New Energy Outlook 2017

Long-term Economic Forecast of the World’s Power sector.

Focused on the electricity system, NEO combines the expertise of over 80 market and technology specialists in 12 countries to provide a unique view of how the market will evolve.   What sets NEO apart is that our assessment is focused on the parts of the system that are driving rapid change in markets, grid systems and business models. This includes the cost of wind and solar technology, battery storage, electricity demand and the uptake of EVs among others.

 “Renewable energy sources are set to represent almost three quarters of the $10.2 trillion the world will invest in new power generating technology until 2040, thanks to rapidly falling costs for solar and wind power, and a growing role for batteries, including electric vehicle batteries, in balancing supply and demand.”

S&P Global Platts Global Polyethylene Outlook

Short-term plastic surpluses, but long-term need for more capacity

Key Agenda Items and Takeaways

  1. Global PE expansions: Capacity additions to continue, led by the US, Asia and the Middle East
  2. Per capita demand patterns: India and China to lead the way: China to try to stimulate growth through the One Belt, One Road initiative (OBOR)
  3. Global demand: HDPE and LLDPE to be the fastest growing and take up the largest share of PE consumption
  4. Global/regional balances: North America to grow export surplus, Middle East to maintain lead in export position, Asia, Western Europe and Africa to grow in deficit. Speculative capacity needed post 2024 for market to find balance, with US, Iran and Asia possible locations
  5. When will the next trough be?: Operating rates will have to fall back to 82/83% globally for market to find balance between 2017-2020 as global surpluses ensue, if rationalisation does not occur.
  6. PE Price and margin outlook: Reflecting the fundamentals, global prices and margins to go through a bearish period from 2018 through to 2020. Post 2021 prices and margins to show recovery as demand catches up with suppy.

Solar Energy in the UAE: Impressive Progress

APICORP Energy Research, Volume 3

The development of the renewable-energy sector in the UAE has been moving ahead rapidly. Enjoying strong government support, solar energy has made particularly impressive progress. The UAE has again received some of the lowest renewable-energy prices awarded globally for both photovoltaic (PV) and concentrated solar power (CSP), highlighting the great resources available in the country and GCC. Many factors are contributing to this early success, with financing playing a critical role in achieving low costs. 

S&P Global Platts Global LNG Report: Dawn of a Global Commodity

LNG Trading Transformed

The LNG industry is well into its third and most significant expansionary phase, one in which supply is racing ahead of demand. But to turn an old adage on its head: there is nothing like low prices to cure low prices. The industry’s expansion is part and parcel of two overarching trends: the gradual spread of gas-on-gas competition that has emanated from both the US and North West Europe for more than a decade, and the global transition to lower emission energy sources, which is making LNG a key fuel of choice for many countries seeking to address chronic energy deficits. LNG is well but ambiguously placed. It can bring the cleanest of fossil fuels to global markets and expansion has de-risked the supply chain. But when it arrives it must compete with local gas, other domestic sources of energy and alternative imported fuels. Moreover, the supply of LNG is only as good as the weakest link in the chain. It requires heavy investment from both seller and buyer alike. It needs gas production, liquefaction, transport, import facilities, storage and then distribution infrastructure before a single, chilly molecule can reach the end user. And it needs efficient markets at each and every point along the line. A market distortion in one element can have huge ramifications all the way back up to the supplier. The high risk this entails has historically promoted inflexible supply agreements, necessary to provide investment certainty, but LNG is increasingly landing not in regulated but liberalized, competitive markets. The juxtaposition of external inflexible supply and internal competition cannot help but create stresses and strains that are ultimately unsustainable. It is not just a “buyers’ market” in temporary supply and demand terms; it is a market that is structurally changing at both the point of production and the point of consumption. This poses major challenges for the traditional LNG supply model, but within it also provides the seeds of resolution. The industry’s expansion is making LNG a global commodity in its own right, but to consolidate that trend new markets must be opened, and that means extending LNG supply chains into less credit-worthy, higher-risk markets and into industries relatively new to LNG, such as maritime and land transport. It is a simple equation: in both these markets, and in existing, liberalizing markets, LNG must be at least as flexible as its competitors to succeed say s Abache Abreu, Senior Editor, LNG News & Analysis - Asia-Pacific and Middle East, S&P Global Platts.

