Oil-gas-links and the outlook on US shale gas

Natural Gas World gives an interesting insight on the US oil and gas market:

"According to a Reuters report, LNG bagged a 14% share of the European gas market in the period October 2018 to August 2019, up from 5% in the same period a year earlier. Gas Infrastructure Europe reports that gas storage in Europe was 89.65% full as of August 20, with storage in Austria, Belgium, the Czech Republic, Denmark, France, Germany and the Netherlands over 90%. European gas prices reached a 10-year low in July … yet still the LNG comes.

Despite general European antipathy towards hydraulic fracturing, it is ‘fracking’ which has delivered this tsunami of cheap gas. In doing so, it addresses a fundamental long-standing driver of European energy policy – the fear that as European domestic gas production falls, Europe will become ever more dependent on the few major pipeline exporters that provide the majority of its imported gas supplies -- with Russia to the fore.

That concern now looks much less severe thanks to US LNG, largely derived from shale drilling. The EIA reported that the US last year saw one of the largest absolute increases in oil and gas production from a single country in history."

(...)

"If a recessionary outlook is assumed, oil demand forecasts will continue to fall and with them oil prices and US shale drilling activity, which will worsen the financial stress already evident in the sector. If this turmoil results in a slowdown in oil production, it is likely to have a knock-on impact on US gas production similar to the last contraction in US shale drilling.

The US will then find itself in an unfamiliar position. Steadily rising demand for gas as long-lead time infrastructure – notably LNG plants – is completed, but a slowdown in production growth. This is likely to push gas prices higher.

Just as gas prices have fallen as oil prices rose, the reverse will go into effect, which would come as an unwelcome surprise both to US users of gas, but also their European counterparts who have this year become used to very low prices for imported US LNG."

You can read the rest of the piece via the below link:

https://www.naturalgasworld.com/oil-prices-and-the-us-lng-juggernaut-lng-condensed-73111?utm_medium=email&utm_campaign=NGW%20Newsletter%20-%20NGWs%20Top%205%20of%20the%20Day%20-%20September%2018%202019&utm_content=NGW%20Newsletter%20-%20NGWs%20Top%205%20of%20the%20Day%20-%20September%2018%202019+CID_edf39098640b56ab2122f19c15e1be91&utm_source=Campaign%20Monitor&utm_term=ull%20ar 

 

 

Experts: wind energy in Germany useless and expensive

Three physics professors of the university of Heidelberg have calculated that the share of wind (combined with solar) represents only 3,1% of the energy supply in Germany.
However from Januar to March 2019 deficiency compensation of 364 Million Euro had to be paid to operators of wind power stations for energy that couldn't be fed into the grid due to saturation.
The german EEG reallocation charge appears more and more like a wrong track for consumers who have to carry this burden.

https://www.physi.uni-heidelberg.de/~dubbers/energiewende/text.pdf 

Nord Stream 2: US congress hits pipe-laying companies

Foreign Policy describes the balancing act of US administration to impede russian dominated Nord Stream 2 pipeline and preserve a productive relationship with german and other european governments:

"The threat of sanctions is now more pronounced. Two bills in the House and the Senate, instead of penalizing the major gas companies involved, would target a perceived weak link: the specialized pipe-laying companies working on Nord Stream 2 (and on the Russian state-controlled gas company Gazprom’s TurkStream project, which will bring Russian gas across the Black Sea to Turkey and eventually to Europe). The bills would sanction pipe-laying companies involved in the project, freezing their U.S. assets and prohibiting them from doing U.S. business.  Only a handful of companies possess the pipe-laying technology Nord Stream 2 needs, and they are in high demand worldwide. One of them, the Swiss-based contractor Allseas—which is heavily exposed to the U.S. dollar and U.S. business—is essential to completing the pipeline, and the proposed sanctions could cause the company to withdraw. The bills have bipartisan support: The Senate Foreign Relations Committee passed the bill by a vote of 20 to two at the end of July, after the House version passed the House Foreign Affairs Committee with similar bipartisan approval. The bills’ widespread support across parties and chambers increases their likelihood of passing with a veto-proof majority, which could kill the pipeline or delay its completion by years."

