Editors: Tom Whipple, Steve Andrews
Quote of the Week
“U.S. rig counts are still nowhere close to supporting the U.S. returning to anywhere like the 13 million b/d we closed 2019 at.”
Mike Muller, Vitol
Graphic of the Week
| Contents 1. Energy prices and production 2. Geopolitical instability 3. Climate change 4. The global economy and the coronavirus 5. Renewables and new technologies 6. Briefs |
1. Energy prices and production
Oil: Prices settled near $70 a barrel on Friday, supported by production cuts by major oil producers and optimism about a demand recovery in the second half of the year. Benchmark Brent settled at $69.22 a barrel. US West Texas Intermediate crude ended at $65.61 a barrel. Brent and US crude finished the week roughly flat after prices touched a 13-month high on Monday, following seven straight weeks of gains.
According to data from Baker Hughes, US drillers are cutting the number of oil and natural gas rigs operating for the first time since November. Nearly a month after an Arctic blast knocked out more than 18 of 30 Texas refineries and almost 5 million b/d of crude-processing capacity, all but two sites have restarted all or a good portion of the production units they need to make gasoline and diesel again.
US gasoline inventories moved sharply lower for a second week, as rising demand stressed winter-storm blunted production. Total US gasoline stocks fell 11.87 million barrels last week to 231.6 million barrels, driving inventories more than 6% below the five-year average. Gasoline stocks tightened in all regions, but the draw was concentrated on the high-demand US Atlantic Coast, where stocks retreated 7.49 million barrels to 63.69 million.
Due to plunging drilling activity amid low oil prices, US crude oil production fell by nearly 1 million b/d last year, registering the largest annual decline in history. In 2020, US crude oil production averaged 11.3 million b/d, dropping by 935,000 b/d—or 8 percent—compared to the record-high annual average of 12.2 million b/d in 2019.
S&P Global Platts, the company that publishes the world’s critical crude price, announced on February 22nd that it would radically change the very nature of that benchmark, known as Dated Brent. However, just nine days after announcing its ambitious overhaul, which had been meant to begin in June 2022, Platts was forced to apologize to the market for the move’s suddenness. A week later, it went a step further: the changes would be shelved for an as-yet-undefined period.
OPEC: The cartel’s crude oil production fell by 650,000 b/d in February due to the extra cut from Saudi Arabia. Total oil production averaged 24.85 million b/d in February, dropping by 650,000 b/d compared to January. Crude oil production increased in all three OPEC members exempted from the OPEC+ cuts – Iran, Libya, and Venezuela.
OPEC expects that global oil demand will rebound strongly in the second half of 2021. Still, OPEC’s crude call will be lower than previously expected, its latest analysis showed. This provides some backing for Saudi Arabia’s decision not to relax its output cuts through April. In its closely watched Monthly Oil Market Report, OPEC revised downward its forecast of 2021 oil demand by 220,000 b/d to 96.27 million b/d and said the recovery would be backloaded in the second half of the year, after disappointing data in Q1.
With too many vessels to haul fuel, losses for supertankers on a benchmark Middle East-to-China route deepened to $6,779 a day. That’s the weakest earnings since at least 2017 and effectively means vessel owners would be subsidizing the transport of oil on that route. A host of factors has hit tanker rates. First, OPEC+ is withholding near-record amounts of oil. There’s also an oversupply of ships, which has been compounded by the unwinding of crude stored at sea. For much of last year, those volumes kept tankers off the market and sent daily earnings soaring.
Refiners and integrated oil firms continue to struggle with low refining margins, as a part of global oil demand—jet fuel consumption—is still enormously depressed by international travel restrictions. Margins for middle distillates, including jet fuel, have improved since the worst effect of the pandemic last year. But the crisis in the airline industry and the pressure on refiners to curb jet fuel supply amid still low demand could accelerate permanent closures of refineries geared to produce more middle distillates than gasoline, especially in Europe and Asia.
New refinery capacity in the Middle East and Asia also pressures older refineries elsewhere. These refineries yield more middle distillates and risk permanent closure due to unprofitable or uncompetitive low-profit-margin operations. A current glut of diesel supply in Asia also depresses margins, while crude oil prices above $65 a barrel make raw materials more expensive.
