Energy ‘Tsunamis’ Could Mean $10 Oil lweb.es/f2473 12.20.2016
The oil industry must brace for five energy “tsunamis” that threaten to drag prices as low as $10 a barrel in less than a decade, according to Thierry Lepercq, head of research, technology and innovation at Engie SA. The falling cost of solar power and battery storage, rising sales of electric vehicles, increasingly “smart” buildings and cheap hydrogen will all weigh on crude: “Even if oil demand continues to climb until 2025, its price could drop to $10 if markets anticipate a significant fall in demand.”
Wood Mackenzie’s global corporate outlook for 2017 forecasts that the oil and gas industry will turn cash flow positive for the first time since the downturn, if OPEC production cuts drive oil prices above $55 a barrel. Focus is on five themes: strengthening finances as a top priority; U.S. Independents to lead the sector into a new investment cycle; portfolios will adapt, down the cost curve and into new energy; modest growth in production despite past capex cuts; and an improved value proposition for exploration and mergers and acquisitions.
According to the International Energy Agency oil stockpiles will decline by about 600,000 barrels a day in the next six months as curbs by OPEC and its partners take effect. Oil has gained about 17 percent since OPEC agreed on November 30th to trim output. The accord was expanded on December 10th with the participation of 11 non-members including Russia and Kazakhstan. The stockpile declines will only occur if OPEC reduces supply enough to maintain a target of about 32.7 million barrels a day, said the Agency. 
India’s energy system faces the challenges of meeting growing demand, cutting pollution and offering more than 300 million people not connected to the power grid access to modern energy. The target is to build 175GW of renewable energy by 2022, primarily solar and wind. This would present an investment opportunity of more than $150 billion in clean power generation. This report examines the recent growth across India’s off-grid, small energy grids, rooftop solar and utility-scale renewable energy segments and looks at challenges in their future growth. 
U.S. field production of crude oil increased in 2015 for the seventh consecutive year, reaching 9.42 million barrels per day. This was the highest crude oil production level since 1972. In 2015, production gains were highest in Texas, the Gulf of Mexico, and North Dakota, as these three regions accounted for 77% of the country’s total increase. Although annual production for 2015 grew, monthly U.S. crude oil production has declined since April 2015. Lower oil prices led to slower development activity, and production fell to 8.74 million b/d in August 2016.
According to the Nigerian National Petroleum Corporation, Nigeria has capacity to create about $51 billion investment opportunities in the midstream and downstream gas sector. This investment will go into gas exploration and production activities, power plant projects, fertilizer plants, virtual pipelines and flare gas commercialization initiatives; as well as in Free Trade Zones infrastructure development and concessioning, port infrastructure, central gas processing facilities, gas transmission, LPG plants, real estate development, pipe milling and local fabrication yards. The intent is to position Nigeria as a regional hub for gas-based industries. 
This 2016 Energy Outlook from the company JLL looks at global macroeconomic trends and considers the recovery timeline to expect once oil prices stabilize. The net effect on property markets of the structural changes that are currently redefining the energy industry is then discussed, focusing on the performance of office and industrial inventories in energy-centric cities. The influence of renewable energy on the health of real estate markets today and into the future is also covered. Lastly, U.S. and Canadian trends, deals and fundamentals are presented.
According to the International Energy Agency, in 2015 coal power plants produced close to 39% of the world’s power, whilst renewables – including hydroelectric dams – accounted for 23%. However the IEA expects that number to climb to 28% by 2021, when renewables will supply the equivalent of all the power produced currently in the US and the EU combined. The IEA sees renewables growing 13% more between 2015 and 2021 than it did in its previous year’s forecast, due mostly to “stronger policy backing in the United States, China, India and Mexico.” 
The International Civil Aviation Organization (ICAO) announced the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), designed to serve as a global market-based measure to control increases in CO2 emissions from international aviation operations. CORSIA will increasingly require international airspace users and others to measure, verify and report their greenhouse gas emissions to ICAO. CORSIA’s main goal is to allow operators to offset unavoidable aircraft emission growth with a reduction in activities elsewhere by allowing operators to buy carbon credits and outsource the process of reducing emissions.
Mexico and Brazil want a slice from a shrinking pie as international drillers limit their investments during a time of depressed oil prices. Mexico will hold its first-ever deepwater auction December 5th, offering up 10 areas in the Perdido area, near its maritime border with the U.S.; in the southern gulf’s Cuenca Salina; and a separate bid for the joint-venture with Pemex in Trion field. Brazil’s tender, set for 2017, will include “unitized” blocks that extend from already discovered pre-salt areas previously awarded to concession holders. 
According to the National Bureau of Statistics of China’s preliminary estimates, the country’s gross domestic product in the first three quarters of this year was 52,997.1 billion yuan, a year-on-year increase of 6.7 percent. The value added of primary industry was 4,066.6 billion yuan, up by 3.5 percent year-on-year; the value-added of secondary industry was 20,941.5 billion yuan, up by 6.1 percent; and that of tertiary industry was 27,989.0 billion yuan, up by 7.6 percent. Third quarter GDP rose by 1.8 percent on a quarter-on-quarter basis.
Crude oil inventories are near record high levels and are rising on a year-on-year basis. Gasoline and ultra-low-sulfur diesel inventories are increasing to a lesser extent. Inventories of all three remain near seasonally-adjusted record highs. However, the pace of this increase – even though still growing – is slowing rapidly, and this is, on balance, welcome news for energy producers and those who have financial exposure to them. It’s a sign that energy supply and demand are moving more closely into alignment.
The James M. Barry Electric Generating Station, a 2.7 gigawatt mixed-use coal and gas-fired power plant operated by Alabama Power will host pilot plant tests of a fuel cell carbon capture technology, which uses carbonate fuel cells to concentrate and capture carbon dioxide streams from power plants. “The fuel cell carbon capture solution we are advancing with ExxonMobil could be a game-changer in affordably reducing carbon dioxide emissions from coal and gas-fired power plants globally,” said Chip Bottone, president and CEO of FuelCell Energy, Inc.