Editors: Tom Whipple, Steve Andrews
Quotes of the Week
“[The oil industry is] trying with all their might to hire. But they are not finding employees that want to come back into the industry and come back to North Dakota to work on the frack crews.”
Lynn Helms, Director at North Dakota Department of Mineral Resources
“If reported labor shortages continue, it would be impossible to grow production.”
Elisabeth Murphy, an analyst at research firm ESAI Energy
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: Damages to oil production facilities in the US Gulf of Mexico kept output largely halted a week after Hurricane Ida made landfall, according to offshore regulator the Bureau of Safety and Environmental Enforcement. Energy companies have been coping with damaged platforms and onshore power outages and logistical issues, slowing efforts to restart production. Some 88% of crude oil output and 83% of natural gas production remained suspended. About 1.6 million barrels of crude oil remained offline, with only about 100,000 barrels added since Saturday. Another 1.8 billion cubic feet per day of natural gas output also was shut in.
The Noble Corporation said its Globetrotter II drillship sustained considerable damage during the hurricane, and some of its drilling equipment broke away and fell to the seabed.
Over the weekend, ports were reopening, and some pipelines restarted as companies completed post-storm evaluations. The White House sought to ease fuel shortages in the region, authorizing the release of crude oil to Exxon and other refiners to produce gasoline. However, four large refineries in Louisiana remain shut. Reviving all the refineries shut by Hurricane Ida could take weeks and cost operators tens of millions of dollars in lost revenue as water and electrical power are slowly restored.
In addition, widespread fuel and power shortages hampered recovery. About 600,000 homes and businesses in the state still lacked power over the weekend. The problem is the worst south of New Orleans where it may take weeks to restore power to some customers.
The Mississippi River reopened on Thursday. But critical ports that are oil-support hubs for producing up to 1.8 million b/d remain closed. Port Fourchon, the main base supporting the US Gulf of Mexico offshore oil industry, appears to have withstood Hurricane Ida. Still, it will be weeks before it will be fully operational.
US crude stocks dropped sharply the week before last, while petroleum products supplied by refiners hit a record despite the rise in coronavirus cases nationwide. Crude inventories fell by 7.2 million barrels in the week of Aug. 27th to 425.4 million barrels, compared with analysts’ expectations for a 3.1 million-barrel drop. Product supplied by refineries, a measure of demand, rose to 22.8 million b/d in the most recent week. That’s a one-week all-time record and signals strength in consumption for diesel, gasoline, and other fuels by consumers and exporters. The four-week average rose to 21.4 million bpd, the highest since September 2019.
OPEC: The cartel boosted crude production last month as it continued the revival of supplies halted during the pandemic, but some members struggled to keep up. According to a Bloomberg survey, the organization lifted output by 290,000 b/d, slightly more than stipulated by plan for restoring output. Saudi Arabia and Iraq were the main drivers of the increase. However, despite the gains, the group is actually pumping about 10% below its overall quota as some members — notably Angola and Nigeria — suffer from deteriorating production capacity and disruptions.
Seeing robust global oil demand ahead, OPEC and its allies agreed on Sept. 1st to hike their collective crude production by 400,000 b/d in October, sticking to their plans to keep easing back their historic output cuts. With crude prices above $70 a barrel, economic growth firm, and rival US production growth still relatively subdued, OPEC+ ministers saw no reason to change course, quickly wrapping up their virtual meeting in under an hour.
Despite the COVID resurgence, OPEC+ estimates the oil market will become increasingly tight this year; as the group continues to ease the production cuts into next year, the balance will tip into surplus again in 2022. As a result, OPEC believes global inventories are set to dwindle by 825,000 b/d over the next four months.
Natural Gas: The front-month Henry Hub contract jumped from $2.40 per million at the beginning of September 2020 to as much as $4.60 on Sept. 2nd. Prices have rallied even though Appalachia’s biggest gas-producing basin saw in the first half of 2021 its highest average output since natural gas production in the Marcellus and Utica shale formations started in 2008. US natural gas production in the other shale basins is not recovering from the pandemic-induced slump last year as fast as in Appalachia. In the Permian, fewer oil-directed rigs are pumping less associated gas. In sum, overall American natural gas production is rising. But it’s not increasing so quickly as to offset surging US gas exports via pipelines and LNG cargoes, which have been setting all-time high records this year.