Shale Oil: Saudi Arabia’s bet that the golden age of US shale is over appears to be a safe one — for now, at least. A round-up of data on shale drillers shows they’re sticking to their pledge to cut costs, return money to shareholders and reduce debt. If they stay the course, it will validate the OPEC+ alliance’s high-stakes wager that it can curb output and drive crude prices higher without unleashing an onslaught of supply from US rivals. That’s still a big “if,” one that’s keeping the oil market on edge as crude’s rally makes it more tempting for shale producers to go back on their word.
An analysis of preliminary BLS data by the Energy Workforce and Technology Council shows a loss of 10,000-plus oilfield services and equipment jobs last month. The finding marks the third consecutive month of domestic oilfield job losses.
Expectations that shale production would fall sharply to circa 5-6 million boe/d by the end of 2020 have not been borne out. Recent EIA reporting says that shale oil output has remained in the area of 7.6 million boe/d. A more significant drop was expected based on a lack of drilling/completion activity due to low prices. Historical annual decline rates for shale wells can be as high as 60% in the first year.
However, technology is making more oil per unit of interval than just a few years ago, and operators high grading of their portfolios to focus almost solely on the most productive Tier I acreage. This acreage is the low-cost, high-return play that works particularly well in the Permian with its stacked reservoirs. Shale oil producers have simply been drilling mostly high-output wells in the last couple of years, and this increase in the “Productivity Index” shows better than expected productivity.
Sustained higher oil prices are expected to spur higher US oil output this year, according to JP Morgan’s analysts. “At current prices, most US onshore operators are making money, leaving a large group of operators, from large public companies to private players, in a good position to ramp up activity in 2H21 and build momentum for higher volumes in 2022,” they said. The bank now forecasts US crude oil production to average 11.78 million b/d in December 2021, up 710,000 b/d year-on-year. The bank projects US tight oil production to average 11.36 million b/d in 2021, compared to 11.32 million b/d last year.
Last week, the EIA said US crude oil production is expected to fall by 160,000 b/d in 2021 to 11.15 million, a smaller decline than its previous monthly forecast for a 290,000 b/d drop. Oil prices have staged a very strong recovery since hitting record lows last year at the height of the COVID-19 pandemic.
Chevron revived its aspirations to pump 1 million b/d in the Permian Basin after its drastic budget and job cuts trimmed operating costs. Chevron plans to ramp up investment in North America’s most extensive oil field through 2025, reversing the pandemic-driven production decline. Chief Executive Officer Mike Wirth surprised investors by restoring the million-barrel Permian target only a year after it disappeared from the company’s guidance as Covid-19 crashed energy markets. The California oil titan expects its Permian wells to generate $3 billion in free cash flow by the middle of the decade, assuming international crude prices average $50 a barrel.
Natural Gas: Despite February’s deep freeze drastically reducing Midwest gas storage volumes, mild weather in March looks to flip the deficit back in line with historical norms as supply grows and regional prices retreat. US natural gas storage volumes declined less than the market expected for the second consecutive week, weighing again on prices as only three net draws likely remain before injection season begins. Storage inventories decreased by 52 Bcf to 1.793 Tcf for the week ended March 5th.
Electricity: Texas’s top utility regulator said that an independent market monitor has substantially revised a recommendation to reprice $16 billion worth of electricity charges stemming from last month’s blackouts, lowering it to around $3 billion. The Public Utility Commission of Texas has already rejected the proposal to reverse the market pricing for electricity that resulted in ERCOT overcharging the Texas electricity market during the freeze in February.
The ultimate dollar impact from the storm is still a moving target. Under existing rules, the grid operator spreads the cost of unsettled bills among other market participants. That number isn’t likely to be finalized for some time as market participants and regulators iron out the fine points.
Prognosis: The EIA says in its March Short-Term Energy Outlook that oil prices remain subject to heightened uncertainty levels because responses to COVID-19 continue to evolve. Reduced economic activity related to the COVID-19 pandemic has caused changes in energy demand and supply during the past year and will continue to affect future patterns. US gross domestic product declined by 3.5% in 2020 from 2019 levels. The EIA assumes US GDP will grow by 5.5% in 2021 and by 4.2% in 2022, compared with an assumption of 3.8% in 2021 and 4.2% in 2022 in last month’s STEO.
