Tom Whipple and Steve Andrews, Editors.
Quote of the Week
“As a result [of the oil release from the SPR], drivers could see some price relief at the pump over the coming weeks, but they should expect prices to remain higher than last year’s holiday season and in 2019.”
American Automobile Association (AAA)
Graphic of the Week
Weekly US Natural Gas Inventories
Trailing twelve months through 11/12/2021
1. Energy prices and production
Oil: The discovery of a new coronavirus variant named Omicron triggered global alarm on Friday as countries rushed to suspend travel from southern Africa, and the equity and commodity markets on both sides of the Atlantic suffered their most significant drop in more than a year. The World Health Organization said Omicron might spread more quickly than other forms of the virus, and preliminary evidence suggested an increased risk of reinfection.
Oil prices plunged on Friday as reports of the new coronavirus variant sparked fears of more pandemic lockdowns and another blow to fuel demand. West Texas Intermediate dropped by 13% to settle at $68.15/barrel as US traders returned following Thanksgiving. The international benchmark Brent fell 12% to settle at $72.72/barrel. Both oil markers had their biggest one-day declines since the WTI price briefly went negative in April 2020 at the height of the pandemic.
The fall in price came days after the White House announced that it would release some 50 million barrels of crude from its Strategic Petroleum Reserve over the coming months in conjunction with added contributions from five other countries. The US announcement on Tuesday had little immediate effect on prices. But news of the Omicron variant has now overwhelmed sentiment.
According to EIA data, US crude oil inventories for the week ended Nov. 19th, excluding the Strategic Petroleum Reserve, increased by 1 million barrels (mb) from the previous week. At 434 mb, US crude oil inventories are 7% below the 5-year average. EIA said total motor gasoline inventories decreased by 600,000 barrels from last week and are about 6% below the 5-year range. Distillate fuel inventories fell by 2.0 mb from the previous week and are 8% below the 5-year average.
The Biden administration proposed several changes to the nation’s federal oil and gas leasing program, including hiking fees on drilling companies to keep them out of sensitive wildlife and cultural zones. The recommendations followed a months-long review aimed at ensuring drilling on federal lands and waters benefits the public. But in a sign of the extreme controversy surrounding the issue, environmental groups slammed the proposals as too weak, and the industry criticized them as too harsh.
According to ethanol traders and producers, supply chain snags threaten to hamper ethanol deliveries needed for blending with gasoline. Unlike crude oil and other refined products, which can be transported by pipeline, ethanol is shipped primarily by train from various Corn Belt states to facilities where it is blended with gasoline. That makes the sector more vulnerable to labor shortages and other supply issues that reduce the availability of rail cars and truck drivers.
Since the Renewable Fuel Standard became law in 2005, ethanol has traded at around the same price as unblended gasoline or at a discount. This year, the two have diverged as ethanol has increased about 157% to $3.42 a gallon, while unblended gasoline is up about 61% to $2.28. The price of the finished US gasoline consumers buy, including ethanol and other additives, is up about 62% this year, the highest level since 2014.
International Energy Agency: The IEA accused Saudi Arabia, Russia, and other major energy producers of creating artificial tightness in global oil and gas markets, urging the OPEC+ cartel to accelerate the return of supplies. “Today’s prices for key fuels are well in the danger zone for most of the developing economies,” IEA Executive Director Fatih Birol said Wednesday at a press briefing. He urged OPEC and its partners to “take this situation into account and make the necessary steps to comfort the global oil market and help to bring prices down to reasonable levels.”
OPEC+: The cartel is monitoring developments around the new coronavirus variant. Some are concerned that it may worsen the oil market outlook less than a week before a meeting to set policy. OPEC+ is already facing a release of oil stocks led by the US to cool prices. Still, a source said Russia, a critical OPEC+ member, was not yet concerned about the virus variant. OPEC+ has resisted US calls to do more to lower oil prices, continuing to unwind last year’s record output curbs by adding 400,000 barrels of supply per day every month since August.
According to delegates who declined to be identified, the 23-nation alliance led by Saudi Arabia is leaning toward abandoning the plan for a modest production hike scheduled for January when it meets on Dec. 1st to 2nd. The group was already considering a pause after the US and other consumers announced the release of emergency oil stockpiles on Monday.
Russia’s oil-output growth has slowed this month, as the nation’s producers are running out of spare capacity. This could give OPEC’s main ally a reason not to oppose any move by the producer group to ditch its plan to raise output next week. The average daily crude oil and condensate output were 1.486 million tons on Nov. 1st-24th, according to data from the Energy Ministry. That equates to 10.89 million b/d, based on a 7.33 barrel-per-ton conversion rate.
