Total aims to reduce costs by $40/barrel in response to low oil prices

Total’s new chief executive, Patrick Pouyanné, has told the Financial Times that the company plans to reduce oil production costs by $US40/barrel to “weather the storm” of very low oil prices, which have halved since last June to below $US 50 per barrel. Mr Pouyanné, who was installed as CEO following an airplane accident in Moscow which killed former CEO Christophe de Margerie, believes that prices will not rise significantly in the first half of 2015, as the factors contributing to the low prices – low global demand, US shale production, and Opec’s decision not to reduce production – remain in place. To reduce costs, Total will cut spending on exploration by around 30%, putting some projects, such as two involving Canadian tar sands, on the “long backburner”, while also reducing operational costs by reducing output at certain refineries and lowering spending at some oilfields. Mr Pouyanné says the company must be careful not to cut too deep and hamper future growth, however, as he believes that oil prices will rebound as demand eventually rebounds. In the meantime, Total will retain its strong ties with Russia and continue to develop its African fields.

IRENA report shows increasing cost competitiveness of renewables

The International Renewable Energy Agency (IRENA) this month released its report Renewable Power Generation Costs 2014. It shows particularly sharp drops in the cost of generating electricity through solar photovoltaics and concentrated solar thermal tecnology, with falls between 29-65% for utility-scale generation since 2010, though solar remains on average the most expensive means of producing electricity. The cost comparisons between different types of renewables and fossil fuels are interesting but complicated, with grid integration costs usually excluded from costs per kilowatt-hour for renewables, and health and CO₂ externality costs usually excluded for fossil fuels. In addition, in comparing to fossil fuels, the cost per kilowatt-hour is given for fossil fuels as a group, and as a range, rather than including median costs as well as ranges per fossil fuel type. Nevertheless, there is much interesting data, showing that onshore wind power, biomass and hydropower are generally very competitive against fossil fuels (and sometimes cheaper), geothermal competitive (though seldom deployed), and solar and offshore wind currently generally uncompetitive, despite solar’s costs falling. There are breakdowns of costs by world region. Overall the report makes for very interesting reading.

Shale gas production creating surplus of ethane in US; exports predicted to come

An interesting story in the Financial Times has considered the role of increased shale gas production on the supply and demand of ethane, and the resulting effects on the wider energy sector. Ethane is a by-product of shale gas production (which has risen by 30% over the last five years), and US production is expected to expand from the current 1 million barrels per day to 2 million by 2020. Usually used as a feedstock in the petrochemical industry (but also sometimes as a fuel for power generation), supply will by far outstrip US petrochemical demand in the coming years, meaning that ethane is likely to be even cheaper than today, and exported. (Pipeline requirements mean that it cannot be left un-extracted from natural gas.) Exporters such as American Ethane and Enterprise Product Partners are well positioned to take advantage of the surplus, and Shell and Reliance Industries are also considering it. Transport is not easy, as it needs very low temperatures, but on the other hand, export is not controlled as methane and oil are. India is touted as an export destination, and petrochemical industries in Europe and South America may also import. There is speculation that ethane will begin to be used in the power generation sector, competing with methane, which may make future gas extraction projects uneconomic.

EC considering financial aid for efficient coal-fired plant exports

Reuters has reported on an EC discussion paper which purportedly supports European makers of coal-fired power plant equipment receiving financial aid to export their products when the technology is considered energy efficient. The paper might be seen as being at odds with the EC’s aim of leading the fight against climate change, especially its decision to end subsidies for new domestic coal-fired plants by 2018, but the discussion paper bases its argument on the fact that more efficient equipment (which is less polluting) than what otherwise might be built in the importing countries reduces carbon emissions. In this approach the paper appears to be taking the same stance in regards to coal-fired power plant exports as Japan, a stance which has received the criticism of the USA. The financial aid is in the form of preferential loans, which have a longer pay-back period, to those buying equipment.

E.ON to sell Italian plants to EPH

E.ON is to sell its Italian gas and coal-fired power plants to Czech utility EPH, with a deal expected to be completed in the second quarter of the year. It covers 4,500 MW  of generation capacity in total – 600 MW from a coal-fired plant in Sardinia and the remaining 3,900 MW from six gas-fired plants in Sicily and mainland Italy. EPH sees the move as the chance to expand its business after growing as large as it can in its domestic market; for E.ON, it appears to be the sale of unwanted assets. EDF’s Italian subsidiary, Edison, were rumoured to be interested in buying the plants, but no offer has yet been forthcoming.

ExxonMobil set for licence to explore further PNG gasfield in return for supplying gas for domestic power generation

ExxonMobil is set to supply natural gas to power plants in Papua New Guinea after signing a memorandum of understanding with the national government that will grant the company licences to develop a new gas field to expand its $US 19 billion (€16.4 billion) PNG LNG project, which exports to Asia. ExxonMobil already supplies gas to the Hides power plant for domestic power generation, but will supply up to an additional 20 million cubic feet per day of gas for 20 years under the deal. Part of the gas will go to an existing power plant (to provide 25 MW of electrical output) and the remainder to a new power plant to be built near Port Moresby. Meanwhile, preparations will begin this year to drill an appraisal well in the P’nyang gas field, which the company hopes to drill within two years, subject to actually being awarded the licences they seek.

Century-old Greenwich Power Station to be upgraded

The 109-year old Greenwich Power Station, which helps generates electricity for the London Underground network, is to be upgraded, with a combined heat and power plant composed of six gas engines to be added to the existing station. The installation will be staggered over several years, with the first two engines to be added by 2017 and the last by 2025, whereupon the plant will supply something around an average of 17.7 MW of electricity (if run continuously over a year), plus heat for a new district heating system to be installed in the vicinity of the plant.  The new equipment will help to reduce air pollution and noise generated by the station. Greenwich started as a coal-fired plant in 1906, and was converted to gas in the 1970s. It is one of the world’s longest-serving power stations.

Maasai pastoralists making biogas from animal blood; set to expand operations

Maasai pastoralists have become electricity generators using an uncommon fuel – biogas from animal blood.  At the Keekonyokie slaughterhouse in Kenya’s Kajiado County, blood from goats, cows and sheep is converted into ‘Keeko Biogas’ – said to be 30-40% ‘hotter’ than propane – which is then fired to produce electricity for the slaughterhouse. Some biogas is also being supplied to nearby hotels, while there are plans to bottle the gas for sale more widely. Around 120 cows and 400 goats and sheep are slaughtered at the facility daily, and while the Reuters article does not state how much gas that produces, it does note that it is enough to fill 100 cylinders weighing 6 kg each. A planned upgrade to incorporate secondary digestion is expected to triple the amount of biogas produced. The project is supported by the World Bank through the Kenya Climate Innovation Centre, which sees benefits in reducing fugitive methane emissions from the slaughterhouse, reducing the number of trees felled for local fuel, and providing locally a cheaper form of gas. The 320 pastoralists who own the facility enjoy reduced costs from disposing of the biowaste, not having to buy electricity, and being able to sell the biogas – a win-win for all those involved, except of course the animals.