Markets

Flow data shows U.S. natural gas output in the Lower 48 states has gained 7.0 billion cubic feet per day y/y to date in January, as shippers struggle with restrictions across the TETCO pipeline network in Appalachia. The return of cold weather this week, and long-term rig decline across Appalachia, starts to drag down production and pushes up gas prices.

The Japanese government keeps watering down its green energy goals, bowing to cost pressure in the face of slower macroeconomic growth. Ambitious targets to decrease gas and coal generation to 27 percent and 26 percent shares, respectively, and offset that lost capacity with nuclear and renewables, are no longer being pursued.

Gassco, the Norwegian natural gas pipeline operator, has transported 106.99 billion cubic metres of gas from Norway to northern Europe and the UK in 2019 – just above the volume of Australian LNG exports in the same year.

China’s Blue Sky Policy envisages boosting the share of natural gas in the energy mix from currently 7.5 percent to 15 percent by 2030 which requires substantial investment in LNG and pipeline import capacity and related infrastructure. Imports are forecast to meet more than 70 percent of gas consumption in Greater China in 2040.

Spot gas prices at the U.S. benchmark Henry Hub in Louisiana have fallen to their lowest level in the past year since 2016 as domestic production keeps growing. “Lower natural gas prices in 2019 supported higher consumption – particularly in the electric generation sector – and higher natural gas exports,” EIA analysts commented.

Gazprom has just launched TurkStream, a two-string gas pipeline through the Black Sea to Turkey with a combined throughput capacity of 31.5 billion cubic meters (Bcm). The first string will deliver Russian gas to Turkey, while the second string is intended for gas transit to southeastern Europe.

The energy portion of the S&P Goldman Sachs Commodity Index (GSCI) has risen faster than other commodities over the course of 2019 with prices of WTI and Brent crude oil up 31 percent and 20 percent, respectively. In contrast, natural gas futures sold on NYMEX fell 26 percent to end the year at $2.19/MMBtu — the largest decline of all commodities in the index.

Traded volumes of natural gas in European brokered markets have soared nearly 22% to reach 30,496 TWh in the period from January-November, according to the London Energy Brokers’ Association (Leba). Volumes on the Dutch TTF – Europe’s most liquid hub – increased over 21%, while UK NBP trading fell nearly 27%.

Germany’s largest utility Uniper strives to fast-track permitting and construction of a floating storage and regas unit (FSRU) in Brunsbüttel to importLNG from Australia, among others.To that end, Uniper agreed with Woodside Energy Trading Singapore to import 0.5 mtpa initially from 2023, which will be increased to 1 mtpa by 2025.

Germany's expansion of renewable energy sources will be unable to keep up with future demand growth, leading the country to miss its renewable targets in its 2030 power generation mix, say researchers from the Institute of Energy Economics at the University of Cologne (EWI).

Keen to maximize China’s domestic oil and gas production and streamline imports, the government in Beijing’s is taking steps to bundle all onshore trunk pipelines owned by PetroChina, Sinopec Group and CNOOC into one single transmission system operator (TSO). Wood Mackenzie reckons China’s new state TSO could be worth up to $105 billion and is likely to lead to higher end-user energy prices.

Strong economic growth in Asia and other non-OECD countries is forecast to push up the world’s energy consumption by nearly 50 percent over the next three decades. According to the U.S. government projections, industry accounts for most of the energy demand growth and is expected to reach about 315 quadrillion British thermal units (Btu) globally by 2050.

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News in Brief

Zhonghua’s profits halve

April 1 – Hong Kong-listed Zhonghua Gas Holdings has recorded a staggering 46.7% fall in profit, citing a lower margin for LNG supplies and reduced subsidies, although full-year revenue rose by 7.3%. In December, Zhonghua partnered with Shanghai Shenergy to supply LNG in the Yangtze River Delta region, and also has strong business relationships with Tractebel Engineering and Tianjin Jinre Heat-Supply Group.

Endesa donates $28m to fight coronavirus

March 31 – Endesa has created a 25 million euros ($27.8 million) fund to help fight the coronavirus pandemic in Spain. The Spanish utility, subsidiary of Enel, said the fund will be designated for purchases of protective equipment for health-care workers.

 

MAN develops liquid methane terminal in Swedish port

March 30 – OxGas has commissioned MAN Energy Solutions to act as ‘owners engineer’ to develop and build a liquefied methane-based fuels terminal in the Swedish Port of Oxelösund. The terminal will feed both LNG and green methane derived from bio gas to SSAB ’s local steel production, and to re-distribute it via train and trailers to other parts of Sweden for use in the steel industry and decentralized power generation.

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.