Global Energy Growth

Rising energy consumption complicates net zero.

AME forecasts global energy demand to increase by 6% in 2021 to 14,869Mtoe, more than offsetting the 3% contraction in 2020 and pushing demand 2.9% above 2019 levels. As economies and energy markets recover from the impact of the pandemic, the fundamental transition towards decarbonising energy systems will continue, and look to accelerate rapidly over the coming decades.

Growth in energy demand this year will be driven by renewable energy, with solar photovoltaic (PV) and thermal jumping 38% from 2020 to 142Mtoe, and wind increasing by 17% to 156Mtoe. Demand for geothermal energy is forecast to rise by 7% on-year to 111Mtoe, while nuclear output will increase by 9% on-year to 762Mtoe.

Demand for all fossil fuels has grown significantly in 2021. AME expects oil demand to rise by 4% on-year to 4,215Mtoe, but 5% below 2019 levels. Gas demand is forecast to increase by 5% on-year to 3,384Mtoe, surpassing 2019 level by 0.5%. Coal demand is expected to rise 9% on-year to 4,259Mtoe, 10% higher than 2019.

REACHING NET ZERO

To meet the ambition of net zero emissions while simultaneously satisfying growing demand for energy services, production from zero-emission sources would have to be scaled up 9-13 times in 30 years. Hydro and nuclear power production are unlikely to increase by anything like this amount, implying the need for even faster growth in wind, solar and other renewables.

The problem becomes more manageable if coal, oil and gas remain a significant part of the energy mix by coupling them with carbon capture and storage technology or other ways to offset their emissions. Even so, the implied deployment of zero-emissions energy technologies will be exceptionally difficult within the time frame.

In addition to the net zero target, global policymakers have committed themselves to ensuring universal access to affordable, reliable and modern energy services, as part of the United Nations Sustainable Development Goals. Across much of sub-Saharan Africa, as well as parts of Asia and Latin America, even the most basic energy needs for cooking and heating have still not been met. In urban areas, most households now have access to electricity, even in developing countries, but one-fifth of rural households worldwide still lack this basic service, according to the World Bank.

One-third of the world's population still relies on traditional cooking fuels such as wood, coal and kerosene, according to the World Health Organization. Household fuel combustion is responsible for significant indoor air pollution, contributes to poor outdoor air quality, and was one the world's leading causes of mortality before the Covid-19 pandemic. The WHO estimates household air pollution was responsible for almost 4m deaths in 2016.

Beyond satisfying basic needs, over time households in developing countries are likely to want to use more advanced energy services for lighting, heating, air-conditioning, television, computing and transport, including aviation.

In 2019, the average person in the advanced economies in the Organization for Economic Cooperation and Development (OECD) used more than three times as much energy as their counterparts in the rest of the world. But developing countries have been steadily closing the energy consumption gap, which has narrowed from 7:1 in 1969 and 6:1 in 1979 to 5:1 in 1989 and 4:1 in 2009.

If developing countries continue to close even part of the gap, the increase in primary energy use will be huge. Rising living standards and energy consumption in developing countries explain why most projections show big increases in global energy demand by 2050, even if energy efficiency can be improved.

In the IEA'S net zero by 2050 pathway, global energy demand is around 8% smaller than today, but it serves an economy more than twice as big and a population with 2bn more people. Almost 90% of electricity generation comes from renewable sources, with wind and solar PV together accounting for almost 70%. Most of the remainder comes from nuclear power.

New energy security challenges will emerge on the way to net zero by 2050 while longstanding ones will remain, even as the role of oil and gas diminishes. Growing energy security challenges that result from the increasing importance of electricity include the variability of supply from some renewables and cybersecurity risks. In addition, the rising dependence on critical minerals required for key clean energy technologies and infrastructure brings risks of price volatility and supply disruptions that could hinder the transition.

"AME forecasts global energy demand to rise by 6% in 2021 to 14,869Mtoe, more than offsetting the 3% contraction in 2020."

"Growth in energy demand this year will be driven by renewable energy, with solar jumping 38% and wind increasing 17%."

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China’s Sinopec Issues Tender for Up to 45 LNG Cargoes
21 Jan 2022
China’s Sinopec Corp has issued a tender to sell up to 45 cargoes of liquefied natural gas for 2022 deliveries, in a rare sell tender to take advantage of high Asian spot prices.

Under the tender, Sinopec offered two to five cargoes each month between February and October on a delivered ex-ship basis.

Prices will be linked either to Europe’s Title Transfer Facility pricing or North Asian benchmark Japan Korean Marker. The tender closes on 21st January. 

On Tuesday, Sinopec received its first cargo of LNG under a new term supply deal signed last year with Qatar Petroleum, according to local state media reports.

The tanker Al Sahla, carrying 94kt of Qatari gas, was discharged into Sinopec's Tianjin terminal earlier this week, state-run Tianjin Daily reported.

This is part of a deal signed with Qatar Petroleum in March for an annual supply of 2Mt for 10 years, with supply starting this month.
Santos Posts 66% Jump in December Quarter Sales Revenue
21 Jan 2022
Australian gas producer Santos on Thursday posted a 66% jump in its December quarter sales revenue, with revenue boosted by strong prices and sustained demand from Asia and Europe.

