Markets

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 government 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 coal.

Fallouts of the corona pandemic could slow South Korea’s electricity consumption by nearly 2% this year as manufacturing, exports and private consumption grind to a near-halt. Fitch Solutions says that Korea’s manufacturing sector is hit hard due to its large exposure to Chinese supply chains in the first half of 2020.

Volatility in oil and natural gas trading has risen sharply after OPEG and Russia failed to agree on production cuts – despite demand destruction due to the Covid-19 outbreak. Traded volumes for energy futures at the derivatives marketplace CME reached a daily record of 6.8 million as traders strive to hedge their positions.

Germany's largest coal power plant operator RWE has shifted to invest in renewables as earnings from its 2.9 GW lignite and nuclear portfolio may fall to €200 million, or even net zero from 2023 due to mandatory plant closures. RWE said it wants to add 4 GW of wind and solar capacity by 2022, at a cost of €5 billion.

Saudi Aramco is taking steps to rationalize its planned 2020 capital spending after posting a 21% plunge in 2019 net profits due to faltering oil prices and sluggish demand. CEO Amin Nasser underlined the “importance of agility and adaptability” while responding to the world’s “rising desire for cleaner energy.”

Kuwait’s Electricity & Water Ministry (MEW) is seeking to privatize the North Shuaiba dual fuel combined-cycle power plant over the next three years. Investors are hesitant, however, given the low dispatch of the mostly gas-fuelled combined-cycle power unit with load factors at 55% on average.

Nova Gas Transmission Ltd. (NGTL), part of the Canadian pipeline company TC Energy, has signed a letter of intent with Tidewater Midstream and Infrastructure and TransAlta to acquire the Pioneer Pipeline for C$255 million (US$185m). The pipeline supplies West Canadian gas to power generation units in wider Alberta, supporting coal-to-gas conversions.

Though the latest oil price crash hits U.S. upstream companies, for Asian buyers it’s a blessing as the pricing of oil-indexed long term gas contracts is bound to come down from late 2020. Sustained lower oil price will substantially lower the price of gas which could prompt large scale coal-to-gas switching for power gen in Japan, South Korea and parts of China.

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.

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News in Brief

Siemens to service Kalamkas gas turbines

June 4 – JSC Mangistaumunaigaz, one of Kazakhstan’s largest oil and gas producers, has contracted Siemens to service two STG-800 gas turbines at a power plant, designed to meet the entire energy needs of the nearby Kalamkas oil and gas field. The nine-year contract covers turbine maintenance and eventual upgrades as well as remote monitoring of operations.

NamPower to invest $575m on grid expansion

June 3 – Namibia’s state-owned utility NamPower is planning to spend $575 million over the next three years in upgrading and extending its power transmission infrastructure. Namibia imports 60% of its total electrical energy requirement, primarily through bilateral contracts from South Africa’s Eskom and to a lesser extent, the Southern Africa Power Pool (SAPP).

UK TSOs call for £900m green gas investment

June 2 – Britain’s five gas network companies – Cadent, National Grid, NGN, SGN and Wales & West Utilities – have urged the Government to unlock over £900 million (€1bn) for new green gas infrastructure. Research by the Energy Networks Association (ENA) shows that if investment into zero-carbon hydrogen infrastructure started today, the UK could save energy bill payers £89 billion (€99.2bn) by 2044 – five years prior to its 2050 net-zero targets.

Exxon, INNIO about to launch gas engine oil

June 1 – ExxonMobil and INNIO have announced the imminent launch of their first co-engineered and co-branded natural gas engine oil. The U.S. oil major and the Austrian engine maker have just extended their global lubricant collaboration agreement for INNIO’s Jenbacher Type 2, 3, 4, 6 and 9 natural gas engines.

BelGAS launches new pressure regulator

May 29 – BelGAS has introduced its new P1098 High-Capacity Pressure Reducing Regulator, a large-volume regulator for natural gas, propane and other fuels. The pilot-operated device has a large-area actuator diaphragm, allowing for fast and accurate response to modulating gas flow conditions. It is adaptable for low to extra-high pressure—up to 400 psi main valve inlet.

GE to sell lightning business

May 28 – GE has signed a definitive agreement to sell its lighting business to Savant Systems, a provider of smart homes. CEO H. Lawrence Culp called the divestment “an important step in the transformation of GE into a more focused industrial company.” The transaction is expected to close in mid-2020.