(...)

"Since 2014, Germany has been the linchpin for sustaining EU sanctions against Russia for its aggression in Ukraine. Increasingly, countries such as Italy, Greece, and Hungary express a desire to end the sanctions, but Berlin has held the EU together. It is risky for the United States to subject Germany to increased political pressure on Nord Stream 2 at a time when solidarity on the more comprehensive sanctions effort is eroding. It would add to a growing list of U.S.-German tensions, including  U.S. tariffs on European aluminum and steel, U.S. demands that Germany increase its defense spending, the consequences of U.S. withdrawal over the Iran nuclear deal, and the question of how best to respond to China’s growing international economic role and the influence of its technology companies worldwide. It is hard to imagine a German government going out on a limb on other U.S. requests—whether for German participation in a maritime escort mission in the Persian Gulf or for German ground troop commitments in Syria—while Washington is sanctioning German companies over Nord Stream 2."

You can read the rest of the piece via the below link:

https://foreignpolicy.com/2019/09/02/maximum-pressure-on-germany-is-a-big-mistake/ 

The dirty drawbacks of supposedly "clean" renewable energy

Interesting angle by Jason Hickel in Foreign Policy: 

"The phrase “clean energy” normally conjures up happy, innocent images of warm sunshine and fresh wind. But while sunshine and wind is obviously clean, the infrastructure we need to capture it is not. Far from it. The transition to renewables is going to require a dramatic increase in the extraction of metals and rare-earth minerals, with real ecological and social costs."

 (...)

"In 2017, the World Bank released a little-noticed report that offered the first comprehensive look at this question. It models the increase in material extraction that would be required to build enough solar and wind utilities to produce an annual output of about 7 terawatts of electricity by 2050. That’s enough to power roughly half of the global economy. By doubling the World Bank figures, we can estimate what it will take to get all the way to zero emissions—and the results are staggering: 34 million metric tons of copper, 40 million tons of lead, 50 million tons of zinc, 162 million tons of aluminum, and no less than 4.8 billion tons of iron."

(...)

"The problem here is not that we’re going to run out of key minerals—although that may indeed become a concern. The real issue is that this will exacerbate an already existing crisis of overextraction. Mining has become one of the biggest single drivers of deforestation, ecosystem collapse, and biodiversity loss around the world. Ecologists estimate that even at present rates of global material use, we are overshooting sustainable levels by 82 percent."

You can read the rest of this interesting piece via the below link:

https://foreignpolicy.com/2019/09/06/the-path-to-clean-energy-will-be-very-dirty-climate-change-renewables/ 

New conflict over gas transit between Russia and Ukraine ahead

Interesting article by Steven Pifer for Brookings:

"Twice in the past 14 years, a dispute between Ukraine and Russia has led Russia to cut off natural gas flows to Ukraine and Europe. The stage is being set for another cut-off in January. The European Union wants to ensure that gas continues to flow, so EU officials will attempt at a mid-September meeting to broker an agreement. But they face a difficult slog.

Gazprom, a large Russian parastatal, now transits a significant amount of gas to European destinations via Ukrainian pipelines. The volume totaled 87 billion cubic meters (bcm) in 2018, one-third of Russian gas exports to Europe.

However, the contract that governs this gas transit expires at the end of 2019. Kyiv wants to replace the current agreement with another long-term contract, preferably for 10 years. Moscow, on the other hand, wants just one year.

Russia hopes to bring Nord Stream 2—which runs from Russia to Germany under the Baltic Sea—online in 2020. (The U.S. government has raised the possibility of sanctions against companies involved with Nord Stream 2, but the pipeline is already 75% complete.) Moscow also hopes that Turk Stream—two pipelines running under the Black Sea from Russia to Turkey—will reach full capacity next year. Nord Stream 2 will have a capacity of 55 bcm of gas per year. Turk Stream consists of two pipelines, each with an annual capacity of 15.75 bcm. The Turks plan to use half of the gas domestically and export the rest to southeastern Europe. If Gazprom can move an additional 70.75 BCM of gas to Europe via Nord Stream 2 and the Turk Stream pipelines after 2020, its need for the Ukrainian pipelines will drastically decline."

