Editors: Tom Whipple, Steve Andrews
Quotes of the Week
“Let me begin with the obvious: e-mobility has won the race. It is the only solution to reduce mobility emissions fast.”
Herbert Diess, CEO of Volkswagen AG
“There is no way there’s enough raw materials being produced right now to start replacing millions of gasoline-powered motor vehicles with EVs.”
Lewis Black, CEO of tungsten miner Almonty Industries
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: On Thursday, prices suffered their biggest weekly fall since October as signs of flagging demand in key markets halted a strong rally. International benchmark Brent crude ended the week down almost 7%, settling at $64.53 a barrel. West Texas Intermediate, the US marker, fell by a similar margin to $61.42 a barrel. Oil futures are still up well over 20% since the start of the year, with the world’s largest oil producers reining in supply and travel around the world still slow.
The slide put the brakes on an almost unbroken rally this year. Since early November, Brent and WTI have soared more than 60% as the world began to reopen from pandemic-induced lockdowns. But analysts said the rally had moved ahead of itself after Brent pierced the $70-a barrel mark last week, with traders refocusing on renewed lockdown measures in parts of Europe and signs that physical demand in China and the US remained fragile.
IEA says that a supercycle for oil is not around the corner amid plentiful supply and extensive global spare capacity. Oil’s sharp rally to near $70 a barrel has spurred talk of a new supercycle and a looming supply shortfall. IEA’s data and analysis suggest otherwise. First, oil inventories still look ample compared to historical levels despite a steady decline from a massive overhang piled up during 2Q20. By the end of January, at 3,023 million barrels, OECD industry stocks were still 110 million higher than a year ago – at the onset of the Covid crisis. Additionally, a hefty amount of spare production capacity has built up due to OPEC+ supply curbs.
The market for physical crude in Asia, which has been supporting prices all winter, shows signs of weakness, with muted buying from China leading to ample supply. Spot differentials for cargoes scheduled to be loaded in April or May from the Middle East and Russia — which make up a large portion of the oil consumed by Asian refiners — have suddenly dipped.
Global oil demand may have hit the peak in 2019, and natural gas will follow suit around 2025, the director-general of the International Renewable Energy Agency said last week. As the energy transition gathers pace, the IRENA’s forecasts echo those made by BP last year. Under a 2050 scenario that meets the Paris Agreement’s commitment to limit global warming, fuel use is forecast to decline by more than 75% if energy transition policies are enforced now, IRENA said in its World Energy Transitions Outlook. Under the 1.5 C scenario, global oil production is projected to plummet by 85% to slightly above 11 million b/d by 2050 from current levels. Natural gas remains the largest source of fossil fuel at about 52% of current levels.
“In the last eight years, the installed capacity of renewables has been outpacing the installed capacity of fossil fuels-related plants systemically,” Francesco La Camera, director-general of IRENA, said in a briefing. “There is a structural change that is already there. The energy transition is in place, and it is unstoppable.” That’s one view; changes in demand for fossil fuel could play out that way.
OPEC: US oil firms, focused exclusively on the shale patch, are expected only marginally to increase their combined production this year compared to 2020. This signifies that OPEC+ could be right, at least for now, that $70 oil would not unleash a massive production increase from the US. According to Bloomberg Intelligence data, the largest listed US shale firms with no production outside America are set to raise their output from 6.5 million b/d in 2020 to 7.2 million in 2021—a modest increase compared to the previous two boom-and-bust cycles.
For now, OPEC+ continues to restrict supply. High stock levels and a still-fragile recovery in oil demand led the group to agree on March 4th to extend cuts by one month into April. Saudi Arabia also rolled over its extra 1 million b/d cut and said it would gradually phase it out at the right time. The OPEC+ decision helped boost crude to its highest since May 2019. OPEC+ is to meet on April 1st to chart policy for May.
Shale Oil: The EIA’s Drilling Productivity Report for March pretty much tells the story of shale oil. Production from the seven largest US shale regions is set to decline by 46,000 b/d in April, but output in the large Permian basin is expected to eke out a production gain next month. All oil-producing regions except for the Permian are expected to see their production drop in April, but the Permian should see output rise by a modest 11,000 b/d to 4.292 million.
EIA’s Drilling Productivity Report for March 2021
Shale drillers’ newfound prudence after last year’s crash puts producers in the unusual situation of reducing oil output just as prices surge. More focused than ever on keeping spending in check, drillers haven’t been boring new wells fast enough to keep up with output declines from older ones.