Crude oil exports from West Africa slumped below 3.5 million b/d in October, down from 3.84 million in September as the continent’s foremost producer, Nigeria, struggled to increase its production and exports, hampered primarily by local disruptions. The fall observed in Nigeria’s crude oil output is estimated to have surpassed 70,000 b/d, following a force majeure declared by Shell which halted loadings of Bonny Light crude after a pipeline shut down. Nigeria’s unstable production could become an obstacle for OPEC+ efforts to increase supply by the end of this year.
Shale Oil: Producers in the US are showing no sign of accelerating the pace of deployment for drilling rigs, despite criticism from the Biden administration that they’re holding back on production to the detriment of consumers. According to Baker Hughes, the number of rigs drilling for crude in US fields rose by 6 to 467 this week. Moreover, operators added 23 drilling rigs in the second consecutive month, suggesting that explorers are more interested in growing production slowly and steadily than in heeding the administration’s call for more supply.
The biggest US oil-rig operator, Helmerich & Payne, posted a steeper-than-expected loss and warned of ballooning costs amid worsening energy-industry inflation. Analysts at Tudor, Pickering, Holt & Co. say growing demand for rigs isn’t translating into improved profitability. Helmerich’s warning follows similar commentary by America’s No. 2 provider of fracking pumps, Liberty Oilfield Services, which last month cited “serious” supply-chain issues that have boosted costs faster than they can be passed on.
Natural Gas: Asia’s natural gas demand is set to nearly double by 2050, and the region’s production is already declining. Asian natural gas buyers have had to pay record prices for LNG cargo as the global energy crunch sent spot prices skyrocketing amid scarce supply. Prices have eased somewhat since the all-time highs in October, but demand for natural gas in Asia will continue to rise not only this winter but in all winters and summers going forward as the region expands.
US natural gas production surged to more than 95 billion cf/d Nov. 24th, hitting a nearly two-year high that comes as domestic operators stage a prewinter push that has recently begun to cool the bullish sentiment in the gas market. The new high caps an almost eight-week drive by producers to lift output from stubbornly depressed levels in September, when production averaged just 90.1 billion cf/d following extensive damage caused by Hurricane Ida. The recent surge comes almost entirely from a handful of onshore fields.
The shifting supply and demand considerations have prompted a stunning selloff in recent trading, with prices for December, January, and February falling more than 30 cents after reaching a 20 cents premium to the Henry Hub earlier this month.
A $12 billion liquefied natural gas investment approved in Australia leads a wave of projects betting demand will rise as the world shuns more polluting alternatives like coal. The development of the Scarborough field, Pluto onshore processing facility, and a 267-mile subsea pipeline led by Woodside Petroleum will supply as much as 8 million tons annually for at least 20 years, with first cargoes expected in 2026. It’s a project that cuts straight to a debate in the energy transition: the role of natural gas as nations aim to both curb greenhouse gas emissions and avoid supply crunches that triggered recent power shortages in Asia and record prices in Europe.
Coal: Russian authorities opened a criminal investigation into a suspected methane-gas explosion at a Siberian coal mine that killed more than 50 people and left dozens hospitalized, casting a spotlight on an industry that has been plagued with accidents in recent years. According to official data, Russia has suffered at least 11 major mining accidents since 2000 in which ten or more people have died.
Prognosis: The US uses more gasoline than any other nation globally, and lately Americans have grown concerned about the swift rise in costs at the pump. The average retail price of gas was at $3.40 for a regular gallon, up from roughly $2.11 at this time a year ago and the swift increase – 61% over 12 months – has alarmed consumers. As a result, President Biden tried to deliver a Thanksgiving gift for US drivers on Tuesday by announcing that the US would release 50 million barrels of oil from its 600-million-barrel Strategic Reserve in response to voter concerns. The UK, India, South Korea, Japan, and China also agreed to release oil stocks. Britain’s planned release is for up to 1.5m barrels; India about 5 million and Japan about a million. Volume from the others is not yet known.
The total release from all the countries involved covers about 12 hours of worldwide oil demand of about 100 million b/d. Only 32 million barrels of the US’s contribution will be from newly authorized releases. They will be delivered to the markets slowly between mid-December and the end of April 2022 in a swap with oil companies, which must return an equivalent volume by 2024. The other 18 million barrels have already been authorized. Given that the US release and that of other nations will be on the order of 40 million barrels spread over 229 days, the impact on world prices will be minimal as the world will consume some 2.3 billion barrels during this period.