The EIA’s forecast of declining crude oil prices and a more balanced oil market reflect global oil supply surpassing oil demand during the second half of 2021. However, the forecast depends heavily on future production decisions by OPEC+, the responsiveness of US tight oil production to higher oil prices, and the pace of oil demand growth, among other factors. EIA expects Brent prices will average $59 in 2022.
EIA expects US coal production to total 581 million tons in 2021, 8% more than 2020. In 2022, EIA expects coal production to rise by another 5%. Recent extreme cold weather in much of the country contributed to increased coal use for power generation. EIA expects that coal use for US power generation will increase by 16% to 505 million in 2021. Supply for a rising coal-fired generation will be partly met by draws from on-site stockpiles at power plants. Rising natural gas prices are behind the increased use of coal.
Russian oil producer Lukoil warned of impending oil and gas supply shortages due to chronic underinvestment as governments and industries worldwide chase ambitious emissions-reduction targets. Fossil fuel companies have scaled back spending amid the transition to greener energy production and low oil prices caused by a slump in global demand amid the coronavirus.
“For… a long time, the oil and gas industry has been experiencing difficulties in attracting investments into greenfield and exploration projects to identify new reserves,” Lukoil president Vagit Alekperov said on a conference call on Thursday. Even in the company’s most optimistic scenario, forecasting that wind and solar will account for 40% of global energy consumption by 2050, the lack of sufficient available capital for existing and new oil and gas projects will see supply struggling to meet demand.
2. Geopolitical instability
(These are the situations that reduce the world’s energy supplies or have the potential to do so.)
Iran: The Biden administration is caught between critics in Congress and allies in Europe over returning to an accord to limit Iran’s nuclear ambitions without bending to Tehran’s demands for financial relief. Diplomats from Britain, France, and Germany have since urged Iran to accept a joint European-American invitation to begin informal negotiations. Russian and Chinese officials have taken a more sympathetic approach in asking Tehran in recent days to return to talks.
Wary of the US again reneging on its diplomatic assurances, Iran’s leaders had insisted they will not go back to the nuclear negotiating table until President Biden begins lifting harsh sanctions that the Trump administration imposed. “America was first in breaking with the agreement, and it should be the first to return to it,” Mr. Rouhani said on Wednesday during a cabinet meeting in Tehran. However, he added: “America should know that we are ready to implement the agreement.”
Iran has quietly moved record amounts of crude to China in recent months, while India’s state refiners have added Iranian oil to their annual import plans on the assumption that US sanctions on the OPEC supplier will soon ease. The National Iranian Oil Company has started reaching out to customers across Asia to assess the potential demand for its crude.
Israel has targeted at least a dozen vessels bound for Syria that were carrying Iranian oil out of concern that petroleum profits are funding extremism in the Middle East. Since late 2019, Israel has used various means, including mines, to strike Iranian vessels or those carrying Iranian cargo as they sail in the Red Sea to Syria and other areas of the region. Iran has continued its oil trade with Syria, shipping millions of barrels and contravening US sanctions against Iran and international sanctions against Syria.
Iraq: February oil production, including flows from the semi-autonomous Kurdistan region, rose 1.6% month on month, breaching the country’s OPEC+ quota. OPEC’s second-largest oil producer pumped 3.868 million b/d in February, up from 3.807 million b/d in January and above its 3.857 million b/d quotas. Both federal and Kurdish production rose last month compared with January. Iraq largely depends on Asia to take in its oil exports. Be it Basrah Light or Heavy, Asia’s share of Iraqi exports averaged 80% in 2020, quite a steady progression from 60% in 2017, 65% in 2018, and 71% in 2019.
Libya: The parliament approved the first unity government since 2014, potentially paving the way to more stability in oil production. Lawmakers approved an interim government led by Prime Minister Abdulhamid Dbeibeh that could end the rivalry between institutions in the east and west of Libya. The interim government is tasked with ruling the country together with a three-member presidency council until the end of December 2021, when elections are scheduled to be held. Libya plans to raise its oil production to 1.45 million b/d by the end of this year, from 1.3 million b/d now, according to the chairman of Libya’s National Oil Corporation.
