Saudi says likely to extend oil cuts to end-2017 or longer

al-Falih Saudi energy minister attends the WEF annual meeting in Davos

Saudi Arabia’s oil minister said on Monday that oil producers would “do whatever it takes” to rebalance the market and that he expected a global deal on cutting crude output to be extended to the end of 2017 or possibly longer.

The Organization of the Petroleum Exporting Countries, of which Saudi Arabia is the de-facto leader, and other producers including Russia pledged to cut output by 1.8 million barrels per day (bpd) in the first half of the year to lift oil prices.

But global inventories remain high, pulling crude back below $50 per barrel and putting pressure on OPEC to extend the cuts to the rest of the year.

“Based on consultations that I’ve had with participating members, I am confident the agreement will be extended into the second half of the year and possibly beyond,” Saudi Oil Minister Khalid al-Falih said at an industry event in Kuala Lumpur.

“The producer coalition is determined to do whatever it takes to achieve our target of bringing stock levels back to the five-year average,” he said.

Falih said recent price falls had been caused by seasonal low demand and refinery maintenance, as well as by non-OPEC production growth, especially in the United States.

U.S. oil production has gained more than 10 percent since mid-2016 to 9.3 million bpd, close to the levels of top producers Russia and Saudi Arabia.

Despite this, Falih said markets had improved from last year’s lows, when crude prices fell below $30 per barrel.

“I believe the worst is now behind us with multiple leading indicators showing that supply-demand balances are in deficit and the market is moving towards rebalancing,” he said.

“We should expect healthier markets going forward.”

He said he expected global oil demand to grow at a rate close to last year. In China, oil demand growth should match last year’s due to a robust transport sector, while India should record healthy growth, he said.

OPEC and industry sources said there had been discussions about extending curbs until the end of the first quarter 2018, when crude demand is seasonally at its weakest.

The chairman of energy consultancy FGE Fereidun Fesharaki said: “They (OPEC) are looking at (extending) for nine to 12 months. Six months is not enough as we’ll still be well above five years average of stocks.”


Falih said almost all of the expected oil demand growth in the next 25 years was likely to come from Asia as the region’s population grows, with countries such as Vietnam and the Philippines rising into the ranks of top 20 global economies.

Asia would also account for nearly two-thirds of global gas demand by that time, he said.

Global investments in exploration and production have also fallen behind, potentially creating a big supply-demand gap in the next few years, he said.

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Exclusive: Millions of barrels of Venezuelan oil stuck at sea in dirty tankers

More than 4 million barrels of Venezuelan crude and fuels are sitting in tankers anchored in the Caribbean sea, unable to reach their final destination because state-run PDVSA cannot pay for hull cleaning, inspections, and other port services, according to internal documents and Reuters data.

About a dozen tankers are being held back because the hulls have been soiled by crude, stemming from several oil leaks in the last year at key ports of Bajo Grande and Jose, which has resulted in delayed operations for loading and discharging.

Since debt-laden PDVSA cannot afford to have the ships cleaned, they have to wait for weeks to navigate international waters, delaying shipments.

Dirty tankers are the latest of a litany of problems weighing on PDVSA, the source of most of Venezuela’s export revenue and critical to the government’s budget.

Oil production and exports are currently at lows not seen in more than two decades. PDVSA’s difficulty with paying creditors and service providers makes pulling itself out of that hole more onerous. That has contributed to a deep, years-long recession in the OPEC country.

As of Jan. 25, vessels carrying some 1.4 million barrels of crude, diesel, gasoline, fuel oil and liquefied petroleum gas were anchored in Venezuelan and Caribbean waters waiting for cleaning, according to PDVSA’s trade documents, verified by Reuters shipping data. The company did not respond to a request for comment.

“PDVSA almost solved this situation in Bajo Grande in early December because it needed to drain inventories, but it is now taking at least three weeks to complete the cleaning,” said an inspector at Lake Maracaibo, who was not authorized to speak to the press.