Liquefied natural gas buyers with long-term contracts are asking their suppliers for extra fuel volumes pegged to oil prices that are currently much lower than spot prices. As a result, some have requested to load bigger cargoes bought under their long-term contracts instead of turning to the spot market to purchase additional cargoes. They have also asked for earlier delivery of the shipments. “Oil-linked LNG prices are now about 25% cheaper than spot, so buyers are trying to optimize wherever they can and are buying only what they absolutely need in the spot market,” a Singapore-based LNG trader said.
Surging LNG prices are prompting utilities across Asia and the Middle East to burn more high-sulfur fuel oil (HSFO) than usual to meet increased power demand during the summer. The move towards the cheaper but more polluting HSFO highlights the problems faced by developing countries that must grapple with the economics of lower costs versus meeting emission-cutting standards. The strong demand for the residual fuel oil could last beyond the summer as the global economic recovery from the coronavirus gathers momentum and global LNG prices hold firm at more than twice where they averaged in 2020.
Electricity: Residents in southern Louisiana are bracing for weeks without electrical power and their water systems in the wake of Hurricane Ida. Entergy Corp, the major power supplier in the region, said it could take weeks before electricity is restored in the southern towns along the coast. Power, however, should be restored to New Orleans by the middle of this week, utility officials said Friday. The utility issued a statement asking for patience and acknowledging the heat and misery. More than 25,000 workers from 40 states are trying to fix 26,000 damaged poles and sections of power lines.
While burying power cables underground is one way to avoid power outages caused by storms, the chief drawback is the expense. Electric power in Manhattan — where the lights stayed on despite Ida’s floods — has been channeled underground for years, as it has in other downtown areas across the country. Germany and the Netherlands are moving to put all their lines below the surface. Burying power lines can cost millions of dollars per mile in some locations compared with $100,000s per mile for some rural lines.
In California, Pacific Gas and Electric resisted calls to bury its transmission lines for years as too costly. But after the company’s equipment sparked a string of devastating forest fires, it reversed itself in July, announcing that it would bury 10,000 miles of lines that currently run overhead. The price tag, however, will be somewhere between $15 billion and $30 billion. Power companies are exploring ways to limit the damage from storms by developing lines that will break or unplug themselves quickly when hit by falling trees and other debris. This would limit damage to poles and enable much quicker recovery from storms.
Democrats want to drive carbon emissions out of the US power grid. But groups representing thousands of smaller electric utilities are wary of being conscripted in the campaign. Last week, the Democratic-led US Congress approved a $3. 5 trillion budget framework set to include a “clean electricity payment program,” which would reward utilities that sell more zero-carbon power and penalize those that sell less. The goal is to nudge utilities into selling 80% of their electricity from clean sources by 2030, from about 40% now.
Two trade associations together representing most of the nation’s utilities have raised concerns about the costs of such a program, however, complicating the bill’s passage. Climate experts say that deploying solar, wind, battery, and nuclear technologies, along with possibly capturing emissions from fossil fuel generators, would clean up a sector that accounts for a quarter of US greenhouse gas emissions.
But pursuing this goal through a clean electricity payment program is “probably too ambitious,” Desmarie Waterhouse, vice-president of government relations at the American Public Power Association, told the Financial Times. About 1,400 municipal-owned utilities are members of her association. “There’s a level of nervousness [among members] about whether we can still keep electricity affordable and reliable and having to do such a very huge transition in a very, very short timeframe,” Waterhouse said. “Even with all this money that’s going to be thrown at utilities to help them get there.” Doubts are also brewing at the National Rural Electric Co-operative.
2. Geopolitical instability
(These are the situations that reduce the world’s energy supplies or have the potential to do so.)
A new geopolitical conflict Is looming over the Arctic. First founded in 1996, the Arctic Council comprises eight nations: Canada, Denmark, Finland, Iceland, Norway, Russia, Sweden, and the US. While these members represent a range of interests, priorities, and concerns — many of which conflict — all Arctic nations are concerned with sovereignty and security, resources and development, shipping routes, and environmental conservation. Those oft-conflicting priorities, however, are coming to a head against the backdrop of global warming.
As the ice caps melt, new shipping routes are opening in northern waters, and some nations are taking these newly navigable seas as an invitation to scale up oil and gas exploration in the region. The Arctic is thought to include 13% of the Earth’s oil reserves and a quarter of its untapped gas reserves, Barrons reported last week. “The untapped resources in the Russian region alone have an estimated value of $35 trillion. President Putin is offering $300 billion of incentives for new projects in the area and bragging that Russia has decades of oil and gas ready to be extracted.