Santos, which became a global top-20 oil and gas firm after its US$6.2bn buyout of Oil Search last year, said it earned an average of US$13.64/MMBtu for its LNG during the quarter, a more than twofold jump from a year ago.

This boosted its sales revenue to US$1.53bn for the quarter, including contributions from Oil Search since 10th December, when the merger became effective.

Last year, Santos reported sales revenue of US$922m.

Output in the December quarter fell to 22.9Mboe from last year's 25.4Mboe but rose 5% on-quarter. Annual output was 92.1Mboe, 3.5% higher than a year ago. This includes 1.7Mboe from Oil Search assets. 

Santos said it would provide 2022 guidance with its full-year results on 16th February.
Verizon Purchases Up to 640MW of Renewable Energy from Leeward
21 Jan 2022
US telecommunications conglomerate Verizon will purchase up to 640MW of renewable energy from Leeward Renewable Energy, as part of its goal to achieve carbon neutrality in its operational emissions by 2035.

Verizon will purchase the energy generated from four of Leeward’s wind and solar projects under development: the 200MW Blackford County Wind, 200MW Horizon Solar, 160MW White Wing Ranch Solar projects, and an 80MW wind project currently under development. The projects have a combined capacity to generate up to 640MW of clean energy.

Construction of the 200MW Blackford Wind project in Indiana is expected to begin in February 2023 and to be completed by the end of 2023.

Construction of the 200MW Horizon Solar project in Texas is expected to begin in September 2022 and to be completed by the end of 2023.

Construction of the 160MW White Wing Ranch Solar project in Arizona is expected to begin in May 2023 and to be completed by the end of June 2024.

The last project, an 80MW wind asset, is still in development. Details have not yet been disclosed.

The projects will utilise wind turbines and thin-film panels from American renewable technology manufacturers such as Arizona-based First Solar.

Verizon and Leeward have an existing relationship through previously signed renewable energy purchase agreements for the 196MW Big Plain and 100MW Oak Trail solar projects.

“Since 2019, Verizon has issued three US$1bn green bonds to support our climate strategy, including our expansive renewable energy initiatives,” James Gowen, Verizon’s chief sustainability officer, said. 

Texas-based Leeward currently has a total installed generating capacity of more than 2GW across nine US states.
China Imports 7.5Mt of Coking Coal in December 2021, Surging 110% YoY
21 Jan 2022
China imported 7.5Mt of coking coal in the December 2021, with imports surging by 110% year on year but down 3.3% month on month. After registering imports of Australian coal in October and November 2021, China again allowed 2.73Mt of Australian coking coal loaded on coal transport vessels to pass through customs clearance in December 2021, importing a total of 6.2Mt of Australian coking coal during the December quarter of 2021.

For the 2021 full year, China imported a total of 55.5Mt of coking coal, down 23.6% year on year due to its unofficial ban on Australia coal.
Shell to Supply Crude to Pemex's Newly-Acquired Deer Park Refinery
21 Jan 2022
Mexico's state oil firm Pemex on Thursday signed a long-term crude supply deal with Shell, as part of its purchase of the Deer Park refinery in Texas.

The transaction, announced last May, is worth almost US$600m and will make Pemex the sole owner of the 340kbpd-capacity facility. 

Shell will supply about 200kbpd of foreign and US crude to the plant for at least 15 years, according to a source and a July document. A Pemex unit expects to supply up to 115kbpd of Mexican crude to the refinery and receive about 230kbpd of refined products that could go to the domestic market.

If Pemex suspends or reduces the volumes that are part of its supply contract, it would have to pay Shell between US$50m and US$190m, depending on the year it does so, according to the July document.

Pemex separately agreed to supply the adjacent Shell Chemical plant with feedstocks. It also made two-year job offers to the plant's salaried workforce, according to sources.

The refinery purchase is aligned with Mexico's goal to become more self-sufficient in gasoline and diesel, Pemex CEO Octavio Romero said.

Pemex's fuel production declined by almost half between 2016 and 2020 and its refineries ran at less than 50% of their capacity in 2020. In contrast, Deer Park ran at 78% of its capacity in 2020.
Shell to Carry Out Five-Month Maintenance at Pernis Oil Refinery
21 Jan 2022
Shell plans to carry out major maintenance work at its Pernis oil refinery in the Netherlands, the largest in Europe, in the coming five months.

"We will inspect a large number of installations from the inside and out, clean them and replace parts", Shell said in a statement.

The work at the refinery, which has a capacity to process 404kbpd, will start at the end of January and is expected to last until the end of June, the company said.

The Pernis refinery has traditionally been one of the main sources of locally-produced fuel for the Rotterdam bunker market.

Gasoil stocks held in independent storage in the Amsterdam-Rotterdam-Antwerp (ARA) refining and storage area fell 8% to 1,686Mt in the week to Thursday.

Gasoil stocks were well below their five-year average for this time of year of around 2.475Mt.
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