Editors: Tom Whipple, Steve Andrews

Quote of the Week

“We think we are at or near ‘peak Permian production’…The North American oil market has been grossly overcapitalized, which is not sustainable.”

Adam Waterous, Waterous Energy Fund

Graphic of the Week

1.  Energy prices and production
2.  Geopolitical instability
3.  Climate change
4. The global economy and trade wars
5. Renewables and new technologies
6. Briefs

1.  Energy prices and production

Oil prices inched up a bit last week with Brent closing just below $65 a barrel after the US and Iran thought better of going to war.  Attention then shifted to the signing of the first phase of a US-China trade deal and the slowing Chinese economy.  On Friday, Beijing released data showing that its economy grew by 6.1 percent in 2019, its slowest expansion in 29 years.  While Washington is touting the supposed $200 billion it garnered from the trade deal, many trade experts are skeptical.  Some are saying that Beijing will never buy the amounts of US products that Washington is claiming, and others are saying that in the long run, China won the tariff war.
Analysts continue to differ as to how severe the US shale oil slowdown will turn out to be.  Some are saying production will peak this year, and others such as the EIA are predicting that average US shale oil production will grow this year by 1.3 million b/d over 2019 to 13.3 million b/d.  US production ended the year at around 12.9 million b/d, according to the weekly data, so achieving 13.3 million b/d this year is far less impressive than the annual averages suggest.  The agency sees a more dramatic slowdown in 2021, with the growth of just 0.4 million b/d over 2020.  Rystad Energy is predicting annual growth of 1.9 million b/d for US shale this year, although that figure includes natural gas liquids.
OPEC said last week that a sharper increase in non-OPEC supply would offset a rise in oil demand growth this year.  S&P is forecasting that global demand for oil will increase by 1.26 million b/d in 2020, up from 0.95 million in 2019, with growth expected in all regions except Western Europe and Japan.
No matter US shale oil production, the global oil market is likely to stay well supplied in the near term with oil stocks growing in the first half of 2020 despite deeper production cuts from the OPEC alliance and a slowdown in the growth of the US production.  The IEA’s latest monthly report predicts non-OPEC oil supply growth accelerating to 2.1 million b/d this year from 2 million b/d in 2019.  The composition of what makes up this extra crude coming on to the market will change dramatically. The US contribution to that forecast growth slumps to 52 percent versus 84 percent on average over 2017-2019.  Significant gains will come from Norway, Brazil, Canada, Australia, and Guyana.
Despite the guarded optimism for the US shale oil industry this year, pessimistic news keeps coming out.  Forecasting a significant contraction in North American oil and gas activity for 2020, Schlumberger on Friday unveiled a 2020 strategy focused on expanding margins by shrinking its less profitable business lines.  The three biggest oilfield service providers all have announced asset sales as they adapt to an environment featuring laxer demand for their services.  Halliburton is selling its pipeline and process services business, and Baker Hughes is selling various business operations.  Combined, the asset sales sought by the big three, which hold a combined 26 percent of the oilfield services market, could generate $800 million.
Over the past six months, the number of drilled but uncompleted (DUC) wells across the US shale patch has been steadily declining in a fresh sign that shale producers have stopped the relentless drilling of wells.  According to Bloomberg estimates based on EIA data, the number of DUC wells dropped from a recent high of 8,429 in May 2019 to 7,574 such wells in November.
The signs of the time are everywhere, and the question is no longer whether shale production growth can continue indefinitely but rather how much longer it will be before it finally gives out.  One prominent investor has a somewhat depressing answer to the latter.  Adam Waterous, CEO at Waterous Energy Fund, says US shale production will peak in 2020 and then begin a steep decline after that.  He argues that the financial position of Permian oil has become untenable, and output is much closer to peaking than many current forecasts suggest.
Weak natural gas prices amid abundant supply and a falling rig count across the United States will slow down natural gas production growth this year, and some basins will even see production declines.  As with the shale oil industry, companies are struggling with negative cash flows as prices stay low, and investors are not rewarding production growth if they don’t have returns.
US carbon emissions fell again last year as coal-fired generating stations are replaced with natural gas.  More and more US LNG terminals are opening and are signing long term export contracts.  Fifteen years ago, US natural gas production was in terminal decline, only to be revived by horizontal drilling and fracking in the last decade.  Looking ahead, however, the US may soon be hard-pressed to meet export and growing power generation demands if horizontal drilling for oil goes into decline and less associated gas is produced.

