Editors: Tom Whipple, Steve Andrews
Quotes of the Week
“I’m worried that [the price of oil per barrel] may get too high, above $100. I hope it stabilizes between a $80 to $100 range over the next several years. We need stability in the oil markets.”
Scott Sheffield, CEO of Pioneer Natural Resources
“The future of car manufacturing has shifted significantly over the past two years, from companies showing little interest in EVs to it forming part of their main investment strategy for the next decade. As auto majors around the world continue to boost their funding of EVs and batteries, we can expect a very different road landscape by 2030.”
Felicity Bradstock for Oilprice.com
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: Futures posted a weekly decline after a few volatile days that saw traders grow more concerned about the demand impact from the omicron variant and tighter monetary policy. New York futures fell 3.4% on Friday to close at $70.85 after briefly trading below $70 a barrel. Brent closed the week at $73.52. Daily Covid-19 cases in the UK jumped to a record, while hospitalizations surged across the US. Prices also weakened after the US dollar rose in response to impending steps by the Federal Reserve and other central banks to tame inflation.
On Wednesday morning the EIA reported an inventory draw of 4.6 million barrels for the week of Dec. 10th. At 428.3 million barrels, crude oil inventories remain 7% below the five-year average. Last week’s draw compares with a modest 200,000-barrel decline for the previous week. Gasoline inventories shed 0.7 million barrels in the reporting period, compared with a build of 3.9 million barrels for the previous week. Gasoline production averaged 10.0 million b/d, compared with 9.6 million b/d in the week before. In middle distillates, the EIA estimated an inventory decline of 2.9 million barrels for the week to Dec. 10th.
Surging gasoline demand may limit the success of the Biden Administration’s efforts to nudge pump prices much lower. The four-week average of US gasoline demand rose to 9.14 million b/d last week. That’s the highest for this time of year since 2015 and suggests concerns about the omicron variant have yet to stop Americans from hitting the road. Gasoline prices in the US have fallen by 10 cents per gallon since early November when they hit a seven-year high.
International Energy Agency: The agency says supplies are rebounding worldwide — from the current OPEC+ ramp-up and sales from strategic reserves to record output in the US, Canada, and Brazil next year. With jet fuel demand also faltering amid the new virus strain, global oil inventories could swell at a rate of 1.7 million b/d in the first few months of 2022. “Much-needed relief for tight markets is on the way, with world oil supply set to overtake demand starting this month,” the agency said in its monthly report. “The steady rise in supply, combined with easing demand, has considerably loosened our balances.”
The IEA said that the Omicron variant’s emergence would allow the oil supply to overtake the rate at which the world is consuming it, easing the supply tightness of recent months. As a result, the agency trimmed its 2022 supply forecast from non-OPEC producers by 100,000 b/d and cut its demand forecast by the same amount. In addition, it expects the surge in coronavirus cases to hinder the recovery in global demand.
OPEC: The cartel raised its world oil demand forecast for the first quarter of 2022 and stuck to its timeline for a return to pre-pandemic levels of oil use, saying the Omicron coronavirus variant would have a mild and brief impact. In its monthly report, OPEC said it expects world oil demand to average 99.13 million b/d in the first quarter of 2022, up 1.11 million b/d from its forecast last month. Saudi Arabia’s energy minister warned traders against shorting oil, saying OPEC+ could react quickly to any fall in prices.
OPEC raised its crude oil production by 285,000 b/d to 27.72 million b/d in November as it continues to ease the cuts per the OPEC+ deal, but the overall output of the 10 OPEC members in the pact was still below the quota for last month. Excluding the November production of the three OPEC members exempted from the OPEC+ agreement—Iran, Libya, and Venezuela—the remaining OPEC producers fell short of November’s 24.04 million b/d quota. Combined, Iran, Libya, and Venezuela pumped a total of 4.23 million b/d in November, leaving the other ten OPEC members with 23.47 million in oil production, below the 24-million-b/d ceiling for the month.
Shale Oil: Production from the Permian Basin is expected to surpass its pre-pandemic high this month. Supplies from the Basin are projected to reach 4.96 million b/d in December, the EIA said in its monthly report. The current record of 4.91 million b/d was set in March 2020. The agency also sees supplies exceeding 5 million barrels a day in January for the first time in data going back to 2007. Crude production from the Permian alone exceeds every OPEC member except Saudi Arabia, underscoring its importance in balancing the oil market. In addition, its low production costs make it appealing to drillers, with most producers focusing their US plans for expansion in the Permian at the expense of other shale basins.
