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10 February 2015

Press review 14-02-2015 - Back to the past

Europe has been stuck to the screen following the chess match between the already iconic Greek leaders and the lethargic EU leadership. Chronic recession, appaling youth unemployment, degrading social cohesion; an half-built Union that instead of federating seems itself at stake. Largely unnoticed, the EuroStat publishes a bare set of information that explains to a great extent the moment we live: energy consumption is back to levels of twenty years ago. In a document submitted to the Energy Commission almost five years ago I wrote the following:
Europe faces enormous challenges in the years, and possibly decades, ahead due to its reliance on foreign imports of fossil energy. By different factors, outright scarcity, geographic constraints or demand growth from competing importers, Oil, Gas and Coal are all set to become harder to afford for Europe. If no other way is provided for the reduction of their usage, then economic hardship shall take care of such task.
"If you do not deal with reality, reality will deal back with you". These sage words explain what Greece and the EU face: there is no point in slashing GDP if the fundamental issue of the trade balance is not tackled.

Energy consumption in the EU down to its early 1990 s level

In 2013, gross inland energy consumption 1 , which reflects the energy necessary to satisfy inland consumption, amounted in the European Union (EU ) to 1 6 66 million tonnes of oil equivalent 2 ( Mtoe ), back to its early 1990 s level and down by 9.1% compared to its peak of 1 832 Mtoe in 2006.

In 2013, n uclear energy (29%) accounted for the largest share of EU domestic production of energy, ahead of renewables (24%), solid fuels (20%), gas (17%), oil ( 9 %) and non - renewable wastes ( 1 %). In total, the EU produced 790 Mtoe of energy in 2013.

As a result, the EU w as dependent 3 on energy imports for slightly over a half (53%) of its consumption in 2013 .
At the very close of this review I learnt about the extraction cut to the Groningen gas field. This news helps explaining why Germany and France are going to such lengths to find a peaceful solution for Ukraine. Europe is ever more reliant on imports to meet its gas needs and loosing Russia as a supplier is simply not an option at this moment.
A Massive Natgas Production Cut You Didn't Hear About
Dave Forest, 12-02-2015

On Monday, the government of the Netherlands announced significant production cuts for the country's giant Groningen natgas field. Immediately restricting the output of the field to 16.5 billion cubic meters (bcm) for the first half of 2015.

That's a sizeable drop in output from Groningen. Suggesting that the field will produce something on the order of 33 bcm of natgas for the full-year 2015. Which would represent a 16.5% cut from the previous field production target of 39.5 bcm yearly.

This is critical to natgas supply not just for the Netherlands, but for Europe as a whole. Given that Groningen is Western Europe's largest gas producer -- and has long been an anchor of supply for the region.
A new cease fire is supposed to be enforced in a few hours. Taking into account all that has happened, and the deep involvement of the US and Russia in the conflict, I can not say I am optimistic. Below a courageous attempt to question the official discourse on what has been happening. Things are rarely what they seem to be in Ukraine.
The untold story of the Maidan massacre
Gabriel Gatehouse, 12-02-2015

It's early in the morning, 20 February, 2014. Kiev's Maidan square is divided - on one side the riot police, the protesters on the other.

This has been going on for more than two months now. But events are about to come to a head. By the end of the day, more than 50 people will be dead, many of them gunned down in the street by security forces.

The violence will lead to the downfall of Ukraine's pro-Russian president, Viktor Yanukovych. Moscow will call 20 February an armed coup, and use it to justify the annexation of Crimea and support for separatists in Eastern Ukraine.

The protest leaders, some of whom now hold positions of power in the new Ukraine, insist full responsibility for the shootings lies with the security forces, acting on behalf of the previous government.

But one year on, some witnesses are beginning to paint a different picture.
In Petroleum news there is a noticeable recovery of the Brent index, closing the week above 60 $/b. However, a sustainable rise to prices matching geologic reality is likely not yet here. The spectacular rise of petroleum extraction in Canada since summer is at this stage the main reason to expect this phase of supply destruction to last a while longer.
Total Canadian oil production up 8 percent
Daniel J. Graeber, 10-02-2015

The full-year 2014 crude oil production average for Canadian basins increased year-on-year, but there may be strains from low oil prices, federal data show.

The National Energy Board released full-year production figures for 2014, showing a cumulative average of 3.8 million barrels per day, an 8 percent increase from full-year 2013. Total crude oil production since June, when oil prices reached their recent peak, increased by about 1 percent.

In a late January report, NEB noted the decline in global crude oil prices was in part a reflection of the increase in U.S. oil production. That lead to strains on Canadian oil output, which is expensive to produce.
The Petroleum industry as a whole is living a contraction that might not have parallel in the past three decades. Every new figure that comes about seems more spectacular.
Global Oil Layoffs Exceed 100,000
Bradley Olson, 12-02-2015

The promise of plentiful jobs and salaries as high as a quarter-million dollars a year lured Colombia native Clara Correa Zappa and her British husband to Perth, Australia, at the height of the continent’s oil and gas frenzy.