2.  Geopolitical instability

Last week Venezuela rejoined Iran, Iraq, and Libya in the group of nations where political instability is most likely to damage oil exports.  President Maduro continues to project an image of strength, and his grip on power appears secure.  Residents of Caracas have a regular supply of electricity and gasoline.  Shops have imported goods.  But beyond the capital, this facade quickly melts away.  To preserve the quality of life of his most important backers, the country’s political and military elites, Maduro has poured the country’s dwindling resources into Caracas and forsaken much of Venezuela. 

Across much of the country, essential government functions like policing, road maintenance, health care, schools, and public utilities have been abandoned.  The economy, suffering from poor management, diminished oil and gold exports and crippling US sanctions, is now entering its seventh year of devastating contraction.  This lasting depression, along with the reduction of state resources, has allowed much of the nation’s infrastructure to fall into neglect.

It has also led to Venezuela’s breakup into localized economies with only nominal links to Caracas.  As runaway inflation rendered the country’s currency practically worthless, dollars, euros, gold, and the currencies of three neighboring countries began to circulate.  In parts of Venezuela barter is rampant.

Behind the recent scramble to control the Venezuelan parliament was a government effort to change a Chavez-era law so that Russian and Chinese firms could run the country’s oil production.  Maduro sees outside management as the only way to revive the country’s oil industry, which is only producing some 700,000 b/d.

Oil exports from eastern and central Libyan oil ports were shut down Saturday, resulting in the loss of 700,000 b/d, as the result of the breakdown of a reconciliation conference.  The closure of the ports except for the Zueitina had been ordered by the Libyan National Army led by Khalifa Haftar, which controls east and central Libya. 

Turkey says it will not refrain from “teaching a lesson” to Haftar if his forces continue attacks against the country’s internationally recognized government, Turkey’s President Erdogan said on Tuesday.  Erdogan said the “putschist Haftar ran away” from Moscow after Monday’s peace talks between him and the head of the Tripoli-based government, Fayez al-Serraj, failed to lead to an open-ended ceasefire to end their nine-month conflict.

Iraq’s caretaker Prime Minister, Abdul-Mahdi, indicated he would leave a decision as to whether to expel US forces from the country to his successor, potentially slowing a push that would trigger American military-aid cuts and sanctions.  The Trump administration warned Iraq this week that it risks losing access to a critical government bank account if Baghdad kicks out US forces.  The State Department warned that the US could shut down Iraq’s access to the country’s central bank account held at the Federal Reserve Bank of New York, a move that would seriously harm Iraq’s already shaky economy.

Iraqi security forces killed at least one protester and wounded 25 others on Friday when they launched tear gas canisters to break up a crowd trying to breach Baghdad’s Sinak bridge.  The bridge is close to the capital’s central Tahrir Square, where thousands have been camped out for months, with recent clashes causing the authorities to restrict access to the crossing.

Iraqi officials and Western experts warn that the death of Abu Mahdi al-Muhandis, one of the most potent Iraqi militia commanders killed in the US airstrike, has rocked Iraq’s powerful network of Shia militias.  There is an increasing risk of militia violence and reprisals against US targets.

Iraq is a “potentially vulnerable” oil supplier which makes it more difficult to ensure sufficient spare production capacity, the IEA said on Thursday.  “Recent events have shown that Iraq is a potentially vulnerable supplier, just as its strategic importance has grown. Today, both China and India receive about 1 million b/d of oil from Iraq and another 1 million b/d moves to various European countries.  In India’s case, around 20 percent of its crude imports come from Iraq, and refiners in the US consumed about 300,000 barrels of Iraqi oil between January-October.”

Many oil and gas companies face hard decisions regarding their short and mid-term plans in Iraq.  There are still some 5000 American troops stationed there, but their continued presence in the country has become uncertain.  Iraqi oil production averaged more than 4.8 million b/d in 2019.  International oil companies were responsible for the lion’s share of production – around 3 million b/d. Companies headquartered in China collectively produced more than 1 million b/d, E&Ps from the United Kingdom produced around 630,000 b/d, and Russian players had a combined average output of around 330,000 b/d.

Prices of consumer goods in Iran, including food, have risen sharply in the past few years as the country faces sanctions from the US and its allies.  The Trump administration announced more sanctions the week before last on Iran, marking the latest move in a series of financial US punishments that have left the Iranian economy reeling and its citizens under extreme pressure. 