The coronavirus’s impact on energy consumption was so bad last year that several heavily indebted shale producers went under after years of being bankrolled by Wall Street. Now, producers don’t seem to be in a rush to start another boom, and their backers aren’t either. Except for production from the Permian Basin, some of which is being drilled by well-off Chevron and Exxon, the other shale oil regions suffer from falling production.
“We are still seeing only about 50% of last year’s rig count,” EIA analyst Jozef Lieskovsky said. “With such a low rig count, even with the increased productivity, production declines in all regions are possible.” According to Baker Hughes data, the number of rigs drilling for oil in the US started plunging when the pandemic hit, reaching just 172 in August, down from 683 late in March 2020. They are now a little more than 300.
In theory, producers also have the option of fracking wells that have been drilled but left uncompleted, known as DUCs. But that wouldn’t help them conserve much capital because the process of blasting a mixture of water, chemicals, and sand into the ground to unleash oil and gas from shale rock is the most expensive part of a well’s development. DUCs also require some work before they can be fracked if they’ve been lying idle for too long. Some of the DUCs were drilled years ago in less-productive areas and are no longer profitable to bring into production.
Prognosis: The IEA published its latest medium-term oil market outlook on March 17th, containing closely watched forecasts for oil supply and demand fundamentals to 2026.
On the demand side, IEA is more upbeat on recovery due to progress in rolling out COVID-19 vaccine programs, a raft of fiscal stimulus packages, and signs of growth in China’s industrial activity. After collapsing by 8.7 million b/d in 2020, IEA estimates demand growth will rebound by 13.1 mb/d to 104.1 mb/d by 2026. Overall, global oil demand is now forecast to rise by 3.5 mb/d between 2019 and 2025, up from an estimated 2.8 mb/d in October. IEA sees no peak oil demand under its default scenario, so stricter government policies are needed to curb oil use.
For the future of oil supply, the agency warns of a shrinking global spare capacity cushion in the absence of more upstream spending. OPEC’s effective excess crude production capacity will narrow to 2.4 million b/d by 2026, from 6.5 million b/d in 2020, the bulk of it in Saudi Arabia. The Middle East will dominate the 2021-2026 supply growth picture, while US supply growth will be more modest compared to recent years. IEA estimates that the demand for OPEC’s crude will rise from 27.3 million b/d this year to reach 30.8 million b/d in 2026.
Many in the industry have warned that oil and gas investment will need to see a huge boost to prevent a supply crunch that could send prices skyrocketing and tip the global economy back into crisis.
The world’s thirst for gasoline isn’t likely to return to pre-pandemic levels, the IEA forecasts. An accelerating global shift toward electric vehicles, along with increasing fuel efficiency among gasoline-powered fleets, will more than outweigh demand growth from developing countries.
2. Geopolitical instability
(These are the situations that reduce the world’s energy supplies or have the potential to do so.)
Iran: Since President Biden took office, there have been numerous reports that China’s ‘illicit’ imports of Iranian oil have soared. These reports resulted in critics charging the White House with “turning a blind eye” to enforcing sanctions based on existing laws. A Biden administration official admitted that such banned Iranian oil exports to China have been increasing “for some time now” as Beijing continues to be Tehran’s lifeline for circumventing oil sanctions.
Last week, however, there was a report that a senior US official said Washington had told Beijing it would enforce Trump-era sanctions against Iranian oil. The official noted that “Ultimately, our goal is not to enforce the sanctions; it is to get to the point where we lift sanctions and Iran reverses its nuclear steps.” According to the senior Biden administration official, the US is willing to sit down with Iran “tomorrow” and jointly agree to full compliance with the nuclear accord they and five other world powers signed in 2015. “We’ve made clear that we’re not talking about renegotiating the deal,” the official said of the agreement that curbed Iran’s nuclear program in exchange for lifting the US and other sanctions.
Iran had made equally clear it shares the goal of going back to the terms of the original agreement before President Donald Trump pulled out of it and instituted some 1,500 new sanctions. In response, Iran reactivated critical elements of the program the US and others say could produce nuclear weapons. Iran denies any such ambition. But nearly two months into Biden’s presidency, with Iran’s contentious presidential election approaching in June, the two sides have been unable even to talk to each other about what both say they want.
Iraq: Talks continue between the federal government and the KRG “in the hope of reaching a bilateral agreement that serves the interest of the country.” Baghdad and Erbil agreed on the draft budget in December, which calls for the KRG to hand over 250,000 b/d of its crude production to Baghdad in exchange for its share of federal revenues. Iraq’s 2021 budget deficit is about $20 billion. In the past, Baghdad has often blamed Kurdish non-compliance with OPEC+ cuts for the country’s overall oil overproduction in the last few years.
