The most significant development for world crude oil prices is the lack of investment in conventional oil which constitutes about 90% of the world’s oil supply.  Multiple voices are warning about the lack of investment in the energy sector. The International Energy Agency reports that last year energy companies approved the lowest number of new drilling projects in more than 70 years. Global investment in exploration is expected to be about $37 billion in 2018, down 7% from a year earlier and over 60% below the 2014 peak, according to Wood Mackenzie.  Experts are warning that there is at least a possibility of going back to the situation we had ten years ago when oil prices were very, very high at a time when global demand was growing. There appears to be a growing realization that increasing shale oil production cannot by itself satisfy the ever-increasing demand for crude oil now that discoveries of new conventional oil are at 50-year lows. Optimistic analysts are saying that this will not have an important impact on oil prices for another ten years. Some suggest that the shortage will come much earlier.

The US is on the verge of becoming the world’s largest crude oil producer.  According to research firm Rystad Energy, US crude production is expected to increase 10% in 2018 to about 11 million barrels per day. At that level, the Americans will pass Russian and Saudi Arabian production.

China is on track to overtake Japan this year as the world’s largest importer of natural gas. China’s 2017 imports of pipeline gas and liquefied natural gas (LNG) are expected to surpass 67 million tons, up by more than 25% from 2016. China is cracking down on pollution in its cities and using natural gas to make electricity while it closes coal-fired plants.

China has more than 4,000 coal mines with a total production capacity of 3.41 billion tons a year.

A second China-Russian crude oil pipeline has began operating, doubling China’s capacity to import crude from the East Siberia-Pacific Ocean system. The Asian nation can now import 30 million tons annually (about 600,000 barrels a day) of Russian crude via pipeline.

Russia’s Gazprom shipped 190 billion cubic meters of natural gas to Europe in 2017 — a record high, according to Bloomberg. Europe’s imports of Russian gas has increased more than 25% since the 2014 Ukrainian crisis, despite a lot of rhetoric in the EU about diversifying away from Russia.

The eastern Mediterranean could the conflict in 2018 driven by territorial disputes over natural gas and newly discovered hydrocarbon reserves in the eastern Mediterranean basin.  The end of 2017 saw worsening relationships between Turkey and the Greek Cypriot-Greece-Israel-Egypt bloc.

Global sales of passenger cars and trucks likely surpassed 90 million for the first time in 2017, the latest indicator that demand for conventional automobiles remains strong even as driverless cars and ride sharing get increasing attention. Sales were fueled in part by a continued rebound in Western Europe and recovery in major emerging markets, including Brazil and Russia. Asian buyers are the main engine for sales growth with more than 25% of the cars sold last year going to Chinese customers, up from less than 15% a decade ago.

The world’s first ‘zero subsidy’ auction for wind power was held in the Netherlands last month. The Dutch ministry of Economic Affairs announced that several companies have bid to build a subsidy-free wind farm in the Dutch part of the North Sea. Bidders included Swedish energy company Vattenfall and Norway’s Statoil. The winner is expected to be announced in March.  Globally, subsidies for wind farms are falling sharply due to a combination of surging demand for wind energy, low interest rates, technological progress, and competition among turbine makers which made it considerably cheaper to build wind farms. The Dutch are running a series of auctions over 6 years to build offshore wind farms with a total capacity of 3,5 terrawatts..

China has opened a 1-kilometer long solar road in Jinan in Shandong province south of Beijing. The two-lane road covers 5,875 square meters and can generate up to 1 million kilowatt-hours of electric power annually. The electricity will be used to run street lights, billboards, surveillance cameras, and toll collection plazas. It will also be used to heat the road surface to keep it clear of snow. Any excess will be fed back into the local utility grid. The surface of the road is made of transparent concrete which can withstand 10 times more pressure than regular concrete. Beneath the concrete are solar panels that convert sunlight to electricity. Under the solar panels is an insulating layer designed to protect them from excessive heat or cold. In crowded Chinese cities there is not always room for solar panels, so finding alternative locations such as roads and bodies of water is becoming more common.

The UK has created a renewable energy link between Scotland and Wales. The cable runs from Hunterston in Scotland, where a converter station is based, to Flintshire Bridge in Wales. The cable will transfer up to 900 megawatts of wind power from Scotland across several hundred kilometres to link the transmission network in Wales.

The Central Asian country of Nepal was busy in the electric power sector last year. Private firms added 150 megawatts of hydro power. The country was also working hard attempting to construct transmission lines to bring power to the remotest parts of the mountainous country. In several areas it ran into roadblocks as landholders are refusing to accept the rights-of-way compensation being offered by the Napalese government to cross their territory.  In addition to domestic transmission lines, Nepal reached agreements with India and China to build cross-border connections. Nepal and India agreed to construct a 400 kilovolt (kV) New Butwal-Gorakhpur cross-border transmission line. Nepal and China signed a memorandum of understanding to construct a 500 kV power line linking Rasuwagadhi and Kyirong across the northern border. 2017 further saw legislation passed to enable the Energy Ministry to create a regulatory body to oversee the nation’s electric grid and set rules and regulations to govern the industry.

















with h/t Tom Whipple

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