Markets

Though Chinese workers have returned to factories of Airbus, General Motors and Toyota in recent days, many remain shuttered due to coronavirus quarantine measures. The recovery of Chinese gas demand is likely to stay subdued well into March, Energy Aspects says, forecasting a drop in LNG offtake volumes at least until early April.

The OPEC+ alliance, dominated by Saudi Arabia and Russia, is reacting to the global coronavirus spread by considering additional cuts to oil and associated gas production. As an emergency measure, crude oil output could be cut by 0.6 million barrels per day (mb/d) on top of the 1.7 mb/d already pledged, in a bid to stabilize prices.

Energy intensity keeps falling in the United States, with the Government forecasting energy consumption will grow more slowly than gross domestic product (GDP) through 2050. In the AEO2020 High Economic Growth Case, more effective energy use of U.S. industry is set to lower energy intensity by 1.6 percent annually.

Asian markets will be able to absorb most of the global gas and LNG supply growth from the mid-2020s, as new supply slows from 30 million tons of new liquefaction capacity last year to less than 20 mtpa by 2025, Royal Dutch Shell said. Europe will hence cease to be a balancing market.

Gazprom’s latest international gas marketing strategy is refocusing the company’s remit on growth in Asia. Having just started pipeline gas deliveries to China, the Russian gas giant seeks to scale up LNG supplies to Asia-Pacific while trying to maintain its strong position in Europe.

The International Energy Agency (IEA) has urged German policy makers to promote the development of hydrogen technology and start importing LNG to advance its energy transition. The IEA lauded Germany’s “extraordinary progress with renewables,” but noted the “nuclear phase-out as well as higher electricity exports have offset some of the emissions benefits."

Not much unabated gas (without CCS) will be burnt in the European Union after 2040, as industry and transport sectors will be electrified to comply with low-carbon regulations, Energy Aspects finds. While Europe seeks to boost electricity in end-use sectors to 27 percent, and ultimately 30 percent, China and India just started on their electrification journey.

The Chinese Government is open to applications for tariff exemptions on several U.S. products, including crude oil and LNG, starting from March 2, 2020. The long-anticipated announcement was widely welcomed by traders, though there are concerns about long-term demand destruction due to the coronavirus outbreak.

Saudi Arabia, the world’s largest crude oil exporter, is gearing up to selling also natural gas and petrochemicals to global markets in a bid to diversify its economy. The Kingdom has been investing in gas exploration and recently made a large discovery in the Red Sea.

Pressure keeps piling up on the Northeast Asian LNG market as the coronavirus outbreak destroys demand. The Japan-Korea-Marker (JKM) for Apr-20 and Mar-20 delivery contracts trade at a discount to the Dutch TTF hub. For summer, Energy Aspects anticipates spreads as low as -0.15 $/MMBtu.

Warm weather and plentiful dry gas production has pushed down the daily spot price at the U.S. benchmark Henry Hub this winter heating season. A low-point of $1.81/MMBtu was reached at Henry Hub on February 10, while NYMEX gas futures traded as low as $1.77/MMBtu on the same day.

Alexey Miller, CEO of Gazprom, and the Government of Belarus have agreed on the pricing of Russian gas deliveries until the start of 2021. The transit volume of Russian gas is understood to remain at the same level, ensuring stable onward deliveries to Germany via the Belarus-Poland pipeline.

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News in Brief

Statkraft, GE enhance GB grid stability

July 10 – Statkraft and GE Power Conversion are working together to stabilise Britain’s power grid. To that end, GE will manufacture and install two Rotating Stabiliser synchronous machines at Statkraft’s site in Keith, Moray. Statkraft was awarded four stability contracts (two at Keith and two at Lister Drive) by National Grid ESO (NGESO) earlier this year.

Siemens Energy spin-off approved

July 9 – A large majority of Siemens shareholders have voted to approve the spin-off of the company’s energy business. The spin-off was approved by 99.36 percent of capital stock represented at today’s extraordinary shareholders’ meeting.

Central Hudson links solar farms to VPP

July 9 – Central Hudson Gas & Electric Corp has established its distributed generation program within the broader context of New York State’s energy plan. Together with Sensus and their Remote Telemetry Module (RTM-III), the Central Hudson will monitor decentralized solar PV backed up by flexible gas gensets.

Siemens and GREEN Solar turn German town CO2-free

July 8 – GREEN Solar and Siemens Energy are jointly developing a concept for making Herzogenrath CO2-free. The plan is to provide an energy-efficient and economical combination of solar power plants, wind turbines, batteries, CHP and combined cycle power plants, as well as heat and hydrogen storage. The hybrid system will be built on the grounds of Nivelsteiner Sandwerke and will be large enough to cover the city’s entire energy demand with zero CO2 emissions by 2030.