Iraq pumped 3.89 million b/d during February, according to S&P Global Platts’ most recent survey of OPEC production. This slightly exceeds its assigned quota of 3.857 million b/d under the OPEC+ production cut agreement. The oil ministry has reached an agreement with international oil companies to compensate them for restricting production under the OPEC quotas but did not elaborate. Under complex technical service contracts, the IOCs are paid quarterly a fixed fee per barrel linked to production. Baghdad could be liable for hefty compensation if output falls below specified levels.
Iraq and French oil major Total are in talks to jointly work on developing associated gas and solar power projects. According to the country’s oil minister, Baghdad still seeks to reduce dependence on power generation from Iranian energy imports. Iraq and Total, which signed a memorandum of understanding for developing “big projects,” want to cooperate on associated gas projects. Iraq’s oil minister and a Total delegation also discussed the potential development of solar power projects in its central and southern provinces.
Libya: The country may be back in the oil business after years of setbacks. Energy facilities shut or damaged during its civil war were reopened last year, and the state oil company has managed to keep its production above 1 mb/d since November. Last week, the country’s first unified government in seven years was sworn in as efforts to reach a formal peace gather pace.
Libya is now pumping over 1.3 mb/d, more than several of its peers in OPEC. The National Oil Corp. plans to raise production to 1.45 mb/d by the end of 2021, to 1.6 mb/d within two years and to 2.1 m within four years, Chairman Sanalla said. The NOC plans to start new oil fields in the coming months in the basins of Sirte, in the central part of the country, and Ghadmes in the west. It’s also working to restart fields shut down by Islamic State attacks in 2015.
Sanalla said those ambitious goals would depend on peace holding and the NOC getting a big enough budget from the government to repair energy infrastructure. The NOC is leaning on foreign energy companies for financing. Total, Eni, and Repsol are among those with stakes in the country, though many of them pared back operations during the fighting.
Saudi-Yemen: Secretary of State Blinken’s comments about supporting a Yemen free from foreign influence is “positive”, Houthi official Mohammed Ali al-Houthi said last week. He also said the US should back up its intentions by ending its involvement in military operations carried out by the Saudi-led coalition against his group. A Saudi Arabia-led military coalition intervened in Yemen in 2015 after the Iran-allied Houthi group ousted the country’s government from the capital Sanaa. The UN describes Yemen as the world’s worst humanitarian crisis.
Washington plans to reinvigorate diplomatic efforts, alongside the UN and others, to end the war. “The US supports a unified, stable Yemen free from foreign influence, and that there is no military solution to the conflict,” a State Department Spokesman said in a statement.
3. Climate change
The world’s three biggest consumers of coal are getting ready to boost usage so much that it will almost be as if the pandemic-induced drop in emissions never happened. US power plants will consume 16% more coal this year than in 2020, and then another 3% in 2022, the Energy Information Administration said last week. China and India, which account for almost two-thirds of coal demand, have no plans to cut back in the near term.
This means higher emissions, a setback for climate action ahead of international talks this year, intended to raise the level of ambition from commitments under the Paris Agreement to reduce greenhouse gases. In the US, the gains may undermine President Biden’s push to reestablish America as an environmental leader and raise pressure on him to implement his climate agenda quickly.
New findings published in the National Academy of Sciences Proceedings indicate that the enormous reservoir of ice in the Northern Hemisphere can collapse due to relatively small increases in temperature over a long period. That makes it even more vulnerable to human-caused warming, causing the Earth to warm faster now than at any other period in its history. Greenland is losing ice at its fastest rate since humans invented agriculture, causing about 14 millimeters of sea-level rise in the past half-century. If the island’s entire ice sheet were to melt, global sea levels would rise by more than 20 feet.
As US climate research took a backseat during the Trump administration, European scientists have focused on finding new ways to understand the changing atmosphere. In November, the EU launched a satellite that can track minuscule changes in sea levels down to the millimeter. New projects are underway to monitor freshwater flows and greenhouse gas emissions, technical challenges akin to forecasting how a drop of ink will disperse inside a choppy pond.
The data collected by European satellites are at the heart of the continent’s multibillion-euro Destination Earth program seeking to develop the world’s best digital Earth simulation. “We have the gold standard of satellite infrastructure in space,” said Josef Aschbacher, the geophysicist who’ll become Director-General of the European Space Agency this year. Europe’s space agency has 16 Earth observation satellites in orbit, with some three dozen under development. It is in talks with the NASA to assume even greater responsibility for climate monitoring during the next decade.
