Friday, November 22nd, 2019
Happy Friday and welcome to Energized, your weekly look into the geopolitics, news, and happenings of energy markets.
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Now, onto this week’s issue.
Curated weekly oil and gas newsletter
Oil Prices and Markets
+ Fast Facts – Houston Chronicle “Fuel Fix”
Light, sweet crude (dollars per barrel): $57.72
Last Week: $57.24
Natural Gas (dollars per million British thermal units): $2.69
Last Week: $2.79
Rig count (United States): 806
Last Week: 817
+ More data than oil: bandwidth poised to become next bottleneck in the Permian Basin – Houston Chronicle
At first, there were not enough pipelines to move oil and natural gas to market. Then, it was a lack of water for drilling and hydraulic fracturing operations. And then it was an insufficient number of disposal sites to handle all the wastewater from the oil fields. Now, bandwidth — the capacity to transmit data over the internet — is poised to become the next big bottleneck in the Permian Basin, the nation’s largest and busiest oil field (Houston Chronicle).
If that’s not the greatest intro to an article, I don’t know what is. Sergio Chapa poignantly alludes to the brutal environment of West Texas, where nothing is ever easy.
The article has a prevailing theme, that the business case for infrastructure investment for carriers like Verizon and AT&T isn’t really there for the vast, expansive Permian.
“Operators in places like the Permian are starting to say that they’re producing more data than oil,” Bonny said. “That’s something to think about.”
For now, a lot of improvised, temporary solutions are commonplace in the Permian. If the basin is to flourish into the long-term cash cow that so many hope it to be, there has to be a consortium or combined effort of some sort on the infrastructure side.
A slew of IEA reports just in time for Thanksgiving. Dig in!
Global Energy Outlook
+ World energy outlook 2019 – IEA
On November 13th, the IEA released its latest World Energy Outlook.
For reports such as these, the IEA is merely a metrologist, forecasting well into the future with an inevitable amount of error. Still, the highlights from the report can offer those interested in the industry some valuable insight into the prevailing questions surrounding the energy market today, and the world to come.
Key questions tackled in the report include the following:
* What do the shale revolution, the rise of liquefied natural gas, the falling costs of renewables and the spread of digital technologies mean for tomorrow’s energy supply?
* How can the world get on a pathway to meet global climate targets and other sustainable energy goals?
* What are the energy choices that will shape Africa’s future, and how might the rise of the African consumer affect global trends?
* How large a role could offshore wind play in the transformation of the energy sector?
* Could the world’s gas grids one day deliver low-carbon energy?
Today, 850 million people around the world lack access to electricity, a painful reminder that while developing nations attempt to find a balance between renewable and unrenewable sources of energy, many people aren’t afforded that luxury.
The IEA’s report aims to juggle the conflicting needs of fewer greenhouse emissions, but also higher anticipated energy demand. The IEA estimates that greenhouse gas emissions will need to decrease despite insufficient state and international efforts. Energy demand is expected to rise by 1.3% a year to 2040.
The report also includes recommendations and forecasts based on the Current Policies Scenario, the Stated Policies Scenario, and the Sustainable Development Scenario. The scenarios, as quoted from the IEA, are as follows:
The path the world is on right now is shown by the Current Policies Scenario, which provides a baseline picture of how global energy systems would evolve if governments make no changes to their existing policies. In this scenario, energy demand rises by 1.3% a year to 2040, resulting in strains across all aspects of energy markets and a continued strong upward march in energy-related emissions (IEA).
The Stated Policies Scenario, formerly known as the New Policies Scenario, incorporates today’s policy intentions and targets in addition to existing measures. The aim is to hold up a mirror to today’s plans and illustrate their consequences. The future outlined in this scenario is still well off track from the aim of a secure and sustainable energy future. It describes a world in 2040 where hundreds of millions of people still go without access to electricity, where pollution-related premature deaths remain around today’s elevated levels, and where CO2 emissions would lock in severe impacts from climate change (IEA).