Venezuela: There are growing signs that President Biden’s approach to the crisis, that was destroying what was once Latin America’s wealthiest nation, will differ significantly from his predecessor’s hardline policy. Washington’s harsh sanctions targeting Maduro’s regime have not only failed to instigate regime change but strengthened his grip on power and worsened the country’s humanitarian crisis. By the end of 2020, President Maduro had taken control of the National Assembly. That not only gave Maduro and his ruling socialist party power over the last legislative institution which his regime couldn’t control, and had defied it, but undermined internationally recognized interim president Juan Guaidó’s position.
The European Union in early January 2020 released a statement calling Guaidó a privileged interlocutor but announced it no longer recognized him as Venezuela’s interim president. That decision was made because Guaido was no longer the head of Venezuela’s recognized legislature.
Saudi Arabia – Yemen: Saudi Arabia said its largest oil export terminal at Ras Tanura in the Persian Gulf has emerged unscathed after being targeted in a March 7th drone attack in a series of strikes. The Saudis alleged the strikes were launched by Iranian-backed Houthi rebels from Yemen. Ras Tanura is the world’s largest oil terminal, capable of exporting roughly 6.5 million b/d— nearly 7% of oil demand — and as such is heavily protected.
The battlefield in Yemen is getting more volatile with each passing day. The Saudi-led coalition is attempting to push back the Houthis with heavy airstrike activity. The ground offensive by Ansar Allah seems only to be challenged by air raids and little else. On March 9th alone, the Saudi-led coalition carried out at least 32 airstrikes, including on the capital Sana’a. The frontline is in a state of chaos, and a constant back and forth can be observed, with the slight upper hand appearing to be for the Houthis.
The head of the UN food agency warned that his underfunded organization might be forced to seek hundreds of millions of dollars in private donations in a desperate bid to stave off widespread famine in coming months. The World Food Program needs at least $815 million in Yemen aid over the next six months but has only $300 million, the agency’s executive director said.
3. Climate change
A study published last week suggests that sharply cutting greenhouse gas emissions to stay below the 1.5 degrees Celsius increase limit will help the tropics avoid high heat and high humidity episodes — known as the extreme wet-bulb temperature that go beyond the limits of human survival. “An important problem of climate research is what a global warming target means for local extreme weather events,” said Yi Zhang, a graduate student in geosciences at Princeton University and the study’s lead author.
China, the world’s biggest polluter, fell short when it unveiled its goal for the next five years. The world’s second-biggest economy said Friday it plans to lower emissions per unit of gross domestic product by 18% by 2025—the same level it targeted in the previous five-plan. The lack of new ambition was conspicuous after President Xi Jinping won international praise in September for pledging to get China to net-zero by 2060.
The new targets were in line with current trends which show where China is actually heading. Plans to get a fifth of the country’s energy from non-fossil fuel sources by 2025 would mean growing its wind and solar generation by an average of 12% a year, about the same rate US installations increased under former President Donald Trump.
4. The global economy and the coronavirus
That covid-19’s toll has been surprisingly low across much of Africa and Asia is one of the biggest mysteries about the pandemic. The virus has killed a fraction of as many people on those continents — despite their relative lack of resources — as it has in Europe or the US. This isn’t how public health emergencies usually work. They tend to inflict their worst damage in more impoverished places, which is indeed what’s happening within the US, where the toll has been higher in many minority and low-income communities. Globally, though, Covid has been different.
For much of 2020, most people — including most experts — weren’t particularly worried about the virus’s ability to evolve. SARS-CoV-2 was changing, but the change hadn’t amounted to anything especially concerning. Then, in late fall, it jumped. Distinctive new versions of the virus sparked alarming surges in Brazil, South Africa, and the United Kingdom. Now, in a few short months, variants have become a global preoccupation. Nearly every time public health experts talk about the health crisis’s trajectory, they dwell on the variants, the loose cannon that could wreck hard-won progress. Some experts fear vaccines may be less effective against strains of the coronavirus that were first found in the UK, South Africa, and Brazil.
United States: A highly infectious Covid-19 variant is circulating widely in Florida, prompting concern that a resurgence of the virus is possible in the state and beyond, even as cases and hospitalizations drop dramatically nationwide. The per-capita rate of Covid-19 patients currently in Florida hospitals is now about 25% above the national average. And new patients are arriving at its hospital emergency departments at slightly higher rates than the rest of the country.