Industry observers generally agreed that the move would have a limited effect on lowering gasoline prices. Market prices recovered after the announcement in a few hours. So far, the most significant impact of the release announcement was that OPEC+ producers began threatening to forego planned monthly production increases of 400,000 b/d.
Over the longer term, the future for OPEC+ oil production does not look bright. There are persistent rumblings that Russia’s output is peaking for geological reasons, and output from most of the smaller OPEC members has been declining for years. Only a handful of middle eastern states have substantial oil reserves left and these are on the cusp of unbearable summer temperatures leading to serious crop and water shortages that could stifle oil production growth.
2. Geopolitical instability
(These are the situations that reduce the world’s energy supplies or have the potential to do so.)
Ukraine: President Zelensky asserted Friday that a group of Russians and Ukrainians planned a coup in Ukraine next month and that the plotters tried to enlist the help of the country’s richest man, Rinat Akhmetov. Zelensky, speaking at a “press marathon” for local and international media, said that audio recordings obtained by Ukraine’s security services caught plotters discussing their plans.
Secretary of State Blinken said the US has genuine concerns, widely shared with partners in Europe, over Russian activities at the Ukrainian border, after Ukraine said it feared Russia might be preparing an attack. The head of Ukraine’s military intelligence told the Military Times that Russia had more than 92,000 troops amassed around Ukrainian borders and is preparing for an attack by the end of January or the beginning of February. Moscow has dismissed such suggestions as inflammatory and complained about what it says is increasing activity in the region by the NATO alliance.
All options are on the table in responding to Russia’s “large and unusual” troop buildup near Ukraine’s border. The NATO alliance will decide on the next move following consultations next week, the State Department’s top US diplomat for European affairs said on Friday.
Iran: World powers and Iran return to Vienna on Monday for a last-ditch effort to salvage a 2015 nuclear deal, but few expect a breakthrough as Tehran’s atomic activities rumble on in an apparent bid to gain leverage against the West. Tehran wants the verifiable lifting of economic sanctions Foreign Minister Amirabdollahian said on Friday. “If the opposing sides are prepared to return to their full obligations and the lifting of sanctions, a good and even immediate agreement can be reached.” Separately, the head of Iran’s Atomic Energy Organization, Mohammad Eslami, said the Vienna talks would not be about “nuclear issues,” but rather about the US’s return to the 2015 nuclear deal.
American intelligence officials and international inspectors say the Iranians have quickly gotten the facilities back online after the Israeli attacks — often installing newer machines that can enrich uranium at a far more rapid pace.
American officials have warned their Israeli counterparts that while the repeated attacks on Iranian nuclear facilities may be tactically satisfying, they are ultimately counterproductive, according to several officials familiar with the behind-the-scenes discussions. Nevertheless, Israeli officials have said they have no intention of letting up— one of many areas in which the US and Israel disagree on the benefits of using diplomacy rather than force.
Iraq: The West Qurna 2 oil field, which Lukoil operates, is expected to reach peak production of 800,000 b/d by 2027, the country’s oil minister said last week. This increase in production is essential as Iraq seeks to hit a production capacity of 8 million b/d by the end of that year, compared to the 4.8 mb/d which they produced in 2019, prior to the pandemic. Ihsan Ismaael didn’t provide current production figures for the field. West Qurna 2 is one of the world’s largest oil fields, with around 14 billion barrels of initial recoverable reserves.
Venezuela: The US Treasury Department extended until Jun 1st its authorization for Chevron, Halliburton, Schlumberger, Baker Hughes, and Weatherford International to keep activity in the country at a minimum just to preserve their assets, protect employees and reimburse contractors. The decision further frustrates expectations in Venezuelan political circles and the oil industry that US President Biden would at some point relax sanctions imposed by his predecessor, which are starving Maduro’s regime of petrodollars. Maduro’s party dominated votes last week to win over 3,000 posts, including governorships and municipalities. The US, Canada, and Spain are among the nations that questioned the results.
Venezuela’s President Nicolas Maduro said there would be no renewed talks with opposition politicians until “the kidnap” of a prominent government envoy Alex Saab – who was extradited to the United States – comes to an end. Last month Venezuela’s government withdrew from negotiations in Mexico, which had started in August following Saab’s extradition in October. Saab, a Colombian businessman, is accused by US prosecutors in Miami of diverting about $350 million out of Venezuela through the US.