After the significant drop in drilling during the last two years, oil production in the US was maintained this year by completing DUCs (Drilled but Uncompleted Wells). There has been a decline of about 2,500 DUC’s since the beginning of the year, or an average of 227 per month. However, much of the excess inventory has been worked off, and companies are increasing drilling to maintain production. An article in Forbes estimates a 430,000 b/d decline rate for legacy shale wells, meaning that new output must exceed that figure to maintain production.
Natural Gas: Russia’s gas shipments through the major transit route to Germany are set to remain capped on Monday, potentially worsening Europe’s energy crunch just as a cold snap arrives in the region. Just a fraction of pipeline space was booked in auctions on Sunday to flow gas into Germany through Belarus and Poland. The bookings signal supplies via the Yamal-Europe link could remain limited on Monday after plunging over the weekend. Reduced gas flows would exacerbate Europe’s energy crunch, which has already prompted metal smelters and fertilizer producers to curb output.
European gas prices have never been higher relative to US supplies as winter descends across the northern hemisphere. Benchmark Dutch gas futures were almost $40 per million British thermal units costlier than the front-month US contract last week, the widest margin in data going back to 2017. European furnace and power-plant fuel supplies are so expensive that importers are outbidding Asian rivals for seaborne cargoes, a rare flipflop during the peak-demand season.
The European market is still headed for its longest run of weekly gains as storage levels are at their lowest ever for this time of year, promising brutal prices this winter with plenty of more volatility to come. In addition, traders remain unsure of what Russia’s supply strategy will be, given increasing political tensions with the West over Ukraine. “Whatever the unknown reason for the late booking is, it very clearly highlights the problem Europe is facing with rapidly falling stocks,” said one trader.
Germany’s energy regulator has suspended the approval process for the new Nord Stream 2 pipeline bringing Russian gas into Europe, throwing up a new roadblock to the contentious project and driving up regional gas prices. On Tuesday, the regulator said it had temporarily halted the certification process because the Swiss-based consortium behind Nord Stream 2 first needed to form a German subsidiary company under German law to secure an operating license.
The leaders of the European Union member states are expected to discuss a new system to jointly buy natural gas to create strategic reserves to protect the countries and consumers from gas shortages and soaring energy prices. The European Commission has drawn up proposals to develop the new system and has circulated the document among EU member states. The recommendations include an enabling framework for the joint procurement of strategic gas stocks by regulated entities.
So far in December, US natural gas demand from homes and businesses has averaged just 35.9 billion cf/d, marking the lowest month-to-date average since 2015; mild weather gets full credit for the weak demand. In December, the US population-weighted temperature has averaged a balmy 48.4 degrees Fahrenheit – also the warmest since 2015.
US LNG feedgas demand hit a new record high at 12.55 billion cf/d on Dec. 17th, as the export value of Gulf Coast cargoes surged amid solid demand in Europe. The positive trends for US LNG export activity are expected to continue heading into the new year as a seventh US liquefaction facility, Venture Global LNG’s Calcasieu Pass, begins production.
Exxon Mobil launched a sale of its oil and gas properties in the first major US shale field as part of a portfolio reshuffling to focus on more lucrative assets. Last week, the firm sought offers for its Barnett Shale holdings that include 2,700 wells across about 182,000 acres in North Texas, home of the first horizontally drilled shale wells.
Processing high-sulfur crudes produced in the Gulf of Mexico hasn’t been this profitable since 2017, thanks mainly to cheap shale gas. While Europe and Asia grapple with surging prices for natural gas this winter, cheap US supplies allow refiners to extract low-cost hydrogen needed to remove sulfur from the fuel made with sour crudes. That means those crude grades, which were out of favor just a few months ago, are again in demand.
In September, US flaring activity reached 380-390 million cubic feet per day, a roughly 24% fall from the prior month. Flaring activity is tumbling as best practices that only major operators had previously adopted spread to smaller, independent players. The most significant contributors to this steep decline were the Bakken and Permian plays, which saw reduced flaring of around 50 million cf/d each in September.
