Editors: Tom Whipple, Steve Andrews
Quote of the Week
[About the Enbridge pipeline under Lake Michigan] “We have signaled very clearly that this is nonnegotiable. Line 5 is very different from Keystone XL and we fully support it, and we will defend it. We made our case with Republicans as well as Democrats.”
Seamus O’Regan, Canadian Natural Resources Minister
Graphic of the Week
1. Energy prices and production
2. Geopolitical instability
3. Climate change
4. The global economy and the coronavirus
5. Renewables and new technologies
1. Energy prices and production
Oil: The struggle between the spreading pandemic in the less developed world and the revival of economic activity in the US, Europe, and China continues to keep prices volatile as they move steadily higher. Last week, futures posted another gain as expectations for growing economic activity in the US and Europe fueled optimism around more robust summer demand, with New York prices advancing 2.1%. Fuel sales in the UK rose to the highest since the pandemic began, and in the US, refineries are running at their highest rate since the pandemic began as they gear up for the summer driving season. Declining crude inventories and progress in reopening the US economy are boosting oil prices.
The EIA reported a massive draw in crude oil inventories of 8 million barrels for the week ending April 30th. Analysts had predicted a more modest draw of 2.346 million for the week. Prices closed out the week at nearly $65 a barrel in New York and over $68 in London.
According to the EIA, the US exported 8.51 million b/d of crude oil and oil and gas products in 2020, versus imports of 7.86 million. Exports of crude alone stood at 3.18 million b/d. Imports of oil were higher, leaving the US a net importer of oil, at 5.88 million b/d. US oil producers sold crude to many countries, mainly in Asia, which is a natural market for the light, sweet grades of oil.
Travel demand has been piling up for more than a year, and now it’s about to burst out into one hot summer for US domestic flights. Jet fuel use is expected to jump 30% this summer. The extra demand comes as airlines revamp routes to offer more nonstop flights and boost capacity to reach more leisure destinations.
The operator of the biggest gasoline pipeline in the US shut down operations late Friday following a ransomware attack that threatens to roil energy markets and upends gas and diesel supply to the East Coast. Colonial Pipeline said that it “proactively took certain systems offline to contain the threat, which has temporarily halted all pipeline operations, and affected some of our IT systems.” It’s working to get business back to normal.
OPEC: The cartel and its allies overproduced their quotas by a cumulative 3.31 million b/d in March, with Russia and Iraq the most egregious offenders, according to an internal document seen by S&P Global Platts. Under the terms of the OPEC+ agreement, each country must compensate for excess production with cuts of equivalent volume below its quota by the end of September. The extra cuts, if fulfilled, could go a long way towards speeding the market’s rebalancing, though the figures show scant progress has been made on this compensation. The overproduction has worsened, rising from 3.027 million b/d in February and 2.793 million b/d in January.
Russia, the largest non-OPEC partner in the alliance, has increasingly flouted its cap over the last several months, with its excess production soaring to 877,000 b/d. Iraq, which has long struggled with compliance, has pumped 707,000 b/d over its cap, while the third-largest violator is South Sudan, with 557,000 b/d of overproduction, followed by Kazakhstan at 435,000 b/d.
Shale Oil: A Rystad Energy analysis shows that the US shale industry is set to achieve a significant milestone in 2020; if NY futures continue their strong run and average at $60 per barrel this year and natural gas prices remain steady, producers can expect a record-high hydrocarbon revenue of $195 billion before factoring in hedges. The previous record of $191 billion was set in 2019. The estimate includes hydrocarbon sales from all tight oil horizontal wells in the Permian, Eagle Ford, Bakken, Niobrara, and Anadarko regions. However, corporate cash flows from operations may not reach a record before 2022. This is because more than $10 billion worth of revenue is going to be absorbed by significant hedging losses in 2021.
Neither Exxon nor Chevron are rushing to boost production in the Permian, despite the oil price rally. The two biggest US oil corporations now prioritize debt reduction and increased cash flows to pay down the excess debt they had accumulated last year when oil prices crashed. Their crude oil production targets in the Permian remain unchanged for the longer term to 2025. Still, their immediate goals for 2021 do not include increased capital expenditures or a significant output boost in the basin. Any rise in Permian oil production this year will come from cost efficiencies and improved recovery rates, not a race to drill for production’s sake.
According to the State Land Office, New Mexico raked in its highest ever royalties from oil and gas leases in April: $110 million, higher than what New Mexico received before the pandemic ($109 in February of last year). On average, these royalties save the average New Mexican household $1,599 in taxes per year.
