Group of 30 report sees bleak future for oil

A report by the Group of 30 (a group that analyses global economic issues) has argued that the present oil price slump is different to that of previous oil cycles, and that this will make it have deep long-term impacts around the world. The report, split into two papers, attributes the difference to the rise of shale oil production in North America, the challenges facing ‘traditional’ oil producers such as OPEC countries, and the global drive to a lower-carbon future. Advances in shale oil extraction technology have driven the rise of shale oil, and continuing technological advance may make oil shale industries economically viable in other countries, further challenging OPEC producers. Those producers have diverging interests – examples being Iraq’s wish to increase oil output to raise revenue for reconstruction, and Iran and Saudi Arabia ideologically opposed to each other and jostling for regional superiority – meaning they may not act in unison, weakening their collective power. Meanwhile, global oil demand is expected to remain relatively steady in the medium term, while supply increases, placing continued pressure on prices. The tactic of OPEC countries, largely driven by Saudi Arabia, to force North American shale oil producers out of business through low oil prices has had mixed success (much less than anticipated), but has also resulted in an estimated loss of US$390 billion (€354 billion) in revenues in oil-exporting countries in the Middle-East and North Africa in 2015 (where oil revenues can account for around 80-90% of total government revenues). A lack of fiscal discipline in some oil exporting countries has meant that little has been saved in boom years for the leaner years, which in such countries is creating social pressures that may in turn imperil oil production, though other countries have managed much better. Longer term (past 2030), oil demand may fall, and the second paper in the report argues that companies such as Chevron, Petrobras and Saudi Aramco, which rely on a traditional oil production approach, may be severely negatively affected, and those countries relying heavily on traditional oil revenues similarly impacted. To top it all off, the astronomical levels of debt in the oil and gas industry (the total seems to be around US$3 trillion/€2.7 trillion), may spark another global financial crisis if a significant portion of the debt turns bad, as some analysts are predicting. One perverse scenario has struggling oil companies ramping up output to meet debt repayments, but in doing so contributing to lower prices per barrel and lower profits, in a kind of downward spiral. The report makes very interesting and persuasive reading.

UK Committee on Climate Change outlines how the UK should respond to Paris Agreement

The UK’s Committee on Climate Change has released a report into what it considers should be the kingdom’s actions following the Paris Agreement on climate change. The recommendations are that no new UK emissions targets should be set; instead, the existing commitments should be pursued through new policies that further decarbonise power generation, improve energy efficiencies, and spread zero-emissions vehicles. Additionally, there should be a new focus on removing carbon dioxide from the air by afforestation, bioenergy with carbon capture and storage, the use of carbon-storing materials, and direct air capture and storage. While the recommendation not to set new targets may be surprising, the authors argue that the five-year periodic reviews which are part of the Paris Agreement provide ample opportunity for resetting goals, and that the present goals are ambitious enough for the time being. Amongst the technical recommendations is support for carbon capture and storage development as well as a transport network for CO₂ analogous to a stormwater or sewage network.

Statistics chart coal’s recent decline in the US, point towards slight improvement

Reuter’s John Kemp has taken a look at the fortunes of the coal industry in the US, which contains some striking statistics. From having around 600 working coal-fired power plants in 2010, there are now only around 300, with the total output from coal-fired plants dropping by 37% in the same period, in contrast to a 45% increase for gas-firing. These are the effects of the North American shale gas boom, as well as more stringent emissions limits. The output from operating coal plants has reduced from 65% of maximum capacity in February 2015 to 48% a year later, meaning that power generators’ coal stockpiles have been rising. Recent gas price rises are now leading to some rebalancing, and it is thought that the relatively warm winter of 2015-16 will not be repeated in the coming winter, and consequently more power will be required. Mr Kemp did not comment on the longer-term prospects for coal.

Sri Lanka introduces daily power outages after coal-fired power station breaks down

Sri Lanka is to introduce a daily nationwide 90-minute power outage, the country’s state-run power firm Ceylon Electricity Board has announced, after another breakdown of a 900 MW plant coal-fired power plant with a habit of breaking down. The Chinese-built plant was commissioned in March 2011 and has broken down more than 20 times since then, four of them being earlier this year. Because the country has a demand for only 2.2 GW of electricity, the outage of the plant causes massive disruption. It is unclear whether the plant will be overhauled or how long the blackouts will continue.

UK National Grid buys additional fossil-fired backup generation capacity to cover for winter

The Financial Times has looked at the moves by the UK’s National Grid to sure up the kingdom’s winter power supplies by purchasing additional standby capacity from coal and gas-fired power plants. The purchases of the standby capacity of 10 plants raises the buffer capacity from a projected 1.1% to 6.6%, a level considered enough to cope with any disruptions to operating generation capacity. The reaction to the purchases has been mixed, with think tank Energy and Climate Intelligence Unit saying that it shows the flexibility of the current system to cope with a changing energy mix that features a higher proportion of renewables, while the FT itself appears to find the situation more of a problem, highlighting a National Grid report which says that wind power generation can only be assumed to be available 21% of the time, and noting that solar power generation is much less effective in the British winter compared to the summer (in which this year, solar for the first time produced more power than coal in the UK). The coming years will demonstrate the actual ability of the system to cope with the supply challenge as large plants close.

Global CO2 Initiative to fund commercialization of ‘trees on steroids’

A new company, Global CO2 Initiative, has been launched with up to US$100 million in funding to finance the development and commercialization of means to capture and reuse of carbon dioxide. CEO Dr Issam Dairanieh told Carbon Brief that what the company aims to do is bring into being ‘trees on steroids’ – techniques to quickly capture carbon and use it usefully. He pointed to their identification of “a company that produces cement and concrete at a carbon footprint 70% less than what’s currently done”, as well as opportunities for capturing carbon from sources in which the CO₂ is close to pure – methane reforming processes in refining, and biomass fermentation to produce biofuels. The global board of the Global CO2 Initiative includes Steven Chu, the former US secretary of energy, and Jeremy Oppenheim, programme chair of the New Climate Economy project.

DOE and CanmetEnergy open 1 MW oxy-fired test facility for carbon capture, utilisation and storage research

A new 1 MWth oxy-fired pressurized fluidized bed combustion test facility has been opened in Ottawa, Canada, funded by the U.S. Department of Energy and Natural Resources Canada through CanmetEnergy. The facility will test processes to capture CO₂ for storage and utilisation in conjunction with oxy-fuel firing, with the project being led by the Gas Technology Institute (GTI) in partnership with the Linde Group, the Electric Power Research Institute, Alstom Power and Alberta Innovates, and managed by the DOE’s National Energy Technology Laboratory. It promises to be a project of high interest to the combustion industry.

EDF agrees to sell coal trading arm to Jera

In an update to a story from earlier in the year, a deal to sell EDF’s coal trading business Jera, the Japanese energy trading venture co-owned by Tokyo Electric Power and Chubu Electric Power, has now been agreed. The deal improves EDF’s balance sheet and helps to move the company towards a lower-carbon image, while for Jera it significantly strengthens its market power at a time when Japanese utilities are burning more fossil fuels. Both companies have declined to state the price of the deal.