Coal: The economic rebound from the pandemic is taking coal power generation to a record high this year. Based on current trends, global coal demand is set to rise to 8,025 million tons in 2022, the highest level ever seen. This could lead global coal production — of thermal and metallurgical qualities — to rise to a yet-higher level in 2022, the IEA said in its Coal 2021 report. However, according to the US’s EIA, planned retirements of coal-fired power plants will shrink US coal demand by 28% by 2035.
Prognosis: Oversupply has been one of the main talking points in oil markets in recent months, and now it seems that it will soon be upon us. Softening Asian oil demand, triggered by China’s zero-COVID measures and Beijing’s continued clampdown on independent refiners, has curbed the enthusiasm of markets. However, some upside factors remain, primarily the low level of inventories globally, which are now roughly at March 2020 levels. With Omicron cases doubling daily in European countries, it seems supply is poised to shoot past demand.
Technical analysis of futures trading is already sending signs that lower prices are ahead. For example, Brent crude for February settlement flipped to trade at a discount to the March contract for the first time since March 2020. In addition, the so-called prompt spread is actively traded by both physical and financial oil players, making it one of the most liquid parts of the oil futures curve and a gauge of near-term supply and demand balances. Finally, the switch to negative territory – known as contango – could also deter investors with a neutral view on oil from jumping into the market.
Over the longer term, however, supply additions are expected to be too slow to keep up with demand. Goldman Sachs’ forecast is for Brent to stay around $85 next year and into 2023. Oil could breach triple digits through either higher cost inflation for drillers or if an unexpected supply shortfall forces prices to spike high enough to destroy demand.
2. Geopolitical instability
(These are the situations that reduce the world’s energy supplies or have the potential to do so.)
Ukraine: Moscow, for the first time, laid out in detail demands that it says are essential for lowering tensions in Europe and defusing a crisis over Ukraine. The demands contain elements – such as an effective Russian veto on future NATO membership for Ukraine – that the West has already ruled out. Others would imply the removal of US nuclear weapons from Europe and the withdrawal of multinational NATO battalions from Poland and the Baltic states of Estonia, Latvia, and Lithuania that were once in the Soviet Union.
Russia faces massive consequences and severe costs if it attacks Ukraine, the Group of Seven warned last week. The Kremlin denies it plans to invade and says Russophobia grips the West. Moscow says the expansion of NATO threatens Russia and has contravened assurances given to it as the Soviet Union collapsed in 1991. At a meeting in Liverpool, the G7 delegates said they were united in their condemnation of Russia’s military build-up near Ukraine, and they called on Moscow to de-escalate.
Iran: Tehran agreed to let the UN atomic agency monitor its production of critical centrifuge parts, ending a three-month deadlock and averting a fresh diplomatic clash with the US. The Iranian move offers a sliver of hope for negotiations between Iran, the US, and other powers on restoring the 2015 nuclear accord by removing one of the plethora of issues of concern to Western officials. However, diplomats say those talks remain deadlocked.
Germany’s foreign minister warned that time was running out to find a way to revive a 2015 nuclear deal between world powers and Iran, speaking after meetings with her counterparts from G7 countries. “Time is running out,” German Foreign Minister Annalena Baerbock told reporters. “It has shown in the last days that we do not have any progress.” The stated US aim in US-Iranian talks is to see if the two can revive a 2015 nuclear deal, but Washington’s unspoken goal may be to win support from China and Russia to pressure Iran if the talks fail, diplomats said.
The National Iranian Oil Company will change the benchmark against which it prices its crude for Europe and the Mediterranean—a move which traders say could signal Iran’s intention to return to exporting its oil to Europe. As of January 1, 2022, the state-controlled oil firm of the Islamic Republic will use the ICE Brent settlement for pricing the crude it would sell to the European and Mediterranean markets. Currently, no refiner in Europe buys Iranian crude oil, as no one risks incurring secondary sanctions from the U.S. for dealing with Iran’s oil.
Israel asked the Biden administration last week to speed up the delivery of refueling tankers that could prove critical to striking Iran’s nuclear facilities. However, it was told that the aircraft were back-ordered, and it was unlikely that its first one would be ready until late 2024, according to US and Israeli officials.