Belt & Road: Opportunity & Risk

Belt and Road: What you need to know..

- The Belt and Road Initiative (BRI) is a combination of two initiatives: a 21st Century Maritime Silk Road and a Silk Road Economic Belt. Both initiatives were announced by President Xi Jinping in 2013. 

- BRI is also known as One Belt One Road (OBOR). 

- The five major goals of the BRI are policy coordination, facilities connectivity, unimpeded trade, financial integration and people-to-people bonds. 

- Existing bilateral and multilateral cooperation mechanisms will be used to accelerate the economic integration of countries along the route and support growth in trade.

- BRI is open to all countries and organisations, but, official maps and documents emphasise the importance of 60+ countries in Asia, the Middle East, Eastern Africa and Eastern Europe. 

- The majority of investments so far have been in infrastructure, energy and mining, ranging from standard gauge railway in Kenya to hydropower projects in Cambodia and lignite coal deposits in Pakistan. 

- The maritime “Road” will be a major opportunity for consumer and industrial firms as it accounts for 63% of the global population and 44% of its GDP, excluding China.

- The landlocked “Belt” connects two of the world’s largest economies; China and Europe. The route will emerge as a major logistics corridor and offers significant energy and mining opportunities. 

- We estimate BRI projects linked to China will be worth USD 350 billion over the coming five years.

Slowdown in GCC domestic fuel consumption: temporary slump or new reality?

An economic slowdown coupled with energy reforms has adversely affected domestic fuel consumption growth across most of the GCC, and in some cases even led to negative growth. Saudi Arabia, the region’s largest fuel consumer, saw a 10% decrease in demand for diesel in 2016, while gasoline demand flatlined. Kuwait, Qatar and Bahrain have also experienced a drop in gasoline consumption since major reforms were introduced in 2016. Lack of transportation alternatives has resulted in greater fuel switching, as consumption of premium grade gasoline in Oman declined and was offset by larger volumes of the lower grade fuel. Having implemented energy liberalisation plans in August 2015 – leading to lower domestic prices and falling global crude prices – the UAE is the only country where demand for both gasoline and diesel increased in 2016.

OPEC Monthly Oil Market Report

  • OPEC
  • September-01-2017

September 2017

Oil Market Highlights

Crude Oil Price Movements
The OPEC Reference Basket rose for the second-consecutive month in August to average $49.60/b, representing a gain of $2.67/b or 6%. Year-to-date, the Basket was 30.9% higher at $49.73/b. Crude futures prices also saw gains with ICE Brent increasing 5.5% to $51.87/b and NYMEX WTI up 3.0% at $48.06/b. Year-to-date, crude futures prices were more than 20% higher. During the week of 29 August money managers cut WTI futures and options net long positions by 105,671 contracts to 147,303 lots, the US Commodity Futures Trading Commission (CFTC) said. Money managers slightly reduced Brent futures and options net length contracts by 1,296 to 416,551 lots during the same week.

World Economy
World economic growth has been revised up for 2017 to 3.5% from 3.4%, while the growth forecast for 2018 remains unchanged at 3.4%. OECD growth has performed better-than-anticipated in the current year – particularly the Euro-zone and to some extent in the US – and is now forecast to grow by 2.2% in 2017 and 2.0% in 2018. India is expected to grow by 6.9% in 2017 and 7.5% in 2018. Brazil and Russia are both forecast to expand their recovery to 0.5% and 1.5% in 2017, respectively, followed by growth of 1.5% and 1.4% in 2018. China is expected to grow by 6.7% in 2017 and 6.3% in 2018.