Coal: In 2020, Americans used 447 million tons of coal. That’s enough to fill 4 million railroad cars. But it’s also the country’s lowest annual coal consumption since 1965 and after a few more years at the downward pace of the past decade, US coal use will reach levels last seen in the 19th century. This year coal is getting a respite as a roaring economic recovery boosts electricity demand after last year’s pandemic-induced drop. The EIA forecasts a 12% increase in coal consumption for the year and a slight increase in 2022. After that, though, it’s hard to see what could stand in the way of a resumption of the decline, which averaged 5% a year in the decade before the pandemic.
Most of the market-share loss so far has been to fracked natural gas, but the combination of cheap wind and solar power plus better batteries will likely push coal’s continued decline. President Trump’s pro-coal policies failed to slow its downward spiral; President Biden’s climate policies will aim to accelerate it. By 2030, BloombergNEF forecasts, electricity generation from coal will have fallen to about half of 2020’s depressed level.
As much as 80 percent of the coal-fired power plants in the United States are already uneconomic compared to new wind and solar projects, energy and climate policy think tank Energy Innovation said in new research this week. The combined costs for fuel, maintenance, and other expenses at most operating coal power plants in the US are higher than the all-in costs of new solar and wind projects because of the cost declines of wind and solar generation.
Electricity: Natural gas suppliers, pipeline companies, and banks that trade commodities have emerged as the most significant market winners from February’s US winter blast that roiled gas and power markets, according to interviews and quarterly earnings reports. The deep freeze caught Texas’s utilities off-guard, killed more than 100 people and left 4.5 million without power. Demand for heat pushed wholesale power costs to 400 times the usual amount and propelled natural gas prices to record highs, forcing utilities and consumers to pay exorbitant bills.
After the storm, few companies wanted to talk about their financial gains, unwilling to be seen as profiting off others’ hardships. But a better picture is emerging from quarterly earnings and as utility companies smarting from big bills sue to recoup their losses. The biggest winners were companies with access to supplies, including leading energy trader Vitol, gas suppliers Kinder Morgan, Enterprise Products Partners, and Energy Transfer, oil giant BP, and banks Goldman Sachs, Bank of America, and Macquarie Group.
As the storm attacked Texas in February, the state’s grid operator made a last-ditch attempt to avert mass blackouts. The move ended up constraining natural-gas supplies needed by power plants. The Electric Reliability Council of Texas activated a program that pays large industrial power users to reduce their consumption during emergencies. But the grid operator didn’t know who was being paid to participate in this program and what type of facilities were getting shut off.
Prognosis: Investment in new oil and gas projects last year, some $350 billion, sank to the lowest in 15 years. As the world continues its battle against Covid-19 and as the energy industry increasingly looks towards diversification outside its core business, there are some signs of recovery in fossil fuel investments. Wood Mackenzie reports there are a total of 26 new projects in conventional oil and gas that could get their final investment decision this year. The Wood Mac analysts said these projects would require some $110 billion investments to unlock about 27 billion barrels of oil equivalent in reserves.
One interesting point about these projects, which shows the changes that the energy industry is undergoing, is that more than 50% of the reserves to be tapped are natural gas. Many of the most significant projects slated for greenlighting this year are in liquefied natural gas, notably Qatar Petroleum’s expansion of production at the North Field. A tenth of the projects awaiting FID this year are deepwater production, and the rest are a mix of offshore and onshore projects.
The International Energy Agency warned that high commodity prices could delay a transition to clean energy owing to the quantity of metals needed for batteries, solar panels, and wind turbines. Reaching the Paris climate agreement goals would result in a quadrupling of mineral demand by 2040, the IEA said. Yet a lack of investment in new mines risks substantially raising the costs of clean energy technologies, it said in a report published last week.
2. Geopolitical instability
(These are the situations that are reducing the world’s energy supplies or have the potential to do so.)
Iran: Supreme leader, Ayatollah Ali Khamenei, criticized the government’s Foreign Minister Zarif, who said in a leaked interview that the elite Revolutionary Guards had more influence in foreign affairs and Tehran’s nuclear policy than he does. Zarif has been the public face of Iranian diplomacy as it deals with a host of issues, including talks with world powers on how to revive Iran’s 2015 nuclear. Relations between pragmatist President Hassan Rouhani’s government and the Guards are essential because the influence of the hardline force can disrupt any rapprochement with the West.
Reports emerged that bringing Iran and the US back to the nuclear deal continues to make progress. Tehran says it will raise its crude oil exports to 2.5 million b/d after the US sanctions on its oil industry are lifted, a top Iranian official said last week. “Oil sales have dropped a lot, but now the situation is better, and we are in control. We will be able to increase oil exports to 2.5mn b/d after removal of the sanctions,” Iran’s vice-president Eshaq Jahangiri said.