Iraq: For the first time since the defeat of the Islamic State, Iraqi federal forces and Kurdish peshmerga are coordinating to close security gaps along a disputed zone in northern Iraq as part of their ongoing fight against the militants. Despite a long-standing territorial dispute, Baghdad and Iraq’s Kurds are taking steps to work together to prevent a resurgence of the Islamic State group. Whether the fragile security partnership can hold is the big test in the next chapter of Iraq’s war with the Islamic State. Both sides say they need the Americans to help keep it together — and they say that is one reason why the US military presence in Iraq is not going away even as its combat mission officially ends on December 31st.
Tribesmen living near the Gharraf oil field in southern Iraq shot a rocket-propelled grenade and machine gun bullets at police in anger over water shortages, as environmental issues threaten to aggravate instability in southern Iraq. This incident suggests that Iraq’s water shortage situation may be worse than is generally recognized.
Iraq’s semi-autonomous Kurdistan Regional Government has run up nearly $5 billion worth of debt to power producers — a significant factor complicating efforts to improve electricity service and attract investment.
Libya: Elections are supposed to be held on December 24th; however, there has been a delay in approving the official candidate list, which could mean that elections will be delayed. No one even knows who has the ultimate authority to postpone elections. There are real fears this delay will lead to more bloodshed and a possible return to all-out civil war.
On Thursday, a group of armed men surrounded the Presidential Council building in Tripoli, which houses the prime minister’s office, just as Prime Minister Dbeibeh announced his candidacy for president. In the meantime, clashes broke out last week in Sebha between local government and pro-Haftar forces, sparked by unconfirmed reports that Haftar loyalists seized military vehicles intended to be used in election security.
3. Climate change
New research shows that rising temperatures have irreversibly altered both the Arctic and Antarctic, and ripple effects will be felt around the globe. Last week at the world’s biggest earth science conference, Erin Pettit, an Oregon State University glaciologist, showed that the Antarctic’s Thwaites ice shelf could collapse within the next three to five years. Such a collapse would unleash a river of ice that could dramatically raise sea levels.
The Southern Ocean’s dominant feature, extending up to two miles deep and as much as 1,200 miles wide, is the Antarctic Circumpolar Current, by far the largest current in the world. It is the world’s climate engine, and it has kept the world from warming even more by drawing deep water from the Atlantic, Pacific, and Indian oceans, much of which has been submerged for hundreds of years and pulling it to the surface. There, it exchanges heat and carbon dioxide with the atmosphere before being dispatched again on its eternal round trip.
Without this action, which scientists call upwelling, the world would be even hotter than it has become due to human-caused emissions of carbon dioxide and other heat-trapping gases. “From no perspective is there any place more important than the Southern Ocean,” said Joellen L. Russell, an oceanographer at the University of Arizona. “There’s nothing like it on Planet Earth.”
In addition, the Southern Ocean is getting warmer, which has another key climate effect. Some of this upwelling water, which is already relatively warm, flows beneath ice shelves on the Antarctic coast that helps keep the continent’s vast ice sheets from reaching the sea more quickly. In effect, “Antarctica is melting from the bottom,” said Henri Drake, a Massachusetts Institute of Technology oceanographer.
The European Commission unveiled proposals to curb methane emissions and reduce leaks in the energy sector in the EU as part of efforts to put the bloc on a path to climate neutrality by 2050. Under the legislation proposed by the Commission, oil and gas operators in the EU will be obliged to monitor, report, and verify methane emissions. However, the legislation largely spares companies operating outside the EU that supply most of the bloc’s fossil fuels.
China extended its defense of coal’s future after diluting demands for action at the COP26 climate summit by insisting on a gradual transition away from coal. “In many developing countries, not everyone has access to electricity and energy supply is not adequate,” Chinese Foreign Ministry spokesman Zhao Lijian told a press briefing in Beijing. “Before asking all countries to stop using coal, consideration should be given to the energy shortfall in these countries.” Both China and India, the biggest coal-consuming nations, have been ramping up output from mines in recent weeks to ease an autumn energy crisis that caused widespread power shortages and disrupted industrial activity.