Under intense pressure to donate excess coronavirus vaccines to impoverished nations, the Biden administration is moving to address the global shortage by partnering with Japan, India, and Australia to finance a dramatic expansion of vaccine manufacturing capacity. The agreement was announced Friday at the Quad Summit, a virtual meeting between the heads of state of those four countries. The US plan with Japan, India, and Australia to provide 1 billion doses of Johnson & Johnson’s Covid-19 vaccine to south-east Asian nations is to counter Chinese influence in the region.
The number of Americans seeking unemployment benefits fell last week to 712,000, the lowest total since early November, evidence that fewer employers are cutting jobs amid a decline in confirmed coronavirus cases and signs of an improving economy. Though the job market has been slowly strengthening, many businesses remain under pressure, and 9.6 million jobs remain lost to the pandemic that flattened the economy 12 months ago.
China: Beijing aims to vaccinate 70-80% of its population, some 900 million to 1 billion people, by mid-2022 and had administered 52.5 million vaccine doses through the end of February. It has been slower in its vaccination campaign than many other countries, including the US. However, China has committed roughly ten times more doses abroad than it has distributed at home.
Twice a decade, Beijing releases a new five-year plan to signal key economic policy goals. This year, the outline of the plan contains a unique and intriguing goal: keep manufacturing as a percentage of the total economy “basically stable.” It might seem odd for the world’s factory powerhouse—which has gained global export market share during the pandemic—to worry about deindustrialization. Most countries see the percentage of manufacturing in their economy fall as they move up the income ladder: Richer citizens have more money to spend on services like healthcare and entertainment. China had already seen manufacturing decline from 32% in 2010 to 26% in 2020. On its own, this isn’t problematic and still puts it well above other big economies like the US and Japan.
China’s crude imports grew 5.8% on the year to 11.13 million b/d in January-February 2021, rebounding from the 27-month low of 9.1 million b/d recorded in December. The increase was attributed to the wave of crude imports for the independent sector, which took advantage of the fresh crude import quotas allocated for 2021.
Despite the US sanctions on Iranian oil exports, some Chinese refiners are buying so much Iranian crude that the Shandong province ports, where most independent refiners are based, are experiencing tanker traffic congestions. China has never stopped buying crude oil from the Islamic Republic, even after the Trump administration slapped sanctions on Iran’s oil sales in 2018. Various reports, media investigations, and tanker-tracking firms suggest that China has received much more oil from Iran than the official figures report.
China’s natural gas imports, including piped gas and LNG, jumped 17.4% on the year over January-February, up from a growth of 2.8% a year earlier, driven by higher-than-expected domestic consumption amid the most severe winter weather in decades. China imported a total of 28.68 Bcm of natural gas in the first two months of 2021, compared with 24.43 Bcm in the same period last year.
Since taking power in late 2012, President Xi has realigned Chinese politics with his authoritarian style and a top-down drive to forge a centralized state under the Communist Party. But his efforts are running into an old foe: bureaucracy. Party observers say the campaign for centralization in a sprawling nation too often fosters bureaucratic inertia, duplicity, and other unproductive practices aimed at satisfying Beijing and protecting careers but threatens to undermine Xi’s goals.
Some local officials have become so focused on pleasing Xi and fulfilling party mandates that they can neglect their essential duties as public servants. As the coronavirus spread in Wuhan during late 2019, local authorities were afraid to share bad news with Beijing. That impeded the national response and contributed to the global death toll.
European Union: The region’s problems with the AstraZeneca vaccine are deepening, with at least ten countries globally suspending the use of the shot over safety concerns. In the US, the administration is holding on to its stockpile of AstraZeneca vaccines, rebuffing pressure from Europe and the company to consider sharing doses of the shot. AstraZeneca’s goal of supplying 30 million doses of its COVID-19 vaccine to the European Union by the end of March hinges on the bloc’s drug regulator approving supplies from a factory in the Netherlands.
The Anglo-Swedish drugmaker’s new pledge to deliver 30 million doses to the EU by the end of March is down from a contractual obligation of 90 million and a previous commitment made last month to provide 40 million doses. EU leaders have come under fire for rolling out vaccines at a far slower pace than neighboring Britain due to a more extended approval and purchasing process, as well as repeated delays in supplies from AstraZeneca and other drugmakers.