Iran banned air conditioning at Tehran’s state agencies as the country looks to save electricity consumption amid low power generation. The government is looking to prioritize electricity supply to residential areas, and hospitals after Iran’s hydropower generation slumped this year because of a lack of rainfall.
Iraq: Oil sales posted a slight increase last month, around 21,000 b/d more than in March, but revenues fell by about 5 percent as global crude prices slightly weakened. Nationwide exports averaged 3.389 million b/d in oil exports in April, up from 3.367 million in March.
Oil Minister Ismaael filed an official objection to several key provisions in Iraq’s 2021 national budget law, including problems that would result in payment delays for oil companies. The complaint is the latest indication of severe flaws in the legislation passed one month ago.
Iraq is in talks with ExxonMobil to take over its 32.7% stake in West Qurna 1 as the US major seeks to exit one of the world’s largest oil fields with its expected recoverable reserves of over 20 billion barrels. Oil Minister Ihsan Ismaael disclosed the talks in a press conference in Baghdad on May 3rd. As a matter of practice, ExxonMobil does not comment on commercial discussions, a spokeswoman said.
Insurgents bombed two oil wells at Kirkuk’s Bai Hassan field and killed at least one guard on Wednesday. This is the latest sign that energy infrastructure remains vulnerable as the Islamic State militant group increases the tempo and intensity of its attacks around northern Iraq.
Venezuela: Oil exports are hanging around 700,000 b/d, where they have been for the last three months, according to tanker tracking data and PDVSA documents. Of that 700,000 b/d, roughly 75% found its way to Asia and the Middle East. PDVSA’s oil exports fell sharply last year after the US toughened its stance on the Latin American country’s oil exports by ordering it to stop swapping its crude oil for imported fuel. Venezuela’s oil exports were below 400,000 b/d last September and below 370,000 b/d last October. But in November, Venezuela increased its exports to 690,000 b/d after it found new mysterious buyers that were all registered in Russia. For March, Venezuela shipped an average of 688,533 b/d.
As Maduro’s government struggles to secure enough doses to cover even the most vulnerable of its people, there is no sign that Beijing or Moscow are giving preferential treatment to their socialist ally. Venezuela has received 380,000 of those Russian doses — just 3.8 percent of what the president promised — and 500,000 doses of the Sinopharm vaccine from China. It has vaccinated just 1 percent of its population, the lowest share of any nation in South America. At that rate, it will need over a decade to reach herd immunity.
“Neither Russia nor China are offering Maduro the help he would like at this difficult moment because they have other priorities,” said Dimitris Pantoulas, a political analyst in Caracas. “And also, Maduro simply doesn’t have the money to pay them. It’s a big problem for both Venezuela and Maduro. The country is becoming a secondary priority for the Russians.
3. Climate change
According to two new studies published in Nature last week, the warming climate will push Antarctica’s ice sheets to the brink of irreversible melting. This will happen even if nations make good on the new commitments to cut carbon dioxide emissions they announced during the US-led climate summit last month. The studies show that the best chance of stopping the meltdown is to reach the Paris agreement’s most ambitious target to cap warming at 2.7 degrees Fahrenheit (1.5 degrees Celsius) above the pre-industrial level. The alternative is millennia of sea-level rise that will swamp Pacific islands, flood shoreline cities, and displace millions of people from coastal regions. Major climate reports project that, even with rapid cuts in CO2 emissions, the global average sea level will rise at least 12 to 16 inches by 2100.
A new report from the United Nations Environment Program and the Climate and Clean Air Coalition says a 45% reduction in human-caused methane emissions by 2030 would put the world on a path to achieving the goal to keep warming to 1.5 degrees Celsius this century. The CCAC/UNEP report estimates that the fossil fuel sector is responsible for 35% of human-caused methane emissions.
According to the International Energy Agency, oil and gas operations worldwide emitted some 72 million tons of methane into the atmosphere in 2020, broadly equivalent to the total energy-related CO2 emissions from the entire EU. The biggest two emitters were Russia — Europe’s biggest gas supplier — and the US, which too has emerged as a significant supplier of LNG to Europe. The EU and US are implementing legislative measures to cut methane emissions from the oil and gas sectors. The European Commission last October published its first ever strategy aimed at curbing methane emissions and plans to bring forward legislative proposals on the issue over the course of 2021.