Iran: Tehran plans to ramp up its crude oil exports even though negotiations with the US on the nuclear deal are currently paused. “Good things will happen regarding Iran’s oil sales in the coming months,” the country’s new oil minister, Javad Owji, said last week, in the latest demonstration that Iran is pursuing its oil production growth plans despite continued US sanctions. The sanctions, reimposed on Iran by the Trump administration and maintained so far by his successor, have decimated Iran’s crude oil production and exports. The latter fell from an estimated 2.8 million b/d in 2018 before the sanctions to less than 2 million b/d in recent months.
Tehran is now looking to increase its oil output from the fields that constitute its massive West Karoun cluster. With over 67 billion barrels of oil in place across the West Karoun fields, the Petroleum Ministry says that each 1% improvement in the recovery rate would increase recoverable reserves by 670 million barrels or some $33 billion in revenues even with oil at $50 a barrel. This expansion is to occur, irrespective of how quickly a new iteration of the nuclear deal is signed between Iran and the US, plus the remainder of the P5+1 group of nations that agreed to the original version.
Iranian Oil Minister Owji met with the deputy head of the China National Petroleum Corporation’s Middle Eastern division to boost cooperation. CNPC has developed the North Azadegan oilfield in Iran, which is located along the border with Iraq. The new Iranian president and administration continue to work on close ties with China, forged during the previous administration. China is Iran’s biggest trade partner. A few other countries are also still importing some crude oil from Iran despite the US sanctions.
Iraq: The federal government has sent a second budget transfer to the semi-autonomous Kurdistan Regional Government under a stop-gap political deal. Two senior KRG officials said the transfer of $138 million was received last week.
France’s Total will build four giant energy projects in southern Iraq under a $27 billion deal signed in Baghdad on Sunday, the country’s oil minister said. The company will start with an initial investment of $10 billion, Total CEO Pouyanne said at the signing ceremony, adding that engineering work will start “immediately”. The plan is to mobilize teams in Iraq by the end of 2021, he said. Iraqi oil minister Ihsan Abdul Jabbar said the first phase will include a $3 billion investment by the French group in a project to inject seawater into oilfields to enhance crude recovery. Total, he added, will also provide $2 billion to build a processing plant for gas produced at the southern fields.
Baghdad, which wants to reduce its reliance on gas imports from Iran, gave its approval in July for an initial agreement with TotalEnergies to boost its hydrocarbon output and build a 1,000-megawatt solar plant. The country relies mainly on natural gas to fuel its electricity plants.
Libya: Tensions among Libya’s top oil officials escalated last week when Oil Minister Mohamed Oun said he had suspended Mustafa Sanalla, the chairman of the National Oil Corporation. The tension between Oun and Sanalla has been growing since Oun was appointed oil minister in March in the national unity government, which includes a post for an oil minister for the first time in five years. Earlier this month, reports emerged that Oun had recommended that the government replace NOC’s long-serving Sanalla because of the overlapping of their functions as heads of the oil ministry and the national oil corporation.
Venezuela: Output in Venezuela’s critical Orinoco oil belt plunged by a quarter to less than 300,000 b/d in August due to a shortage of diluents needed to blend with the region’s extra-heavy crude. The drop comes as state oil company PDVSA sends more medium and light crudes to refineries to boost supplies of motor fuel, leaving little to dilute the Orinoco’s tar-like oil into exportable grades. Diluent shortages could threaten the relative stability of the South American country’s oil output and exports in 2021. After years of underinvestment, US sanctions sent crude production plummeting to multi-decade lows last year.
The China National Petroleum Corporation is preparing to return to Venezuela after the Maduro government finalizes legislation to attract more foreign capital to the industry. CNPC is sending engineers and other staff to Venezuela and talking to local companies for maintenance operations at an oil-blending plant that the Chinese company operates together with PDVSA. The Bloomberg sources also said CNPC was in talks with Venezuelan companies to ramp up oil production at five joint ventures that the company has with PDVSA. The CNPC had never entirely left Venezuela, but investments in its local operations declined significantly over the past few years amid constantly tightening US sanctions.
3. Climate change
China’s efforts to thread the needle between an often-conflicting array of environmental, economic, social, and geopolitical objectives are playing out in increasingly unpredictable global commodity markets. The world’s biggest consumer of raw materials, and a significant producer of some of them, is attempting to curb carbon emissions and conserve electricity while at the same time preserving economic growth. It’s also trying to clean up its oil refining sector, improve mine safety, and isn’t averse to using trade policy for geopolitical ends, evidenced by its ban on Australian coal imports. The problem is that many of these policies are cutting the supply of commodities and pushing up prices, making Beijing’s goal to rein in inflation a lot more complicated.
