Markets

Plummeting oil prices impact U.S. fracking activities. With Brent crude oil prices seen average $43 a barrel in 2020, down from $64/bbl last year, the Government expects shale oil and gas output to decline. Spot gas prices at Henry Hub are forecast to rise starting from April, amid higher demand from the power sector, exceeding $2.2/MMBtu in the third quarter of 2020.

Financials of Indonesia’s state utility PLN are burdened by excess electricity, notably on the Java-Bali grid, which could be oversupplied by 41.5% in 2020. PLN is facing mounting criticism that the ongoing construction of mega-projects is “unnecessary,” hence government targets to add 35 GW of new capacity by early 2020 have been pushed back to 2029/30.

German utility Uniper has lifted its full-year earnings outlook in reaction to the recent revival of the UK capacity market programme which compensates power producers for dispatching plants at short notice. Uniper, subject to a takeover bid from Fortum, said today it aims to achieve up to €950 million in EBIT, lifting targets from initially €850 million.

Crude oil prices have edged up some 10 percent and natural gas prices start to stabilize in reaction to President Trump’s promise of a “major” economic relief package to cushion the impact of the coronavirus crisis. Oil prices plunged nearly 30 percent yesterday after Saudi Arabia decided to flood the market with cheap fuel to recapture market share.

The International Energy Agency (IEA) has modeled how oil and gas demand could evolve, dependent on contingency measures against the coronavirus. In a more pessimistic low case, global measures fail to contain the virus and oil demand falls by 730,000 barrels a day worldwide in 2020.

Crude oil prices plummeted over the weekend after Saudi Arabia decided to slash price and flood the market in a bid to recapture market share, opening a price war with Russia. Rock-bottom oil prices affect long-term oil-indexed gas contracts helping the latter outcompete coal as a fuel for power generation.

Buyers in India are stepping up LNG imports, taking advantage of distressed cargoes from Northeast Asia where demand plunged in the wake of the coronavirus outbreak. India has proven capable of increasing LNG imports at short notice to source cheap fuel for power generation.

In Asia, indoor farming is becoming a critical enabler of food security. However, this highly energy intensive process of plant growing requires an electricity price of 3-5¢/kWh to breakeven, U.S. indoor farmers disclosed. In Japan it’s even higher, Wood Mackenzie noted.

Despite the coronavirus outbreak, China’s natural gas demand and LNG offake has rebounded in February as the government is keen to reinvigorate industrial output as much and as quickly as possible. Chinese LNG offtakes in February were more than 21 percent higher year-on-year, compensating for the y/y reduction seen in January.

Cash-strapped McDermott International, a global EPC contractor, is moving forward with the previously agreed sale of Lummus Technology after having received no higher bids. Lummus will be sold for $2.725 billion to the Chatterjee Group and Rhône Capital, with proceeds used to repay McDermott's debtor-in-possession (DIP) financing.

Russia’s Gazprom is playing hardball to reduce cost of its three main sub-holdings: Mezhregiongaz, Energoholding, and Gazprom Export by 2 percent. From 2020, Gazprom will review and approve budgets separately to tighten its grip on the units’ operations and investments.

Iranian power plants have suffered fuel shortages this winter as “severe cold weather” pushed up natural gas demand for power generation and heating, the energy ministry said. To meet demand, Iranian developers strive to finalize the construction of 3 GW additional capacity by March 19.

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News in Brief

American ISOs to delay grid investments

March 27 – North America’s independent system operators (ISO) are considering delaying investments in grid upgrades and enhancement as electricity demand weakens due to industry shutdowns to contain the coronavirus pandemic. PJM Interconnection, the largest U.S. bulk power market which spans 13 Mid-Atlantic and Midwestern states, revised its daily forecast of about 100,000 MW of load but actual demand came in at 95,500 MW.

Wärtsilä starts combustion trials using ammonia

March 26 – The Finish technology group Wärtsilä has initiated combustion trials using ammonia in an effort to reduce emissions. Based on initial results, the tests will be continued on both dual-fuel and spark-ignited gas engines, followed by field tests in collaboration with ship owners from 2022, and potentially also with energy customers.

Xodus sees growth in cable services

March 25 – Xodus Group has stepped up services related to subsea power cables over the last twelve months. The number of new consulting assignments grew by more than 50%, resulting in more than 70 active work streams that are handled by more 30 permanent staff.

Electricity “more indispensible than ever”

March 24 – Disruptions caused by the coronavirus crisis lay bare how much modern societies rely on electricity, according to the International Energy Agency (IAE). Millions of people are mandated to stay home, causing a surge in teleworking, e-commerce and video streaming which pushes up domestic electricity use.