World Oil Demand
World oil demand growth in 2017 is expected to rise by 1.42 mb/d after an upward revision of around 50 tb/d. The adjustment mainly reflects better-than-expected data from OECD region for the 2Q17, particularly OECD Americans and Europe, as well as China. In 2018, world oil demand is anticipated to grow by
1.35 mb/d, an increase of 70 tb/d from the previous report. This reflects higher growth expectations for OECD Europe and China.

World Oil Supply
Non-OPEC oil supply is expected to grow by 0.78 mb/d in 2017, unchanged from the last month due to offsetting revisions in Kazakhstan and US supply. In 2018, non-OPEC oil supply is forecast to grow by 1.0 mb/d, following a downward revision to Russia and Kazakhstan, totalling 0.1 mb/d. OPEC NGLs and non-conventional liquids production are seen averaging 6.49 mb/d in 2018, representing an increase of 0.18 mb/d, broadly in line with growth in the current year. In August, OPEC crude oil production decreased by 79 tb/d, according to secondary sources, to average 32.76 mb/d.

Product Markets and Refining Operations
Refinery margins in the Atlantic Basin strengthened in August. In the US, margins rose amid expectations for a product supply shortfall in the wake of Hurricane Harvey, coupled with already firm domestic demand, which supported product crack spreads. In Europe and Asia, product markets were supported by supply
outages in the US, which encouraged higher arbitrage volumes, as well as healthy seasonal demand, which helped lift refinery margins.

Tanker Market
Average spot freight rates in August followed the typical trend seen in the summer months, with a weakening on most reported routes. Dirty spot freight rates fell, influenced by high vessel availability, as new deliveries were reportedly added to the fleet, putting pressure on an already oversupplied tonnage market.
Clean tanker rates declined on average, influenced by lower rates registered on the West of Suez, despite a temporary hike in rates in the US due to Hurricane Harvey.

Stock Movements
Total OECD commercial oil stocks fell in July to stand at 3,002 mb. At this level, OECD commercial oil stocks were 195 mb above the latest five-year average. Crude and products stocks indicate surpluses of around 123 mb and 72 mb, respectively, above the seasonal norm. In terms of days of forward cover, OECD commercial stocks stood at 62.9 days in July, some 2.7 days higher than the latest five-year average.

Balance of Supply and Demand
Based on the current global oil supply/demand balance, OPEC crude in 2017 is estimated at 32.7 mb/d, around 0.5 mb/d higher than in 2016. Similarly, OPEC crude in 2018 is estimated at 32.8 mb/d, about 0.2 mb/d higher than in 2017. 

The future of coal in the MENA power mix

While governments in the region have long relied on oil and gas-fired power plants to add capacity, efforts to diversify the power mix are gaining momentum with renewable energy and nuclear at the forefront. Nonetheless, countries such as Morocco still depend on coal for much of their power generation, and construction of the GCC’s first coal-fired power plant is in progress in the UAE. Studies are also underway in Egypt to add significant coal capacity. There are several reasons governments are looking at coal, but the most important is to diversify the energy mix and enhance energy security. Despite this, coal is likely to only play a marginal role in the future of the region’s power sector.

BP Statistical Review of World Energy 2017

  • BP
  • June-01-2017

June 2017

For 66 years, the BP Statistical Review of World Energy has provided high-quality objective and globally consistent data on world energy markets. The review is one of the most widely respected and authoritative publications in the field of energy economics, used for reference by the media, academia, world governments and energy companies.

World Oil Outlook 2016 - OPEC

  • OPEC
  • December-01-2016

This year’s World Oil Outlook (WOO) is the tenth edition of the publication, a significant milestone for OPEC’s flagship publication.