The dozen or so tankers that have not been cleaned are mostly from PDVSA’s fleet of owned and leased vessels, according to a series of PDVSA’s internal operational reports confirmed by Reuters vessel tracking data.

In addition, another 11 tankers in early January are being held up for “financial retention,” a classification used by PDVSA in its internal reports to identify loaded vessels that have been embargoed or temporarily retained by port authorities, inspection firms or maritime agencies due to unpaid bills.

Those tankers, along with several smaller ones retained for other operational delays, are holding a combined 2.9 million barrels, according to the data.

The list includes the Aframax Hero, loaded in September with 520,000 barrels of fuel oil bound for China. The cargo is moored in Curacao, delayed by more than 100 days, until a payment to inspection firm Saybolt (CLB.N) is made.

PDVSA’s crude exports fell to 1.59 million barrels per day (bpd) in the last quarter of 2016 from 1.82 million bpd in the first quarter, a 13 percent decline, according to Thomson Reuters trade flows data.

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IEA examines critical interplay between digital and energy systems


The growing use of information and communications technology – digitalization – is increasingly permeating modern life, from the way people work and travel to the way they live and entertain. Digitalization is increasingly having an impact on energy systems, bringing both the potential for substantial efficiency and system improvements and raising new policy issues.

The opportunities and challenges raised by the intersection of digitalization and energy were the focus of a two-day workshop held by the International Energy Agency in Paris this month that brought together more than 120 global experts. This workshop was part of an extensive effort by the IEA to examine the relationship between digitalization and energy that will result in a comprehensive report published in October.

The IEA has deep experience analysing the impact of technology, business and policy changes on energy systems. Through its work on smart grids, system integration of renewables, electric vehicles and smart charging, and the use of technology in the oil and gas sector, the IEA has been analysing the impact of digitalization for many years. One of its most-downloaded reports, “More Data, Less Energy,” examined the implications of connected devices on energy demand.

“Every unit of the IEA – from efficiency to investment, from electricity to transportation, from renewables to modelling, from sustainability to statistics – is examining the implications of digitalization on the energy sector,” says Dr Fatih Birol, the IEA’s executive director. “The interest in this topic is strong, but the world’s current understanding of the scale and scope of its potential remains limited, particularly when it comes to analytically-rigorous assessments.”

The IEA’s workshop, which was held under Chatham House Rule, examined critical questions that will help inform future analysis and policy recommendations. Speakers and participants represented IEA member and partner governments worldwide, well-established energy companies and new start-ups, major ICT companies, financial actors, environmental organizations, and researchers.

Workshop participants addressed questions such as: How big an impact will digitalization have on energy systems? Which companies and business models are best positioned to take advantage of opportunities presented by digitalization? How can governments and regulators make sure that businesses and consumers benefits from digitalization? And what are the most significant challenges and obstacles?

The various speakers explained how digitalization has already led to higher efficiency in operations throughout the energy supply chain, thanks to better analytics, the use of virtual facilities, the introduction of automation and artificial intelligence, and the use of quantum computing technologies.

Thanks to sensors, remote analysis and drones, for instance, operators can use predictive maintenance to extend the life of power generation, transmission and distribution assets. Big data in seismic mapping has significantly increased recoverable resources in oil and gas. The workshop also explored how digital technologies are starting to enable new linkages and interactions between energy supply and demand. Remote control of energy assets such as distributed generation and storage resources within smart grids can enable better electricity load management.

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Renewable energy has robust future in much of Africa

As Africa gears up for a tripling of electricity demand by 2030, a new Berkeley study maps out a viable strategy for developing wind and solar power while simultaneously reducing the continent’s reliance on fossil fuels and lowering power plant construction costs.


Using resource mapping tools, a UC Berkeley and Lawrence Berkeley National Laboratory team assessed the potential for large solar and wind farms in 21 countries in the southern and eastern African power pools, which includes more than half of Africa’s population, stretching from Libya and Egypt in the north and along the eastern coast to South Africa.