Record numbers of Venezuelan migrants have been crossing into the US in recent months, posing a new border challenge for the Biden administration and raising concerns that more of the nearly 6 million people displaced from the South American nation could be heading north. In October, US authorities intercepted 13,406 Venezuelan migrants along the Mexico border, the highest one-month total ever and more than double the number taken into custody in August. The influx includes Venezuelans who left their homes years ago for Colombia and other countries in the region and more recent emigrants fleeing violence, economic collapse, and authoritarian rule.
Belarus: President Lukashenko said Belarus does not want confrontation with Poland but wants the EU to take in 2,000 migrants stranded on its border. The EU accuses Belarus of flying in thousands of people from the Middle East and pushing them to cross into the EU via Poland, Lithuania, and Latvia in response to European sanctions. Minsk denies fomenting the crisis. However, Polish Prime Minister Mateusz Morawiecki warned that the migrant crisis on the Belarus border might be a prelude to “something much worse,” and Poland’s border guard said Belarusian forces were still ferrying migrants to the frontier.
3. Climate change
A recent paper by University of Oxford economists and mathematicians finds that a rapid transition to renewable energy would lead to global savings of $26 trillion compared to the costs of maintaining the current energy mix. Another recent paper, published by the International Renewable Energy Agency looks at previous technological revolutions to help understand the implications of rapid growth and falling costs of renewable energy. The findings provide some analytical heft to ideas that clean energy advocates have long argued about how the transition will lead to economic benefits as renewable energy continues to get cheaper.
The COP26 climate talks in Glasgow ended with some progress, though not enough to ensure the world avoids catastrophic impacts. If countries meet their pledges, greenhouse emissions in 2030 will be slightly lower than previously projected. But a new report warns that the decline doesn’t mean we’re safe. The in-depth study published on Monday, led by the Centre for International Climate Research (Cicero), showed that the temperature outcome based on countries’ climate pledges is full of uncertainties. Using data on goals set about a year ago, the study found that the world could warm anywhere between 1.7°C and 3.8°C by 2100 compared with pre-industrial levels.
The climate crisis is already cutting crop yields and could lead to widespread food shortages. That’s the grave warning from the UN, which cautions that farmers may not meet a projected 50% increase in demand by 2050 if greenhouse gas emissions stay high. Leaders in global agriculture at Bloomberg’s New Economy Forum in Singapore offered some insight into what might be done. Technology will play a starring role, says Werner Baumann, chairman of German healthcare and agricultural giant Bayer AG. One Bayer project involves developing “short-stature” corn that resists stalk breakage and can be planted more densely. Cargill Chairman David MacLennan insists genetically modified organisms must be part of the solution, though GMOs are a controversial component of modern agriculture with significant opposition.
Greenland has had quite a weather year. For the first time in its history, rain fell at its summit. Then, in August, it experienced one of the latest-occurring melt events in recent memory. This year also became the third year with major melting events in the past decade. By the end of the melt season, the ice sheet lost more ice than it gained — for the 25th year in a row. The island experienced anomalous swings from intense melting to unusual snowfall from a former hurricane. While the annual snowfall accumulation was healthy, ice loss from iceberg calving and ocean melt was the highest since satellite records began in 1986.
According to the assessment, the most significant risks to banks come from exposure to energy companies that do not pivot to more sustainable activities and energy-intensive sectors such as aviation. Other hazards include lending on buildings that are less energy-efficient and therefore may have a lower resale value.
Nations clinched the Paris Agreement six years ago but finished writing it only at COP26 in Glasgow this month. There, negotiators finally checked the box on something called “Article 6,” a section of the 2015 climate pact governing how countries can trade credits to emit CO₂. This diplomatic breakthrough may build the confidence needed for billions of investment dollars to flow to recovery and conservation work, particularly in developing nations.
Global talks on how to clean up shipping are set to begin this week as momentum builds to cut pollution from the sector. The International Maritime Organization “is under pressure to do something,” said Edmund Hughes. He was previously responsible for greenhouse gas emissions at the United Nations body, shipping’s global regulator, and the host of the upcoming virtual talks. Following the UN’s COP26 climate summit, the IMO’s chair is challenged with steering as many as 175 member states toward cleaner shipping. The sector, which transports more than 80% of the world’s internationally traded goods, has a carbon footprint bigger than Germany and the Netherlands combined.
A Democratic plan to impose a fee on methane emissions from oil and gas wells has cleared a key hurdle, but it faces strong opposition from the oil and gas industry and criticism by centrist Sen. Joe Manchin. The proposed fee on methane — a potent pollutant that contributes to global warming — was included in a substantial social and environmental policy bill passed by House Democrats.