China’s fuel demand recovers

May 27 – The Chinese government has lifted restrictions on private travel since April which pushed up demand for transport fuels. Gasoline demand has recovered particularly fast and is expected to return to last year’s levels by June 2020. Wood Mackenzie estimates gasoline consumption to reach 3.4 million barrels per day (b/d) in the second quarter, down just a 0.8% year on year. Diesel or gasoil demand is expected to reach 3.4 million b/d in Q2 2020, a 3% decline year-on-year. Overall, China’s oil demand is seen rise a “modest” 13.6 million bpd, or 2.3%, in the second half of 2020.

Wärtsilä to retrofit CHP in Spain

May 26 – The Finish engine maker Wärtsilä has bagged an order to supply and install a 34SG gas-fuelled engine generating set for Rofeica Energia's combined heat and power plant in Barcelona, Spain. The installation of the gas engine will allow Rofeica to switch the CHP from heavy fuel oil to gas-fuelled operation, reducing emissions.

New York body rejects William’s plans for gas pipeline expansion

May 21 – New York’s and New Jersey’s state bodies for environmental conservation have rejected Williams’ plans for the Northeast Supply Enhancement project, designed to transport 400 million cubic feet per day of gas from Pennsylvania to New York. The state bodies had already denied wetland permits in 2019, but Williams pipeline subsidiary Transco filed another application with the U.S. Federal Energy Regulatory Commission (FERC), arguing firm services under the project were agreed with UK’s National Grid for customers in New York City districts of Brooklyn, Queens, Staten Island and Long Island.

UK inflation at 4-year low amid falling energy costs

May 20 – The rate of inflation in the UK has fallen to a four-year low as the pandemic pushed down global oil and fuel prices which translate into lower wholesale power prices. The consumer price index fell to an annual rate of 0.8% in April, down from 1.5% in March, according to the Office for National Statistics.

Deficit grows in German green energy fund

May 19 – German regional grid operator TransnetBW has warned of a growing shortfall in the country’s fund for green energy sources, financed under the so-called renewable energy (EEG) levy. TransnetBW, the TSO in southwest Germany, said “due to the EEG cost allocations defined for 2020, we anticipate there will be a negative year end bank account balance in the high three-digit million euro range for 2020.”

Spanish gas companies ‘resilient’

May 18 – Spain’s regulated gas companies “should prove to be resilient” to external shocks arising from coronavirus containment measures, Standard & Poor’s analysis finds, calculating with an average drop in EBITBA at less than 3% in 2020. A new remuneration framework for 2021-2026, recently enacted by the Spanish government, provides enhanced visibility rated grid operators amid the pandemic.

German electricity prices second highest in EU

May 15 – Taxes and the renewable energy surcharge have pushed up Germany’s household electricity prices to the second highest level in Europe, topped only by prices in Denmark. While Danish households paid 29.2 Euros per 100 kWh on average in the second half of 2019, prices in Germany averaged 28.7 Euros, according to the EU statistics office Eurostat.

Calpine’s Q1 earnings fall

May 14 – Calpine, America’s largest generator of electricity from gas and geothermal, has reported a net income of $128 million for the first quarter of 2020, down from $175 million in the prior year period. Lower commodity margins and unfavourable change in income taxes were partially offset by earnings from hedge positions for the three month ending March 31.

Siemens to supply hybrid plant in the Philippines

May 13 – Berkley Energy has contracted Siemens Energy to build a hybrid power project on the island of Mindoro in the Philippines. The project links 16 MW wind power with battery storage, stabilizing energy supply in a remote location with a weak link to the grid and reducing its dependence on diesel.

U.S. energy emissions fall

May 12 – Energy-related carbon emissions in the United States have fallen more than energy consumption, down 2.8% over the course of last year to 5,130 million metric tons (MMmt). Power sector emissions were down 145 MMmt, due to a switch from coal to gas and renewables. In April 2020, emissions experienced another unprecedented fall in due to Covid-19 lockdowns.

MAN expands Omincare concept

March 11 – MAN Energy Solutions’ service brand has extended its ‘PrimeServ Omnicare’ concept from turbomachinery to the marine and power segments. The one-stop service solution is now also applicable for maintenance of third-party machinery, including engines, turbochargers and related auxiliaries.