Markets

Despite targeting Net Zero by 2060, China’s gas demand is expected to rise for another two decades before peaking in the mid-2040s at above 660 bcm. Around half of China’s demand needs to be covered by imports which poses a massive opportunity for Gazprom, Wood Mackenzie says, considering Europe’s demand is currently 520 bcm, and declining fast.

Sizable US LNG supply contracts with destination flexibility are giving Chinese buyers like Sinopec, ENN and China Gas the clout to set up LNG trading desks in Beijing, Singapore and London. Resorting to coal and renewables for power generation at home, as well as CNPC’s higher pipeline gas purchases from Russia help free up LNG for sale abroad.

Russia has threatened to halt gas supplies through the Nord Stream 1 pipeline if the West imposes a ban on Russian oil, as proposed by the US. Deputy Prime Minister Alexander Novak said “a rejection of our oil would lead to catastrophic consequences,” making oil prices more than double to $300 a barrel with stark ramifications on global gas markets.

Electricity producers cash in on high prices that are well above costs for operations and capital recovery. Assuming gas prices at €22 per MMBtu and CO2 prices at €90 per tonne, the International Energy Agency (IEA) expects utilities will reap excess profits of up to €200 billion in the EU in 2022.

The Chinese government has diversified energy imports and is boosting domestic oil, gas and coal production to keep prices under control. The People’s Republic imports more than 70% of oil and 40% of its natural gas needs from overseas, but claims the impact of spiralling global prices would be “manageable” as it resorts to coal.

The European Union could curb Russian gas imports by a third within one year by minimizing offtake under take-or-pay contracts and replacing 30 bcm – out of a total 155 bcm of Russian supply – with alternative sources, the International Energy Agency (IEA) reckons. Adding 35 TWh of new renewable projects in 2022 would lower gas-burn by a further 6 bcm.

By 2050, approximately 25% more natural gas will be produced than consumed in the United States. However, more than 35% of gross additions will be exported – mostly as LNG – while the share of gas-burn for power generation stays constant, at about one-third from 2021 to 2050.

Germany has decided to fast-track works on two LNG import terminals to reduce dependence on Russian pipeline gas. Chancellor Olaf Scholz said the terminals would be in Brunsbüttel and Wilhelmshaven – for the latter Uniper was asked to revive plans, shelved in 2020. Both terminals could also import hydrogen to fuel the green energy transition.

Germany could soon have its first LNG terminal as Hanseatic Energy Hub, developer of an 8.8 mtpa liquefaction plant in Stade on the Elbe River, will seek planning permission for the €800 million project this summer. “In the most favourable case, the approval process could take one-and-a-half years and then building starts,” said Hanseatic Energy partner Johann Killinger.

Unregulated crypto mining has grown rapidly which risks to disrupt the energy sector in emerging markets, Fitch Ratings warns.  Electricity makes up 90% of crypto mining costs, hence Bitcoins are often produced in countries with low cost, state-subsided energy. With 125 TWh electricity demand per year, crypto miners curtail energy supply for local industry.

Russia’s former President Dmitry Medvedev has warned Europe's gas prices could go through the roof after Germany suspended the $11 billion Nord Stream 2 pipeline project over the escalating Ukraine crisis. "Welcome to the new world where Europeans will soon have to pay €2,000 per thousand cubic metres!" he tweeted – suggesting prices will double.

High spot prices are spurring a rise in marketed gas production in the United States to a record 106.6 billion cubic feet per day (Bcf/d). According to government forecasts, production from new wells in the Lower 48 states will more than double to 37.8 Bcf/d, offsetting falling output from legacy wells and lifting total L48 production to 103.7 Bcf/d in 2023.

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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.