Chinese oil demand to peak before 2030: CNPC
China's petrochemical needs will fuel oil demand growth while a slowdown in incremental oil demand in the transportation sector will contribute to a peak in overall oil consumption before 2030, according to the latest forecast by state-controlled CNPC's research arm the Economics and Technology Research Institute (ETRI).
Chinese oil demand is expected to peak at 18.2mn b/d (780mn t/yr) before 2030, with the petrochemicals sector driving oil demand through 2030. But oil demand is forecast to drop to 8.8mn b/d by 2050 and 5.4mn b/d by 2060.
This will exacerbate the oversupply in refining capacity after 2030, requiring refiners to increase production of higher-end products, rather than transportation fuels, as part of energy transition efforts, the ETRI said. Beijing has already outlined a crude distillation capacity limit of 20mn b/d for Chinese refining capacity in 2025.
Electrification, or the use of electric vehicles, will be especially rapid in the transportation sector between 2031-50. This will reduce gasoline and diesel demand, although petrochemicals demand is still expected to be relatively stable during this period.
Demand for oil products including gasoline, diesel and jet fuel could peak at 8.4mn b/d by 2025 and decline to 1.3mn b/d by 2060, driven by the rise of new energy vehicles (NEVs) and development of railways. Chinese apparent products demand, including gasoline, diesel and jet fuel, averaged 6.9mn b/d in January-November, data from the National Bureau of Statistics and Customs Bureau show.
China's auto fleet still has room to grow, the ETRI said. NEVs will account for 10pc of China's total auto fleet in 2028, and rise to 80pc in 2052. NEVs currently account for just 2.3pc of vehicles in China.
China's auto sales in 2022 are expected to rise by 5.4pc from a year earlier to 27.5mn, with NEVs leading the increase, according to the China Association of Automobile Manufacturers (CAAM).
Sales of NEVs are forecast to rise by 47pc to 5mn in 2022, the CAAM said.
The country's primary energy consumption could also peak during 2030-35, at around 6bn t of standard coal equivalent (tce), then decline to 5.7bn tce by 2060 as renewables production rises, according to the ETRI. China only just met its 2020 consumption target of 5bn t tce with demand of 4.98bn tce.
The ETRI has also forecast Chinese coal demand to peak by 2025, and gas demand by 2040.
The institute expects Chinese crude production to remain at around 4mn b/d before 2035 but for natural gas output to grow at a faster pace, reaching 250bn m³/yr by 2030 and 350bn m³/yr by 2060. Chinese crude output averaged 100,000 b/d or 3pc higher on the year at 3.94mn b/d in January-November. Gas output rose by 8.9pc on year to 186bn m³ in January-November.
For 2021, national crude output is expected at 3.98mn b/d and gas output at 206bn m³, the National Energy Administration said.
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Petroecuador expects more crude with fewer wells
Petroecuador expects more crude with fewer wells
Quito, 1 July (Argus) — State-owned oil company Petroecuador will drill fewer wells this year than first planned but still expects to produce 5,000 b/d more crude than initially forecast for 2024, according to the work plan of interim chief executive Diego Guerrero. Petroecuador plans to drill 90 wells this year, including 27 drilled through May and 63 planned for the rest of the year — well below the 156 wells initially forecast under former chief executive Marcela Reinoso , who resigned in May. But the company expects crude output to average 390,000 b/d by December, according to Guerrero's plans, higher than the 370,000 b/d estimate made before he took office, and up from 369,000 b/d reported for June. Ecuador is expected to lose about 50,000 b/d come 1 September when it shuts down the Ishpingo, Tambococha and Tiputini (ITT) fields in block 43 after Ecuadorians voted to end oil activities in the environmentally sensitive region. Guerrero's plan did not break out how much output it expects from ITT this year. Petroecuador did not respond to a request for comment. Reinoso told the national assembly in February that without ITT, Petroecuador's production would fall to 358,500 b/d in September before rising again to 373,300 b/d in December, leading to a 2024 average of about 385,000 b/d. But petroleum engineers' association vice-president Fernando Reyes said that both the new and old goals for December production are too optimistic without ITT. After a 50,000 b/d drop with the end of ITT production, Reyes believes under a best-case scenario new drilling could add 20,000–30,000 b/d of production, bringing December output to 360,000-370,000 b/d. But Guerrero's higher projections are feasible if Petroecuador keeps pumping crude from ITT, Reyes said. Ecuadorian president Daniel Noboa in January proposed a one-year delay on plans to end drilling in the ITT, but the plan has not advanced. Guerrero's work plan also includes new projects to recover associated gas from the Sacha Norte 2, Sacha Central, Drago and Shushufindi fields, and also workovers in four wells in the offshore Amistad natural gas field. Petroecuador produced 81pc of Ecuador's crude output of 484,499 b/d in May. By Alberto Araujo Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Shale to emerge leaner from M&A boom
