NrgEdge Editor

Sharing content and articles for users
Last Updated: February 14, 2020
1 view
Business Trends
image

Market Watch   

Headline crude prices for the week beginning 10 February 2020 – Brent: US$53/b; WTI: US$49/b

  • The demand destruction caused by the Covid-19 pandemic – also known as the Wuhan coronavirus – has dragged crude prices to fresh lows, with OPEC+ struggling to present a united front to respond to the demand crisis
  • Earlier indications that OPEC+ was preparing to call for an emergency meeting mid-February to discuss the pandemic’s impact on the oil market were dashed, hinting at divisions within the oil club
  • Reportedly, OPEC’s technical committee was proposing to extend the club’s supply quota agreement through June 2020; Saudi Arabia – along with Iran and Bahrain – were the strongest supporters, but Russia remains reticent to commit
  • A group of key Russian oil producers are in support of extending the OPEC+ cuts, with Gazprom, Lukoil and Rosneft indicating that it ‘made sense’
  • In the face of the huge impact of Covid-19, the so-called Brent red spread sank into contango, indicating an intensely bear-ish market
  • Although the fatality rate of the new coronavirus is much lower than SARS, the spread has been far more severe and wider, with confirmed cases nearing 70,000 and deaths nearing 1,500
  • After being on lockdown for weeks, Chinese factories and businesses have gradually returned to work at a glacial pace, impacting gasoline, gasoil and - most significantly – jet fuel demand, causing Chinese refineries to slash output
  • News that China and the US would both implement tariff cuts on the pre-Phase 1 trade deal levies on February 14 failed to calm the market, supporting the floor for prices rather than raising the ceiling
  • Amid that chaos, the US active rig count dropped four rigs, falling down to 790 total and down 255 sites y-o-y; however, the relationship between this proxy and actual production has diminished over the past two years, as the US continues to produce more oil from less rigs
  • Hopes that the outbreak might have peaked has supported crude oil prices this year, although a major spike in confirmed cases from a wider diagnosis tool nipped that in the bud; expect crude oil prices to continue hovering around the US$50/b mark, at US$51-53/b for Brent and US$49-51/b for WTI


Headlines of the week

Upstream

  • Chevron and Petrobras will be selling their stakes in the heavy oil Papa-terra field in the Campos Basin, seeking new operatorship for the BC-20 concession asset that is currently split 62.5/37.5 between Petrobras and Chevron
  • Shell plans to boost its output in the Permian Basin to some 250,000 b/d by end-2020, up from a current production level of 100,000 b/d as it announced plans to invest up to US$3 billion per year in the prolific US shale area
  • Eni’s oil production in Libya has halved to 160,000 b/d, as the country continues to grapple with a blockade started by military strongman Khalifa Haftar
  • Disappointing results in Africa have forced Tullow Oil to reduce its headcount in Kenya by 40%, with operations in Kenya, Uganda and Ghana all yielding either poor results or in danger of significant delays
  • BP and Shell have brought the Alligin field in the UK West of Shetlands region online, with initial output at a better-than-expected 12,000 b/d
  • Guyana’s oil riches keep increasing; after ExxonMobil upped estimates at the Stabroek block last month, Eco Atlantic (together with Tullow Oil and Total) have upped reserves in the Orinduik block from 3.98 mmboe/d to 5.14 mmboe/d

Midstream/Downstream

  • Reports suggest that Chinese independent teapot refineries in Shandong have slashed their utilisation rates by 30-50%, scaling down in response to severely diminished fuel and petrochemicals demand due to the Covid-19 pandemic
  • Chinese state refiners are following suit with slashing output, with CNOOC, Sinopec and PetroChina all lowering their throughput rates by 10-15%
  • Shell has finalised the sale of its Martinez refinery in California, selling it to PBF Energy for some US$1.2 billion, including its supply/offtake agreements
  • Botswana is accelerating its US$4 billion coal-to-liquids refinery project, now expecting to complete the site by 2025, with the aim of tapping into the country’s major coal reserves that are some of the largest in Africa
  • The UK has extended its goal to end the sale of all gasoline- and diesel-powered vehicles in the UK by 2035 to include hybrid vehicles, which would move transport fuel demand entirely to electric vehicles then

Natural Gas/LNG

  • Abu Dhabi and Dubai report that they have made a major natural gas find, with the Jebel Ali reservoir located between the two largest sheikhdoms in the UAE holding some 80 tcf of resources - the world’s largest gas find in 15 years
  • The government of Papua New Guinea has walked away from talks over the P’nyang gas field, impacting the planned expansion of ExxonMobil’s PNG LNG project; the government had previously tried a similar tactic with Total
  • The EU has imposed sanctions on Turkey, in retaliation for its continued exploration of gas resources in the disputed waters off Cyprus that Turkey claims is part of the breakaway Turkish province in the north of the island
  • CNOOC has declared force majeure on some LNG contracts due to the ongoing impact of the Covid-19 outbreak, but two of the world’s largest LNG traders – Shell and Total – have rejected the Chinese attempt to nullify contractual terms
  • Centrica will take a major write-down on its gas assets in Europe, continuing a trend of the global natural gas glut eroding the value of gas assets worldwide
  • GeoPark has made a new natural gas discovery in Chile, with the Jauke Oeste field in the Fell block of the Magallanese Basin yielding small-but-significant gas flows of some 4.4 mscf/d

Oil oil and gas news oil and gas industry LNG oil and gas companies news weekly update market watch market trends latest oil and gas trends
3
2 0

Something interesting to share?
Join NrgEdge and create your own NrgBuzz today

Latest NrgBuzz

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