Denmark paves the way for Nord Stream 2

July 7– Denmark on late Monday gave the Nord Stream 2 consortium permission to utilize pipe-laying vessels with anchors in Danish waters, paving the way for the Gazprom-led consortium to complete the interconnector. Construction of the 1,230-kilometre pipeline is nearly complete, except for a final stretch of about 120-kilometers in Danish waters. The project was halted in December when the Swiss-Dutch pipe-laying company Allseas suspended works over threats of U.S. sanctions.

EPRI tests early warning system

July 6– The Electric Power Research Institute (EPRI) is conducting trial tests with multiple utilities across the United States of an early warning system. It can detect an off-gassing event as a precursor to thermal runaway up to 30 minutes prior to a cascading failure. This gives plant operators time to mitigate the problem or shut down the system.

KKR buys stake in First Gen

July 3 – Valorous Asia Holdings, owned by KKR investment funds, has bought a 11.9% stake in First Gen through a voluntary tender offer. First Gen, one of the Philippines’ largest independent power producers with 3,492 MW installed capacity, is owned by First Philippine Holdings which is controlled by the Lopez family. KKR’s acquisition of the First Gen stake is worth nearly $192.3 million.

Gazprom’s ‘BBB’ rating affirmed

July 2 – S&P Global Ratings, Moody's Investors Service and Fitch Ratings have affirmed Gazprom's long-term credit ratings as part of their annual reviews. The ‘BBB’ ratings for Gazprom from S&P and Fitch are in line with the sovereign credit rating of the Russian Federation, while Moody's ‘Baa2’ rating is a notch higher.

MHIEC to refurbish WtE plant in Kushiro

July 1 – Mitsubishi Heavy Industries Environmental & Chemical Engineering Co (MHIEC) has received an order from the Kushiro Wide-Area Federation to repair and improve the core equipment at the local Waste-to-Energy plant in Takayama. The WtE plant has a capacity of 240 tonnes per day (tpd). Renovation will increase the energy efficiency of the fluidized bed type gasification and ash melting furnace facility, reducing emissions by around 15% annually. Works are due completed in September 2023.

Nigeria: Only two of six power projects on target

June 30 – Nigeria’s Bureau of Public Enterprises has disclosed that only two out of six privatized power plants were delivered on target. Only Transcorp Power Ltd and Geregu Power Ltd out of the six privatised electricity generation companies (GENCOs) were said to have met their performance targets since taking over.

German investors prefer solar over wind

June 29 – Energy infrastructure investors are keen to build solar power projects in Germany, but shun wind parks. In the latest solar power auction, investors offered to build almost 450 MW of capacity – more than four times the 96 MW of volume on offer– with the average successful bid at 5.27 cents per kilowatt-hour (ct/kWh). The wind auction, in contrast, was undersubscribed: The German network agency  (BNetzA) tendered around 826 MW, but successful bids only totalled 464 MW, at an average price of 6.14 ct/KWh.

MAN ventures into synthetic fuels

June 26 – MAN Energy Solutions has entered the hydrogen economy with the recent pro rata acquisition of H-TEC SYSTEMS, an electrolysis tech firm. The German OEM also committed itself to upgrading its gas turbines to run on 100% hydrogen by 2030.

Varegro starts using Cummins gas genset

June 25 – Belgian-based horticultural company Varegro, has started to use a Cummins HSK78G gas generator to power its greenhouses in Oostrozebeke, West Flanders. Varegro said it selected the Cummins HSK78G genset to produce combined heat and power (CHP) on its premises at a competitive cost for use in energy-intensive greenhouse facilities.

GE names Deloitte as independent auditor

June 24 – GE’s audit committee has selected Deloitte as the company’s independent auditor for the 2021 fiscal year, replacing KPMG. The selection of Deloitte concludes GE’s latest audit tender process.

Northern German states push for hydrogen pilot cluster

June 23 – Northern German states are pushing for greater hydrogen use with a pilot project cluster. Some 12 large demonstration plants for the production and use of green hydrogen are meant to be realised in Hamburg, Schleswig-Holstein and Mecklenburg-Western Pomerania. The aim is to demonstrate how 75% of CO2 emissions can be saved in the region by 2035.

Wärtsilä to design and equip battery-powered ferries

June 22– The Finish engine maker Wärtsilä has been awarded a contract to design and equip two new zero-emissions ferries on behalf of the Norwegian operator Boreal Sjö. For each ferry Wärtsilä will supply the thruster motors, batteries, onboard and shore-based battery charging equipment, the back-up generators, and various electrical systems. The equipment is scheduled for delivery to the yard in early 2021 for the ships to start commercial operations in autumn 2021.

Subsidy cut slashes Chinese wind turbine margins

June 19 – China’s wind turbine original equipment manufacturers (OEMs) could have their gross profit margins halved due to subsidy cuts, Wood Mackenzie forecasts. Commissioned onshore wind power capacity is expected to drop by more than 16% to 19 gigawatts (GW) from 2020 to 2021 as government subsidies were terminated. This could also lead to a 27% drop in turbine prices over the next five years, slashing OEMs’ gross profit margins by half.

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