They concluded that with the right strategy for placing solar and wind farms, and with international sharing of power, most African nations could lower the number of conventional power plants – fossil fuel and hydroelectric – they need to build, thereby reducing their infrastructure costs by perhaps billions of dollars.

“The surprising find is that the wind and solar resources in Africa are absolutely gigantic, and something you could tap into for relatively low cost,” said senior author Duncan Callaway, a UC Berkeley associate professor of energy and resources and a faculty scientist at Berkeley Lab. “But we need to be thinking now about strategies for fostering international collaboration to tap into the resource in a way that is going to maximize its potential while minimizing its impact.”

The main issue, Callaway says, is that energy-generating resources are not spread equally throughout Africa. Hydroelectric power is the main power source for one-third of African nations, but it is not available in all countries, and climate change makes it an uncertain resource because of more frequent droughts.

The team set out to understand where wind and solar generation plants might be built in the future under a range of siting strategy scenarios, and how much renewable generators might offset the need to build other forms of generation.

Based on the team’s analysis, choosing wind sites to match the timing of wind generation with electricity demand is less costly overall than choosing sites with the greatest wind energy production. Assuming adequate transmission lines, strategies that take into account the timing of wind generation result in a more even distribution of wind capacity across countries than those that maximize energy production.

Importantly, the researchers say, both energy trade and siting to match generation with demand reduces the system costs of developing wind sites that are low impact, that is, closer to existing transmission lines, closer to areas where electricity would be consumed and in areas with preexisting human activity as opposed to pristine areas.

“If you take the strategy of siting all of these systems such that their total production correlates well with electricity demand, then you save hundreds of millions to billions of dollars per year versus the cost of electricity infrastructure dominated by coal-fired plants or hydro,” Callaway said. “You also get a more equitable distribution of generation sources across these countries.”

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Kentucky Coal Mining Museum in Harlan County switches to solar power

Housed in a former commissary building and tucked into the hollers of Harlan County — the heart of Kentucky mining country — is a museum dedicated to all aspects of extracting coal from the state’s mountains.

Mining equipment decorates its walls, while a two-ton block of coal at the front door greets visitors. Children can climb on the museum’s 1940s model electric locomotive that once carried Kentucky men into the mines. An exhibit dedicated to Loretta Lynn (who wrote and who is the “Coal Miner’s Daughter”) sits on the third floor. Guests can even wander through an actual underground coal mine.

Not much about the Kentucky Coal Mining Museum screams modern. Its website — nay, websites — boasts early 1990s Web design, and its advertisement on YouTube appears to have been shot on a handheld camcorder. It sits next to City Hall on Main Street, the only thoroughfare of Benham, Ky. That’s to be expected from a museum dedicated to an old form of energy, which is what makes its own power methods so interesting.

The museum is switching to solar power in hopes of saving money on energy costs, as reported by WYMT and EKB-TV. The installation of solar panels began this week.

“We believe that this project will help save at least $8,000 to $10,000 off the energy costs on this building alone, so it’s a very worthy effort and it’s going to save the college money in the long run,” Brandon Robinson, communications director of Southeast Kentucky Community and Technical College, which owns the museum, told WYMT.

Robinson wasn’t blind to the incongruity of a coal museum being powered by solar energy, asserting that there’s a symbiosis between the two.

“It is a little ironic,” said Robinson, “But you know, coal and solar and all the different energy sources work hand-in-hand. And, of course, coal is still king around here.”

As Tre’ Sexton, owner of Bluegrass Solar, told EKB-TV, the runoff power collected by the panels will be fed back into Benham’s power grid. The entire town of almost 500 that bills itself as “The Little Town That International Harvester, Coal Miners and Their Families Built!” will be partially run on solar power.

“I know the irony is pretty prevalent,” Sexton told EKB-TV. “But all the same, it is making a big difference, I think, for not only the museum, which will probably eliminate a lot of their overhead, but the city in general.”