The trade-offs have differing impacts on markets: iron ore prices have plunged as steel production is curbed, while coal has surged due to the mine safety push and the row with Australia. In contrast, energy-intensive aluminum has jumped to a 10-year high amid the power-saving drive. So how Beijing juggles the various objectives and to what extent it chooses to sacrifice its climate or social goals for the economy will significantly influence many commodities.
Climate change abruptly gripped North America’s Pacific Coast at the start of summer, setting new heat records by staggering margins across the region’s cities and towns. Hundreds of people died. The sudden and extreme heat disaster — matched by other recent heat waves in the Southeastern US, Northern Africa, Western Asia, Japan, and Europe — means many temperate cities are in significantly warmer conditions. At the same time, cities built to withstand 20th-century heat will now face far worse. The question of which cities and regions will adapt to new extreme heat is part of the complex math of climate change. Heat researchers see this process defined by two drivers: income and climate. Its wealth determines which cities have the resources to defend themselves. Future heat mortality determines if those efforts succeed.
Compare Seattle, San Antonio, and Taipei, wealthy cities with vastly different climates. Each is home to global corporate headquarters. These cities also now have recent severe heat waves in common. Yet heat-related deaths are projected to diverge sharply. San Antonio, Taipei, and Seattle are projected to see similar increases in income in the next 80 years, but income can’t equalize mortality outcomes. Due to hotter climates, San Antonio and Taipei are projected to see much higher death rates.
China’s CNOOC has launched the country’s first offshore carbon capture and storage project in the South China Sea, which is expected to store more than 1.46 million tons of carbon dioxide as one of the auxiliary facilities in the Pearl River Mouth Basin of the South China Sea. The CCS project is designed to reinject 300,000 tons of CO2 per year into seabed reservoirs.
Satellites detected a significant release of methane gas over southern Iraq last month. The methane cloud, spotted by geoanalytics firm Kayrros SAS using European Space Agency satellite data, was halfway between Baghdad and Basra, southern Iraq’s oil and gas hub. The release rate was about 130 tons per hour, which has approximately the same climate-warming impact as 6,500 cars running for a year. One regional producer, Thiqar Oil Co., denied that its assets were the source of the release. Oil Pipelines Co., another operator, did not announce the release on its official page for leaks and maintenance. Iraq’s oil ministry did not respond to a request for comment.
4. The global economy and the coronavirus
US hiring limped ahead in August, inflation pressures mounted in Europe, and the delta variant of the coronavirus took a significant toll on China’s economy. In addition, global shipping markets suffered major disruptions after Hurricane Ida made landfall. As a result, shipments ranging from LNG and naphtha to grains and gasoil are delayed, and refineries are shut down temporarily. In addition, schedules for loading LNG tankers, clean tankers, and dry bulk carriers have been delayed. Moreover, there is uncertainty over the revised plans and eventual loadings because some of the berthing terminals have been heavily damaged.
Analysts say a global shortage of truck drivers has persisted since the middle of the 2000s. Still, the global shortage has tipped into a crisis only recently visible to the broader public. For example, supermarket shelves are missing goods in the UK, McDonald’s restaurants ran out of milkshakes this week, and builders cannot access supplies. At the same time, iron ore struggles to reach Australian ports for export. Moreover, the transport sector’s labor issues have developed over time as multinational companies drive down supply chain costs. At the same time, the trucking workforce in developed nations has aged — the average truck driver in the UK is 55 years old — while more jobs have become computer-based.
The potential consequences are severe. André LeBlanc, vice president of operations at Petroleum Marketing Group, a Virginia-based fuel distributor, said that gas stations it supplies had run out of certain products about 1,200 times since mid-June because of driver shortages. “You don’t get your toilet tissues and your eggs. That’s one thing. Gasoline stops — it shuts everything down,” he warned.
United States: Covid-19 deaths have climbed steadily, hitting a seven-day average of about 1,500 a day last week, after falling to the low 200s in early July. This is due to the contagious variant that has exploited the return to everyday activities by tens of millions of Americans, many of them unvaccinated. The daily average for hospitalized Covid-19 patients is now more than 100,000. That average is higher than in any previous surge except the one last winter before most Americans were eligible to get vaccinated. The influx of patients is straining hospitals and pushing health care workers to the brink. Hospitalizations nationwide have increased by nearly 500% in the past two months, particularly across Southern states. This is a region where ICU beds are filling, a crisis fueled by some of the country’s lowest vaccination rates and widespread political opposition to public health measures like mask requirements.