Germany’s conservative-led government announced even more ambitious plans to cut greenhouse gas emissions on Wednesday, prodded by a constitutional court ruling. The conservatives also have an eye to the opposition Greens’ lead in polls ahead of the September elections. Last week, the court said the government had failed to set out how it would bring carbon emissions down beyond 2030 after a group of plaintiffs, including North Sea islanders fearing inundation from climate change – challenged the 2019 climate law as insufficient. Germany will now aim for a 65% cut in carbon emissions by 2030 and 88% by 2040. Under the new targets, Germany will also aim for nearly net-zero emissions by 2045, rather than 2050 as initially planned.
The intensity, frequency, and cost of natural disasters are rising as climate change supercharges dangerous weather across the US’s most productive farming regions. Much of the economic stress has, so far, fallen on farmers and on taxpayer-funded government subsidies and programs that protect them. But billions of dollars in damage caused by the extreme weather could soon overwhelm the banks and lenders that provide critical cash flow to farmers. And that, in turn, would almost certainly destabilize not only the food supply but the financial systems that underpin the broader global economy.
4. The global economy and the coronavirus
In much of the developed world, the vaccination count is soaring into billions of doses. Covid-19 cases are easing, and economies are poised to roar to life. In many less-developed nations, though, the virus is raging on, while vaccinations are happening far too slowly to protect even the most vulnerable. Some 192 countries signed up last year for Covax, a vaccine-sharing partnership, but the virus is spreading more rapidly than ever, driven mainly by increased infections in South America and India. The campaign to vaccinate the world is floundering.
United States: President Biden set a new vaccination goal to deliver at least one shot to 70% of adult Americans by July Fourth as he tackles the vexing problem of winning over the “doubters” and those unmotivated to get inoculated.
US job growth unexpectedly slowed in April, likely restrained by shortages of workers and raw materials as an economic recovery bolstered by rapidly improving public health and massive government aid fueled a boom in demand. The Labor Department’s closely watched employment report on Friday, which showed a plunge in temporary help jobs – a harbinger for future hiring – as well as decreases in manufacturing, retail, and courier services employment, could heat the debate on generous unemployment benefits.
Nonfarm payrolls increased by only 266,000 jobs last month. Data for March was revised down to show 770,000 jobs added instead of 916,000 as previously reported. Economists polled by Reuters had forecast payrolls would advance by 978,000 jobs. That left employment 8.2 million jobs below its peak in February 2020. Twelve months ago, the economy purged a record 20.679 million jobs as it reeled from mandatory closures of nonessential businesses to slow the first wave of COVID-19 infections. That plunge could have thrown off the government’s model to adjust the data for seasonal fluctuations, resulting in the April payroll number being below forecasts.
European Union: After months of supply shortages and embarrassing blunders, Europe’s coronavirus vaccine campaign is, at last, sprinting ahead, renewing hopes that the continent might meet its initial inoculation goals and tame the virus even while relaxing restrictions. The EU is now administering roughly the same number of daily per capita doses as the U.S., trending up while America trends down.
The EU’s executive has recommended easing COVID-19 travel restrictions next month to let foreign travelers from more countries enter the bloc, hoping to boost the tourism industry this summer. New proposals from the European Commission would allow in fully vaccinated foreign citizens and those from countries with a “good epidemiological situation.”
Factory production and exports increased strongly in Germany during March, according to official statistics released Friday, developments that bode well for the second quarter in Europe’s largest economy as it struggles to emerge from the coronavirus pandemic. The Economy Ministry said industrial production rose 2.5% in March over February when adjusted for seasonal and calendar factors. The increase followed drops of 1.9% in February and 2.2% in January.
China has administered a total of 308.23 million doses of COVID-19 vaccines as of May 7th. Trade with the US and the rest of the world surged by double digits in April as consumer demand recovered, but growth appeared to be slowing. Global exports rose 32.3% over a year ago to $263.9 billion, in line with March but down from the explosive 60.6% rise in the first two months of 2021. Imports increased 43.1% to $221.1 billion, accelerating from March’s 38.1% expansion. Fueled with money from Wall Street and local governments, automakers plan to build eight million electric cars a year there, more than Europe and North America combined.
China’s economic growth faces headwinds this year due to weaker-than-expected investment spending in the country’s vast manufacturing sector. According to Citigroup economists, the slowdown is being driven by Beijing’s efforts to rein in pollution and by a profit squeeze at labor-intensive manufacturers. Spending by manufacturers has been the slowest component of Chinese investment to recover from the pandemic, with outlays in the first quarter still below 2019 levels. Manufacturers’ profitability, the primary source of their investment funds, plunged last year. Many businesses see margins squeezed by higher commodity prices and a resumption of social-security contributions that were suspended during the pandemic.
