Markets

High fuel prices and a cooling economy will lower China’s electricity hunger this year, partly reversing 2021’s staggering 10.3% growth. The Asian powerhouse consumed 8,312.8 TWh of electricity in 2021, National Energy Administration data shows and analysts expect electricity demand growth to slow to 4.5% for the years through 2024.

Spot LNG prices into northeast Asia have fallen nearly 30% after two of China’s state gas companies issued large LNG cargo sale tenders, indicating they are well-stocked amid sluggish demand. Sinopec offered 2-5 LNG cargoes each month between February and October delivered on an ex-ship basis, while CNOOC is selling cargoes for May through November.

Snow storms have made Japan’s utilities scramble to secure spot LNG as gas-burn for power generation rises to compensate for unplanned coal power outages. One utility buyer reportedly snapped up several spot LNG cargoes for February delivery – though the JKM spot LNG price, benchmark for cargoes to Northeast Asia, last traded as high as $18.945 per MMBtu.

Siemens Energy has reduced its target for fiscal 2022 as revenue from its gas and power segment fell 5.9% to €4.140 million and amid a profit warning from its Spanish wind power arm Gamesa. Management now expects FY2022 revenue to be in a range of 2% decline to 3% growth, compared with -1% to 3% in earlier guidance.

Electricity demand growth in China is forecast to exceed 8% in 2022, driving up global coal and LNG prices, which forces power generators to think twice whether to import natural gas or rather keep burning coal. Wood Mackenzie expects a “doubling of spend by Chinese NOCs in 2022,” up from its current US$4 billion guidance.

The International Energy Agency (IEA) was mistaken when stating in July 2021 that global demand for fossil fuel-based electricity peaked. On the contrary, coal- and gas-burn rebounded 9% and 2%, respectively, once lockdowns were lifted and analysts now say this trend will not change before 2024, when renewables could outpace fossil power additions.

US State Department officials have asked European utilities where they would source natural gas from if the escalating conflict between Russia and Ukraine impairs supplies. Gazprom already reduced deliveries since the autumn, creating artificial tightness, but the US promises to ship LNG if contracted Russian gas flows get halted due to conflict or sanctions.

The International Energy Agency (IEA) has dismissed rumours that Europe’s high gas and electricity prices are caused by the clean energy transition. “This is not a renewables crisis; it’s a gas market crisis,” IEA head Fatih Birol said, pointing out Gazprom lowered export to Europa by 25% since November 2021 and currently delivers one-third less than it could.

China may triple electricity generation to cover 60%, instead of currently 23% of total energy demand to reach Net Zero by 2060, Royal Dutch Shell reckons. The oil major also predicts green hydrogen to play a key part in China’s future energy mix as the country’s carbon price will quadruple to 1,300 yuan ($204.82) per tonne in 2060.

Concerns about exposure to Russia push gas buyers towards LNG contracting. “Both oil- and Henry Hub-indexed longterm LNG contracts will trade at a considerable discount to local spot prices through to 2025/6,” Wood Mackenzie reckons, though utility companies need to commit to longer duration contracts to take advantage of the current spot price premium.

Concerned about an excessive onshore wind buildout, Germany’s biggest TSO TenneT underlined the vital role of new hydrogen-ready gas power plants. “If we want to exit coal already by 2030 already, the economy ministry needs to honour his commitment to H2-ready power. TSOs need stable capacity to balance the grid,” says TenneT COO, Tim Meyerjürgens.

Classifying unabated gas-fired power plants as “transitional investments” – as in the EU taxonomy proposal – attracts financial and utility investors. As it stands, both will be able to increase their corporate “green scoring” by investing in gas, including outside Europe. The CO2 cap for new power plants build by 2030, meanwhile, paves the road for hydrogen co-firing.

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News in Brief

FlatFish drone inspects Shell fields off Brazil

May 25 – Shell and Petrobras have contracted Saipem to use its FlatFish subsea drone in pilot projects to inspect two ultra-deepwater oil and gas fields offshore Brazil in over 2,000-meter depth. Initial tests will be carried out at Saipem’s base in Trieste, Italy, with a view to deploying the drone to Brazilian waters in the third quarter of 2022.

Gazprom cuts off supplies to Finland

May 24 – Gazprom has completely suspended gas supplies to Gasum after the Finish company refused to pay in roubles, the two companies said in separate statements. Gasum is confident it will be able to supply all its customers with gas imported through the Balticconnector (2.6 Bcm/y) from Estonia.

Heisco wins tender in Kuwait

May 23 – Heavy Engineering Industries and Shipbuilding Company (Heisco) has won a KD1.8 million ($6.4 million) tender – floated by the energy ministry of Kuwait – to install, examine and test four high voltage transformers at the Doha East Power Generation and Water Distillation Station. Heisco, founded in 1974 and listed on the Kuwait Stock Exchange, has developed into one of the largest energy engineering groups in the emirate.

JERA issues bond to finance power plant upgrades

May 20 – Japan’s leading LNG importer and power producer JERA has issued its first energy transition bond to help finance the accelerated deployment of decarbonisation technologies like hydrogen and ammonia co-firing, as well as the decommissioning of older thermal power stations. The bond is offered in two tranches: a 12 billion yen ($83 million) for a 5-year bond with a 0.420% per annum coupon, and a 8 billion yen $62 million) for a 10-year bond with a 0.664% rate coupon.