The American economy slowed abruptly last month, adding only 235,000 jobs, a sharp drop from the gains recorded earlier in the summer and an indication that the Delta variant of the coronavirus is putting a damper on hiring. Economists had been looking for a gain of 725,000 jobs. The report follows a sharp increase in coronavirus cases and deaths that has undermined hopes that restrictions on daily activities were nearing an end. The unemployment rate was down to 5.2%, compared with 5.4% in July.
US consumer confidence dropped in August to a six-month low, suggesting concerns over the delta variant and elevated prices are weighing on Americans’ views of the economy now and in the coming months. The latest spike in Covid-19 infections has already curbed restaurant reservations, airline travel, and hotel occupancy. At the same time, Americans are paying more at the grocery store and the gas pump, further weighing on sentiment.
Hurricane Ida’s parting hit on New York and the Northeast may push insurance and other losses as high as $60 billion as analysts start assessing the damage from one of the most powerful storms to strike the Gulf Coast and then continue to the eastern seaboard. Some past storms, including Hurricane Katrina, left extensive damage that wasn’t clear for days after landfall, so early estimates are subject to significant modifications.
The European Union: Inflation in the eurozone has risen to its highest level in a decade, increasing pressure on the European Central Bank to slow the pace of its bond purchases. Higher energy prices pushed Germany’s annual inflation to a 13-year high in August, as household energy, motor fuels, and food prices jumped. As a result, Germany’s consumer prices index—harmonized for comparability with other EU economies—increased by 3.4% in August compared to the same month a year earlier and by 0.1% compared to July 2021.
China: The country’s demand for spot crude appears to be recovering after nearly five months of slower purchases caused by a shortage of import quotas, drawdowns from high inventories, and COVID-19 lockdowns that muted fuel consumption. But traders and analysts say Chinese importers are now increasing the pace of purchases and paying higher premiums to secure supplies from November onwards as lockdown restrictions ease. A sustained rebound in demand by China may tighten supplies and support global oil prices.
Beijing is cracking down on its private-sector oil refiners in a bid to close tax loopholes and mitigate pollution. Approximately a quarter of the nation’s refining capacity comes from independent refineries, known as “teapots.” This year, Beijing allowed these private refiners the smallest crude import quotas since 2015, when teapots could first buy their own oil directly. This blow to a significant portion of the nation’s refining capacity is causing considerable disruption to the crude oil supply chain in the region.
This is not only a problem for China’s oil supply and voracious demand but for all the countries that supply petroleum to the world’s largest crude oil importer. Because of the crackdown, oil tankers are currently piling up off the shores of Asian ports. Vessels off Singapore, Malaysia, and China contained about 62 million barrels last week after hitting a near three-month high earlier last month. Some of these stranded ships carry oil from Iran and Venezuela, countries that are currently under sanction from the US. Therefore, they will have difficulty finding another buyer for their oil if the Chinese market dries up.
The situation for the sanctioned oil is compounded by a consumption tax that Beijing rolled out in June as part of its extended crackdown. With the stated purpose of addressing pollution, the tax impacts bitumen blends used for roadmaking which have historically served as a cover for the importation of Iranian and Venezuelan crude. As a result, the tax has hit imports hard, with bitumen imports shrinking by 80% since peaking in May.
In southern China, including Guangdong and Fujian provinces, LNG prices have surged to around $527 per ton in the last couple of weeks, a record high for the summer season. The surge is mainly driven by skyrocketing Asian spot LNG prices and strong demand in the region, domestic trade sources said.
China’s Sinopec Corp plans to spend 4.6 billion on hydrogen energy by 2025 as the state oil and gas major pivots to producing natural gas and hydrogen as part of becoming a carbon-neutral energy provider by 2050. The company aims to make more than 1 million tons of so-called green hydrogen from renewable energy sources between 2021 and 2025 and add 400 megawatts of solar power generation capacity for supplying electricity to charge vehicles. In addition, the company produces about 3 million tons per year of hydrogen from non-renewable energy sources that are mainly used in oil refineries and petrochemical processes.
Russia: Oil production this year is expected to be about 1% lower compared to 2020, because of the OPEC+ agreement, according to Energy Minister Shulginov. By year’s end, it will be about 506 million tons. Russia expects its crude oil plus condensate production to return to pre-pandemic levels by May 2022.