Russia, the world’s fourth-biggest emitter of greenhouse gases, bears witness to one of the most apparent effects of climate change: rapidly rising temperatures in the Arctic. The region is warming more than twice as fast as the rest of the world, altering weather patterns as far south as Texas. Home to more than a fifth of the planet’s forests, Russia has suffered two consecutive years of record-breaking wildfires that released emissions equivalent to those of a mid-sized country such as Spain.
Permafrost, the frozen ground covering about half of the Russian land, is thawing fast, damaging infrastructure, houses, and industrial installations at the cost of up to $2.3 billion a year. The Siberian tundra stores an estimated 1,700 gigatons of planet-warming carbon dioxide, twice the amount currently in the atmosphere. Much of it could be released as the ground thaws.
But Russia is also home to the world’s largest reserves of liquified natural gas so melting ice in the Arctic means it can ship more of its most valuable export to other countries. It could also potentially increase oil production. Warnings from climate experts that both activities could accelerate global warming haven’t deterred Russia’s leaders.
According to Cambridge University, climate change could lift interest payments on sovereign and corporate debts by nearly $270 billion a year by 2100. The authors of the study used artificial intelligence to simulate the impact of global warming on Standard & Poor’s credit ratings for 108 countries. They found that downgrades could be widespread across significant economies, including the US, UK, China, India, Australia, and the EU–in the absence of stringent climate policies. More than 60 nations could already see lower ratings by 2030.
When Hurricane Harvey stalled over Houston and dumped about 3 feet of rain in 2017, Hewlett Packard’s largest campus was heavily flooded. Its global data center was inundated, along with buildings where the tech company’s servers and data-storage gear were assembled. Two months later, the company announced moving all manufacturing operations out of the Houston area to locations less exposed to extreme weather.
Last week, the central business district in Beijing was engulfed in a sandstorm. The Communist Party has made great strides in reducing China’s pollution, but a perfect storm of northern winds and an industrial rebound created dangerously high pollution levels countrywide. The largest and strongest dust storm in a decade swept across north China, grounding hundreds of flights, closing schools in some cities, and casting a ghastly shroud over tens of millions.
4. The global economy and the coronavirus
High-income countries representing just a fifth of the global adult population have purchased more than half of all vaccine doses, per the Kaiser Family Foundation. And the US has bought enough vaccines to vaccinate 750 million people, well over the threshold needed to fully immunize the 260 million adults in the US who are eligible for vaccination. But around the country, people are still scrambling for vaccine appointments, and the herd immunity threshold remains a ways off.
Worldwide supply chain woes for makers of everything from cars and clothing to home siding and medical needle containers, as the extreme Texas weather and port backlogs compounded problems for manufacturers already beset by pandemic disruptions. The long-term economic impact remains unclear. Federal Reserve Chairman Jerome Powell said at a press conference Wednesday that he expects supply chains to adjust as economic growth accelerates.
United States: The rapid rollout of Covid-19 vaccines across the US is starting to work. According to official data that shows the number of deaths and hospital admissions falls more quickly among older people than the broader population. The US has overseen one of the fastest vaccination programs globally, administering more doses than any other country and vaccinating a large proportion of its people.
The number of new COVID-19 cases being reported each week has dropped for nine straight weeks, falling 10% to just under 378,000 in the seven days ended March 14th. Deaths linked to COVID-19 dropped below 10,000 last week, the lowest since mid-November. However, health authorities warned Americans not to lower their guard, pointing to a resurgence in infections in several European countries after they eased restrictions.
The number of Americans seeking unemployment benefits rose last week to 770,000, a sign that layoffs remain high even as much of the US economy is steadily recovering from the coronavirus recession. Before the pandemic struck, applications for unemployment aid had never topped 700,000 in any one week.
The US central bank expects more substantial growth this year than previously forecast, as vaccination rates rise, and government relief funds start flowing. The Federal Reserve forecast average growth of 6.5% this year – up from 4.2% predicted in December. The outlook for jobs recovery has also brightened, the Fed said. Despite the upgrade, officials did not move to raise interest rates. Treasury Secretary Janet Yellen said US inflation risks remain subdued.
A pick-up in spring break travel points to the first signs of life for a battered jet fuel market. The trend is likely to continue as more vaccinated Americans venture back onto airplanes this summer. According to transportation data, the number of passengers checking in through security hit the highest in a year last week. The TSA is consistently seeing more than 1 million people a day pass through checkpoints. Traffic was half that level just two months ago.
