David Fuller and Eoin Treacy's Comment of the Day
Category - Energy

    IEA Says Russia Could Do More to Boost Europe's Gas Supply

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    Europe is facing gas shortages, but Russia has a crunch of its own. Gazprom has boosted production this year, but it’s directing the additional output to refill depleted storage sites at home. Russia has been producing close to its maximum capacity, but its domestic needs have curbed availability to Europe, according to the Oxford Institute for Energy Studies.

    “Russia is not running out of gas and its prolific gas reserves allow Russia to meet much higher overall demand, but this requires time, money, and contractual assurances of offtake,” said OIES Senior Research Fellow Vitaly Yermakov.

    Some analysts have argued that Russia has capped flows to Europe as a way to get its controversial Nord Stream 2 pipeline to Germany online. Flows through the link could improve supplies, but the start of commercial operations will depend on regulatory certification -- first in Germany, then at the European Commission. That could run well into next year. U.S. sanctions have also created challenges for the project.

    The IEA stressed that it’s wrong to blame the shift away from fossil fuels for the surge in gas prices. The comments came a week after Frans Timmermans, the EU’s climate chief, warned that the record spike in energy prices must not undermine the European Union’s resolve to cut emissions.

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    Lucid Air blows past the competition (Tesla) with 520-mile EPA range

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    When Lucid Motors first announced its Air sedan would return 517 miles (832 km) on a single charge, it sounded too good to be true. But Lucid didn't think so, having hired an independent test firm to run it through the EPA cycle. A year and change later, Lucid's best-in-market electric car range stands. The official EPA numbers are out and show that the first 2022 Air models will all surpass the 405-mile (652 km) EPA benchmark set by the 2021 Tesla Model S Long Range, with the longest-distance variants breaking 500 miles.

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    Key U.K. Power Cable Will Be Partly Knocked Out Until March

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    A key U.K. power cable knocked out by a fire will stay partly offline until March, National Grid Plc said, deepening the energy crisis threatening Britain as it heads into winter.

    The timing couldn’t be worse. The U.K. is already struggling with shortages, with gas and power prices breaking records day after day. The energy crunch is fueling concerns about inflation and a potential hit to businesses just as the economy emerges from the worst impact of the pandemic. How the U.K. fares through the winter now hinges in large part on the weather.

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    Shanghai Copper Stockpiles at Lowest in a Decade, Nickel Jumps

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    Copper inventories extend a drop to the lowest level in almost 10 years, while aluminum holdings also fell and nickel inventories climbed, according to weekly data from Shanghai Futures Exchanges.

    Copper -11% to 61,838 tons, lowest since Dec. 2011
    Aluminum -1.6% to 228,529 tons, lowest since Dec.
    Lead +3.3% to record 204,008 tons
    Nickel +45% to 8,608 tons, following a more than 30% gain the previous week

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    North American Gas Markets Now in Deficit

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    Since their initial development in the early 2000s, the US shale gas fields have completely overwhelmed US gas markets. Between 2007 and 2020, shale production grew by an incredible 68 bcf/d on a starting base of 50 bcf/d. Over that time, the shales represented 150% of total US production growth, with conventional supply declining steadily. Notably, the Marcellus (in Pennsylvania) and associated gas from the Permian (in Texas) were responsible for nearly 70% of that increase. In 2019, our neural network indicated that both plays were in the early stages of resource exhaustion. We predicted both basins would have a hard time growing at the same rate as in prior years and may actually begin to decline.

    Our models appear to be correct. Between December 2019 and June 2021, the Marcellus has been flat while the Permian has added only 1.1 bcf/d. To put these figures into perspective, over the eighteen months between June 2018 and December 2019, the Marcellus added 6.5 bcf/d while the Permian added 5.5 bcf/d. In other words, Marcellus growth declined by 98% while Permian growth fell by 80%. While COVID certainly impacted drilling activity, recent production trends have not improved. Year to date, production from the Marcellus and Permian combined is down 250 mmcf/d.

    If the shales stop growing, total US production would decline quite quickly. For example, total US dry gas production peaked in December 2019 at 97 bcf/d. As of April (the most recent month with complete data), US supply was down 4.5 bcf/d or nearly 5% to 92.5 bcf/d. Given that preliminary data suggests the shales declined between April and June, it seems almost certain total US dry gas production has continued to decline as well.

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    VW and Daimler Going Electric Overwhelms German Auto Suppliers

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    Carmakers are exacerbating issues by producing more components in-house. Tesla, VW and Porsche are making car batteries themselves or with a partner from outside the traditional car-parts industry. VW aims to cut procurement costs by 7% and fixed costs by 5% over the next couple years, potentially pressuring suppliers including Continental, Magna and ZF Friedrichshafen, my colleague Joel Levington wrote for Bloomberg Intelligence. During a visit to Germany earlier this month, Tesla CEO Elon Musk publicly called out Bosch for not supplying chips quickly enough.

    The industry’s struggles won’t be over soon. The semiconductor shortage will cut worldwide auto production by as many as 7.1 million vehicles this year, with pandemic-related supply disruptions hobbling output well into 2022, according to IHS Markit. This week, VW's Wolfsburg plant — the world’s
    biggest, employing some 60,000 people — restarted from its usual summer break running only one shift.