Last month, the Supreme Court agreed to hear cases challenging the Environmental Protection Agency‘s authority to limit greenhouse gas emissions from power plants. Environmental lawyers caution that one should be paying attention to the pending cases, which could threaten a key plank of President Biden’s climate agenda.
In October, the Supreme Court said that it would hear the cases in response to requests from Republican-led states and the coal industry. The states and companies specifically asked the court to determine whether the EPA can issue sweeping climate regulations for the power sector under the Clean Air Act, which directs the agency to consider the “best system of emission reduction” for existing coal plants.
Germany’s incoming coalition government plans to add at least 100 trillion Wh/year of renewable energy by 2030, lifting the target share of renewables in the power mix to 80%, according to the coalition treaty published Nov. 24. Under the current law, additions of 377 trillion Wh were planned to 2030, targeting a share of renewables of 65%.
4. The global economy and the coronavirus
A new variant of the coronavirus that causes Covid-19 — now called Omicron — has been identified in South Africa, with officials saying it’s highly concerning. It’s generating fears that the new strain could fuel outbreaks in many countries and pressure health systems, potentially evading vaccines and complicating efforts to reopen economies and borders.
The identification of the new variant highlights the risk to global public health posed by large, unvaccinated populations in the developing world, where countries have struggled to get immunizations and the virus is spreading and evolving. Overall, just 7% of people in Africa are fully vaccinated compared with 42% of the global population. In Europe and the US, vaccination levels are 67% and 58%.
Merck & Co said on Friday updated data from its study of its experimental COVID-19 pill showed the drug was significantly less effective in cutting hospitalizations and deaths than previously reported. The drugmaker said its tablet showed a 30% reduction in hospitalizations and deaths, based on data from 1,433 patients. In October, its data showed a roughly 50% efficacy, based on data from 775 patients.
As the global economy heats up and tries to put the pandemic aside, a battle for the young and able has begun. With fast-track visas and promises of permanent residency, many of the wealthy nations driving the recovery are sending a message to skilled immigrants all over the world: Help wanted. In Germany, where officials recently warned that the country needs 400,000 new immigrants a year to fill jobs, a new Immigration Act offers accelerated work visas and six months to visit and find a job.
Canada plans to give residency to 1.2 million new immigrants by 2023. Israel recently finalized a deal to bring health care workers from Nepal. And in Australia, where mines, hospitals, and pubs are all short-handed after nearly two years with a closed border, the government intends to roughly double the number of immigrants it allows into the country over the next year.
United States: Twenty months into a pandemic that has claimed almost 770,000 American lives and nearly a year after Covid-19 vaccinations became available, US health experts warn a fifth wave of infections risks overwhelming health systems in the worst-affected states. In some Midwestern states, low vaccination rates and Covid-19 cases are rising rapidly after a summer lull. Even some northeastern states where vaccination rates are above 70%, such as Maine and Vermont, are experiencing an uptick in case numbers, a trend that probably reflects breakthrough infections caused by waning immunity to Covid vaccinations, according to epidemiologists.
A US inflation measure closely watched by the Federal Reserve posted its most significant year-on-year jump since the 1990s last month. The commerce department’s core personal consumption expenditure index, which strips out volatile food and energy costs, rose 4.1% in October compared with a year ago. The jump represented a significant increase from the 3.7% annual rise in September and aligned with consensus forecasts.
When energy and food prices are included, the PCE price index rose 5% compared with October 2020, faster than the 4.4% rise in September. The data were released as part of a report showing personal income rising 0.5% in October compared with the preceding month, while consumption rose 1.3%.
Jobless claims, a proxy for layoffs, fell to 199,000 last week, the lowest weekly level in 52 years. The sharp decline in unemployment claims suggests rising wages and bountiful job openings could continue to bolster consumer spending—the economy’s main engine—despite fading government stimulus and dwindling savings.
The US steel industry will likely emerge as one of the biggest winners in America’s infrastructure revamp. The US steel sector’s capacity utilization rate reached 84.1% for the week ending Nov. 13th, the American Iron and Steel Institute reported.
Europe: Coronavirus infections broke records in parts of Europe last week, with the continent again the epicenter of a pandemic that has prompted new curbs on movement and seen health experts push to widen the use of booster vaccination shots. Slovakia, the Czech Republic, the Netherlands, and Hungary reported high daily infections as winter grips Europe and people gather indoors.
Austria went into a significant lockdown on Monday to break the strong fourth wave of Covid spreading across Europe. At the same time, Germany’s health minister, Jens Spahn, warned that “just about everyone in Germany will probably be either vaccinated, recovered or dead by the end of this winter.”