“We’re happy to be able to hopefully provide some power to the city of Benham that we’re not using here,” Robinson told EKBTV. “So it’s a great project; it’s a great effort.”

It’s difficult not to see a foreshadowing in the switch to solar power.

About 85 percent of Harlan County voted for Donald Trump in the 2017 election. The disparity between Hillary Clinton’s and Trump’s campaign promises concerning energy almost assuredly played a factor in that vote.

While Clinton, speaking about renewable energy, infamously said, “We’re going to put a lot of coal miners and coal companies out of business,” Trump promised “sweeping deregulation” of the coal industry.

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New battery technologies still years away

Li-ion replacements promise improved safety, lower prices — someday

TETSUO NOZAWA, Nikkei Electronics staff writer
TOKYO — Lithium-ion batteries are in everything — smartphones, wearables, drones, electric vehicles, power system stabilizers, even jetliners.

But safer, cheaper and higher-capacity power packs are poised to replace them.

While still years away, post-Li-ion batteries are no longer stuck in the distant future.

This past year has seen a number of significant technological breakthroughs. If only one of a number of promising technologies can be commercialized, we can expect dramatic performance improvements from a host of gadgets and machines.

One alternative is the solid-state battery, which uses a solid electrolyte instead of the electrolytic solution that does the heavy lifting in transporting the positive lithium ions between the cathode and anode in today’s batteries. Researchers have succeeded in developing an efficient electrolytic solid material that significantly improves lithium ion conductance, raising hopes that batteries with much higher power densities are edging closer to reality.

Lithium-air batteries, meanwhile, have the ability to greatly improve energy density, but researchers have hit a discharge wall — these power packs can’t put out much current for very long. Yet this technology could also be on the cusp of a dramatic turn: Researchers have succeeded in raising the density close to theoretically expected levels, if only for a single charge cycle.

The need to compromise

Another breakthrough battery does not use lithium. Researchers have succeeded in creating a cathode material for the sodium-ion battery; its discharge capacity beats that of Li-ion cells. The material also enables the power packs to be recharged upward of 500 times, overcoming one of the weaknesses limiting the technology’s prospects.

Battery research has undergone a big shift in recent years. It used to be that nearly half of the presentations at the Battery Symposium in Japan were about fuel cells and Li-ion battery cathode materials. But between 2012 and 2016, the number of fuel cell presentations dropped in half; those regarding cathode materials have decreased by a third since 2012. Presentations on solid-state, lithium-air and non-Li-ion batteries increased by 50% to 100% over the same period.

Toyota Motor in recent years has been a big sponsor of the Battery Symposium in Japan. The automaker has focused on developing solid-state and Li-air batteries. At the symposium in November, the automaker discussed a scenario for transitioning from Li-ion batteries to solid-state and then Li-air batteries in its vehicles.

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South Australia to get $1bn solar farm and world’s biggest battery


A huge $1bn solar farm and battery project will be built and ready to operate in South Australia’s Riverland region by the end of the year.
The battery storage developer Lyon Group says the system will be the biggest of its kind in the world, boasting 3.4m solar panels and 1.1m batteries.

The company says construction will start in months and the project will be built whatever the outcome of the SA government’s tender for a large battery to store renewable energy.

A Lyon Group partner, David Green, says the system, financed by investors and built on privately owned scrubland in Morgan, will be a “significant stimulus” for South Australia.

“The combination of the solar and the battery will significantly enhance the capacity available in the South Australian market,” he said.

Green said the project, along with a similar one it plans to build near Roxby Downs, would have gone ahead whether or not Port Augusta’s Northern power station had closed in 2016.

“We see the inevitability of the need to have large-scale solar and integrated batteries as part of any move to decarbonise,” Green said. “Any short-term decisions are only what I would call noise in the process.”