Engineers were in high demand in 2012, when oil prices exceeded $100 a barrel, making the move across the world a no-brainer. Within two years, though, oil plunged to less than half the 2012 price and Zappa lost her job as a safety analyst. Now she’s worried her husband, who also works in the commodities industry, could also lose his job.

Such anxieties are rising at a time when the number of energy jobs cut globally have climbed well above 100,000 as once-bustling oil hubs in Scotland, Australia and Brazil, among other countries, empty out, according to Swift Worldwide Resources, a staffing firm with offices across the world.
As pointed out regularly in this review, the financial impact of this contraction is not yet absorbed. It is no secret and even resource cornucopia leaning outlets admit to it.
The Guardian
US shale oil boom could become next 'dotcom bubble', says Russian oil boss

The head of top Russian oil producer Rosneft has ​said the US shale ​energy boom could become the next “dotcom bubble”.

Igor Sechin also accused Opec ​of destabilising the market by allowing the oil price to halve in six months.

​​He predicted that​ the rapid growth of fracking in the US would start to peter out after 2020. “We know that revolutions are short-lived and the US production increase is not well supported by reserves,” ​Sechin told an industry conference in London on Tuesday.

Oil companies have responded to the price collapse ​by cutting investment​ Sechin ​warned that lower oil production could start to cause supply shortages by the end of the year.
Others are not so optimistic regarding petroleum extraction in the US. The "shale" peak is within sight, with the easy funding from unwary investors drying out.
Financial Post
How falling oil prices will bring U.S. shale output back to earth this year
Geoffrey Morgan, 04-02-2015

The days of fast-paced growth of shale oil production in the United States are coming to an end, the victim of falling prices. Not only will production growth grind to a halt this year, but oil companies will have a tougher time raising funds to keep drilling in those unconventional plays, a new report from advisory firm IHS says.

“The U.S. growth story has been central to the oil market story,” said Jim Burkhard, vice-president of IHS Energy, in an interview Tuesday. “In a few months, that month-to-month growth is going to flatten out.”

Thanks to the widespread adoption of horizontal multi-stage fracking techniques, total oil production in the U.S. has surged from just over seven million barrels of oil per day at the beginning of 2013 to more than nine million barrels currently.

However, a report Tuesday by IHS predicts the “sensational” growth will level off at 9.5 million barrels per day in the second quarter of 2015, assuming the benchmark West Texas Intermediate (WTI) prices remain below US$60.
And then there is the bond market. This detailed analysis from a an investment management company attests to the sentiment lived presently towards energy related bonds.
Morning Star
The Impact of Energy Prices on High-Yield Bond Funds
Sumit Desai, 10-02-2015

In the years coming out of the credit crisis, high-yield bonds were hard to beat. As global credit markets recovered and the U.S. economy enjoyed a period of steady, if moderate, growth, the high-yield Morningstar Category earned an annualized 16% return between 2009 and 2013. Default rates fell sharply after 2009 and remained low; with the exception of a brief stretch in 2011, funds that took the most credit risk ranked among the category's top performers. Many expected more of the same in 2014 with managers citing relatively solid credit metrics and a generally supportive economic environment. However, 2014 had a surprise in store. Energy prices started to tumble in July and had fallen about 50% from their June peak by the end of the year.

Few asset classes have been as directly affected by the energy market as high-yield bonds. High-yield bond funds returned a paltry 1.1% on average in 2014, the category's worst year since 2008, thanks to a rough second half. As shown in the table below, most high-yield bond funds declined in the second half of 2014, wiping out gains from the earlier part of the year. Interestingly, while BB rated bonds generally held up better than lower-quality fare in 2014--not surprising given that these bonds have stronger credit metrics and are also more sensitive to changes in broad market bond yields, which fell during the year--there was a wide dispersion of returns by sector, with energy sharply lagging the rest of the market. The category declined 3.6% during the last six months of 2014, with a 13% decline in the high-yield energy sector driving losses.
The media has largely forgotten about it (no wonder, given the amount of misinformation it spread) but there was once a country called Libya in north Africa. Of that country now mostly memories remain. War rages on with a multiple factions fighting for the remaining resources.
The Atlantic
The Battle for Libya's Oil
Frederic Wehrey, 09-02-2015

The first artillery rounds landed just as the setting sun threw shadows on this barren stretch of coast. Atop an earthen observation berm, a young fighter in an oversize flak vest peered through a makeshift periscope. Six miles away was the prize: white storage tanks filled with oil.

Over the walkie-talkie came a hurried voice: “Saadun, Saadun, the bird is here, the bird is here!” Saadun was the codename for a portly commander in the Libya Dawn militia and my escort on the frontline when I visited Libya in January. His men—boys, actually—had teased him earlier for struggling to haul his hefty frame up the berm.