Consumers in the European Union and Britain face further gas price spikes this winter as flows of Russian gas via significant transit routes are proving too little, too late. The new Nord Stream 2 pipeline running from Russia to Europe might have eased a tight market. But NS#2 line has faced more delays as German certification has been suspended amid opposition to the whole project from the US and some Europeans. In addition, this year’s power price shock has pushed several European and British energy suppliers out of business.
The suspension of the approval process for the Russian Nord Stream 2 pipeline by a German regulator could be short-lived as Europe is hungry for more gas, an analyst said after meeting officials of Gazprom. Last week, Germany’s energy regulator temporarily halted the certification process for the new pipeline that will carry Russian gas into Europe, throwing up a new roadblock to the contentious project and driving up regional gas prices. German government sources told Reuters that the suspension could delay the commissioning of the infrastructure until next March.
Europe’s first cold spell of the heating season has arrived, pushing power prices higher as freezing temperatures ushers in increased power demand for heat. As a result, German day-ahead power prices jumped to the second-highest level ever, 273.89 euros per megawatt-hour. Day-ahead power prices are also higher in France and Netherlands. In addition, the German Meteorological Service released a weather note on Tuesday warning of frigid and snowy weather.
Germany is facing a ban on combustion-vehicle sales before the end of the decade — that’s if the home of Volkswagen AG is serious about hitting the new government’s targets on battery-powered cars and climate protection. The incoming coalition of pro-business Free Democrats, center-left Social Democrats, and environmental Greens plans to have at least 15 million fully electric vehicles on Germany’s roads by the end of the decade. “It can only be achieved if new cars with internal combustion engines are no longer registered before 2030,” said Volker Quaschning, professor of renewable energy systems in Berlin. “It makes sense to stop the registration of gasoline and diesel cars by around 2028.”
China: According to a study by Peking University mathematicians, China could face more than 630,000 COVID-19 infections a day if it dropped its zero-tolerance policies by lifting travel curbs. The increasingly extreme Covid Zero policies are standing in the way of a full recovery for the shipping industry and prolonging a crisis that’s snarled ports and emptied shelves worldwide. In its attempts to keep the virus out, China’s continued to prohibit crew changes for foreign crews and recently imposed as much as a seven-week mandatory quarantine for returning Chinese seafarers. As a result, even vessels that have refreshed their crew elsewhere have to wait two weeks before they’re allowed to port in China. To comply, shipowners and managers have had to reroute ships, delaying shipments and crew changes, adding to the supply chain crisis.
According to a top researcher involved in drafting proposals, China’s energy crisis won’t derail plans to make progress on curbing greenhouse gas emissions in the next few years. The 2025 energy blueprint, expected to be released by next month, will prioritize the use of more renewables and improve energy efficiency, according to Xu Xiaodong, senior adviser of the China Electricity Power Planning and Engineering Institute. “The power crunch is not a normal phenomenon as China has enough capacity to meet demand so that it won’t change the course of low-carbon development.”
China’s daily coal output has stabilized at 12 million tons, amid a raft of measures to ramp up power production, the country’s state planner said last week. Beijing has been trying to cool a red-hot market for coal, China’s primary fuel for power generation, after shortages led to electricity rationing for the industry in many regions, adding to factory-gate inflation in the world’s second-biggest economy. As a result, coal stocks at ports and power plants have been picking up quickly, with stocks in power plants hitting 129 million tons as of Nov. 14th and expected to hit 140 million tons by the end of November, said state media CCTV.
China’s pipeline natural gas imports declined to 3.21 million mt in October, down 17.2% from the record high of 3.87 million mt in September, according to data released Nov. 21st. Pipeline gas imports from Russia and Turkmenistan saw month-on-month declines of 26.5% and 18.2%, respectively, in October. The October pipeline gas imports were low due to a delay in restoring gas flows after maintenance on the Power of Siberia pipeline in September. Due to scheduled maintenance, Russia’s Gazprom suspended natural gas supplies via the pipeline to China over Sept. 22-29th.
Saudi Arabia: India’s Reliance Industries and Saudi Aramco have called off a deal for the state oil giant to buy a stake in the oil-to-chemicals business of the Indian conglomerate due to valuation concerns. Talks broke down over how much Reliance’s oil-to-chemicals business should be valued as the world seeks to move away from fossil fuels and reduce emissions.
Saudi Arabia held its position as the biggest supplier of crude oil to China for the 11th month in a row in October, with volumes up 19.5% from a year ago, customs data showed on Sunday. Saudi oil arrivals totaled 7.1 million tons, or 1.67 million b/d, which is 19.5% higher than 1.4 million b/d a year ago and compared with 1.94 million b/d in September. Inflows from Russia, including pipeline oil, inched up by 1.3% from a year ago.