Shale to emerge leaner from M&A boom
New York, 1 July (Argus) — The recent flurry of deals in the US shale patch is poised to deliver significant productivity gains, potentially offsetting a drilling slowdown and suggesting that it might well be a mistake to bet against the sector any time soon. Ownership of top shale basins, such as the Permian in west Texas and New Mexico, is increasingly falling into the hands of fewer but larger operators, with the necessary resources to chase technology breakthroughs and drive economies of scale that could support further output growth. The flood of deal-making comes as shale growth is likely to slow after defying all expectations last year. Even as acquirers look to fine-tune their combined portfolios and slow activity in favour of shareholder returns, they will still be targeting ever longer lateral wells that reduce the need for more rigs and hydraulic fracturing (fracking) crews. Fracking multiple wells at the same time and shifting to electric fleets will also help them become more efficient. All in all, shale could continue to be a thorn in Opec's side for years to come. Underestimate US shale at your peril was the title of a recent report from analysts at bank HSBC. "We expect the mergers and acquisitions to result in substantial capital efficiencies," they wrote. Concentrated operations have reduced inefficiencies in the supply chain, and the elimination of downtime has also helped producers become leaner, according to consultancy Wood Mackenzie. But costs remain 15-30pc higher than 2020-21 levels, suggesting scope for further improvements. And while efficiency gains will inevitably become exhausted at some point, opportunities to tackle unproductive processes might still crop up. "The will and the technology are there for some operators, who should be able to keep cutting capex while modestly growing and maintaining shareholder distributions for a while to come," Wood Mackenzie research director for the Lower 48 Maria Peacock says. ExxonMobil flagged $2bn in annual savings from its $64.5bn takeover of shale giant Pioneer, with two-thirds to come from improved resource recovery and the rest from efficiencies. Leading US independent ConocoPhillips says improved technology will help it extend its inventory of top-quality drilling locations in both the Eagle Ford and Bakken basins after its $22.5bn tie-up with Marathon Oil. Return to spender Productivity gains are hardly the preserve of firms that have been active participants in the $200bn of shale deals seen over the past year. For example, US independent EOG, which has sat out the mergers and acquisitions (M&A) boom so far, plans to deliver the same level of growth for this year as seen in 2023 with four fewer rigs and two fewer fracking fleets. "Technology has evolved so much that you can go and drill horizontal wells in these and exploit that technology and you can get just absolutely outstanding returns," chief operating officer Jeff Leitzell says. Still, almost half of oil and gas executives recently polled by the Dallas Federal Reserve think that US oil output will be "slightly lower" if consolidation continues over the next five years. But the answer differed by company size. All executives from E&P firms that produce 100,000 b/d or more envisaged "no impact". Service company executives are more concerned: "Consolidation by E&P firms has curtailed investment in exploration," one said. "Our hope is that it's a temporary situation that will work itself out as the integration is completed." And even though the prolific Permian basin is due to peak before the end of the decade, analysts forecast robust growth in the intervening years. Relatively high oil prices that remain above breakeven costs and efficiency gains — which will shift the mix of wells to newer and more productive ones — will be the main drivers, according to bank Goldman Sachs. By Stephen Cunningham US tight oil production Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Japan mulls seeking more gas-fired capacity in auction
Japan mulls seeking more gas-fired capacity in auction
Osaka, 1 July (Argus) — Japan is considering further adding to gas-fired power generation capacity through its long-term zero emissions power capacity auction, given forecasts of rising electricity demand with the rapid adoption of artificial intelligence. A working group under the trade and industry ministry Meti has proposed to look for an additional 4GW of gas-fired capacity over two fiscal years from April 2024-March 2026 via a clean power auction. This came after awarded gas-fired capacity reached 5.76GW in the first auction held in January , with the auction seeking about 6GW over three years. The second auction — which Tokyo plans to hold in January 2025 — could seek 2.24GW, including the remaining 0.24GW in the first auction, for 2024-25 and another 2GW for 2025-26 in a third auction, the working group suggested. It has also proposed to extend the period within which awarded gas-fired projects have to start operations to eight years from the previous six years, given current resource shortages at plant manufacturers. Japan has launched the auction system to spur investment in clean power sources by securing funding in advance to drive the country's decarbonisation towards 2050. This generally targets clean power sources — such as renewables, nuclear, storage