European Union: It was a rough week in Europe. Countries across the continent suspended inoculations with the AstraZeneca vaccine over concerns the shot may cause blood clots. This happened even though medicine regulators and the World Health Organization said there is no evidence of problems. At the height of the suspension, Germany, Italy, France, Spain, and the Netherlands joined Norway, Denmark, and Bulgaria in pausing vaccinations.
However, the head of the European Medicines Agency said on Thursday its investigation concluded that the AstraZeneca vaccine was “not associated” with a potential risk of blood clots. Most countries resumed using the vaccine on Friday.
Vaccine shortages across the continent, the slow speed of administering vaccinations, and new varieties of the virus have led to new outbreaks of Covid-19. Coronavirus cases are rising exponentially in Germany as continental Europe braces for the third wave of infections. The rise in cases in Germany is said to be fueled by outbreaks among younger people. In France, the new restrictions are not as strict as the previous lockdown. Some 21 million people in 16 areas of France, including the capital Paris, are affected as the country fears the third wave.
In comparison with the US and UK, Europe went wrong in its vaccine rollout. While Washington went into business with the drug companies, Europe was more fiscally conservative and trusted the free market. There was no single culprit. Instead, a cascade of small decisions led to long delays. The bloc was slow to negotiate contracts with drug makers. Its regulators were cautious and deliberative in approving some vaccines. Europe also bet on vaccines that did not pan out or, significantly, had supply disruptions. And governments snarled local efforts in red tape.
The European Commission expects to receive about 200 million doses of the Pfizer vaccine during the second quarter, it said for the first time on Tuesday. The EU aims to vaccinate at least 255 million people, or 70% of its adult population, by the end of the summer.
Brussels has proposed the creation of digital certificates showing the holders pose no health risk from coronavirus. The certificates would prove travelers have been vaccinated, recovered from the virus, or recently tested negative. The certificates could be in place by mid-June.
China: The first high-level US-China talks of the Biden administration got off to a fiery start on Thursday, with both sides leveling sharp rebukes of the others’ policies in a rare public display that underscored the level of bilateral tension. The run-up to the meeting in Anchorage, Alaska, which followed US officials’ visits to allies Japan and South Korea, was marked by a flurry of moves by Washington that showed it was taking a tough stance with Beijing.
China is a growing importer of Iranian oil, as Iran’s production levels hope to soar thanks to better relations with Biden’s government. Over the last year, China imported an average of 306,000 b/d of crude oil from Iran. Most of these imports, 75 percent, came indirectly via Malaysia, Oman, or the United Arab Emirates. As demand increases this month, Chinese imports from Iran are expected to reach 856,000 b/d, an increase of 129 percent over February. The sudden influx of Iranian oil has caused congestion in ports as tankers are offloaded. China is drawn to Iranian crude thanks to its low costs, often priced at between $3 to $5 below Brent.
Xi Jinping has promoted an uplifting vision for growth increasingly freed from greenhouse gas pollution, but turning that plan into action is already proving contentious. The big issue is coal. Xi’s climate-saving ambitions are a pillar of a strategy for the country’s post-pandemic ascent that China’s Communist Party-controlled legislature recently endorsed.
The plan is designed to steer China toward two signature commitments that Xi made last year. China’s CO2 emissions would peak before 2030, he said, and the country would reach net carbon neutrality before 2060, meaning it would emit no more greenhouse gas than it takes from the atmosphere by methods like planting forests. But a debate has risen in China over how aggressively it should cut coal usage, which has fueled its industrial growth for decades.
Russia: The Biden administration is weighing additional sanctions to block the construction of the nearly completed Nord Stream 2 pipeline from Russia to Germany. The sanctions could come in the form of an interim report that may also single out an insurance company that has been working with the vessels laying the pipeline in the Baltic Sea and other companies providing support vessels and materials to the project. US lawmakers from both parties have been pressing the Biden administration to take more decisive action to stop the project.
Germany, however, is betting the US administration will take a pragmatic approach to the Nord Stream 2 project to ship Russian gas to Europe and is pushing for the pipeline’s completion in defiance of US opposition. To try to block the $11 billion project, led by Russia’s Gazprom, successive US administrations have imposed sanctions on some entities and warned other companies involved in the project about the sanctions risk. President Biden thinks the pipeline under the Baltic Sea to Germany is “a bad idea for Europe.”
Berlin is calculating the best strategy is to present the US with a done deal via a finished project. The pipeline is already 95% built and could be finished by September, leaving the Biden administration little time to come up with more measures to thwart it. “Berlin is trying to buy time and make sure that the construction is finished because they think that once the pipeline is onstream, things will look different to the United States,” a senior EU diplomat said. While Biden opposes the project, however, he is also attempting to repair relations with Europe.