The premier, Jay Weatherill, commended the Lyon Group for the Riverland initiative, which will enable 330MW of power generation and at least 100MW of storage. “Projects of this sort, renewable energy projects, represent the future,” he said.

The premier said the company was among several to express interest in building a 100MW battery as part of the South Australia government’s power plan announced this month, to be financed by a new $150m renewable technology fund.

Weatherill said the government would consider the bidders over the coming weeks.

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U.S. Natural Gas To Mexico Skyrockets Making Some In Mexico Nervous About Dependence

Drug tunnels are not the only passageways beneath the U.S.-Mexico border that transport valuable cargo. Pipelines cross the boundary too, carrying natural gas south.

This trade is up 300 percent since 2010, and now it set to double again by 2019. It’s the largest natural gas export capacity expansion in U.S. history, said Victoria Zaretskaya of the U.S. Energy Information Administration.


“You saw just a bonanza of infrastructure,” said Jeremy Martin, vice president for energy and sustainability at the Institute of the Americas, a think tank at the University of California San Diego. “The natural gas imports into Mexico have doubled every year for the previous three years. Projections continue to be blown away.”

17 gas pipelines enter Mexico from the U.S. Four more are in development.

The natural gas has allowed Mexico to shift its source of electricity and factory fuel. Electric power and industry converted from burning diesel fuel and other oil products to natural gas. Now Mexico imports 60 percent of its natural gas from the United States, according to Zumma, an energy consulting firm in Mexico City.

That dependence is causing for concern in Mexico, given the disregard for the bilateral relationship evinced by the Trump administration.

“Definitely there is a level of worry,” said Jonathan Pinzón, a partner at Zumma. “In government and industry circles, they are discussing alternatives, whether gas can be brought from other regions. It’s a very important discussion to keep having, now that trade between the two countries is being re-examined.”

The worry about dependence is a real reverse, Martin said. “For years the idea of energy security was, if you were interdependent you were better off.”

But the concern in Mexico is also tempered by the knowledge that protectionist measures would hurt powerful American energy firms. Without Mexico, the gas might have no customer. That could cause gas prices to fall further. They have been low for several years.

“It would cause a lot of problems in the producing regions, like Texas. In that sense I think it would be political suicide for the current administration to put any restriction on that gas moving to Mexico,” Pinzón said.

The amount of gas is not trifling. It makes up five percent of U.S. production, Martin said.

Experts are in agreement that Mexico is likely to retaliate against trade actions it sees as unfavorable.

Sempra Energy, the San Diego-based Fortune 500 natural gas and electricity holding company whose subsidiaries serve most of Southern California, has significant business across the border.

The company declined an interview. Its subsidiary IEnova has invested $7 billion in energy infrastructure in Mexico over the last two decades. When current projects are complete, it will have more than 1,800 miles of natural gas pipeline in the country, spokeswoman Paty Mitchell wrote in email.

Mexico’s conversion

The pipeline rush south resulted from two developments. Around the year 2000, Mexico began a concerted conversion from diesel fuel to cleaner burning and more efficient natural gas.

Six years later, fracking and horizontal drilling produced so much natural gas that low prices became a problem. Mexico’s own natural gas production was falling. The country found its northern neighbor eager to sell. The gas was a bargain and for U.S. producers it helped support the price.

Most of the existing and planned pipelines run through Texas. Gas from the Eagle Ford Shale and Permian Basin courses through them, though gas could enter the pipeline system from other fields.

There are crossings in California: Sempra has one near Otay Mesa and another near Mexicali. TransCanada has a pipeline crossing near Ogilby.

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Exclusive: Saudi exports to U.S. to fall by 300,000 barrels per day in March – official

Saudi Arabia’s crude exports to the United States in March will fall by around 300,000 barrels per day from February, in line with OPEC’s agreement to reduce supply, a Saudi energy ministry official said on Thursday.

The United States imported about 1.3 million bpd from OPEC’s top exporter in February, according to U.S. Energy Information Administration data.