Natural gas imports into China rose 22.4% on the year in the first four months of this year to 39.45 million tons. April natural gas imports alone were 31% higher on the year and 16.2% higher than in March. China has seen a surge in gas demand as its economy rebounded after the pandemic, with the upward trend likely to remain in place for the observable future, adding 10% this year alone, according to Chinese state energy majors PetroChina and Sinopec.
LNG prices were among the commodities which decreased sharply in price last year as consumption evaporated. During the past several months, however, prices have rebounded strongly, resembling a rollercoaster. The situation was especially dire for East Asian customers who found it hard to buy affordable cargoes. Therefore, buyers are already preparing for the next winter season. China’s Sinopec, for example, has purchased 35 cargoes to be delivered starting in June until February 2022.
The Saudi government is in advanced talks with several Chinese entities – sovereign wealth funds and oil companies – to sell a 1% stake in Saudi Aramco. The sale of such a stake in such a pivotal company to a Chinese entity would mark a decisive shift of power in the Middle East towards China and away from the US, further fracturing the already-strained 1945 core relationship agreement between Washington and Riyadh. For China, Saudi has long been a prime target of its overarching strategy to replace the US. China expects to attain the world’s largest economy by nominal GDP by 2030 at the latest. It is already the world’s largest economy by purchasing power parity, the largest manufacturing economy, and the largest trading economy.
Russia: The state statistics agency says the country recorded more than 400,000 excess deaths from last April to this March during the pandemic, according to Reuters calculations based on the agency’s data. Moscow is turning to multiple Chinese firms to manufacture the Sputnik V coronavirus vaccine to speed up production as demand soars for vaccinations. Moscow announced three deals totaling 260 million doses with Chinese vaccine companies in recent weeks. It’s a decision that could mean quicker access to a shot for countries in Latin America, the Middle East, and Africa that have ordered Russia’s vaccine, as the US and the European Union focus mainly on domestic vaccination needs. Earlier criticism about Russia’s vaccine has been quieted by data published in the British medical journal The Lancet that said large-scale testing showed it to be safe, with an efficacy rate of 91%.
Russia increased its oil production in April thanks to a more generous OPEC+ quota. The nation pumped 42.81 million tons of crude and condensate last month, according to preliminary data from the Energy Ministry’s CDU-TEK unit. That equates to 10.46 million b/d, or 1.9% more than in March. The data don’t provide a breakdown between crude and condensate, making it challenging to assess Russia’s compliance with its quota. If April condensate output were the same as in March, about 900,000 b/d, then crude production would be around 9.56 million b/d, some 180,000 barrels above Russia’s quota.
Saudi Arabia: The country’s GDP is projected to contract by 0.5% in 2021, compared with a contraction of 6.7% in 2020, given production levels agreed by the OPEC+ group, according to the International Monetary Fund. Moreover, the country’s GDP is expected to grow by 6.8% in 2022 as the current OPEC+ agreement is assumed to end as announced. OPEC and its allies have agreed to ease production cuts, boosting crude oil output from May. The alliance intends to pump some 2 million b/d more crude oil by July.
Saudi Aramco’s crude production averaged 8.6 million b/d in the first quarter, down 12.2% from 9.8 million b/d in Q1 2020 due to OPEC+ production cuts and dwindling demand due to the pandemic. Aramco’s total hydrocarbon production averaged at 11.5 million boe/d in Q1. The company’s downstream business consumed 43.8% of Aramco’s crude oil production in Q1, up from 35.5% in the same period a year earlier.
According to estimates from Moody’s, Saudi Arabia could see its budget deficit drop to below 5% of GDP this year if oil prices average $60 per barrel. Last year, the deficits of all oil-producing nations ballooned as oil prices collapsed at the onset of the pandemic and during the short-lived oil price war for market share between OPEC+ allies Saudi Arabia and Russia. Oil market circumstances forced the Kingdom to implement some unpopular austerity measures, including a threefold increase in value-added tax and the cancellation of so-called cost-of-living allowances for civil servants. As per estimates from the International Monetary Fund, Saudi Arabia’s fiscal deficit soared to 11.3% of GDP in 2020.
India: Total COVID-19 cases rose by over 400,000 for the fourth consecutive day on Sunday even as several states imposed strict lockdowns to curb the spread of the virus. India’s health ministry reported 4,092 fatalities over the past 24 hours, taking the overall death toll to 242,362. Cases rose by 403,738, increasing the total since the start of the pandemic to 22.3 million. A top expert warns that the coming weeks in the country of nearly 1.4 billion people will be “horrible.” Medical experts say actual numbers in India could be five to 10 times higher than those reported.