Seen from Moscow, the melting of the polar ice cap is as much economic opportunity as a natural disaster, opening the Northern Sea Route from Asia to Europe for shipping and creating access to potentially vast new reserves of minerals, oil, and gas. More broadly, of the more prominent geopolitical players — China, the EU, India, Russia, and the US — none risks as much from a successful transition from fossil fuels, if that should happen.
Saudi Arabia: Riyadh plans to reduce domestic consumption of liquid hydrocarbons by 1 mb/d for use “in a better way,” according to the kingdom’s Energy Minister Prince Abdulaziz bin Salman. Before the pandemic, the kingdom — the Gulf’s largest economy — was consuming around 491,000 b/d of oil for industrial use and power generation during the height of its summer demand in 2019. The US EIA had estimated the figure to be closer to 1 mb/d in 2015 at the peak of summer during a record year for demand.
The energy ministry said it had contained a fire following a March 19 drone attack on its Riyadh refinery, with no interruption to oil supplies and no casualties, after the latest strike claimed by Yemen’s Iranian-backed Houthi rebels. The Houthis had announced a hit on an unspecified Saudi Aramco facility in the Saudi capital in an attack using six drones.
India: New Delhi reported 40,953 new coronavirus cases last week, the biggest daily jump in nearly four months, with its richest state and economic backbone, Maharashtra, accounting for more than half the infections. Deaths rose by 188 to 159,404, the health ministry reported, underscoring a virus’s resurgence in the world’s third-worst affected country, after the US and Brazil. Some of India’s regions have already reimposed containment measures, including lockdowns and restaurant closures, and more are being considered. Doctors have blamed the fresh infection wave on people’s relaxed attitude to mask-wearing and other social distancing measures, warning that hospital wards were swiftly filling.
India’s growing demand for oil and its plans to rely less on crude from the Middle East is set to support demand for oil tankers traveling on longer routes. India, which imports more than 80 percent of the crude oil it consumes, has been hinting in recent years that it needs to look beyond the traditional Middle East suppliers for oil. As fortunate as it has been for the country to have some of the world’s biggest oil exporters so close to its shores, India is now looking to boost its energy security by having more choices for oil suppliers. It’s also looking to pay less for oil from beyond the Arab Gulf, arbitrage and price spreads permitting.
5. Renewables and new technologies
Investments in hydrogen technologies have skyrocketed over the past two years, with hydrogen being touted as the “fuel of the future.” Meanwhile, industry experts predict that hydrogen could become a globally traded energy source, just like oil and gas. Bank of America says the industry is at a tipping point and set to explode into an $11 trillion marketplace.
Superior returns from green power could help push investors to provide the capital necessary to scale up low-carbon power sources in the coming years, according to the analysis by the IEA and Imperial College Business School. “Renewables are outperforming fossil fuels, and they’re outperforming the broader market,” said a researcher at Imperial College London.
While 2020 was a year of unprecedented disruptions, wind power and wind turbine capacity additions accelerated across the globe. S&P Global Platts Analytics estimates that about 115 GW of wind capacity was installed, twice as much as in 2019, with capacity surging in China and the US, while Europe’s additions slowed. China’s wind power additions over the past year have been boosted by China’s vigorous construction activity, with December 2020 installations reported to be over 47 GW. To put that into context, the amount installed during December is equivalent to the total installed over the past two years.
Rystad Energy estimates that the significant utility solar PV installed capacity required to meet President Biden’s target of achieving net-zero emissions by 2050 would occupy around 13,412 square miles of land. This is slightly larger than the state of Maryland. Land scarcity is often cited as a critical barrier to ramping up solar and wind energy capacity in the US, thus undermining its revitalized decarbonization ambitions for the next 30 years.
Automakers are pairing off with battery companies to try to win the race to develop an electric vehicle battery that costs less and has longer range. The quest is for a “solid-state” battery, a technology that uses a solid substance that weighs less and takes up less space than current batteries that use liquids and gels. General Motors said last week that it has a development agreement with SolidEnergy Systems of Singapore, a maker of solid-state batteries, that aims to produce a battery for electric cars by 2023 and have a version to sell consumers later. Volkswagen, Daimler and others also are betting on solid-state batteries.
