has made a new gas and condensate discovery in the UAE, with the Mahani-1 well in Sharjah’s Area B concession containing up to 50 mscf/d of lean gas
  • US player Edge LNG has been tapped to capture previously unreachable gas from stranded wells in the Tioga Country within the Marcellus shale basin
  • Hess has reported first gas flows from the Zetung well at its North Malay Basin Phase 2 development, part of the Integrated Gas Development Project
  • Reliance has ceased output from the D1-D3 deepwater gas field in India, a flagship Indian gas field that once produced as much as 61 mmscf/d of gas
  • Equinor is set to withdraw from the Thrace basin in Turkey, leaving the shale play and a planned deep gas appraisal programmed to its partner Valeura Energy

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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