    Chancellor Angela Merkel’s government, which has been kind to the industry in past years, earlier this month green-lighted a 1 billion-euro “future” fund to help German regions reliant on autos survive the shift away from the combustion engine. Still, analysts anticipate greater consolidation of the parts industry. So, what can suppliers do? Roland Berger says they must overhaul long-established processes to become leaner, invest more in software and digitization, become more open to R&D partnerships and look to Asia for potential growth.

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    Supply Squeezes are Reappearing Everywhere in Key Metal Markets

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    It’s hard to think of two metals with more disparate fundamentals than copper and lead, and long-term projections for prices reflect that. In one corner, there’s a metal that looks set to soar as it powers the world’s rapidly burgeoning renewable-energy and electric-vehicle industries, and in the other corner there’s lead. The highly toxic metal has been substituted out of virtually every product it’s been used in throughout history, and now the electric-vehicle revolution is posing a manifest threat to its last major application in conventional car batteries.

    Still, for buyers scrambling to get hold of spot metal on the LME, the fact that lead prices are likely to crumble in the future will be of no comfort at all. And the general rule in commodities markets is that as long as buyers are bidding up spot prices, futures are likely to follow.

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    World's biggest wind turbine shows the disproportionate power of scale

    This article from NewAtlas may be of interest to subscribers.

    China's MingYang Smart Energy has announced an offshore wind turbine even bigger than GE's monstrous Haliade-X. The MySE 16.0-242 is a 16-megawatt, 242-meter-tall (794-ft) behemoth capable of powering 20,000 homes per unit over a 25-year service life.

    The stats on these renewable-energy colossi are getting pretty crazy. When MingYang's new turbine first spins up in prototype form next year, its three 118-m (387-ft) blades will sweep a 46,000-sq-m (495,140-sq-ft) area bigger than six soccer fields.

    Every year, each one expected to generate 80 GWh of electricity. That's 45 percent more than the company's MySE 11.0-203, from just a 19 percent increase in diameter. No wonder these things keep getting bigger; the bigger they get, the better they seem to work, and the fewer expensive installation projects need to be undertaken to develop the same capacity.

    The overall result should be a drop in offshore wind energy production prices – a sorely needed drop, too. Current levelized costs of energy, as estimated by the US Energy Information Administration for new energy generation assets going live in 2026, place offshore wind as the most expensive way of generating a megawatt-hour right now, at US$120.52, where ultra-supercritical coal is more like $72.78 and standalone solar is around $32.78 before subsidies.

    Obviously, wind fills in gaps that solar can't, and it'll be a crucial part of the energy mix going forward. Scaling the industry up with these mammoth turbines is the key reason why industry experts are predicting that the cost of offshore wind will drop by between 37 and 49 percent by 2050, as reported by Renew Economy.

    MingYang says the MySE 16.0-242 is just the start of its "new 15MW+ offshore product platform," and that it's capable of operating installed to the sea floor or on a floating base. The full prototype will be built in 2022, installed and into operation by 2023. Commercial production is slated to begin in the first half of 2024.

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    Cost to Bury Carbon Near Tipping Point as Emissions Price Soars

    This article by Rachel Morison and Samuel Etienne for Bloomberg may be of interest to subscribers. Here is a section:

    “We need to see higher carbon prices to make those projects profitable,” said Anders Opedal, chief executive officer of Equinor ASA, which is developing CCS in the U.K., Norway, Germany and the Netherlands. “It actually needs to be more expensive to pollute than actually capture and store.”

    Britain has the most ambitious climate goals of the G-20 nations, targeting a 78% reduction in emissions by 2035. The nation has committed to helping fund two industrial hubs, where heavy industry and power generation can use carbon capture and storage by 2025, with another two by the end of the decade.

    The aim is to scrub as much as 10 million tons of carbon dioxide from the atmosphere every year. Details on how the funding will be allocated are due before December. At today’s power prices, the U.K.’s largest planned project at Drax Group Plc’s biomass station in north England already would be profitable using carbon-capture technology, according to Credit Suisse.

    “We need to be sure we could get those prices over a long time period, but we’re getting pretty close,” CEO Will Gardiner said in an interview on Bloomberg Radio. Drax’s project will start in 2027, and by 2030 it will capture and store 8 million tons of carbon dioxide a year.

    In 2019, the world emitted about 33 gigatons of carbon. Operational projects are capturing just a fraction of that, about 40 million tons, according to Wood Mackenzie. There are 19 large-scale CCS facilities in operation today and another 32 in development, according to Credit Suisse. If these all come online, they could store 100 million tons – a slightly bigger fraction.

    There’s also a chance the technology might not be as effective as promised. The world’s biggest project, at Chevron Corp.’s $54 billion liquefied natural gas plant in Australia, has fallen short of its target to capture 80% of emissions from the plant, burying just 30% over five years.

    “The tech isn’t there yet for large-scale adoption, but our industry has to start changing how we operate,” said Andrew Gardner, chairman of Ineos Grangemouth Ltd., which is working with Royal Dutch Shell Plc on the Acorn project in Scotland that’s scheduled to start in 2027.

    The system developed by Oslo-based Aker Carbon Capture ASA costs between 60 euros and 120 euros per ton, CEO Valborg Lundegaard said. That means CCS could be nearing a crossover point.

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