• Combustion Industry News

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      Patrick Lavery

      Combustion Industry News Editor

Mexican industry enjoying benefits of cheap US shale gas

While last fortnight saw a report that US manufacturing had not yet boomed, as predicted, following the advent of cheap North American shale gas, a separate story in the last week has claimed Mexican industry has done just that. Imports of US shale gas to Mexico rose 11% in the last year, with industrial use of natural gas having doubled since 2009. Honda and Mazda both opened new car-making factories earlier this year, while plants are currently being built by Volkswagen and a Daimler/Renault/Nissan alliance. BMW has announced it will have a plant open by 2019 in the country, and Kia has also announced plans for a new Mexican plant. Meanwhile, new gas pipelines are being built on both sides of the border (on the Mexican side with the involvement of GDF Suez) to move shale gas from the US into Mexico, and more are being planned. While in fact the difference in the timing of the booms may be partly a difference in the perspectives of separate journalists, the historical trend of a shift of manufacturing from the US to Mexico may have meant that a kind of manufacturing momentum was on Mexico’s side (driven by cheaper labour); in addition, The Wall Street Journal suggests difficulties in building gas pipelines within the US (due to community and environmental opposition) may have contributed to more gas being piped across the national border. Fuel oil firing for power generation within Mexico is expected to decrease in the coming years, to be replaced by gas firing.

Mexico takes first steps in liberalising energy market

In related Mexican news, the country last month began liberalising its energy sector, removing monopoly powers by allowing private investment in oil production and refining, a move that Mexican governments had been trying unsuccessfully to do since 1982. The state oil company, Pemex, will now face competition from private companies in exploring, extracting and refining oil, where previously they could only work for Pemex under service contracts. It is speculated that further energy liberalisation will occur in Mexico over the coming years, and may lead to the country becoming a major producer of shale gas. It is estimated to have the world’s sixth-largest reserves, and if in the coming years significant LNG shipping export infrastructure is developed in the US, it may be that Mexico will be able to take advantage of it to become a major international exporter of gas. In any event, it seems Mexico will enjoy cheap gas for decades to come.

Peabody Energy chief executive upbeat about future of coal

The chief executive of Peabody Energy, Greg Boyce, has given an interview to The Wall Street Journal expressing his belief that the finances of the coal industry will pick up in the coming years. Peabody has doubled its level of debt to $US 6 billion (€4.6 billion) in the last four years (mainly for the purposes of acquisitions), and recorded losses in the last three years, including $US 1.1 billion (€849 million) over the last two. Mr Boyce believes, however, that this has mainly been due to a trough in the typically cyclical coal industry, which will pick up as demand from the Asia-Pacific increases in coming years. He also defended the reputation of coal, pointing out that coal use has risen by 200% since 1970 but (non-carbon, i.e. SOx, NOx, mercury and particulates) emissions have fallen almost 90%, with carbon emissions next in line. He further stated that coal-firing helps alleviate energy poverty by providing cheap energy.

IEA: Sharp drop in the growth of oil demand “nothing short of remarkable”

The latest monthly Oil Market Report by the International Energy Agency has described the sharp drop in the predicted growth of oil demand over the last month as “nothing short of remarkable”. The wording may be somewhat misleading, however – worldwide demand is still forecast to grow by 1.3% next year, and 0.9% this year, but these estimates are down from last month’s estimates (the 2015 forecast of growth rate is down by 12%, from 1.365 million extra barrels per day to 1.2 million). The softening of the predicted growth in oil demand precedes weaker global economic growth to be predicted by the International Monetary Fund next month, with growth in Europe and China in particular predicted to be less robust than previously expected. Oil futures prices have been falling since July, as disruption to production in Iraq (due to conflict) has been offset by booming production in Libya (despite the conflict there), such that supply is still strong while demand has softened.

UK seeks emergency supplies of electricity for coming European winter

The UK’s National Grid has been forced to seek emergency electricity supplies for the coming European winter because of the risk of shortages of output from the UK’s power stations. Fires at the coal-fired Ironbridge and Ferrybridge power stations, and emergency shutdowns at two of EDF’s French nuclear-power stations, have put out of operation around 3 GW of generation capacity for the coming winter, raising the overall risk of a shortfall in electricity from ‘modest’ to ‘an increased level of uncertainty’. The National Grid plans to run a tender to extend reserve capacity to meet the potential shortfall.

Israel to supply Jordan with gas in 15-year deal

Israel is to supply Jordan with natural gas from its off-shore Leviathan fields, in a 15-year deal with an estimated value of $US 15 billion (€11.6 billion). US-owned Nobel Energy, and Israel’s Delek, the two main owners of the Leviathan project, agreed the non-binding letter of intent (to be formally signed next year) with Jordan’s state-owned National Electrical Power Company, after much political negotiation and the involvement of the US State Department. If the deal is sealed next year, it will secure energy supply for Jordan, which has struggled to find an affordable fuel source since supply from Egypt broke down in 2011. However, the deal will not commence until at least 2017, when the Leviathan fields are due to commence production; in the meantime, a pipeline linking the fields to Jordan must be built. The two countries signed a peace-deal in 1994, but political tensions have been high recently due to the Israel-Gaza conflict.

Indian coal ruling postponed

The last edition of the Combustion Industry News carried a story on the Indian Supreme Court’s ruling that all private coal mining licenses given over the last 20 years were illegal. A decision on what should be done with them was to come in the following week. While options discussed by government officials included re-auctioning the ‘blocks’, or having Coal India take them over, the Supreme Court announced that it was postponing the decision to an unspecified date, giving the impression the court feels more consideration of the impacts on India is required.

Plans afoot to revive Grand Inga hydroelectricity project

A story in the Financial Times has drawn attention to the growing momentum behind a revival of plans to build the Grand Inga hydroelectricity project in the far west of the Democratic Republic of Congo. With the World Bank already backing the project, South Africa having agreed to buy some of the power, and Chinese and American investors showing signs of cooperating, there is a definite seriousness being given to the project’s prospects. If undertaken, the project, consisting of several dams and hydroelectric power plants, would have a combined capacity of 42 GW, making it almost twice the capacity of the Three Gorges Dam project in China, currently the world’s largest power generation facility. Such an enormous amount of electricity would revolutionise southern Africa, if built. In the words of Richard Kapia Boshinga, the director of the DRC’s state power company, Snel: “Energy is the development of a country.” Barriers to the development include concerns over environmental impacts, corruption, financing and maintenance (two smaller hydroelectricity plants already exist at the site, with five of 14 turbines not functioning).

Last independent UK coke works at risk of closure

Hargreaves Services, the last independent UK coke works, is at risk of closure, according to the company. Facing falling domestic demand for coke and stiff competition from Chinese suppliers, Hargreaves will announce in January if the 130-year old coke plant at Monckton, in the north of England, will continue to operate. The company is positive about the chances, believing that the market will turn to its advantage. The Monckton plant employs 120 people.