6. The Briefs (date of the articles in the Daily Energy Bulletin is in parentheses)
Vitol Group, the world’s largest independent oil trader, reaped record profits of around $3 billion last year. The results are the latest indication of the bonanza that oil traders enjoyed in 2020 when the commodity plunged amid a Saudi-Russian price war in the early days of the pandemic and then staged a sharp recovery as OPEC+ cut production. (3/17)
UK lawmakers are mulling a ban on new oil exploration licenses in the North Sea as a move away from fossil fuels. That would hit jobs and the Scottish economy. Britain is looking at options that include ending permits in 2040 and an immediate temporary pause in licensing. (3/15)
Tanker tricks: Weak or negative returns for VLCCs hauling crude from the Persian Gulf to North Asia are prompting shipowners to adopt cost-cutting measures like curtailing sailing speed and idling their ships near Singapore or Sri Lanka’s port of Galle. (3/15)
In India, record-high gasoline and diesel prices stalled fuel demand recovery in February, with oil consumption down by 5 percent to its lowest level since September last year. (3/15)
India boosted significantly crude oil imports from the United States in February, while it slashed purchases from the world’s top oil exporter, Saudi Arabia, to the point of America overtaking the Saudis as India’s second-largest oil supplier. (3/16)
Kenya had identified the South Lokichar basin as the anchor their onshore oil drilling, a region Tullow estimates to contain 560 million barrels in oil reserves to produce up to 100,000 barrels per day. But Tullow is either putting on hold or disengaging from its East African efforts in favor of its West African assets. (3/16)
Nigeria’s crude oil production declined by 19.6 percent to an average of 1.52 million b/d in the fourth quarter of 2020. The decline in production resulted from Nigeria’s commitment to the OPEC+ production cuts agreement to support the rebalancing of the crude oil market and hence prices. (3/17)
Nigeria’s unemployment rate surged to 33.3%, the second-highest on a global list of countries monitored by Bloomberg. That’s up from 27.1% in the second quarter of 2020. (3/16)
An Italian court has ruled that oil giants Royal Dutch Shell PLC and Eni SPA are not guilty in a bribery case involving a Nigerian oilfield that has spanned years. Eni and Shell have consistently said that they knew nothing about the bribes. (3/18)
Environmental and social justice groups on Wednesday condemned Italy’s anti-corruption laws as “unfit for purpose.” The condemnation followed the acquittal of oil multinationals Shell and Eni on international corruption charges in Milan. (3/18)
Argentina’s YPF said on March 19 that it plans to invest more than $1.5 billion this year to ramp up oil and natural gas production in the Vaca Muerta shale play, the latest move by the state-backed energy company to rebuild output from a slump in 2020. The aim is to boost shale oil output by 56% and unconventional gas output — shale and tight — by 70% compared with 2020. (3/20)
In Guyana, the Liza Phase 1 offshore project—the nation’s first oil-producing project led by ExxonMobil— has reached its total planned production capacity of some 130,000 barrels per day (bpd). Phase 2, projected to expand production to 220,000 b/day, is expected to start up during the middle of 2022. (3/19)
Mexico’s Pemex announced it had discovered over 1.2 billion boe of oil and natural gas in an onshore complex in the state of Tabasco, near the site where the company is planning to build a new refinery. (3/19)
In Canada, Enbridge Inc. warned that refiners in central Canada and the US Midwest would see crude supplies cut in half and propane costs surge for some homeowners if Michigan’s governor succeeds in shutting a critical oil pipeline that crosses the state. Refineries in Michigan, Ohio, Indiana, Pennsylvania, and those in Ontario and Quebec, would have to find alternative means for securing crude oil. (3/18)
The US Senate confirmed by a vote of 51-40 Rep. Deb Haaland as President Biden’s interior secretary Monday, in a vote that for the first time will make a Native American a White House cabinet secretary. (3/16)
The US oil rig count increased by 9 to 318 while gas rigs remained unchanged at 92, Baker Hughes reported on Friday. Canada’s overall rig count declined by 24 to 92 as part of their seasonal dial-down. (3/20)
Alaska heavy oil breakthrough? Early findings in an ongoing four-year study of enhanced oil recovery of heavy oil in Alaska’s North Slope have shown promising results that could unlock tens of billions of oil barrels. The technique, using polymer flooding, has been proven effective in Canada and China. (3/19)
US gasoline demand has rebounded to nearly pre-pandemic levels. Still, after a weak 2020, US refiners are looking to cut costs wherever and whenever possible in light of the still-sluggish fuel demand recovery in some key export markets for US refined petroleum products. (2/18)
In Texas, the February freeze that triggered massive blackouts led to chemical plant shutdowns that disrupted global supply chains, causing a shortage of the raw materials needed for everything from medical face shields to smartphones. A month later, many remain offline, and analysts said it could be months more before all are fully back. (3/18)