Germany reported its second-highest daily virus infections since the start of the month, while Austria’s chancellor is among those demanding a European Union summit over vaccines’ distribution. Hungary has imposed a new round of strict lockdown measures aimed at slowing a record-breaking wave of COVID-19 hospitalizations and deaths among the worst in the world.
Saudi Arabia: Riyadh raised prices for their crude for shipments to Asia and the US next month after OPEC+ extended oil supply constraints, pointing to a tightening physical market. The world’s biggest crude exporter is boosting pricing for barrels sold eastwards to the highest levels since just before the Saudis unleashed a brief price and supply war a year ago.
This suggests the Saudis see demand growth continuing even after the OPEC+ decision to keep oil supply essentially unchanged sent crude higher. The world’s biggest oil exporter had intended to boost production next month by adding back the 1 million barrels a day of oil that it unilaterally slashed for February and March. Instead, the kingdom took the path of greater caution, not risking an erosion in price gains if demand in virus-hobbled economies eases.
India: Refinery expansion plans are gaining speed after a year of subdued activity, but refiners are making efforts to ensure that they have flexibility in switching to different products if the energy transition wave takes a toll on transport fuels in coming years. Although India’s peak oil demand is nowhere near, refiners will have to adopt a different strategy and boost their ability to produce a wide variety of petrochemical products while shedding their overdependence on transport fuels, such as gasoline and gasoil.
“The traditional business of oil and gas is undergoing a big change. The energy transition process will bring a big challenge for refiners. There will be more and more integration,” Prasad Panicker, director of refineries at Nayara Energy, told the Platts summit. “India’s oil demand growth will continue for one or two decades. But by the time electric vehicles come and take over a major share of demand, refiners would have to remain prepared through more integration and diversified products.”
Coal India has approved as many as 32 new coal mining projects worth a total investment of $6.4 billion. One of the world’s largest coal consumers looks to reduce imports as its coal demand continues to grow. A total of 24 of the 32 projects will be to expand existing operations, while eight will be greenfield projects. These projects’ combined incremental peak capacity is expected at 193 million tons per year, which is a record capacity addition for Coal India in its history. While major developed economies look to reduce reliance on coal as part of emission reduction goals, India, which will be the key driver of global energy demand in the coming decades, continues to rely heavily on coal. Its demand is expected to continue to rise.
5. Renewables and new technologies
Hydrogen is increasingly being viewed as a critical element to decarbonizing the most emissions-intensive industries. Yet the US is falling behind the hydrogen curve compared with its European and Asian counterparts. During a webinar held by the Resources for the Future think tank, it was said that “Other countries are moving forward aggressively to develop hydrogen economies. We see hydrogen investment in Europe, Asia, and even Australia and New Zealand outpacing investment in the United States.”
Europe’s gas grid operators are ideally placed to kickstart a new market for hydrogen – apart from the small detail of regulation that prevents them from controlling both supply and transmission assets. Across the EU, gas transmission system operators are planning moves beyond their traditional activities, eyeing active participation in hydrogen or mixed hydrogen and methane gas production. These projects are generally still at an early stage. Yet they could test a core principle of EU energy regulation: unbundling or the structural separation of supply and transportation operations. So far, the flurry of activity has not triggered a public reaction by the European Commission raising questions about its commitment to this crucial tenet of Europe’s free and competitive energy markets.
The EU should promote green hydrogen and ammonia usage by ships as part of its upcoming maritime fuel law, major shipping industry players and environmentalists have told the European Commission. The EU Maritime initiative will require ships carrying EU trade to switch to sustainable alternative fuels. Green group Transport & Environment say green hydrogen and ammonia are sustainable and can be produced in sufficient quantities to decarbonize the industry.
Sun-scorched expanses and steady Red Sea breezes make the northwest tip of Saudi Arabia prime real estate for what the kingdom hopes will become a global hub for green hydrogen. The kingdom is building a $5 billion plant powered entirely by sun and wind that will be among the world’s biggest green hydrogen makers when it opens in the planned megacity of Neom in 2025.