4. The global economy and coronavirus
As Omicron is expected to become the predominant variant in the next few months, there will likely be a surge in infections before a significant number of booster vaccines can be produced and distributed. Another issue may be the efficacy of the Russian and Chinese vaccines that still have not been approved by the World Health Organization. If these vaccines do not protect against hospitalizations of Omicron variant cases, there will be more trouble next year. The risk of reinfection with the Omicron variant is more than five times higher, and it has shown no sign of being milder than Delta, a study by the Imperial College of London showed.
United States:The omicron variant is poised to rip across the US in the coming weeks, upending daily life for vast swaths of the country. Cases from the hyper-transmissible new variant appear to be doubling every two days. Public health experts and government officials warn that the all-but-inevitable wave will overwhelm health systems still battling the delta variant and clobber communities where few people are vaccinated. With hospitalizations rising, sports leagues canceling games, and colleges sending students home early, Americans are starting to feel an unpleasantly familiar sense of whiplash.
Residents of America’s biggest cities are struggling to book vaccine appointments because of the rising wave of the omicron variant and a rush in demand for booster shots before Christmas. According to a New York Times database, coronavirus deaths surpassed 800,000 last week. As the pandemic neared the end of a second year, virus cases in US rose above 50 million.
Europe: Commission President Ursula von der Leyen said Wednesday that omicron is expected to be the dominant coronavirus variant in the 27-nation bloc by mid-January. The EU’s executive branch head said the bloc is well prepared to fight omicron, with 66.6% of the European population now fully vaccinated against the virus. Von der Leyen said she is confident the EU has the strength and means to overcome the disease.
Almost 100 Conservative lawmakers in the UK voted against new coronavirus restrictions, dealing a significant blow to British Prime Minister Boris Johnson’s authority, and raising questions about his leadership. UK trade in goods took a $16.7 billion hit from Brexit in October as imports and exports fell behind equivalent countries. The Center of European Reform said Brexit had lowered goods traded by the UK by 15.7% from where it otherwise would have been. The “cost of Brexit” has hovered between 11% and 16% of British trade since the UK formally left the European Union’s single market and customs union in January.
The EU is reportedly reconsidering its position on extending long-term natural gas contracts beyond 2049 as part of reforms in its natural gas market to meet the net-zero by 2050 goal.
Russia has maintained that the contracts are beneficial for Europe and moving away from them would be a mistake. Russia even went as far as suggesting that Europe’s current energy crisis is its fault.
Should the European Commission’s proposal be endorsed by EU heads of state and governments this week, it would put a timeline on ending long-term gas contracts. This action would open another rift with Russia, which provides one-third of Europe’s gas supply via pipelines under long-term deals.
Électricité de France shuttered two nuclear power plants after routine safety inspections found cracks in the cooling system. The shutdowns will add significantly to France’s energy shortage this winter.
China: At least 20 companies have shut operations in virus-hit areas in Zhejiang, an eastern province with a large industrial sector that accounts for around 6% of China’s GDP and where many goods are manufactured for export. Tens of thousands of Zhejiang residents are in quarantine. Some domestic flights have been suspended as a national health official said the outbreak in three cities – Ningbo, Shaoxing, and Hangzhou – was developing at a “relatively rapid” speed.
Last month, China’s economy took a knock from an ongoing property market slump and sporadic Covid outbreaks, prompting economists to warn that recent easing measures may not be enough to stabilize growth. Residential property sales and the area of new housing started by developers dropped about 20% from a year earlier, pulling down the pace of overall investment spending in the economy. In addition, retail sales growth weakened to 3.9% in November as people stayed home amid renewed virus outbreaks.
November crude output was up 2.7% on year to 3.99 million b/d as Chinese refiners accelerated crude runs to their highest level in five months. The increase was in response to Beijing’s call to lift domestic supplies. However, similar rates are unlikely to be sustained in December due to weak winter demand, easing local prices, and tighter export quota availability. Driven by high refinery throughput, China likely drew crude oil from its commercial and strategic inventories in November, according to estimates from Reuters.
Independent Chinese refineries increased their crude oil imports from Iran last month as the government issued a new batch of import quotas. In addition, an effort to curb pollution ahead of the Winter Olympics will also affect imports negatively, as will the Lunar New Year holiday when demand declines. Chinese imports in March 2022 are set to be around 10.7 million b/d. This would be about 1 million b/d lower than the crude oil imports in March this year.