A new approach to making jet fuel from food waste has the potential to reduce carbon emissions from flying massively, scientists say. Currently, most of the food scraps used for energy worldwide are converted into methane gas. But US researchers have found a way of turning this waste into a paraffin type that works in jet engines. Sustainable aviation fuels can reduce the industry’s carbon footprint by as much as 34%. (3/16)
US coal-fired electricity generation was lower than power generation from natural gas and nuclear plants in 2020, with coal dropping out of the top two electricity sources for the first time since at least 1949. (3/20)
US coal output in the 11 weeks of 2021 is estimated at 118 million st, down 8.5% year on year. (3/19)
The world’s fifth-largest coal exporter, Colombia, is confident that continued coal demand in Asia will warrant government support to the industry for at least two more decades. (3/15)
Wind power developers worldwide commissioned a record-setting 96.7 gigawatts (GW) of installations in 2020, up by a massive 59 percent compared to the 60.7 GW installed in 2019. Last year, the rise in new build capacity was primarily due to soaring installations in China and the US. Most of the global wind capacity additions in 2020 were onshore wind, at 93%. (3/17)
China’s big wind: Record wind power installations in 2020 have secured China’s position at the top of the global industry despite waning Beijing subsidies. The 52 gigawatts of new wind power added last year doubled the capacity China installed during 2019. (3/18)
Federal EVs: President Joe Biden said he planned to replace the whole federal vehicle fleet with electric cars. That’s more than 600,000 cars that will be replaced with EVs. And these EVs will need a stable supply of certain metals and minerals, like lithium, that the US now imports. Developing domestic supplies will require a lot more dirty and expensive mining. (3/16)
Volkswagen is going all-in on electric cars, with plans to build battery factories in Europe, install a network of charging stations, and slash emission-free travel costs. That was the message Monday as the German carmaker showcased its latest electric car technology. (3/17)
VW’s pivot to electric vehicles won’t be cheap. VW announced it plans to build six battery factories across Europe by 2030, estimated to cost about $29 billion. It is also making investments in unifying the design of its battery and in recycling precious metals. (3/16)
BP said on Thursday it had started developing plans for what would be the largest hydrogen project in the UK, aiming to produce 1 GW of blue hydrogen by 2030, as part of its efforts to contribute to industry decarbonization and the UK’s low-carbon energy plans. (3/19)
Qatar plans to build a floating eco-hotel that would spin very slowly—like a record—to generate electricity via solar, wind, and tidal energy. (3/18)
Leading shipping company Stena Bulk unveiled its concept InfinityMAX hybrid bulk carrier design for zero-carbon, multi-modal shipping. The idea is designed to carry both dry and wet cargoes in modular compartments, is built with several new core principles that, accumulatively, represent a paradigm shift in cargo transportation. (3/17)
Delhi has been ranked as the most polluted capital city globally. The ‘World Air Quality Report, 2020’ shows that Bangladesh, China, India, and Pakistan account for 49 of the 50 most polluted cities worldwide; India alone accounts for at least 22 of those cities. (3/18)
Most of Europe’s natural gas industry has announced an ambition to become climate neutral by mid-century at the latest. But a study shows how difficult it will be to turn the goals into reality. A survey of companies revealed none could definitively measure their methane emissions, relying instead on estimates, and few had concrete plans to reduce them. (3/18)
The UK government has announced funding of GBP171 million ($238 million) for nine projects to reduce emissions and indicated a plan to price carbon on industrial pollution as part of its climate change strategy. (3/18)
The record-setting hurricane season of 2020 has prompted the World Meteorological Organization’s hurricane experts to change how they name tropical storms and when to start issuing regular hurricane bulletins. (3/20)
Taxes to save coastline towns? Along North Carolina’s Outer Banks — where tourist-friendly beaches are shrinking by more than 14 feet a year in some places — some towns have imposed taxes similar to the up-to-50% increase Avon is considering. (3/15)
Flood problem: The Federal Emergency Management Agency was preparing to announce new rates for federal flood insurance on April 1, such that prices people pay would more accurately reflect the risks they face. The change would very likely help reduce Americans’ vulnerability to floods and hurricanes by discouraging construction in high-risk areas. But it would also increase insurance costs for some households, making it a tough sell politically. (3/19)
The EU proposed a Covid-19 certificate on Wednesday that would allow people to travel more freely, aiming to save the summer tourist season for member states. (3/18)