Iran’s economy could contract by as much as 14 percent this year as US sanctions strangle its oil exports and cut oil revenues by $50 billion, US State Department Iran envoy Brian Hook said Friday.  “Due to the staggering loss in oil revenue, it is nearly impossible for the regime to put forward a credible budget,” Hook said, adding that the country could soon face a banking crisis and potential hyperinflation.  Tehran’s budget for the fiscal year starting in March assumes 1 million b/d in oil exports, which Hook calls “pure fantasy.”

A week before Germany, France, and Britain accused Iran of breaching the 2015 nuclear deal, the Trump administration issued a private threat to the Europeans that shocked officials in all three countries.  If the European nations refused to call out Tehran and initiate a dispute mechanism, the US would impose a 25 percent tariff on European automobiles.  Within days, the three countries formally accused Iran of violating the deal, triggering a recourse provision that could reimpose United Nations sanctions on Iran and unravel the last remaining vestiges of the Obama-era agreement.

3.  Climate change

In the past year, there have been significant changes in how business thinks about climate change, and more corporations are concluding that global warming due to carbon emissions can no longer be ignored.  Climate change and environmental destruction top the risks highlighted by world decision-makers in a survey ahead of the 2020 gathering at Davos.

For the first time, the annual risk report, compiled by the World Economic Forum, found the top five concerns were all environmental, from extreme weather to biodiversity loss and events like oil spills and radioactive contamination.  That came as trade wars and the rise of nationalist politics around the world were also cited by the panel of more than 750 decision-makers surveyed as making it harder for countries to work together on solutions.

Financial markets could face upheaval if the risks of climate change are not taken more seriously, McKinsey warned in a report issued last week.  Even climate-conscious investors, companies, and regulators could be wrongfooted as slight increases in global temperatures threaten to create havoc.  “Markets assume a relatively stable climate,” said one of the report’s authors. “But there is an edge where risks can spike.”  McKinsey said this risk was prominent in areas such as south Asia, where temperatures were pushing up against the limits of human endurance. If the heat gets worse, productivity could tumble.  As much as 4.5 percent of India’s gross domestic product could be at risk annually as rising temperatures threatened to cut the number of hours people can work.

A senior Brussels policymaker has warned that the impending transformation to carbon-free sources of energy will be comparable to the disruptive effects of the industrial revolution.  Frans Timmermans, the European Commission executive vice-president in charge of its green policy, said the EU’s decision to push for carbon neutrality by 2050 would bring opportunities for new jobs and better living conditions – but would be painful for some workers and involve massive public and private investments well beyond the capacities of EU institutions.  “If you say you are moving from an economy entirely based on carbon to an economy that should be weaned off this dependency, that is not a small change of policy, that is a tectonic shift in the way our society is structured.”

Across the world, local officials are starting to worry about or even begin to plan for the inevitable effects of climate change.  In Florida, losses from flooding could devalue homes by between 15 percent and 35 percent by 2050, which would devastate local tax revenue and make long-term borrowing unavailable.  The insurance sector is particularly vulnerable along the coasts.

The “Thomas Fire,” which devastated parts of Ventura and Santa Barbara counties in December 2017, was one of the most massive fires in California history. Investigators determined that Southern California Edison’s power lines ignited the blaze, and the company recently set aside a $4.7 billion reserve fund for possible liabilities related to the fires.  Now it has embarked on a costly program to upgrade its electrical lines and make its grid less likely to spark fires

The tropical Maldives may lose entire islands unless it can quickly access cheap financing to fight the impact of rising sea levels.  Yet the Maldives has struggled to find money to build critical infrastructure like seawalls.

A giant barrier costing $119 billion is the largest of five options the Army Corps of Engineers is studying to protect the New York area as storms become more frequent and destructive.  The proposals have sparked fierce debate as New York, like other coastal cities, grapples with stronger storms and rising sea levels.

Those who support the $119 billion barrier miles from Manhattan’s coast in the outer New York Harbor say it would be the best solution for protecting the most people, properties, and landmarks, including the Statue of Liberty, from a storm surge swelling the East and Hudson Rivers.  Others say that the use of locally tailored, onshore solutions alone, like berms, wetlands restoration, and raised parks are the solution.