Indian opposition leader Rahul Gandhi called for a nationwide lockdown as the country’s tally of coronavirus infections surged past 20 million on Tuesday, becoming the second nation after the U.S. to pass the grim milestone. India’s deadly second wave of infections has seen it take just over four months to add 10 million cases, versus more than ten months for its first 10 million.
The Confederation of Indian Industry (CII), the leading Indian industry body, urged authorities to take the “strongest national steps” and to curtail economic activity to save lives. Billionaire Uday Kotak, managing director of Kotak Mahindra Bank, said a “maximal response measure at the highest level is called for to cut the transmission links.” He was speaking on behalf of the CII, where he is the president. “At this critical juncture when the toll of lives is rising, CII urges the strongest national steps including curtailing economic activity to reduce suffering,” Kotak said in a statement.
Africa: While India battles a catastrophic second wave of Covid-19 infections, health officials in Africa are watching with alarm as their immunization campaigns, heavily dependent on vaccine imports from the subcontinent, stutter to a halt. “Two months ago, India was doing a victory dance and handing out vaccines around the world like candies,” said Dr. Ayoade Alakija, cochair of the Africa Vaccine Delivery Alliance, which is coordinating distribution on the continent. “They were saying how wonderfully they had done because of the immunity and the youth of their population. Look where India is today.”
African health officials aim to vaccinate at least 30% of the 1.2 billion population by the end of the year, rising to 60% or higher after that. But supply constraints, logistical problems, and vaccine hesitancy mean immunization campaigns have been patchy. In total, Africa has received just 32 million doses of vaccine, of which about 18 million have made it into people’s arms. Doses of the Oxford/AstraZeneca shot from the multilateral Covax program make up the bulk of jabs deployed so far. Still, supply has dried up after Delhi blocked exports by the Serum Institute of India to battle its outbreak.
Latin America: Despite lengthy lockdowns and closed borders across South America, the continent is one of the worst affected by the COVID-19 pandemic. Three countries–Brazil, Argentina, and Colombia–rank among the top 12 nations for cases, while Brazil and Colombia are in the top 12 countries globally by deaths. A third devastating viral wave is spreading across South America, triggering other lockdowns and restrictions on movement aimed at slowing the virus’s spread as the health systems of many countries struggle to cope and are pushed to breaking point.
The regional economic fallout has already been devastating, causing South America’s 2020 gross domestic product, according to the IMF, to shrink by almost 7%, making it one of the worst-performing regions globally. The pandemic battered South America’s hydrocarbon sector. Energy companies were forced to shutter operations in response to the March 2020 crude oil price collapse and to comply with government directives.
Development plans for the significant offshore oil discoveries in Guyana and Suriname remain unchanged, with operators reiterating their pre-crash plans in the Q1 earnings releases. These operators continue to view the oil discoveries offshore Guyana and Suriname as high-quality resources that deserve full attention and financing. Abundant quality offshore resources could pump oil for decades. The wells in the US shale patch, which are much cheaper and faster to design, drill, and develop, deplete much quicker than large offshore reservoirs. For this reason, it shouldn’t come as a surprise that Exxon said at the earnings call last week that it would be cutting production in the Permian yet going full steam ahead with the developments in Guyana.
5. Renewables and new technologies
Following the introduction of R33 Blue Diesel, Bosch, Shell, and Volkswagen have now developed low-carbon gasoline. The new fuel, called Blue Gasoline, contains up to 33% renewables, ensuring a well-to-wheel reduction in carbon emissions of at least 20% per kilometer driven. Shell will offset the remaining carbon emissions from the use of Blue Gasoline through certified offset arrangements. The initial plan is to make the fuel available at regular filling stations over the year, starting in Germany.
In August 2020, Phillips 66 announced that it planned to reconfigure its San Francisco Refinery in Rodeo, California, to produce renewable fuels. The plant will no longer produce fuels from crude oil but will make fuels from used cooking oil, fats, greases, and soybean oils. In April, the company completed the diesel hydrotreater conversion, and will ramp up to 8,000 b/d of renewable diesel production by the third quarter of 2021. Upon completion of the project, the Rodeo facility will no longer process conventional crude oils.
Western governments should consider stockpiling critical battery metals such as cobalt and lithium, the International Energy Agency said, in a stark warning of the geopolitical risks that accompany the green-energy transition. That call comes as some policymakers worry the shift from burning fossil fuels to a greener economy will expose the world to new threats. Unlike oil, a relatively ubiquitous commodity, the production and processing of minerals such as lithium, cobalt, and some rare earth elements are highly concentrated.