5. Renewables and new technologies
The cost of Lithium-ion batteries has plunged some 97% since their introduction three decades ago—a rate similar to the drop in solar panel prices. A team at MIT has analyzed what has accounted for the extraordinary savings and found that by far the most significant single factor was work on research and development, particularly in chemistry and materials science. This outweighed the gains achieved through economies of scale, although that became the second-largest category of reductions.
Some of today’s vehicles already feature more than 100 control units. This high complexity of electrical and electronic systems and their architecture will further increase but must remain manageable. The “Software-Defined Car” (SofDCar) project now aims to develop standardized rules and processes to ensure that electronic components of a vehicle interact smoothly, remain updatable, and, hence, safe.
The three-year SofDCar project is funded with some €43 million by the German Federal Ministry for Economic Affairs and Energy. Academic partners include Karlsruhe Institute of Technology, University of Stuttgart, the Research Institute of Automotive Engineering and Vehicle Engines Stuttgart, and the FZI Research Center for Information Technology, an innovation partner of KIT.
6. The Briefs (date of the article in the Daily Energy Bulletin is in parentheses)
UK bankruptcy: The energy crisis and soaring wholesale power and natural gas prices claimed its biggest victim so far in the UK when Bulb, a power and gas supplier serving 1.7 million customers, said on Monday that it would enter into special administration. According to insiders, another 20 energy providers in the UK could go bust in what looks like a “massacre” in the coming months unless the government reviews the energy price cap. (11/23)
UK Prime Minister Boris Johnson will set out plans for a dramatic expansion of the UK’s electric vehicle charging network by 2030 when the government will ban the sale of new gasoline and diesel cars. (11/22)
BP has kicked off a hiring campaign to fill jobs in its fledgling hydrogen business. The UK oil and gas major is initially looking to fill some 100 hydrogen jobs to work on projects from Spain to Australia. (11/22)
Ukraine’s dependence on natural gas imports has left it vulnerable to Russian influence and increasing prices. According to energy experts and officials, Ukraine could substantially reduce its use of natural gas for heating by tapping its enormous biomass resources. (11/26)
Pakistan’s petrol retailers began a nationwide strike on Thursday as the leading industry body flagged low-profit margins, exacerbated by the government’s move to raise taxes and boost revenue under its agreements with the International Monetary Fund. (11/25)
In Nigeria, the World Bank has called on the federal government to end what it described as its expensive fuel subsidy regime’ within three to six months. According to the World Bank Update, the poorest 40% of people in Nigeria consume less than 3% of the total available Premium Motor Spirit (gasoline), noting that the rich benefitted more from the subsidies. (11/25)
Nigerian attack: Communities near oil well Obiavu-5, operated by the Nigeria Agip Oil Co. in Rivers State, are now living in fear following an attack on the company’s facility by a suspected militant group unhappy about the lack of benefits paid to those communities. (11/24)
In Nigeria, 19 days after the spill at the Santa Barbara Well 1 in Bayelsa State, the wellhead is still spewing crude into the environment, polluting farmlands and the creeks. The well had been dormant and non-producing since its acquisition in 2015. Halliburton Co. said its Boots and Coots unit had been hired to help seal the well. (11/26)
Brazil’s Petrobras plans to invest $68 billion in expanding its crude oil production. That’s 84% of its total planned investments for the period 2022-2026. Offshore Technology reports that the number is a substantial increase on previously planned assets of $55 billion. (11/27)
Guyana is treading a fine line between its potential for economic growth through new oil developments and the risk of environmental degradation and rising sea levels associated with fossil fuel-driven climate change. (11/25)
Oil/tar sands: Oil and gas companies like ExxonMobil and Canada’s Suncor have transformed Alberta’s tar sands—also called oil sands—into one of the world’s most significant industrial developments, covering Indigenous people’s lands with massive mines and stripping away boreal forest and wetlands. (11/22)
US barges carrying gasoline are headed to Canada’s west coast to deliver much-needed fuel to a region cut off from the rest of the country after last week’s rainstorms brought flooding and landslides that damaged transportation links. (11/23)
In British Columbia, Trans Mountain is optimistic it can restart its 300,000-b/d crude oil pipeline, in some capacity, by the end of the week if all planning and work continue to progress and no further issues are assessed. (11/25)
Canada’s warehouses are filling up with everything from furniture to alcohol and lumber after floods in British Columbia washed out critical rail and road lines, disrupting already strained supply chains. (11/24)