battery, biomass, hydrogen and ammonia. But the scheme also applies to new power plants burning regasified LNG as an immediate measure to ensure stable power supplies, subject to a gradual switch from gas to cleaner energy sources. These measures will not necessarily lead to increased demand for LNG, as Japanese import demand for the fuel would further come under pressure from expanded use of renewables and nuclear power. But the power sector will have to secure enough capacity to meet peak demand, especially with power consumption by data centres and semiconductor producers expected to continue to increase. Japan's peak power demand in 2033-34 is forecast at 161GW, up from an estimated 159GW in 2024-25, as the country's digital push will more than offset the impact of falling population and further energy saving efforts, according to the nationwide transmission system operator Organisation for Cross-regional Co-ordination of Transmission Operator. By Motoko Hasegawa Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Indonesia's coal exports edge higher in April
Indonesia's coal exports edge higher in April
Singapore, 1 July (Argus) — Indonesia's coal exports in April edged higher from a year earlier, led by a growth in shipments to India and southeast Asia. The country exported 44.54mn t of coal in April, up by 2.2pc from a year earlier, customs data show. But the exports fell from 46.1mn t in March . The data includes all types of coal such as thermal as well as coking coal. Indonesia exported about 175.58mn t of coal in January-April, up from 168.5mn t during the same period a year earlier. The country could export a total of 526.68mn t this year at the current pace of 43.89mn t/month, up from 521.1mn t a year earlier, according to Argus calculations based on the customs data. The year-on-year increase in April exports was mainly supported by a rise in demand from India, the world's second-largest coal importer, as utilities there looked to bulk up purchases to replenish stocks for the summer season. Shipments to India in April rose by 8.5pc on the year and by 4.8pc on the month to 11.03mn t, according to the data. The exports were supported by strong demand from utilities with an increase in coal-fired generation. India's overall coal-fired generation — which meets most of the country's power requirements — rose to 116.5TWh in April, up from 106TWh a year earlier, according to data from the country's Central Electricity Authority. April's coal-fired generation was also higher than March's 112.5TWh because heatwaves led to increased air-conditioning use. Indonesian exports also rose to cater for increased demand from southeast Asia. Exports to the region in April rose by 36pc on the year and by 21pc from March to 11.03mn t. This was led by a steady rise in exports to Vietnam, where shipments more than doubled to 2.86mn t from 1.35mn t a year earlier and 2.03mn t in March. The demand was led by utilities as coal-fired generation rose to around 16.5TWh in April, up from an estimated 11.89TWh a year earlier, to cater for an increase in power demand during the dry season. Vietnamese coal imports reached 6.5mn t in May , up from 4.97mn t a year earlier, and from 5.9mn t in April, provisional customs data show. Shipments to China — the world's largest coal importer — accounted for nearly 35pc of Indonesian exports at 15.57mn t, down from 18.5mn t a year earlier and 19.26mn t in March. The drop came as Chinese utilities slowed down purchases of seaborne cargoes in line with the softness in thermal power generation. China's thermal power generation, which mainly uses coal, fell to 454TWh in May from 471TWh a year earlier and 459TWh in April, according to the latest data from the National Bureau of Statistics. China's imports of thermal coal — including non-coking bituminous coal, sub-bituminous coal, and lignite — totalled 32.7mn t, down from 31.4mn t a year earlier and from 32.9mn t in May, Chinese customs data show. Output rises A rise in Indonesian coal production supported higher exports in January-April. Output during the period rose to 266.1mn t, up by 9.2pc from a year earlier, according to data from the country's energy ministry (ESDM). But the output in May and June is estimated to have slipped, taking the year-to-date tally to about 371mn t, down by 2.5pc from a year earlier. The data will likely be revised, as output is frequently reviewed in Indonesia because of a lag in some producers' reporting. Indonesian output could face pressure from heavy rains in parts of key coal-producing Kalimantan region, while production cutbacks could also affect overall production. Some coal producers could trim output in response to ongoing prices in the international market. Argus assessed Indonesian GAR 4,200 kcal/kg coal at $52.86/t fob Kalimantan on 28 June, down by 6.4pc from $57.50/t on 8 March, the highest level for 2024. It is also sharply down from a 2023 peak of $90.41/t in January last year. Weaker output could dent the export trajectory, but coal exports in May are estimated at 44.12mn t, according to data from trade analytics firm Kpler, up from 41.47mn t a year earlier. By Saurabh Chaturvedi Indonesian coal exports (mn t) Indonesia Jan-Apr coal exports by destination (mn t) Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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