6. The Briefs (date of the articles in the Daily Energy Bulletin is in parentheses)
French LNG-powered ships: French container shipping firm CMA CGM said on April 30 it had ordered 22 new ships to be built, including 12 that will be powered by LNG. CMA CGM signed the new building contract with China State Shipbuilding Corp. for 2023-24 delivery. (5/3)
Kenya and Tanzania have signed a deal for a gas pipeline that will run between coastal cities of Mombasa and Dar es Salaam. The signing took place Tuesday, as Tanzanian President Samia Suluhu Hassan made her first visit to Kenya following the death of her predecessor. Kenyan President Uhuru Kenyatta said the two countries are ready to improve their relations. (5/5)
Colombia, for the third time in less than two years, is saturated by protests sparked by President Ivan Duque’s proposed tax reforms which are aimed at stabilizing government finances. This is further evidence of Colombia’s intensifying political turmoil and escalating security crisis, impacting the country’s economically crucial petroleum industry responsible for 17% of fiscal revenue. (5/5)
In Alberta, Canada, there are thousands of orphan oil wells being left to fall into disrepair, which could be repurposed for alternative energy uses to open up substantial economic opportunities for the province, according to new research. (5/3)
Canada is fighting to stop US officials from closing a vital cross-border oil and gas pipeline as a May 12 deadline to shut it looms. Last November, Michigan Gov. Gretchen Whitmer announced she was revoking a permit that allows Enbridge’s Line 5 pipeline to run along the bottom of the Straits of Mackinac, between Lake Michigan and Lake Huron. (5/6)
The clash over Calgary-based Enbridge’s Line 5, which carries up to 540,000 barrels of crude oil and natural gas liquids across Michigan and under the Great Lakes each day, is placing stress on U.S.-Canada ties — and raising questions about how the close allies, which have expressed a desire to work together to fight climate change, can balance energy security with the transition to a clean-energy economy. (5/3)
President Biden is coming under fire for his attack on oil and gas once again as Canada pleads to keep the cross-border Great Lakes oil pipeline open. Canada is battling against the state of Michigan to keep the cross-border pipeline open as calls to enhance the joint response to climate change seems to be at odds with the two countries’ oil industries. (5/3)
The US oil rig count inched up by two to 344, while the gas rig count grew by 7 to 103, according to Baker Hughes’ data. The total rig count is now up 74 over last year at this time. Canada’s overall rig count also increased this week by 4. Oil and gas rigs in Canada now sit at 55 active rigs, up 29 on the year. (5/8)
TX pushback: The Texas Independent Producers & Royalty Owners Association has welcomed the passage of a new bill, which seeks to prohibit companies that divest from, boycott, or sanction the fossil fuel industry from doing business with the state of Texas. (5/7)
TX pushback #2: In an unusual move on Thursday, Governor Abbott of Texas asked the state’s Supreme Court to accept an Exxon Mobil Corp petition seeking to reverse a state court decision in a climate change case. “No Texan voted for any of these meddling California officials,” wrote Abbott, adding the officials “should mind their own business in California if they want to stay out of court in Texas.” (5/7)
Freight industry executives expect a squeeze on trucking capacity that has been driving up shipping costs for US companies to persist through the rest of the year, as strong demand in a rebounding American economy collides with a shortfall in truck availability. (5/3)
Trucker shortage: The National Tank Truck Carriers industry trade group warns that a worsening semi-truck driver shortage may spark higher fuel prices and gas shortages this summer. The industry group said about a quarter of tanker trucks aren’t on the road ahead of the busy summer driving season as there’s a shortage of qualified drivers available. (5/5)
American drivers may soon not be able to fill their vehicles up with gas. While there is no shortage of gasoline or crude oil, there is a shortage of tanker truck drivers needed to fuel gasoline stations across the country. (5/3)
A new US push to cut ship emissions will kick into high gear a multibillion-dollar quest for nonfossil fuels to power oceangoing vessels, but likely will face a backlash from Asian and South American nations that fear rising export costs. South American countries fear that the cost of exporting meat products, fresh produce, and commodities would at least double if ships have to run on nonfossil fuels, which currently cost roughly ten times more than conventional bunker oil. (5/8)
New York City on Thursday sued three major oil companies and the top industry trade group in state court, arguing that the companies are misrepresenting themselves by selling fuels as “cleaner” and advertising themselves as leaders in fighting climate change. (5/3)