As the property slump deepens, China is likely to set a floor for economic growth of 5% next year as it tries to balance a desire to rein in the real-estate sector with the need for stability in a year of crucial political change. That’s the consensus among economists after year-on-year growth weakened to below that threshold in the second half of this year. The target would represent a sizable drop from pre-pandemic growth rates closer to 7% and reflect expectations that Beijing will persist with its efforts to reduce its reliance on real estate even at the cost of slower growth.
Russia: Due to the lack of new exploration leases, almost all of Russia’s crude will soon be ‘hard-to-recover’ according to the country’s Energy Minister. The difficulties in extracting the oil will mean higher production costs. And the fact that the country’s oil and gas discoveries fell to the lowest in five years in the first half of 2021 does not bode well for its future output. Moreover, following restrictions and lower demand during the 2020 pandemic, several major Russian companies reduced their exploration operations and funding to contend with market instability. Therefore, the country needs to attract greater investment in exploration projects to continue developing its oil and gas sector at its projected pace. However, Russia does not appear to be backing down from its oil and gas commitments, with new deals with India and plans to up its crude output from January.
The pace of Gazprom’s natural gas exports’ growth to Europe has slowed in recent months. Gazprom revealed that its natural gas exports outside the former Soviet Union bloc between January and December had increased 4.8% year-on-year to 178.1 billion cubic meters. The figures are a stark contrast from double-digit increases seen earlier this year. The company previously reported a 26% gain for the first half of the year and 19.4% growth for January – August, with shortages emerging over the autumn. This winter, Russia’s natural gas exports have been a sore point of contention amid soaring gas prices, supply shortages, and energy storage issues across European economies.
Saudi Arabia: The government expects to book its first budget surplus in close to ten years in the next financial year, coming in at 2.5% of gross domestic product or $24 billion. Finance minister Mohammed Al-Jadaan also said budget revenues next year will be 12.4% higher than this year’s result. However, despite the contribution of oil to this forecast performance of the Saudi economy, the Kingdom will remain on its diversification course, Al-Jadaan also said, and it will also remain disciplined about public spending.
The crown prince’s next grand plan is to defy the skeptics and turn Riyadh into a greener, cooler city for twice the population. Saudis have gotten used to breakneck change over the past five years under Crown Prince bin Salman, whether it’s the shock therapy to turn the Kingdom into a post-oil economy, a high-tech city on the Red Sea, or allowing men and women to mix more freely. But among the most ambitious plans is to transform Riyadh — one of the world’s most sprawling, car-dependent, and water-poor cities — into a paragon of sustainability.
India: The threat from the new virus variant has not been severe enough to dent the country’s oil demand recovery, trade sources and analysts said. India’s refinery runs are expected to rise by 370,000 b/d to 5.2 million b/d in 2022 on the back of strong domestic demand as economic activity gains steam.
Last week, Russia and India signed several energy cooperation agreements, as Moscow plans to send just under 15 million barrels of oil from Russian producer Rosneft to India during 2022. India, the world’s third-largest crude consumer, currently imports around 85% of its oil needs, mainly from Middle Eastern suppliers. This year, the country’s imports have soared after a problematic 2020 when pandemic restrictions drove down energy demand.
5. Renewables and new technologies
Saudi Arabia and the UAE have revealed significant investments in blue and green hydrogen production for the next decade, hoping to beat Europe to become the biggest producers of the fuel. Last week, France’s Engie and Abu Dhabi-based renewable energy business Masdar announced plans to invest $5 billion in developing the UAE’s green hydrogen industry.
Chinese companies spent ten years aggressively maneuvering to become the dominant solar power player. Now they’re seeking to lead the way in developing the next big thing in clean energy: hydrogen. Top solar manufacturers, including Longi Green Energy Technology, are ramping up the production of electrolyzers, the equipment needed to make green hydrogen, the cleanest form of the fuel. They are accelerating investments to bet that a market will boom as industries and consumers switch to lower-carbon fuels. Chinese companies are following the same playbook used to dominate solar — slashing prices and production costs, dramatically increasing installations, and accelerating the development of new technologies to come out in front of the global hydrogen race.