According to Bloomberg calculations, Gazprom needs to store nearly as much natural gas at home to keep Russians warm this winter as it currently ships to Western Europe every day. As a result, the Russian gas giant has just two months to build its depleted inventories to the record levels it’s targeting, a goal the Energy Minister Nikolay Shulginov expects Gazprom to meet. That will require pumping into underground storage sites in Russia supplies equal to about 80% of daily exports to Western Europe. The calculations, based on Gazprom’s data, send a worrying signal to Europe. The continent is running out of time to boost its own buffer stockpiles ahead of the heating season. Countries from the UK to Spain and Germany are already contending with energy inflation due to soaring gas and electricity prices.
According to Russian Deputy Prime Minister Alexander Novak, Russia will not run out of oil and gas anytime soon—its offshore Arctic resources alone could last for decades and even centuries. “The potential of the Arctic zone is huge. Offshore resources alone contain about 15 billion tons of oil and around 100 trillion cubic meters of gas. That will suffice for decades, or hundreds of years if they are required, and it is economically reasonable,” Novak told the Russian news agency TASS. These resources, however, are costly to develop right now, the Russian official said but noted that the government plans to encourage offshore Arctic development regardless. “Those are rather expensive projects, which require the provision of certain subsidies, including taxes and return on investment. The government has provided such incentives. Certain taxes have been slashed to zero for offshore projects.
Gazprom CEO Alexei Miller said that the first gas flows via the almost-complete Nord Stream 2 gas pipeline from Russia to Germany could start before year-end, with all preparations finished on the Russian side. The availability of Nord Stream 2 is a crucial factor currently impacting the European natural gas market.
Saudi Arabia: When Crown Prince bin Salman announced Saudi Arabia’s “green initiative” this year, he did so with the type of eye-catching pledge that has come to characterize the young royal’s grandiose plans to modernize the kingdom. Promising that the world’s top oil exporter would lead the “next green era,” Prince Mohammed vowed that 50% of Saudi Arabia’s power generation would be provided by renewables by 2030, with the other 50% fueled by gas. Riyadh would also plant 10 billion trees in the desert nation in the coming decades – provided it can find the water.
But as with many of the prince’s ambitious schemes, skeptics question whether his rhetoric will be matched with tangible action on the ground. The kingdom burns about 1 million barrels of oil equivalent a day to fuel its power system, a figure that rises sharply in the scorching summer months. An independent research group, the Climate Action Tracker, rates Saudi Arabia’s climate commitments as “critically insufficient,” citing a lack of clear policies or data about its emissions. “It’s not very clear how they aim to achieve these climate goals. It’s not very transparent at all,” said Mia Moisio, an analyst at the NewClimate Institute, which helps collate the Climate Action Tracker data. “I am quite cautious about the kingdom’s announcements . . . There’s no reason why it wouldn’t be possible in Saudi. But there’s a lot of inertia.”
India: Gasoline demand is set to hit a record this fiscal year, with consumption accelerating as more people travel after the easing of Covid-19 curbs. Shunning trains, buses, and planes, safety-conscious Indians are buying more cars and increasingly using personal vehicles to commute as they embark on ‘revenge travel’ – flocking to tourist destinations after months of restrictions, despite record-high fuel prices. As a result, annual passenger vehicle sales in India rose by 45% to 264,442 units in July, driven by pent-up demand. The stronger-than-expected gasoline consumption growth could prompt Indian refiners to import the fuel or boost gasoil exports in the coming months.
India’s economy is growing at a record pace but still digging out from one of the deepest recessions to hit any significant economy during the pandemic. The country’s gross domestic product grew 20.1% in the three months ended June 2021, a period when India suffered through one of the world’s worst Covid-19 surges of the pandemic.
The double-digit growth compares to a year earlier when the economy contracted by about 24%, the country’s sharpest decline on record. Moreover, India was the first nation hit by a significant Covid-19 wave driven by the Delta variant, slowing a recovery that began in late 2020. The country’s current economic activity still remains well below pre-pandemic levels.
A consortium of Indian energy companies—including state major ONGC—is in early talks with Rosneft to acquire a stake in the Russian state company’s massive Vostok oil project. The Vostok Oil mega project in Siberia, including the Vankor and Payakha clusters, has resources estimated at 44 billion barrels. All those clusters are close to the Northern Sea Route that Rosneft plans to use for shipping oil to Europe and Asia. The project will make up the backbone of Russia’s future oil production, tapping into 5 billion tons of oil to yield 50 million tons by 2024.
The UK said on Thursday that it would help India’s green growth with a $1.2-billion package of public and private finance as it joined the Climate Finance Leadership Initiative India partnership. The partnership will be led by a group of leading financial institutions responsible for $6.2 trillion of assets and chaired by Michael Bloomberg, UN Special Envoy on Climate Ambition and Solutions.