The Sustainable Development Scenario indicates what needs to be done differently to fully achieve climate and other energy goals that policy makers around the world have set themselves. Achieving this scenario – a path fully aligned with the Paris Agreement aim of holding the rise in global temperatures to well below 2°C and pursuing efforts to limit it to 1.5°C – requires rapid and widespread changes across all parts of the energy system. Sharp emission cuts are achieved thanks to multiple fuels and technologies providing efficient and cost-effective energy services for all (IEA).
“In the Stated Policies Scenario, energy demand increases by 1% per year to 2040. Low-carbon sources, led by solar PV, supply more than half of this growth, and natural gas accounts for another third. Oil demand flattens out in the 2030s, and coal use edges lower.”
“The momentum behind clean energy is insufficient to offset the effects of an expanding global economy and growing population. The rise in emissions slows but does not peak before 2040.”
“Shale output from the United States is set to stay higher for longer than previously projected, reshaping global markets, trade flows and security.”
“The higher US output pushes down the share of OPEC members and Russia in total oil production, which drops to 47% in 2030, from 55% in the mid-2000s. But whichever pathway the energy system follows, the world is set to rely heavily on oil supply from the Middle East for years to come.”
“Electricity is one of the few energy sources that sees rising consumption over the next two decades in the Sustainable Development Scenario. Electricity’s share of final consumption overtakes that of oil, today’s leader, by 2040. Wind and solar PV provide almost all the increase in electricity generation.”
“Over the past 20 years, Asia has accounted for 90% of all coal-fired capacity built worldwide, and these plants potentially have long operational lifetimes ahead of them.”
The Asian market is teeming with opportunity, as discussed in this newsletter on the topics of LNG imports to Asia from Qatar, Australia, and the U.S. What could happen is a stepping stone approach, transitioning from coal to natural gas as soon as possible, and then shifting to renewables over time.
The IEA’s World Energy Outlook is a lot to unpack. Although forecasts are often wrong, predictions change, and expectations are tweaked, the report is asking the right questions and deserves a look for those who are curious about more than just the day-to-day energy markets.
A downloadable pdf that condenses the 810-page report to 11 pages. It’s also free. Highly recommended.
Africa Energy Outlook
+ Africa Energy Outlook – IEA
Africa’s role in global energy growth between 2018-40 is huge. The report compares Africa to other developing nations and areas like China, India, and the Middle East. Africa clocks in ahead of China and the Middle East in oil demand, and that’s largely because “more than half a billion people are added to Africa’s urban population by 2040, much higher than the growth seen in China’s urban population in the two decades of China’s economic and energy boom.”
Urbanization will hopefully result in more electricity for Africans. A good chunk of Africa’s population lives without electricity, making up over half of the world’s population without electricity.
The link provides some phenomenal visuals towards understanding Africa’s present energy needs, and some solutions for the next 20 years.
You can buy the full Africa energy outlook, but I suggest you check out the key takeaways first.
The Offshore Wind Outlook 2019 is an excerpt from the IEA’s World Energy Outlook 2019.
The IEA finds that global offshore wind capacity may increase 15-fold and attract around $1 trillion of cumulative investment by 2040. This is driven by falling costs, supportive government policies and some remarkable technological progress, such as larger turbines and floating foundations. That’s just the start – the IEA report finds that offshore wind technology has the potential to grow far more strongly with stepped-up support from policy makers (IEA).
“Today, offshore wind capacity in the European Union stands at almost 20 gigawatts. Under current policy settings, that is set to rise to nearly 130 gigawatts by 2040.”
“China is also set to play a major role in offshore wind’s long-term growth, driven by efforts to reduce air pollution.”
“By around 2025, China is likely to have the largest offshore wind fleet of any country, overtaking the United Kingdom. China’s offshore wind capacity is set to rise from 4 gigawatts today to 110 gigawatts by 2040. Policies designed to meet global sustainable energy goals could push that even higher to above 170 gigawatts.”
“The United States has good offshore wind resources in the northeast of the country and near demand centres along the densely populated east coast, offering a way to help diversify the country’s power mix. Floating foundations would expand the possibilities for harnessing wind resources off the west coast.”
Have a great weekend!
EKT Interactive Managing Editor