As ZeroAvia moves closer to commercialization of its hydrogen-electric technology, the company has secured $35 million to help develop its zero-emission powertrain system for regional aviation. United Airlines has invested in ZeroAvia. An agreement with United anticipates an order for 50 ZA2000-RJ engines, with an option for 50 more. The ZA2000 engine family is being designed to produce between 2,000 and 5,000 kilowatts of power with a 500-mile range. Other investors include Alaska Air Group, Amazon’s Climate Pledge Fund, AP Ventures, Breakthrough Energy Ventures, Horizons Ventures, Summa Equity, and Shell Ventures. Total investment to date in the company is up to $115 million.
6. The Briefs (date of the articles in the Daily Energy Bulletin is in parentheses)
Qatar and China have signed another long-term LNG contract, with Qatar set to send 1 million tons per annum to China starting in 2024. As a key US ally and the location of a significant US airbase, China’s growing influence on Qatar should be a severe worry for Washington. (12/16)
Nigeria has regained its top position among crude oil-producing countries in Africa, with crude oil production averaging 1.27 million b/day in November, according to OPEC’s latest monthly report. (12/14)
Brazil: Several oil majors on Friday committed $35 billion over 35 years to exploring and developing deep-sea oil prospects off Brazil’s coast, following an auction widely seen as a test of the industry’s appetite for crude in the face of the green energy transition. Total, Petronas, and Qatar Petroleum joined with Brazil’s Petrobras in a winning bid to develop the Sépia field in the south Atlantic; Total and Shell will team up with Petrobras to explore the Atapu prospect. (12/18)
Peruvian villagers demanding more lavish social spending in the northern Amazon jungle took over a Petroperu pipeline’s central pumping station on Oct. 5th, forcing the company to halt pumping operations. An agreement has been reached, and the pipeline will restart within a week. (12/17)
Mexico could further ease the financial burden on its state oil firm Pemex, the world’s most indebted oil company, as the government looks to stop years of production declines. (12/15)
The US oil rig count last week grew by 4 to 475 while the gas rig count dropped 1 to 104, Baker Hughes Co. reported. Three basins account for two-thirds of the active rigs: Permian (288), Haynesville (47), and Eagle Ford (44). Canada’s total rig count dropped 10 to 167. (12/18/21)
SPR release #2: The Biden administration’s release of crude from US emergency reserves to cool oil’s rally is going into a second round, with bids due by the first working day of the year. The Department of Energy is selling 18 million barrels of sour crude from storage caverns in Texas and Louisiana in a tender that closes Jan. 4th, with deliveries from Feb. 1st through Mar. 31st. (12/18)
Half of all crude oil pipelines across the United States are not being fully utilized amid lower fossil fuel production following the outbreak of the global coronavirus pandemic, energy consultancy Wood Mackenzie reported. Before the pandemic, the utilization rate of US oil pipelines stood at 60% to 70%, but now it’s down to 50% as production dropped from a record 13 million bpd to 11 million bpd. (12/17)
Output at the Permian, the largest US shale basin, will surge to a record in January, according to the EIA. (12/18)
In Alaska, GMT-2 is ConocoPhillips’ third oil project to be developed commercially in the petroleum reserve, a 23-million-acre federal land enclave west of the major producing fields of the North Slope. (12/16)
Shunning nat. gas: New York City authorities are set to decide today whether to ban natural gas connections for new buildings in a bid to reduce the city’s carbon footprint. (12/16)
Holiday travel: More than 100 million Americans are forecast to hit the road this holiday season, nearing pre-pandemic levels even as gasoline prices at the pump remain close to seven-year highs. The estimate for people planning to drive 50 miles or more between Dec. 23rd and Jan. 2nd represents a 28% increase from last year. (12/15)
DC’s EV push: The Biden administration released an ambitious federal strategy Monday to build 500,000 charging stations for electric vehicles across the country and bring down the cost of electric cars to get the US auto industry to sell 50% EVs by 2030. (12/14)
The rapid growth of the hybrid and electric vehicle segment could potentially cause demand for electrical steel to outpace supply from 2025, according to a new report by a team of analysts from the Automotive Supply Chain and Technology team at IHS Markit. (12/17)
Toyota said it would pour $35bn into a shift towards electric vehicles. It marks a significant increase in its electric targets. It aims to sell 3-5 million battery-powered cars annually by 2030, with the launch of 30 EV models by then in a line-up, including sports cars and commercial vehicles. It had previously said it would sell 2 million electric and fuel-cell vehicles combined by 2030 and spend $13bn in batteries. (12/15)