6. The Briefs (date of the articles in the Daily Energy Bulletin is in parentheses)
Royal Dutch Shell has appointed Andrew Mackenzie as its new chairman, tapping a mining veteran to oversee the oil and gas giant’s energy transition. This comes when the company, instead of boosting oil and gas production, will focus on growing the amount of electricity it sells and promoting its low-carbon activities such as electric-vehicle charging. (3/12)
Swiss oil trading: According to the data from Switzerland’s State Secretariat for Economic Affairs, commodity trading accounted for 4.8 percent of the Swiss GDP in 2018, much more than the tourism sector, which represented 2.9 percent of GDP that year. (3/9)
China easing? A ship that waited nine months is among a handful of vessels that China has let unload their cargoes of Australian coal, a reprieve for some of the seafarers and vessels caught by a trade war that at one point stranded more than 70 carriers and 1,400 mariners. (3/12)
Nigeria has unleashed a spectacular legal attack on Shell. The Lagos-based Nigerian holding Aiteo Eastern E&P has taken Shell to court seeking a total of $4 billion over the poor condition of the Nembe Creek Trunk Line, a pipeline used to move Bonny Light towards its export terminal, an asset it had repurchased in 2015. Aiteo is claiming $2.7 billion against SPDC over alleged problems with the Nembe Creek Trunk Line pipeline and over claims that Shell undercounted its oil exports. (3/11)
Nigerian shutdown: The host community has shut a crude production flow station operated by Conoil Production in Bayelsa. The facility was closed to protest the oil firm’s insensitivity to its social obligations to the people. (3/12)
In Argentina, after a harsh 2020 and slow post-pandemic recovery, the hydrocarbon sector has come roaring back to life. A combination of substantially higher oil prices, government subsidies, favorable legislation, and growing demand for light sweet crude oil and natural gas has caused activity in Argentina’s Vaca Muerta to soar. (3/12)
In Colombia, the continued difficulty which the government has in preventing violence is weighing heavily on Colombia’s petroleum industry. Oilfield and pipeline attacks continue. Authorities seem unable to guarantee the security of remote industry operations. That deters investment from foreign energy companies required to bolster crude oil reserves, expand hydrocarbon production, and ultimately drive economic growth. (3/9)
The Government of Canada plans to provide C$2.75 billion in funding over five years, starting in 2021, to enhance public transit systems and switch them to cleaner electrical power, including supporting the purchase of zero-emission public transit and school buses. (3/8)
The US oil rig count fell by one to 309 this week while the gas rig count remained unchanged at 92, Baker Hughes reported last Friday. Canada’s overall rig count decreased this week by 25, reflecting their seasonal rig decline in large part as the spring melt approaches. (3/13)
SPR sale: The US Department of Energy’s Office of Fossil Energy has announced that contracts have been awarded to sell 10.1 million barrels from the Strategic Petroleum Reserve. (3/9)
The US Senate confirmed Michael Regan as EPA administrator on Wednesday, putting the former North Carolina environmental chief in line to chart broad federal policies combating climate change and countering pollution. (3/12)
More miles coming: Northern Californians are taking to the open road in much greater numbers, an early signal that gasoline demand may be returning a year after the pandemic paralyzed the economy. (3/9)
Kern County lawsuit: The Sierra Club and several other environmentalist organizations are suing Kern County in California for approving a revised ordinance that will allow fast-tracking for the drilling of as many as 2,700 new oil wells each year for the next 15 years. (3/13)
In Texas, as a growing number of Wall Street banks and virtually all major asset managers declare their shift away from fossil fuel investments, the Senate is striking back with a bill proposing that the state’s investment funds exit all companies “boycotting” oil and gas. (3/13)
Shell doubled its crude and refined products trading profits in 2020 from 2019, its trading offsetting some of the collapse’s adverse effects on refining margins and fuel demand during the pandemic. (3/13)
Three ships carrying ethanol were heading to China from the US Gulf Coast, three trade sources told Reuters on Monday, in a sign that exports of the fuel were sharply increasing from the United States to the country. The shipments may surpass the total amount of US ethanol that China imported last year, a positive development for the US ethanol industry. (3/9)
Coal recovery? S&P Global Platts Analytics projects optimism that the utility sector’s coal burn is expected to increase approximately 95 million st year on year to 522 million st in 2021 and bullish expectations for prices compared with last year. (3/11)