You can read the rest of the piece via the below link:

https://www.brookings.edu/blog/order-from-chaos/2019/08/30/heading-for-another-ukraine-russia-gas-fight/ 

 

Low oil prices get KSA in trouble

Saudi economy meets financial hardship as oil price remains at 60 USD. 
KSA curbs oil extraction to 10 m barrel per day. However US shale oil thwart attempts to increase the oil price through artificial shortage. Minister of Energy
Khalid al-Falih has been fired by MBS.
Media: stock market launch  of oil production company Aramco possibly cancelled.

https://www.bild.de/politik/ausland/politik-ausland/haushaltsloch-in-saudi-arabien-bei-den-oel-scheichs-wird-die-kohle-knapp-64476958.bild.html 

McKinsey: Germany misses climate goals; threat of supply shortfall

An analysis by consulting company McKinsey of the Germany energy sector comes to the conclusion that the self-defined goals for carbon dioxide are not met.

"Mit 866 Mio. Tonnen lagen die CO2-Emissionen (gemessen in Mio. Tonnen CO2e -Äquivalent) 2018 trotz einer Reduktion um 4,5% gegenüber dem Vorjahr immer noch 116 Mio. Tonnen über dem anvisierten Ziel von 750 Mio. Tonnen CO2e. Am langfristigen Trend ändert die vorübergehende, vor allem witterungsbedingte Verbesserung im Vorjahr nichts. McKinsey-Seniorpartner Thomas Vahlenkamp warnt: „Laufen die Emissionseinsparungen im gleichen Tempo weiter wie im vergangenen Jahrzehnt, werden die CO2e-Ziele für 2020 erst acht Jahre später erreicht und die Ziele für 2030 sogar erst 2046.“

Furthermore the coal phase-out until 2030 is a threat to the security of supply if there is no compensation. The disconnection of coal plants will deprive Germany of 43 % of secured power in the coming 10 years.

"Der beschlossene Kohleausstieg sieht die Abschaltung von 29 Gigawatt (GW) Kohlekapazität bis 2030 und weiteren 17 GW bis 2038 vor. „In den nächsten zehn Jahren gehen somit im Zuge des Atom- und Kohleausstiegs rund 43% der gesamten gesicherten Leistung des Jahres 2018 vom Netz“, stellt McKinsey-Experte Vahlenkamp fest. Ohne ausgleichende Maßnahmen sei die Versorgungssicherheit in Deutschland in Gefahr. Bis 2030 würden Modellrechnungen zufolge zusätzliche Kapazitäten von 17 GW benötigt, um die Stilllegungen zu kompensieren, um Schwankungen bei den Erneuerbaren auszugleichen und Spitzenlasten abzufedern. Sonst könnten schon ab Mitte des kommenden Jahrzehnts erste Engpässe auftreten, die sich bis 2030 verschärfen könnten."

You can read the rest of the piece via the below link:

https://www.mckinsey.de/news/presse/2019-09-05-energiewende-index 

LNG trade to rise 11 %: Shell outlook

For Shell, the biggest buyer and seller of liquefied natural gas, the  demand of 384 tons of LNG is an indicaion of a booming industry. New import and export capacity is created in the form of import terminals, liquefaction and regasification facilites emerge in Asia, the USA and Russia.

 You can read the rest of this post via the below link:

https://www.reuters.com/article/us-lng-trade/global-lng-trade-to-rise-11-percent-this-year-shell-idUSKCN1QE0NJ 

FERC approves liquefaction and export for Chenieres 2nd train in Corpus Christi

"The US Federal Energy Regulatory Commission (Ferc) on August 28 approved a request from Cheniere Energy to begin full liquefaction and export activities from Train 2 at its Corpus Christi Liquefaction Project (CCLP) in Texas.
CCLP Train 2 has been in commissioning mode since June, and joins Train 1, which has been in full service since March. Both trains are rated at 4.5mn mt/yr of LNG.
The third train at Corpus Christi is expected to be in service by 2021."

https://www.naturalgasworld.com/ferc-okays-full-start-at-chenieres-texas-lng-terminal-72539?#signin