Massive EV push: The world’s biggest automakers plan to spend over half a trillion dollars on electric vehicles and batteries over the next decade. Toyota, Nissan, and Volkswagen recently unveiled plans to invest billions of dollars into new electric vehicle and battery plants. (12/15)
EV budget in the UK: For the second time this year, the UK is slashing the grants available to buyers of electric vehicles (EVs) as it looks to curb spending and targets less expensive models. (12/16)
Proterra announced plans to open a new EV battery system manufacturing plant in South Carolina to produce the company’s battery systems for Proterra Powered customers’ commercial electric vehicles, including delivery and work trucks, industrial equipment, buses, and more. Proterra has committed to a minimum investment of at least $76 million. (12/15)
Ford is choosing to participate in the California Air Resource Board (CARB) Low Carbon Fuel Standard (LCFS) to allow customers to match the electricity used to charge plug-in electric vehicles at home with 100% local renewable energy. (12/18)
General Motors has begun deliveries of its first next-generation electric vehicles, the GMC HUMMER EV Edition 1 Pickup and BrightDrop EV600 light commercial vehicles, built on the Ultium Platform. This dedicated EV architecture and propulsion system is the foundation for GM’s all-electric future. (12/18)
UK battery: Sembcorp Energy UK has announced plans to build Europe’s largest battery in Teeside to boost its portfolio and strengthen the UK’s renewable infrastructure as the country pushes to reach net-zero carbon emissions by 2050. The group intends to construct the battery as part of a 360MW energy storage system. (12/15)
Germany’s lithium: In the valley alongside Germany’s Black Forest lies enough competitively priced lithium, some two miles underground, for at least 1 million electric vehicles a year. With the critical resource for battery-powered cars usually coming from far-flung regions, Vulcan Energy Resources’ $2 billion projects could be key for meeting Europe’s climate ambitions. (12/15)
Battery up! Earlier this year, QuantumScape claimed to have a revolutionary solid-state lithium-ion cell that could change EVs forever. Now it has data to prove it. Co-founder and CEO Jagdeep Singh says the battery resolved all of the core challenges that have plagued solid-state batteries in the past, such as very short lifetimes and slow charging rate. (12/13)
Four offshore wind power projects in two East Coast states—Maryland and Massachusetts—won the backing of government officials Friday, as the region increasingly eyes offshore turbines as a source of clean energy. (12/18)
Chinese wind turbine maker Ming Yang Smart Energy Group Ltd. agreed to help build factories in the UK, which plans to add 40 GW of offshore wind power by 2030. The UK is projected to become the second-largest offshore market globally in 2035, with China the largest. (12/18)
Shell plans to expand its global solar portfolio with the purchase of US solar and energy storage developer Savion. Savion is a Kansas City-based renewable energy company that operates over 130 solar and energy storage projects in various stages of development across 26 states. (12/15)
H2 in Africa: Namibia is putting up to $45 million in funding from former colonial power Germany on feasibility studies and pilot projects related to so-called green hydrogen, made using renewable electricity. With bright sunshine 300 days a year and vicious winds that rip along a nearly 1,000-mile coast, renewable experts and government officials say the southwest African nation has outsize potential for renewable energy production. (12/18)
H2 locomotive: Progress Rail, a Caterpillar Company, BNSF Railway Company (BNSF), and Chevron USA, a subsidiary of Chevron Corporation, announced an MOU to advance the demonstration of a locomotive powered by hydrogen fuel cells. (12/16)
Bio-LNG: Royal Dutch Shell Plc aims to produce liquefied natural gas with a bio-component for use in heavy vehicles within about two years. (12/16)
US energy companies are pressing states to speed the development of low-carbon fuel markets, warning that numerous proposed projects to make renewable natural gas and other biofuels may fizzle without such markets. (12/13)
Fossil fuel combustion, a significant source of air pollution, contributed to more than one million deaths globally in 2017, more than 27% of all deaths from outdoor fine particulate matter (PM 2.5), according to a new report published by the Health Effects Institute (HEI). Coal combustion alone was responsible for half of those deaths, with natural gas and oil combustion accounting for the other half. (12/16)