Asia: Australia, which is struggling to quell its worst wave of COVID-19, reported 1,756 infections on Saturday, another record high, and officials warned that worse is yet to come, urging people to get vaccinated.
With Asia expected to contribute around 90% of the world’s growing oil demand over the next five years, we see more and more regional partnerships being established. India and Malaysia are the latest of many forging links to ensure the future of energy in Southeast Asia. Malaysia’s state-owned Petronas is planning to partner with Indian Oil Corp. to build liquefied natural gas terminals and expand fuel retailing and gas distribution, expanding its current role as an LPG exporter to India. The company also hopes to help shift India’s oil refining industry beyond predominantly national players. Each state company owns 50% of the joint venture, will be called IndianOil Petronas Private Ltd., or IPP.
5. Renewables and new technologies
The US Department of Energy’s Oak Ridge National Laboratory has licensed its high-power wireless charging technology for electric vehicles to HEVO, a startup developing better systems for the wireless charging of electric cars. The Oak Ridge system provides the world’s highest power levels in the smallest package and could one day enable electric vehicles to be charged as they are driven at highway speeds. The license covers ORNL’s unique polyphase electromagnetic coil that delivers the highest surface power density available, 1.5 megawatts (1,500 kilowatts) per square meter—eight to 10 times higher than the currently available technology. This surface power density supports higher power levels in a thinner, lighter coil, resolving the issue of adding range-sapping weight to electric vehicles.
Scientists at the National Renewable Energy Laboratory are testing and evaluating the compatibility of inlet and connectors for a new high-power charging standard for medium- and heavy-duty vehicles called the Megawatt Charging System (MCS). MCS will facilitate charging capacity up to 3.75MW—seven times higher than the current light-duty fast charging technology, which peaks at 500 kilowatts. When electrified, medium- and heavy-duty trucks will require different charging facilities from those that now serve passenger cars. To meet the needs of medium- and heavy-duty fleets, truck charging stations of the future must provide fast charging at an estimated capacity of 1 megawatt or more. This need also extends beyond road vehicles: industries from aviation to shipping are considering options to electrify their fleets and are also looking for a 15- to 20-minute fast-charging standard.
The largest battery storage facility globally, located along Monterey Bay in California, has completed an expansion, demonstrating how storage systems can exist on a gigantic scale and quickly expand. Moss Landing Energy Storage Facility, owned by Vistra Corp. of Texas, has now added 100 megawatts to the 300 MW of capacity that went online in December for as total of 400 MW. The lithium-ion batteries can run for up to four hours on a charge, translating to 1,600 megawatt-hours. The initial project and the expansion are operating under a long-term agreement with the utility Pacific Gas & Electric. According to federal energy data, California was already leading the nation with 1,438 MW of utility-scale battery storage capacity as of June.
6. The Briefs (date of the articles in the Daily Energy Bulletin is in parentheses)
Leaded gas has gone: After 99 years, the world officially eliminated the use of leaded gasoline as gas stations in Algeria stopped offering leaded fuel, the UN Environment Program said last week, calling for an accelerated transition to zero-emission vehicles. The world started using leaded gasoline in 1922, with tetraethyllead as an additive to improve engine performance. (9/1)
In Norway, Aker BP ASA, the nation’s second-biggest oil operator, isn’t planning on drilling for more oil and gas in the Arctic Barents Sea. Norway, Western Europe’s biggest oil producer, has more than 50% of its recoverable resources still in the ground. The Barents Sea probably holds most of that, yet there’s only one oil field and one gas field currently producing. (8/31)
Offshore Ivory Coast, Italian energy group Eni said it had made a giant oil discovery that could hold as much as 2 billion barrels of oil in place. (9/2)
Nigeria’s journey to the Petroleum Industry Act started in 2000. A reform committee’s report formed the basis of the first Petroleum Industry Bill eight years later. It was submitted to the National Assembly but not passed. Nor was it passed under the next president, Goodluck Jonathan. President Muhammadu Buhari also declined assent to it in 2018 because of some provisions. It was finally passed by the National Assembly on 1 July 2021 and signed into law by Buhari. (9/3)
Conflict-torn Colombia’s economically crucial oil industry continues to labor under the pressure of an array of threats: the pandemic, heightened political turmoil, and a surge in violence and lawlessness. On all accounts, 2021 is shaping up to be Colombia’s most violent year in a decade. So, it is no surprise that oil output in the Andean country has fallen to its lowest level in over a decade, to an average of 694,151 barrels per day during June 2021. (8/30)
Mexico’s Pemex is buying a Texas oil refinery that has racked up a rare net loss of about $360 million this year—in large part due to the February deep freeze—adding to the challenges Mexico faces in seeking energy independence. (9/2)
In Canada, Enbridge Inc. is getting ready to ship crude from the oil sands in the first new cross-border oil-sands conduit built to the US in years. In October, the company is offering 620,000 b/d of capacity in its Line 3 oil pipeline, replacing an older Line 3 that can ship about 390,000 b/d. (9/3)
The US oil rig count dropped by 16 last week to 394 while gas rigs increased by five to 103, Baker Hughes reported. The total rig count is 497, up 241 from last year but lagging behind the 790 active rigs in March 2020. Canada’s overall rig count increased by 5. Active oil and gas rigs in Canada are now at 152.