“Exports may fluctuate week on week, but on average in March exports will be down,” the official said, responding to a Reuters request to comment on the EIA data. Saudi exports are then expected to remain around March’s level for the next few months, the official said.

The official noted that export data showed higher Saudi oil exports in January and February, but these shipments were the result of cargo loaded in November and December.

Saudi Arabia has made the largest cut in production after the agreement reached last year by both the Organization of the Petroleum Exporting Countries and non-OPEC producers to reduce output by 1.8 million bpd.

Oil prices have been in a downtrend for two weeks on concerns that OPEC cuts so far have not dented record U.S. crude inventories. U.S. crude has declined nearly 10 percent since March 7 as speculators reduced big bets that oil would keep rising. It settled on $47.70 on Thursday.

Crude stocks in the United States, the world’s largest oil consumer, were a record 533 million barrels last week, the EIA said. In the week ended March 17, U.S. imports from Saudi Arabia unexpectedly rose by more than 200,000 bpd to 1.28 million bpd, after a sharp decline the prior week.

The official said lower Saudi exports to the U.S. is likely to affect stockpiling in the U.S.

“This is mainly because there is a refinery maintenance in the U.S. The cuts in exports will help the crude stockpiling in the U.S. to go down,” the official said.

Gasoline stocks are falling, but remain seasonally high.

The official also said he believed other Gulf oil exporters will follow suit and their crude exports will be lower in March and will continue to decline. Imports from Iraq and Kuwait dropped sharply for the week to March 10 but then rebounded in the most recent week of data.

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This Texas oilfield is messing with OPEC

Texas is once again making life difficult for OPEC.
The Permian Basin of Texas and New Mexico has emerged as the new poster boy of the U.S. shale oil revolution. Land prices in the Permian have skyrocketed, drilling activity has tripled since last year and production there is poised to soar despite cheap oil prices.
Some are even predicting this hotbed of shale activity could eventually surpass the colossal Ghawar field in Saudi Arabia as the world’s biggest oilfield.

The Permian’s rise on the global stage couldn’t come at a worse time for OPEC, which just last November cobbled together a delicate deal to deal with the oil glut by cutting production.
The latest resurgence of U.S. shale oil output from the basin has caught OPEC off guard. Its strength even prompted U.S. government experts to recently predict that American oil production could soar to a new record by 2018.

“The Permian Basin is definitely the thorn in the side of the OPEC production deal,” said Matt Smith, director of commodity research at ClipperData.
The key is that the unique geology of the Permian allows frackers to hit multiple layers of oil as they drill into the ground. That’s what sets the Permian apart from other major oilfields, making it lucrative to drill there even at today’s sub-$50 prices.

Related: Shale set to lead U.S. to record oil output
The proof is in the skyrocketing cost of land in the Permian Basin, which mostly lies in West Texas but also has a foothold in New Mexico.
Oil explorers have paid as much as $60,000 an acre in the Permian Basin, according to Wood Mackenzie. That’s a stunning 50 times higher than the price four years ago.

Land in the Permian is now fetching 10 times what oil explorers will pay for the Bakken, the North Dakota shale formation that used to be the face of the American shale oil boom.
“While the heyday of the Bakken may well be over, it seems better times are ahead for the Permian. It’s leading to this modern-day land grab, with spiraling prices for land there,” said Smith.

ExxonMobil (XOM) is finally taking notice. After Exxon was late to the shale oil boom, the oil giant spent $5.6 billion earlier this year to purchase coveted land in the Permian. It was Exxon’s largest deal since 2010 and doubled the company’s Permian assets.
“The Permian is the best, by far. It has established itself as the premiere oil basin in the U.S. — and potentially in the world,” said Rob Thummel, a portfolio manager at energy investment firm Tortoise Capital.
U.S. oil producers have added 315 oil rigs since last May. Nearly half of those rigs are located in the Permian Basin alone, which has almost tripled its rig count over the past year, according to Baker Hughes.

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