A German utility said it would eliminate thousands of jobs tied to the country’s phase-out of coal by 2038, as the government pledged nearly $56 billion in aid to regional governments.  These moves reflect the country’s struggle to transition to cleaner power sources.  RWE AG said Thursday the planned exit from coal would lead to some 6,000 job cuts by 2030, or more than 25 percent of its total workforce.  The federal government pledged aid to regions and workers affected by the plan to phase out coal.

A crippling drought in eastern Australia is threatening the production of commodities from coal to gold, sparking a scramble by companies for water to keep their operations going.  The affected mines and processing operations are in arid regions a hundred or more miles inland of most of the areas hit by unprecedented bush fires.  In the last few days, severe storms have hit Australia’s eastern coast, suppressing the worst of the flames.  However, the rains are causing floods and mudslides.

4.  The global economy and trade wars

Chinese economic growth slowed to 6.1 percent last year as sagging trade and business confidence pulled the closely watched, and probably overstated, reading to its lowest level in nearly three decades.  China has accelerated the issuance of local government special bonds since the start of January, to speed up infrastructure construction to offset downward pressure on China’s economic growth. 

State Grid, China’s largest utility company, has warned the rate of economic growth in the country could decline to 4 percent within the next four years.  The state-owned utility forecasts a rapid slowdown that has already dented energy demand across all 23 provinces and could last until 2024.  The company’s internal estimates show China’s economy is decelerating while official GDP estimates are up, once again proving that economic growth may not be as high as Beijing says.

The China Association of Automobile Manufacturers (CAAM) expects a 2 percent fall in vehicle sales this year.  That would compare with an 8.2 percent drop in 2019 when sales were pressured by new emission standards in a shrinking economy and with tit-for-tat import tariffs with the US.  CAAM also reported that auto sales declined for the 18th consecutive month in December.

Foreign and domestic automakers in China used to growth in a market where their biggest challenge was building factories quickly enough to meet demand, are hurting.  General Motors posted its biggest-ever China sales drop last year and warned of a severe 2020s.  Ford’s annual sales fell for the third year in a row, by 26 percent to 570,000 vehicles—less than half the nearly 1.3 million vehicles it sold at its peak in 2016.

China’s export growth slowed to a three-year low last year as the effects of trade tensions with the US, and a slowing global economy took its toll.  Exports grew 0.5 percent in dollar terms in 2019, the lowest reading since 2016, when they contracted, and down from the 9.9 percent growth in 2018.  Imports fell by 2.8 percent last year.

The trade war with China took a toll on the US, but not a big one.  Farmers took a large sales hit.  Importers of auto parts, furniture, and machinery swallowed punishing tariffs.  Investment between the world’s two largest economies dropped. However, much of the US economy is mostly unscathed by the two turbulent years. Nevertheless, US economic growth is trending to end up near 2 percent in 2019, well short of the Trump administration’s goal of 3 percent.

President Trump signed the first trade deal with China on Wednesday, bringing the first chapter of a protracted and economically damaging fight to a close.  China has committed to buying an additional $200 billion worth of American goods and services by 2021 and is expected to ease some of the tariffs it has placed on American products.

Beijing has committed to purchase $36.3 billion worth of US agricultural products, including soybeans, in 2020 and $43.3 billion in 2021, under the Phase 1 deal according to a joint statement released by the two governments.  However, China’s pledge to buy US farm goods is based on “market conditions,” and many experts on Chinese trade are skeptical that this level of sales will happen.

Beijing pledged to buy more metallurgical coal in the next two years and plans to boost its imports of US energy, including liquefied natural gas, crude oil, refined products, and coal by $18.5 billion in 2020 and $33.9 billion in 2021. 

Germany’s economic growth slumped to a six-year low in 2019 as it faced challenges to its car industry, persistently slowing Chinese growth and global trade conflicts, a slowdown that weighs on Europe’s outlook.

5.  Renewables and new technologies

The US renewable energy industry doesn’t seem to take much notice of President Trump’s views on green energy and climate change as investments surged to a record last year.  Investments were buoyed by wind and solar companies rushing to qualify for federal tax credits being scaled back in 2020.  A total of $55.5 billion was spent in the sector 2019, an increase of 28 percent, second only to China and beating Europe.

The New York State Department of Public Service issued a report recommending the establishment of a statewide utility-supported “Make-Ready” program that would provide incentives for electric vehicle charging equipment for both Level 2 and Direct Current fast charger stations.  The plan would improve electric vehicle charging station economics by covering up to 90 percent of the costs to “make-ready” a site for EV charging; these costs currently present an economic barrier to charging station developers.