Rolls-Royce conducts laser field tests in the US

May 18 – Rolls-Royce has successfully conducted laser field tests to demonstrate ‘deep magazine’ power capability for directed applications in connection with Lockheed Martin’s layered laser defense project. Deep magazine power can be provided by a battery-only system, but the Rolls-Royce ColdFire system includes both battery-powered and near-continuous firing modes provided by M250 gas turbine engines.

Gas vs oil ratio increases in the Bakken

May 17 – The ratio of natural gas to crude oil production has risen in North Dakota’s Bakken region since 2008, and continues to accelerate. According to the US Energy Information Administration's (EIA) Drilling Productivity Report, annual gas gross withdrawals in the Bakken increased by 9% to an annual high of 2.97 Bcf/d in 2021, even though the region’s crude oil production fell by 6%.

Middle East shifts to gas power

May 16 – The Middle East, a region vulnerable to climate change, is undergoing a major shift from petroleum-based power plants towards gas-fired generation and renewable power sources. Capacity additions of over 185.46 GW are the pipeline, according to ResearchandMarkets, as the regions electricity demand for industry and residential cooling is set to grow. In fact, cooling already accounts for 70% of residential power demand.

Carbon utilisation in strong demand

May 13 – The market for carbon utilisation is forecast to grow rapidly from the 2030s onwards to surpass $285 billion by 2042, driven by rising climate commitments and a favourable regulatory framework. In its latest report IDTechEx also highlights the role of technology advances such as thermodynamics which help sequester CO2 permanently.

MTU gensets approved for biofuels

May 12 – Rolls-Royce has gained approval to use synthetic fuels in its MTU Series 4000 and Series 1600 diesel engines for power generation application. Field testing confirmed both engines can use a range of sustainable fuels including biomass-to-liquid, hydrotreated vegetable oil and power-to-liquid fuels such as e-diesel.

E.ON tells Germans how to save gas

May 11 – A large-scale switch to heat pumps, solar power and better demand-side management could help save Germany nearly 100 TWh of natural gas per year, E.ON has said, calling on households to contribute to Europe’s efforts to reduce reliance on Russian gas imports. “If 10% of the homes in Germany are equipped with solar PV installations, 20% of gas boilers are replaced by heat pumps, and the average temperature in all households is reduced by one degree Celsius on average, this would lead to natural gas savings of 103 TWh per year," E.ON Energy CEO Filip Thon said, noting this volume would equate to about 30% of Germany’s current gas imports from Russia.

Exelon Q1 earnings lower following Constellation cave-out

May 10 – Exelon has reported lower first quarter earnings and a higher operating revenue, having completed the separation of Constellation Energy – Excelon’s former power gen business. Focussing now solely on transmission and distribution, Exelon’s net income from continuing operations for the first quarter of 2022 decreased to $0.49 per share from $0.53 a share in pre-year period. In contrast, adjusted operating earnings notched up to $0.64 per share, primarily due to due to higher electric distribution earnings at ComEd from higher rate base and higher allowed electric distribution. Rate increases at Excelon’s group companies PECO, BGE, and PHI were partially offset by higher depreciation expenses at BGE and PHI.

South Africa to add 2.6 GW of new capacity

May 9 – South Africa’s Department of Mineral Resources and Energy, has just announced the REIPPPP BW6 Request for Proposals (RFP).  The bid round will add 2,600 MWs of new capacity to the energy mix. The ministry seeks to procure 11,813 MW of electricity from various power sources including renewable energy, storage, gas and coal.

GE Gas Power authorized as CVE Numbering Authority

May 6 – GE Gas Power’s increased focus on cybersecurity has been recognized by the Common Vulnerability and Exposures Programm as a ‘CVE Numbering Authority (CNA).  As such, GE Gas Power can now assign CVE identification numbers to newly discovered vulnerabilities potentially related to its products and allow GE Gas Power to directly publish new CVE Records and streamline the reporting process.

Heliogen gets nearly $90m in funding

May 5 – Heliogen has moved from design into testing and implementation of its supercritical CO2 power gen system that will be deployed for Woodside in California. The system consists of a 5 MWe sCO2 power block integrated with high temperature solid media thermal energy storage. The demonstration project is being funded with up to $50 million from Woodside, along with $39 million from the U.S. Department of Energy (DoE).

Capstone to install microturbine in the Caribbean

May 4 – E-Finity Distributed Generation, Capstone's distributor for the Mid-Atlantic, Southeastern United States and the Caribbean, has secured an order for two C1000S microturbines for a government water authority in the Caribbean. The 2 MW system will provide emergency standby power to several pumping stations throughout the remote island community and is scheduled to be commissioned towards the end of 2022.

Forecasting solar and energy storage in CAISO

May 3 – Marubeni has chosen Veritone’s AI-based distributed energy resource management solution (iDERMS) to provide price, demand and generation forecasts at their pilot project in the California Independent System Operator (CAISO) SP-15 region. In addition to day-ahead and real-time generation figures, Veritone will also forecast production and demand for the overall CAISO region.

Forecasting solar and energy storage in CAISO

May 2 – Marubeni has chosen Veritone’s AI-based distributed energy resource management solution (iDERMS) to provide price, demand and generation forecasts at their pilot project in the California Independent System Operator (CAISO) SP-15 region. In addition to day-ahead and real-time generation figures, Veritone will also forecast production and demand for the overall CAISO region.