Greenland said on Monday it had stripped a Chinese mining company of its license to an iron ore deposit near the capital Nuuk, dealing a blow to attempts by Chinese companies to gain a foothold on the resource-rich Arctic Island. (11/23)
The US oil rig count increased by 6 to 467 units, nearly double the 241 oil rigs last year at this time, according to Baker Hughes. Rigs targeting gas were unchanged at 102. (11/25)
Keystone suit: TC Energy is seeking $15 billion in damages from the US government for the cancellation of the Keystone XL pipeline project and has filed a formal request for arbitration under the North American Free Trade Agreement. (11/14)
Gasoline prices: California currently has the highest gas prices in the nation, an average of $4.70 a gallon of regular unleaded, according to AAA. Gasoline prices in the US were up 50% in October from last year amid rising inflation. (11/22)
The US Environmental Protection Agency’s calculation of modest gains in carmakers’ fuel economy last year—from 24.9 to 25.4 mpg—spotlight the need for a rapid increase in electric vehicles if the industry meets proposed targets. (11/22)
Cheniere Energy Partners produced the first LNG at the sixth liquefaction train at the Sabine Pass terminal in Cameron Parish, Louisiana, one year ahead of the train’s previous completion schedule. The completed train will boost the production capacity of Sabine Pass, which has had five 5-million-mt/year trains in operation, to roughly 30 million mt/year and Cheniere Energy’s total US LNG production capacity to 45 million mt/year. (11/25)
US chips are coming: Samsung Electronics Co. is expected to announce plans to build a $17 billion semiconductor factory in Central Texas, a massive investment against the backdrop of a global chip shortage that has tripped up industries as varied as toy manufacturers and automakers. (11/24)
EVs: BlackRock Inc. is joining automakers including BMW, Volkswagen, and Ford as shareholders in electric-car charging consortium Ionity GmbH, contributing to a $787 million investment in the venture. The joint outlay will more than quadruple Ionity’s high-power charging points in Europe. (11/25)
Demand for lithium is set to see a prolonged rally, prompting buyers to scramble to secure long-term contracts. Though China is leading the race for lithium, American and European companies are betting big on new production. (11/26)
Shell and China-based EV maker NIO have entered into a strategic partnership to further its global involvement in the electric vehicle and energy industries. As part of this new strategic cooperation agreement, NIO and Shell will construct and operate battery charging and swapping facilities. (11/26)
President Biden’s administration greenlit a major offshore wind project to supply power to New York as part of a broader push to build out renewable energy and tackle climate change. The move inches the country closer to the Biden administration’s goal of generating 30 gigawatts of power from offshore wind energy by the end of the decade. (11/25)
Fukushima ongoing: Tokyo Electric Power Co will launch remedial works at the stricken Fukushima Daiichi nuclear plant to strengthen an ice wall intended to halt groundwater flow after testing indicated partial melting. (11/26)
Heat pumps winner: For all the hype surrounding hydrogen, the cheapest way to warm a home during the green transition will be a heat pump. That’s the finding of a new study by European consumer organizations, which said the pumps — that draw heat from the surrounding air — can help cut heating bills by a quarter compared with the cost of conventional gas boilers. The verdict on hydrogen-fueled boilers is severe: they “will never be a cost-effective option.” (11/26)
In Argentina, some 80% of the country’s crop exports flow through the Parana River’s muddy waters en route to the Atlantic Ocean. Now the river’s levels have fallen to the lowest since the 1940s. Grains traders suddenly found themselves forced to scale back how much they pile onto cargo ships, afraid to get them stuck in the river’s shallow banks. (11/24)
Mobile carbon capture in shipping is technically feasible, according to an industry-funded study. However, the study found that high operational and capital expenses would be involved in any deployment and recommended further work should be done to compare costs of carbon capture against other long-term marine carbon dioxide reduction technologies. (11/22)
CO2 pipeline: Summit Carbon Solutions plans to build a 2,000-mile pipeline, dubbed the Midwest Carbon Express, moving climate-warming greenhouse gases from Midwest biofuels plants to North Dakota for permanent storage underground. (11/24)
Air pollution: Researchers now report in ACS’ Environmental Science & Technology Letters that satellite data from before and during the spring 2020 lockdown in Los Angeles shows that vehicles, rather than agriculture, are the primary source of urban airborne ammonia (NH 3), which forms small particles that contribute to air pollution and harm human health. (11/25)
The world’s fish population is in a dire state, with about half of assessed stocks being overfished, according to a study backed by Australian billionaire Andrew Forrest. (11/22)