The US government has approved First Solar Inc.’s proposed $1 billion Desert Quartzite Solar Project on roughly 3,000 acres of public land in eastern Riverside County, California.   The project has been under development since 2007. The envisioned 450-MW, thin-film photovoltaic project could start operation in 2022. However, First Solar still lacks a contract for the output of the facility.

Experts are optimistic that the US is set to make significant steps toward a cleaner energy mix this year.  They see a continued decline in the use of coal, the beginnings of shaming the notion of widespread natural gas use, and the continued rise of solar power installations.  In addition to these trends, the fight for federal incentives for clean energy and the ever-growing public awareness about climate change, make up the five factors to watch in 2020.

For all the success China has had conquering other industries, it never really mastered the art of manufacturing cars with efficient internal-combustion engines. Foreign brands had dominated since the 1990s, when General Motors, Ford, Volkswagen, and others began ramping up sales, turning China into the world’s largest auto buyer.  However, the age of electric vehicles means that China has a chance to dominate the industry.

The Chinese government has spent at least $60 billion to support the fledgling electric-car industry, including research-and-development funding, tax exemptions, and financing for battery-charging stations.  To curb pollution in cities, the government hands out license plates immediately for new electric cars, while getting a plate for an internal combustion car may take months or cost thousands of dollars.  These incentives have encouraged some 400+ Chinese companies to get into the electric-car business.  Some Western analysts worry that China’s investment could ultimately threaten foreign auto company sales in China and beyond.

Chinese startups say they have a good shot at the electric vehicle market in part because they are easier to make.  “The infrastructure from an engineering perspective is lighter and simpler than in a combustion engine,” says an executive at Chinese electric car manufacturer Nio.  While a gasoline-powered car has endless moving parts, with an electric vehicle, “you just put a big battery between the two axles and motors on both of the axles or one of the axles,” he said.

For now, foreign car companies continue to see gold in China’s electric automobile market and are boosting local production of their electric vehicles.  Tesla has opened a new factory in Shanghai with the capacity to produce 250,000 cars a year. Volkswagen and its Chinese joint-venture partners will start production at two factories, with a total potential output of 600,000 electric vehicles a year.  Ford has begun selling its battery-powered Territory SUV, produced in a joint venture with China’s Jiangling Motors, and is aiming to launch its glamorous electric Mustang Mach-E in China in 2021.  The technology of electric cars is rushing, so it difficult to see just how the competition between China and the rest of the world to dominate the electric car market will turn out. 

Enevate, a developer of advanced silicon-dominant Li-ion battery technology capable of high-speed charging for electric vehicles, announced its new fourth-generation technology optimized for high volume commercialization and manufacturing at the gigafactory scale.  The new technology achieves 5-minute charging to 75 percent capacity with 800 Wh/L cell energy density.  Today’s conventional large-format EV cells are at 500-600 Wh/L and typically take more than an hour to charge.

UAE environment minister Thani Al Zeyoudi told delegates at the International Renewable Energy Agency’s conference that “With further investment, hydrogen production could become cost-competitive in the next five years,” the minister said in a statement by IRENA.  The minister was referring to the massive MBR solar park developed by Dubai utility Dewa including a small pilot project integrating the first green hydrogen electrolyzer in the region. 

Because of the problems of distributing hydrogen widely, it is unlikely to be practical for transportation.  On the other hand, if somebody can come up with a competitive source of hydrogen it might be useful in fixed locations such as non-polluting power stations.

6.  The Briefs (date of the article in the Peak Oil News is in parentheses)

Supply of shipping fuels compliant with the stricter, low-sulfur, regulations are growing at a fast pace and are at adequate levels at the critical hubs around the world, the International Energy Agency said on Thursday. In previous months, refiners, traders, and buyers have been bracing for what was expected to be “the single largest oil market disruptor,” and there were concerns that supply of low-sulfur fuels, especially very-low sulfur fuel oil, could not be enough. The IEA allayed those concerns today, saying that new data shows that supply is rising fast. (1/17)

In Norway, one of the most active companies on the Continental Shelf, Lundin Petroleum, said on Monday that it had revised its resource estimate for a recent discovery in the Barents Sea. It no longer considers that a stand-alone development would be commercial. Although Lundin reported overall increased reserves and contingent resources as of December 31, 2019, its estimate for the Alta discovery in the Arctic waters of the Barents Sea “has been adjusted downwards.” (1/14)

