Markets

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.

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.

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News in Brief

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.

MIVOLT launches cooling fluid

May 7 – MIVOLT, part of the British company M&I Materials, has launched two specialist fluids to improve cooling efficiency at data centres. The electricity demand of data centres is forecast to rise to 20% of global supply to accommodate lifestyle changes like 5G internet network, autonomous vehicles and bitcoin mining.

Germany adds 1,300 km to power grid

May 6 – Germany has made progress in expanding its strained power grid. According to the Federal Network Agency (BNetzA), over 1,300 kilometres of new power transmission lines have been built and another 830km approved. A further 3,600km are planned to be built by 2030 to alleviate grid bottlenecks and allow transporting rising volumes of offshore wind southbound.

 

 

 

Oman nationalizes first IPP

May 5 – Manah Power, the first privately-run Independent Power Project (IPP) in Oman, has been transferred to state ownership, following the expiry of a Power Purchase Agreement (PPA) between United Power Company and state-owned OPWP. Manah IPP was developed under Build-Own-Operate-Transfer (BOOT) model, which stipulates an eventual nationalization of the assets – a feature absent in subsequent IPPs.

U.S inventories at record highs

May 4 – Inventories for crude oil and natural gas have reached a new record high in the United States, as fuel demand declines both for transport and the electric power sector. From March 13 – when a national emergency was declared due to the Covid-19 pandemic – to April 24, U.S. commercial crude oil inventories increased by 74 million barrels, or 16%, according to government figures. The acute scarcity of crude storage on April 20 led to a sell-off of future contracts at negative prices.