Coal retirements: Despite the February 14 winter storm’s triple-digit natural gas prices, massive gas-fired generation outages, soaring power prices, and rolling blackouts in the southern Great Plains of the US, coal-fired generation is likely to continue to show net capacity reductions across the Lower 48 in the next few years. Platts Analytics projects coal’s share to fall to about 22% in 2022, dip below 20% in 2023 and continue to drop below 16% by 2026. (3/9)
Nuclear energy produces about 10% of the world’s electricity, down from a peak of 18% in the mid-1990s, and the construction of new plants lags far behind the pace of closures, according to the International Energy Agency. (3/8)
Japan’s energy future: Since Japan pledged in October to become carbon neutral by 2050, many among its long-term energy planning team have reached a common conclusion: to meet its global climate commitments, the country will need to restart almost every nuclear reactor it shuttered in the aftermath of the 2011 Fukushima meltdowns, and then build more. Nuclear now accounts for about 6% of Japan’s energy mix, down from roughly 30%. In the immediate aftermath, Japan closed all its 54 reactors, then permanently scrapped a third of them. (3/8)
Nuclear storage: Two fishing villages in Hokkaido are vying to host the final storage facility for half a century of Japanese nuclear waste. This competition is splitting communities between those seeking investment to stop the towns from dying and those haunted by the 2011 Fukushima disaster, who are determined to stop the project. (3/8)
The giant offshore wind is coming: US federal regulators’ final environmental review for the 800-MW Vineyard Wind offshore wind farm off the Massachusetts Coast identified a preferred project alternative that would include no more than 84 wind turbines and prohibit installing turbines in six locations. (3/9)
Latin RE: The Inter-American Development Bank and the International Renewable Energy Agency are teaming up to promote renewable energy investment in Latin America and the Caribbean, backing the region’s energy transition. (3/12)
In India, Tesla is in initial talks with the largest integrated power company, Tata Power, about a possible agreement about electric vehicle (EV) charging infrastructure in India. (3/13)
EV sales reality: As auto executives and investors buzz about the coming age of the electric car, many dealers say they are struggling to square that enthusiasm with the reality today on new-car sales lots, where last year battery-powered vehicles made up fewer than 2% of US auto sales. Most consumers who come to showrooms aren’t shopping for electric cars, and with gasoline prices relatively low, even hybrid models can be a tough sell. (3/8)
EV sales barrier: Due to the ongoing shortage of electronic chips, because electric vehicles often require over 100 semiconductors, it’s put them in a position where automakers don’t have the pieces to build the cars. This is why automakers are now seeing backlogs of 40+ weeks before they’ll get the tiny chips needed to make their electric vehicles. That means it could be another nine months before they’re able to add more chips to start production again in some places. (3/8)
LG Chem is prepared to invest $4.5 billion over the next five years to expand battery capacity in the United States. Their plans are expected to result in 10,000 new jobs. (3/12)
GM’s lithium metal battery with a protected anode will feature a combination of affordability, high performance, and energy density. The initial prototype batteries have already completed 150,000 simulated test miles at research and development labs at GM’s Global Technical Center in Warren, Michigan, demonstrating real-world potential. (3/12)
LNG shipment has carbon offset: According to Gazprom, the Russian company and Shell are jointly offsetting the carbon footprint of a cargo of LNG via the Verified Carbon Standard and the Climate, Community, and Biodiversity carbon credit standards. (3/9)
Temperatures in the Arctic Ocean, an area that significantly influences the world’s weather, were much warmer last month than the average for the past two decades. Northeastern Canada and Greenland were also much warmer-than-average for February. Scientists have linked this warming to extreme weather events elsewhere globally, including the blast of cold air that swept out of Canada and deep into the US south in the middle of last month, causing an energy crisis in Texas. (3/9)
The La Nina climate pattern that egged on a record 2020 Atlantic hurricane season and left the western US parched will likely fade in the next few months, but there’s a 51% chance it could return later in the year. (3/13)
Deadly air pollution: More than 10 million people die each year from air pollution, according to a new study — far more than the estimated 2.6 million people who have been killed from Covid-19 since it was detected more than a year ago. Why aren’t these deaths a more significant issue in US political and policy discourse? One reason may be that 62% of those deaths are in China and India. (3/11)
Japan’s COVID-19 inoculation campaign is moving at a glacial pace, hampered by a lack of supply and a shortage of specialty syringes that underscore the enormous challenge it faces in its aim to vaccinate every adult by the year’s end. Since the campaign began three weeks ago, just under 46,500 doses had been administered to frontline medical workers as of Friday. (3/8)