India, Iran, and the US: India and the US will discuss India’s energy security and the Asian country buying increased volumes of US crude oil when US President Donald Trump and Indian Prime Minister Narendra Modi meet in India later this year. India had already boosted its imports of US crude oil after the United States ended the waivers for Iranian oil customers when it stepped up the sanctions pressure on Iran’s regime last year. (1/17)

Nigeria’s crude oil output slipped by 95,000 b/d last month, as the price of its Bonny Light crude climbed to $65.31 per barrel in the international market. The decline jeopardizes the 2020 budget, which was predicated on crude oil production of 2.18 million b/d. It casts new doubt on the goal of reaching 3 million b/d by 2023. (1/17)

Offshore Angola, Total will drill an ultra-deepwater well off that will be the deepest in the world—more than two miles below the surface—according to Maersk Drilling, which has been hired for the drilling operation. The project is bound to be welcomed by Angola, which has been struggling to reverse a persistent decline in its oil production, chiefly as a result of underinvestment. Even so, Angola is still the second-largest oil producer in sub-Saharan Africa, with an output of almost 1.4 million b/d. (1/17)

Angola, after years of declines in crude oil production, is finally about to see its production rise in the coming years, with several new projects coming online. Italy’s oil and gas major Eni said on Friday that it had started up the Agogo oilfield just nine months after its discovery, with the project timeline facilitated by the nearby Floating Production Storage Offloading (FPSO) Ngoma, which lies only 9 miles away from the Agogo field. Production at the new oilfield is expected to rise to 20,000 b/d over the next few weeks. (1/18)

Chile’s environmental regulator on Monday charged state oil company ENAP with improper fracking in Tierra del Fuego, a wild, mostly unpopulated region at the southern fringe of the South American continent. The country’s environmental superintendent said ENAP had failed to follow protocols in its permits for “hydro-fracking” activities. Three of the six charges filed by regulators are severe enough to shut down the project, the regulator said. (1/14)

Mexico’s future is, in large part, dictated by the prospect for its oil and gas industry, and the rolling back of landmark energy reforms has now put that all in jeopardy. Mexico’s President Obrador announced earlier this week that Mexico was indeed not looking to put oil and gas blocks up on the auction block this year, as some had hoped. The announcement dashed all hopes that the world’s energy companies would be invited to develop Mexico’s oil and gas resources. (1/14)

An arctic blast sweeping across Western Canada is weighing on the price of heavy crude. Temperatures of 22 Fahrenheit and lower have descended on Alberta and Saskatchewan — cold enough to render the region’s viscous oil rock solid. To transport it, producers must blend in more of a lighter crude called condensate, thereby reducing the volume that can be shipped by pipeline and increasing transportation costs. (1/16)

In Canada, prices for heavy crude have fallen to $36.66 per barrel, once again coming under pressure because of limits on pipeline capacity. Western Canada Select (WCS) typically trades at a discount relative to WTI, due to quality differences and because of the long-distance it needs to travel. But the discount tends to increase – or, put another way, the price of WCS tends to drop – when oil producers run into pipeline bottlenecks. (1/13)

In Canada, Prime Minister Justin Trudeau’s bid to complete the Trans Mountain oil pipeline won a significant victory Thursday as the nation’s top court rejected an appeal brought by British Columbia aimed at challenging the controversial project. The Supreme Court of Canada has dismissed the case, the court said in a statement. (1/18)

The US oil rig count increased by 14 oil rigs to hit 673, down by 179 year-over-year, according to Baker Hughes Co. Gas rigs inched up by one to 120, down from 198 twelve months ago. This week’s additions offset last week’s loss of 15 rigs. (1/17)

Permian peak? Such is the extent of the shakeout in the US shale industry that Permian Basin oil production is closer to peaking than many forecasts suggest, according to one energy investor. Adam Waterous regards the sector’s financial position as unsustainable after years of disappointing returns for investors and negative free cash flow. According to Waterous, with capital markets now largely shunning shale producers, the impact will begin to show in oil and natural gas output from the largest US oil patch. (1/14)

Natural gas hit: The most significant natural gas driller in the US just announced a massive write-down for its assets, offering more evidence that the shale sector faces fundamental problems with profitability. Pittsburgh-based EQT took a $1.8 billion impairment for the fourth quarter, as the natural gas market continues to sour. EQT said that the write-down comes as a result of the “changes to our development strategy and a renewed focus on a refined core operating footprint,” which is a jargony way of saying that some of its assets are now worth much less. (1/15)