The bird was a MiG-21 or MiG-23 fighter-bomber belonging to the rival Dignity forces. An overhead roar gave way to crackling flashes across a cloudless sky—flak from anti-aircraft guns. The MiG dropped its bomb about a mile away. It was the second and final airstrike of the day. Like the other, it did no damage.
The break down of the electrical grid and mobile network attest, not only to the disgruntlement of authority, but also to the break down of Libya into its cultural and ethnical regions.
Libya struggles to keep electricity on

Libya's electricity grid is struggling to keep going as a shortage of power and gas for generation and its break up under two governments hit supply.

Residents in the two main cities Tripoli and Benghazi say they have been coping for days with outages lasting 10 hours or longer. Mobile phone coverage in parts eastern Libya broke down this week due to a lack of electricity.

"The network has been broken up in separate regions which has a negative impact, is leading to instability and cases of total blackouts," Libya's state electricity firm said on its website.
Sales of electrical cars in Europe climbed 60% in 2014. Subsidies still play a major role in this trend, but a welcome development nonetheless. The cost of batteries for mobile applications has subsided significantly in recent years and the overall cost effectiveness of electrical vehicles is becoming ever more attractive. Also of note that almost half of the electrical cars sold in Europe are produced by the Renault group.
Immatriculations de véhicules électriques en Europe : +60% en 2014 !

65 199 voitures particulières et utilitaires ont été enregistrés en Europe en 2014, soit une progression de + 60,9% par rapport à 2013. Les voitures électriques particulières représentent 87% des immatriculations. La Norvège et la France enregistrent à eux seuls un peu plus de 50% des immatriculations de véhicules électriques.

La Norvège termine l'année 2014 à la première place avec 18 649 immatriculations, soit le double des ventes enregistrées en 2013. Dans ce pays, plus d'une voiture sur dix vendue en 2014 est électrique ! Le succès est principalement lié aux mesures incitatives à l'acquisition et à l'usage mises en place par les pouvoirs publics, qui rendent l'offre électrique plus compétitive que les motorisées thermiques.

La France arrive en seconde position avec 15 046 immatriculations (lire actualité précédente) devant l'Allemagne (8 804) et le Royaume-Uni (7 370).

L'arrivée de nouveaux modèles constructeurs, qui a permis de booster les ventes sur le second semestre 2014 (55% des immatriculations de l'année), devrait poursuivre ses effets en 2015. Les bons résultats du Royaume-Uni, qui a triplé ses volumes de vente en 2014, laissent également présager que le marché continuera de se développer en 2015.
The declining cost of solar technologies is also bringing changes to the mining industry. In remote locations where a connection to the grid may not be possible, the cost cuts brought about by solar power are a welcome boon.
West Australia copper mine to be powered by solar plus storage

A copper mine in Western Australia has announced it will build a 10.6MW solar PV array, with “6MW” of battery storage, to power an existing off-grid copper mine 900kms north east of Perth.

Listed company Sandfire Resources says it has signed a contract with German-based juwi Renewable Energy to build the $40 million facility at the underground DeGrussa Copper Mine in Western Australia, and help power the copper treatment plant.

[...] juwi says that the 10.6MW solar array will incorporate 34,080 solar PV panel with single axis tracking of the sun. The solar energy produced will be used to reduce the consumption of more expensive diesel at the 20MW plant that currently exists at the mine. The plant is expected to be commissioned early next year.

[...] Andrew Drager, managing director of juwi Australia, said there were at least 10 other mines in Australia looking at a solar and storage option to help deflect high diesel prices.
And while Europe makes the best to delay the spread of solar power, the reminder of the world seems bound to make the most of this affordable and sustainable energy source.
Off-Grid Solar Firms Raised $42 Million in the First Month of 2015
Stephen Lacey, 06-02-2015

Only one month into 2015, private equity firms, venture investors and development banks have poured $42 million into off-grid solar companies working in developing countries. That represents two-thirds of all off-grid investments closed in 2014.

[...] Those three deals, closed within the first five weeks of the year, brought investment totals to just over $42 million. The early surge in financing is a sign that 2015 will be a strong year for leading companies in the off-grid solar and energy services sector.

Solar developers looking to connect with the grid are also anticipating a financial boost as well. The World Bank indicated this month that it will loan $500 million to India's Power Grid Corporation in order to build new transmission networks for photovoltaics projects worth 7 gigawatts of capacity.
That it for this week. Have a pleasant weekend.

1 comment:

  1. Thank you for posting these always interesting compilations, and the inclusion of quantitative data and historical background to discussions of global affairs. That is, everything which is missing from the "news" media, which exists in a kind of hyperactive amnestic state. The relentless decline of European energy consumption goes unremarked in the global media, which is entranced by the magical power of interest rates and debt. Heartbreaking news from Libya, Iraq, Afghanistan, Syria, Ukraine - we now have the answer to the question so often posed by the wise men of the West - what could be worse than an authoritarian government? Do we need any further proof that Hobbes was right about the necessity for some sort of effective governance, even if it not by those whom we would invite to a dinner party?