U.S. frackers cut Capex

March 23 – Sharp cuts in capital spending among Appalachian gas producers are now being replicated in other U.S. basis, with Energy Aspects anticipating the deepest impact on production and earnings to take place starting from the second half of 2020. So far, E&P companies just hedged 52% of this year’s expected production even though some Appalachian producers are seen “lock in some pure gas volumes at prices above the curve.”

EV makers face bankrupcy

March 20 – Electric vehicles (EVs) remain particularly exposed to the corona effect of supply-side constraints and demand erosion. Gigafactory facilities are likely to be delayed and fledging EV manufacturers could face bankruptcy, Wood Mackenzie warns. On the flip side, declines in EV sector demand may be gains for the stationary energy storage segment.

Manufacturing rebounds in Asia

March 19 – Asian-dominant supply chains for solar and energy storage are gradually rebounding after contractions in February. Moving forward, Wood Mackenzie expects near-term development activity and local logistics in leading European and North American markets will outweigh lingering supply issues.

Italy’s gas demand plunges

March 18 – Corona-struck Italy has seen demand for natural gas plunge 8% from the previous week, with similar declines likely in other EU countries as national governments impose lockdowns to contain the virus. Industrial demand is “particularly volatile,” while gas generators will bear the brunt of demand loss, Wood Mackenzie says, as a carbon price decline is bolstering thermal coal.

Nexif raises funds for Rayong CHP

March 17 – Nexif Energy, a joint venture between Singapore-based Nexif and Denham Capital, has raised project financing for the Rayong gas-fired cogeneration project in Thailand. The 92 MW plant is being developed project with Ratch Group, based on 25-year power purchase agreement with Electricity Generating Authority of Thailand (EGAT).

ADB provides $10m loan for Afghan IPP

March 16 – The Asian Development Bank (ADB) has agreed to provide $10 million in debt financing for a gas-fired power unit in Mazari Sharif with a capacity of nearly 60 MW. Phase-1 of the Independent Power Project (IPP) will get another $10 million loan from the Leading Asia's Private Sector Infrastructure Fund (LEAP).

IEA models 50% Carbon-Free Generation

March 13 – Analysts at the U.S. Energy Information Administration (EIA) have drawn up the 50% Carbon-Free Generation case - assuming a stark shift in state-level policies. In this event, the U.S. would have 19% more nuclear power generation, 10% more wind power and 17% more solar PV contribution than in its Annual Energy Outlook 2020 (AEO2020) reference case.

E-charging market to top $15bn by 2030

March 12 – By 2030, the U.S. market for energy-optimisation in support of charging electric-vehicles could be worth $15 billion per year, McKinsey finds. The consultancy expects high demand for home-charging appliances as residential power tariffs are comparatively cheap and most charging can happen overnight when off-peak electricity prices are lower.

Oversupply builds up

March 10 – Energy Aspects’ end-March forecast has added on another 100+ billion cubic feet of natural gas supply while demand remains subdued. In the U.S., the seasonal decline in heating degree days nearly halved the natural gas withdrawal rate. Gas-burn in the power sector and residential/commercial demand are forecast to fall by 1.7 billion cubic feet per day (bcf/d) and 4.0 bcf/d, respectively.

Small-scale LNG cuts cost for power plants

March 10 – Decentralized gas power plants in remote locations can source cheaper fuel from small-scale LNG regas terminals than from trucking the super-chilled gas across long distances. “Trucking LNG further inland would entail additional costs as well as logistical challenges,” IEA analysts noted. For example, a 100 MW baseload power plant would require, on average, around 20 daily deliveries from tanker trucks.

Abu Dhabi investor expands Uzbek CCGT

March 9 –Some key Uzbek energy infrastructure is being modernized with foreign monies. Abu Dhabi-based Mubadala Investment Company recently agreed with JSC Thermal Power Plants and the Uzbek government to acquire, finance, develop and operate the 1.7 GW Talimarjan Power Complex.

Oversupply keeps growing

March 6 – In its fourth quarter report, Awilco LNG warned that demand is now unable to keep up with strong gas production growth. Gas demand from China’s industry and power utilities, the world’s second largest LNG importer last year, has fallen by 10-14% thus far in 2020.

Simatic IOT2050 gateway launched

March 5 – Siemens’ newly launched Simatic IOT2050 links cloud, in-company IT and production. Energy companies, and others, can retrofit the solution in existing plants, where it then harmonizes communication between different data sources, analyzes the data, and passes it on for evaluation to a cloud.