Methane leaks: Immense amounts of methane are escaping from oil and gas sites nationwide, worsening global warming, even as the Trump administration weakens restrictions on offenders. Oil and gas lobbyists are finally feeling the heat on climate change, but sadly, they remain committed to misleading the American people. The American Petroleum Institute, the premier industry organization that establishes standards and engages politicians, is out with a nationwide advertising campaign. (1/14)

MPG issue: The Trump administration, which vowed to roll back Obama-era fuel economy standards to make cars more affordable, might stop short of freezing these at 2020 levels, according to a statement by the National Highway Traffic Safety Authority. (1/16)

Biofuel breakthrough? A Rutgers-led team has developed a new biomass pretreatment process that could make it much cheaper to produce biofuels such as ethanol from plant waste and reduce reliance on fossil fuels. The approach, featuring an ammonia-salt-based solvent that rapidly turns plant fibers into sugars needed to make ethanol, works well at close to room temperature, unlike conventional processes. (1/15)

Sustainable aviation fuel (SAF): Shell thinks SAF will be one of the critical growth areas to explore, as ground vehicle transportation fuel and other segments are expected to decline over time. Shell Aviation and Boston-based World Energy will help Lufthansa meet carbon emissions reduction targets by supplying one million gallons of SAF on three routes operated by Deutsche Lufthansa and Swiss International Air Lines. World Energy will produce the SAF at its refinery in Paramount, Calif., from a feedstock of agricultural waste fats and oils. (1/15)

EV boost: New Jersey passed a bill that establishes goals and incentives for increased use of plug-in electric vehicles. Specifically, the law sets a goal of at least 330,000 of the total number of registered light-duty vehicles in the State being plug-in electric vehicles by December 31, 2025. This increases to 2 million by the end of 2035. By the end of 2040, at least 85% of all new light-duty vehicles sold or leased in the State are to be plug-in electric vehicles. (1/14)

Wind and solar power will dominate the electricity generation additions across the US in 2020, accounting for an overwhelming 76 percent of all new capacity set to begin commercial operation this year, the US EIA said. Wind will be the primary source of new capacity additions, followed by solar and natural gas. (1/15)

Egypt imported 6.32 million mt of thermal coal in 2019, up 31% on the previous year, boosted by strong demand from the cement sector. Officials at the port confirmed that most of the coal loadings were of US origin. (1/17)

German coal closeout: The German government and regional leaders have agreed on a plan to phase out coal-fired power stations by 2038, involving compensation of about €40bn. The end date for burning brown coal (lignite) could be brought forward to 2035, depending on the progress made. Germany now has more than 250,000 workers in renewable energy sectors – far more than in the coal industry. (1/16)

Japanese nuke idled: A Japanese high court has ordered local utility Shikoku Electric Power Company to continue idling its only operational nuclear reactor. Shikoku’s only operational reactor at the Ikata nuclear plant in western Japan was taken offline at the end of December for regular maintenance. The utility planned to restart the reactor within two months. Still, the Hiroshima High Court has just ruled that the utility had not provided sufficient guarantees that the reactor would be safe in case of earthquakes or volcano eruptions. (1/18)

Poland’s offshore wind: Poland is to amend the 10-H distance law for onshore wind projects in the first half of this year. The law has frozen new wind development since it was applied in July 2016. It requires all new onshore wind projects to be located at least ten times blade tip height away from residential buildings and protected areas. (1/17)

Last year was the Earth’s second hottest since records began, and the world should brace itself for more extreme weather events like the bushfires ravaging much of Australia, the World Meteorological Organization (WMO) said. The Geneva-based WMO combined several datasets, including two from the US space administration NASA and the UK Met Office. These showed that the average global temperature in 2019 was 1.1 deg. C (2.0 deg. F) above pre-industrial levels, creeping towards a globally agreed limit after which significant changes to life on Earth are expected. (1/16)

Birmingham (UK), the nation’s second-largest city, unveiled a plan to reduce air pollution and carbon emissions by limiting access to private cars to the city center. Under the draft plan, access to the city center for private vehicles will be limited with no through trips, meaning that drivers have to return to the ring road for access to different areas of the city. The plan is part of Birmingham’s measures to cut transportation’s impact on the environment and air quality and support the city’s pledge to become carbon neutral by 2030. (1/16)