 

The WOO 2016 once again provides OPEC’s analysis and views of the medium- and long-term outlook, and marks the conclusion of a challenging twelve months. Since the publication last December of the WOO 2015, oil producers, consumers and investors have faced an oil market that has continued to readjust to the changing industry landscape – something that started in mid-2014. During 2016, the market has shown signs that fundamentals are gradually rebalancing. However, despite non-OPEC supply contracting considerably, global demand remaining robust and the pace of the stock build decelerating,
it is clear that instability and volatility remain. In January of this year, the OPEC Reference Basket (ORB) price fell to $22.48/barrel. It means that between June 2014 and January 2016 the ORB price fell by 80%. This is the largest percentage drop in the five episodes of sharp price declines that the market has experienced over the past three decades. Since then, however, prices mostly saw an upward trend until May, with the ORB price then settling above $40/b in the third quarter of this year.
Meanwhile, stock levels have recently levelled out, but remain wellabove their five-year average. And while global spending on exploration and production by oil and gas producers is expected to fall slightly less this year, the combined amount over the two years still equates to a loss of more than $300 billion. This will impact not only new projects coming onstream, but new discoveries too.
The WOO 2016 takes these various shifting dynamics on board in its analysis and considers developments in the global economy, in oil supply and demand, both in the upstream and downstream, as well as various other drivers, challenges and uncertainties. These include policies, technology, the
changing energy mix and sustainable development concerns, all of which contribute to the future outlook. The consideration of these factors helps to provide a detailed analysis that includes a breakdown by region, sector and timeframe.

World LNG Report – International Gas Union

Liquefied natural gas (LNG) experienced a dynamic 2016, with global trade reaching a record 258 million tonnes (MT), an increase of 13 MT over 2015. Supply ramped up at projects spanning the globe, from the United States to Australia, and LNG found new markets in a diverse array of countries. At the same time, delays and plant outages kept supply growth subdued. LNG prices remained below the cost of new supply as demand grows to reach balance. 

2017 Oil and Gas Trends – a Strategy& PWC Report

  • October-01-2017

How energy companies can adjust their business models to a period of recovery.

The character of Chuck Noland, played by Tom Hanks, says near the end of the film Cast Away, “...because tomorrow the sun will rise. Who knows what the tide could bring?” He makes this observation after having survived on a desert island for four years before being rescued and returned to civilization. If you’re a top executive in an oil and gas company, more than likely you’re feeling the same way right about now — optimistic but extremely cautious.

Much of the oil and gas industry has survived an especially tough few years with weak demand and low prices. It has been difficult to make strategic decisions and plan for the future. Only now is the sector beginning to emerge from its upheaval. If there is hope on the horizon, we must, like Noland in Cast Away, remain mindful of the risk.

Oil and Gas Industry Outlook 2017 – a Deloitte Report

  • October-01-2017

The slow path to recovery

What are the long-term impacts of the oil and gas downturn? What are the reasons to be positive for an oil and gas recovery? Read about the state of the industry in Deloitte’s 2017 Oil and Gas Outlook, a take from John England, US Energy & Resources leader and US and Americas Oil & Gas leader, Deloitte LLP 

APICORP Energy Research – Volume 02 No 04, January 2017 –

IOCs heading in different directions in MENA

International Oil Companies (IOCs) have long played a dominant role in the development of the region’s oil sector – and have always seen the Middle East’s vast reserves as the prized asset. Competition amongst them has always been fierce; but more recently, structural changes in the oil market, political uncertainty and the emergence of shale in North America is changing the way IOCs view the Middle East.

MENA power investment: finance and reform challenges persist

MENA governments are prioritising investments in the power sector to feed rapidly rising electricity de-mand. We estimate that in the period 2017-21, the region will need to invest $302bn in its power sector. Of this, $179bn will be needed to add 138GW of generating capacity, while the rest should be invested in transmission and distribution (T&D). In the GCC, governments have coped well with rising electricity de-mand. As well as adding capacity, some countries have also recently increased electricity prices and intro-duced some limited power sector reforms. In the Mashreq region, inadequate investments and instability have weighed on the power sector and persisting blackouts continue to put pressure on governments to act; while in the Maghreb region, renewable-energy projects are at the forefront of long-term government plans to diversify power-generation capacity and reduce the fuel import bill. But investment in the power sector will continue to be a challenge due to finance constraints and tight government budgets.