Chevron still fighting Ecuador: In 2010, an Ecuadorean court had blamed Chevron for oil pollution and told it to pay $9.5 billion in damages. Chevron has since proved the verdict fraudulent, still hasn’t paid a cent of the Ecuadorean judgment, and says it won’t stop legally battling until it can ensure that it never has to. (5/3)
Refinery sale: Royal Dutch Shell’s subsidiary has reached an agreement for the sale of its Puget Sound Refinery near Anacortes, Washington, to a subsidiary of HollyFrontier Corp. (5/6)
Electricity: In 2020, Americans used 447 million short tons of coal–the country’s lowest annual coal consumption since 1965. The US EIA forecasts a 12% increase in coal consumption for the year and a slight increase in 2022. But coal averaged a 5% decline a year in the decade before the pandemic. Most of the market-share loss so far has been to fracked natural gas, but the combination of cheap wind and solar power plus better batteries will likely push coal’s continued decline. (5/4)
Solid power, a developer of all-solid-state batteries for electric vehicles, announced a $130-million Series B investment round led by the BMW Group, Ford Motor Company, and Volta Energy Technologies. The BMW Group and Ford aim to utilize Solid Power’s low-cost, high-energy, all-solid-state battery technology in forthcoming electric vehicles. (5/4)
Charging stations: As of March 2021, 25 states have at least 1,000 non-residential electric vehicles (EV) charging units (public and private). California has by far the most significant number of non-residential EV chargers with nearly 37,000 units. New York, Florida, and Texas had well over 4,000 each. (5/4)
US coal exports rose to an 18-month high of 6.88 million tons in March, as thermal coal exports jumped to their highest level since January 2019. March coal exports were up 2.5% from February and 9.7% higher than the year-ago month. (5/5)
Australia might benefit from more experimenting away from coal, incorporating the lowest-hanging renewables fruits, and then seeing where to go next. Bursting into the public consciousness with grand, ambitious projects, wind energy might very well become Australia’s new favorite. (5/3)
Aussie ammonia: The world’s largest developer of renewable hydrogen projects, InterContinental Energy targets ammonia exports on a massive scale from its pioneer project in Western Australia. (5/5)
More nukes? The US Administration has reportedly realized that America cannot reach its new ambitious emission-reduction goals without nuclear power generation. The White House has signaled it could create new subsidies to support nuclear plants. (5/6)
Big wind: France has opened a tender for the world’s first commercial floating offshore wind project in an area off the South Brittany coast, eventually sized at 250 MW. (5/6)
China’s bold move: Over the past decade, China has provided billions of dollars of subsidies to state-owned companies to acquire Western manufacturing rivals and to build factories beyond its borders. Now, these overseas factories are roiling global markets with low-priced goods in sectors ranging from automotive tires and rail equipment to fiberglass and steel. (5/7)
Chinese tech giant Baidu rolled out its paid driverless taxi service on Sunday, making it the first company to commercialize autonomous driving operations in China. Unlike previous Baidu autonomous driving demonstrations in Beijing, this was the first time no safety driver was sitting behind the wheel. (5/3)
China now accounts for more greenhouse gas emissions than all of the world’s developed nations combined, according to new research from Rhodium Group. China’s emissions of six heat-trapping gases, including carbon dioxide, methane, and nitrous oxide, rose to 14.09 billion tons of CO2 equivalent in 2019, edging out the total of OECD members by about 30 million tons. (5/7)
H2 hub? The results of a feasibility study showed in July 2019 that Rotterdam had the opportunity to develop itself into a central hub for the production, uptake, and trading of hydrogen. A fossil-based hydrogen plant could be built by 2026. (5/4)
Heatwave and blackouts: The growing risk of overlapping heat waves and power failures poses a severe threat that major American cities are not prepared for, new research suggests. Power failures have increased by more than 60 percent since 2015, even as climate change has worsened heat waves. (5/6)
Trains trump planes: One of the most challenging climate puzzles to solve is cutting greenhouse gases from airplanes. International travel is essential, but zero-emission flights are decades away. In Europe, where transport accounts for a quarter of emissions, policymakers may have a solution: get people to take the train instead. (5/7)
HFCs: The Environmental Protection Agency on Monday will propose a rule curbing the use of hydrofluorocarbons, a potent greenhouse gas used in refrigeration and air conditioning, the Biden administration’s first significant step to limit climate-warming pollutants. The new rule would cut production and importation in the US by 85% over the next 15 years. (5/4)
The next generation of Covid-19 vaccines in development could come as a pill or a nasal spray and be easier to store and transport than the current handful of shots that form the backbone of the worldwide vaccination effort. (5/4)