Citgo is shutting down for four days parts of its refinery in Corpus Christi, Texas, due to a shortage of oxygen needed at hospitals as COVID cases surge. (9/4)
Leasing again: On Tuesday, the Biden administration unveiled more than 16,500 acres it plans to auction to oil and gas drillers early next year as it seeks to comply with a US federal court order directing the government to resume its leasing program. While the acreage offered is tiny compared to auctions under previous administrations, the move represents a setback for President Biden’s plans to fight climate change, including a campaign vow to end new oil and gas leasing on federal lands and waters. (9/1)
O&G jobs: Exploration and production companies and oilfield services providers let go around 100,000 employees in 2020. Around a third of the jobs lost are now back, but not many of the remaining jobs lost last year could be back in the industry soon. Despite the recent uptick in oil industry employment, short-term and permanent shifts in workers’ negative perceptions of the sector have already started to create labor shortages. These shortages threaten to delay and even hinder the recovery of US oil production. (9/2)
The Federal Trade Commission will crack down on practices that may harm consumers at the gasoline pump and seek to deter “unlawful” mergers in the oil and gas industry, FTC Chair Lina Khan told the White House in a letter last week. The FTC promised to investigate abuses in the “franchise market” for retail fuel stations. They will explore why “gas prices tend to rise more quickly to adjust to spikes in oil prices than they fall when the price of oil declines.” (8/31)
The semiconductor shortage is short-circuiting heavy-duty truck production as supply-chain disruptions hamper efforts to meet robust demand for new big rigs. Equipment makers built 14,920 units in July while the backlog of trucks ordered but not built nearly tripled from the same month a year ago to 262,100. (9/4)
Wind power growing: The US installed a record amount of wind-generating capacity last year, adding nearly 17,000 megawatts of power on land, according to the US Energy Department. Wind energy’s share of total utility-scale generating capacity in the US was still only 11% in 2020, behind natural gas at 43% and nuclear and coal, which represented about 20%. But wind is gaining: It accounted for 42% of all new capacity in 2020. (8/31)
Aussie wind: Australia’s conservative government introduced legislation on Thursday that could help clear the way for offshore wind farms to go ahead in a country considered to have massive offshore renewable energy potential. With environmental and financial safeguards, the long-awaited legislation will set up a framework for building, running, maintaining, and decommissioning offshore electricity projects, including wind generation and transmission cables. (9/2)
E-bikes: Mayors of New York, Seattle, Phoenix, and Portland are among the many who have issued net-zero-carbon pledges. So, it seems odd that one obvious climate-fighting implement — the electric cargo bicycle — remains such a rare sight in American cities. Heavy-duty bikes and trikes equipped with batteries for extra pedal power could replace many delivery vehicles that haul packages around cities. (9/2)
Brazil’s hydropower is hurting: Brazil’s Mines and Energy Minister Bento Albuquerque on Tuesday warned that the country’s energy crisis was worse than previously thought, as a record drought hampers hydropower generation. Water reserves at hydropower plants have already fallen to their lowest level in 91 years of record. (9/1)
Jumbo airliners market dries up: Emirates will receive its final A380 jetliner six months early, ending an Airbus SE superjumbo program that proved too big to compete in a changing air-travel market. (9/1)
CO2 capture R&D: Researchers at the Department of Energy’s Pacific Northwest National Laboratory have developed a new method to convert captured CO 2 into methane, the primary component of natural gas. (9/4)
UK emissions commitment in $$: The UK could announce billions of US dollars of additional spending next month on supporting its net-zero targets as part of an overall budget of $83 billion (£60 billion), Goldman Sachs says. (9/4)