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Learning to Live with Less

By Gerard Kreeft

 

 

 

 

 

 

About half of the world’s fossil fuel assets will be worthless by 2036 under a net zero transition, according to a new paper published in Nature Energy. The lead author, Jean-Francois Mercure of the University of Exeter, said the shift to clean energy would benefit the world economy overall, but it would need to be handled carefully to prevent regional pockets of misery and possible global instability.

Countries that are slow to decarbonize will suffer but early movers will profit; the study finds that renewables and freed-up investment will more than make up for the losses to the global economy.

It highlights the risk of producing far more oil and gas than required for future demand, which is estimated to leave $11Trillion-$14Trillion in so-called stranded assets – infrastructure, property and investments where the value has fallen so steeply, they must be written off.

“In a worst-case scenario, people will keep investing in fossil fuels until suddenly the demand they expected does not materialize and they realize that what they own is worthless. Then we could see a financial crisis on the scale of 2008,” he said, warning oil capitals such as Houston could suffer the same fate as Detroit after the decline of the US car industry unless the transition is carefully managed.

The new paper illustrates how a drop in demand for oil and gas before 2036 will reshape the geopolitical landscape. Current investment flows and government commitments to reach net zero emissions by 2050 will make renewable energy more efficient, cheaper and stable, while fossil fuels will be hit by more price volatility. Many carbon assets, such as oil or coal reserves, will be left unburned, while machinery will also be stranded and no longer produce value for its owners.

To what extent can the new independents, taking over oil and gas assets from the oil majors, be a force of good? Carrying out exploration and developing of oil and gas assets and also develop green energy. Some guidance was provided at a recent conference hosted by Frontier Energy. The panel included: Ignacio de Calonje, Chief Investment Officer, International Finance Corporation; Zoḗ Knight, Group Head HSBC Centre for Sustainable Finance, HSBC; Rob Tims, Managing Director, RWT Energy Advisory; Christopher McLean, CEO, Stonechair Capital; Jim Totty, Managing Director, Viridis Capital.

Some key conclusions:

To encourage better sustainable development In emerging markets there is the need to have better financial linkages  between interest rates and CO2 emissions standards.

IFC does provide concessional financing to reduce project risk so that other investors can get on board.

In emerging markets, IFC virtually does no financing of oil and gas projects, the exception being some gas projects that are linked to sustainable development. Offshore wind is a growth area for IFC.

Important to understand Africa’s diversity: some of the highest GDP growth in the world, enormous needs for technology and sustainable energy projects. Energy affects agriculture, stable medical delivery, reliable logistics, and efficient technology growth.

Lack of standardization of financial parameters throughout Africa.

Institutions in Africa lack the sophistication to implement equity financing.

Huge need for PPPs ( private-public partnerships) for transmission and distribution projects.

Energy trading must be encouraged across Africa: for example,  North African gas and solar producers with Sub-Sahara Africa consuming countries.

Learning to Live with Less

It is estimated  that the world population will reach 9.4 billion by 2050, 10.4Billion by 2100, and will ultimately stabilize at just under 11 billion persons around 2200. A growth of such a magnitude also requires an energy system of various aspects- bringing energy poverty nations relief and in the industrialized countries greater energy efficiency with less resources.

Must we think in terms of Jonathan Swift’s Modest Proposal of 1729? In his Modest Proposal he suggests that the impoverished Irish might ease their economic troubles by selling their  children as food to rich gentlemen and ladies.

One of the most compelling energy scenarios is Wood Mackenzie’s AET-2(Accelerated Energy Transition scenario). According to Wood Mackenzie: “The AET-2 scenario is based on the Intergovernmental Panel on Climate Change carbon budget allocation for the next eight decades, to 2100. It sets out our view of how the world can limit the average rise in global temperatures to 2 °C compared with pre-industrial times, examining potential policy drivers, cost reductions and technological innovations. Electrification and low-carbon fuels are central to meeting the 2 °C limit.  We estimate that electricity meets 47% of total final energy consumption globally in 2050 compared with 20% today. Three key assumptions underlie our AET-2 scenario:

  • rapid electrification in all sectors;
  • the decarbonisation of the power sector through the penetration of renewables and storage and coal-to-gas switching;
  • the large-scale development of carbon capture and storage (CCS) and carbon capture, utilisation and storage (CCUS) – 5 billion tonnes (Bt) by 2050 – and low-carbon hydrogen – 380 million tonnes (Mt) by 2050 – in hard-to-decarbonise sectors.”

AET-2 has massive implications for oil and gas demand in 2050: 70% lower than today. From 2023 onward oil demand drops with year-on-year fall of around 2 million barrels per day (bpd). Total oil demand by 2050 is down to 35 million bpd.

Natural gas demands, in contrast, remains resilient to about 2050. Large scale CCS in the industrial and power sectors will support gas while the deployment of blue hydrogen (135Mt by 2050) is a growth sector. Growth will come primarily from Asia, especially China and India.

Under AET-2 the assumption is that as many as 80% of new vehicles sold are electric, either battery-driven or hybrid. Heavy transport- ships and trains- are electric or hydrogen driven. Non-combustion liquid petrochemical demand for plastics is damped by higher rates of recycling.

Wood Mackenzie’s AET-2’s scenario draws the following conclusions:

  • World needs no new supply of oil…” core function is to maintain current commercial production by going into full harvest mode” …
  • Market power slips from OPEC to giant gas producers such as USA, Russia and Qatar.
  • Downstream suffers death by a thousand cuts. By 2050 the refining sector will have withered to 1/3 of its current capacity with less than 150 of the current sites in operation.
  • Era of carbon-neutral gas is born. AET-2 would require $300 billion to support Liquified Natural Gas growth globally and $700Billion to support dry gas development in North America. Blue hydrogen and ammonia emerge as new market products.
  • Currently no International Oil Company nor National Oil Company is prepared for the scale of decline envisaged in this scenario.

Gerard Kreeft, BA (Calvin University, Grand Rapids, USA) and MA (Carleton University, Ottawa, Canada), Energy Transition Adviser, was founder and owner of EnergyWise.  He has managed and implemented energy conferences, seminars and university master classes in Alaska, Angola, Brazil, Canada, India, Libya, Kazakhstan, Russia and throughout Europe.  Kreeft has Dutch and Canadian citizenship and resides in the Netherlands.  He writes on a regular basis for Africa Oil + Gas Report and contributes to the Institute Energy Economics and Financial Analysis (IEEFA). His book entitled The 10 Commandments of the Energy Transition, is scheduled for publication in early 2022.

 

 


Ghana to Revoke Petroleum Licences to Sahara and Britannia U

Ghanaian authorities are finalizing the process for the termination of agreements of four (4) non performing contractors; Swiss African Oil Company Limited (SWAOCO),2 UB Resources, Brittania U, and Sahara Energy Fields Ghana Limited.

Brittannia U and Sahara Energy Fields are companies founded by Nigerian owners.

The Government already revoked the licence granted to Erin Energy (also founded by Nigerians) to operate the Expanded Shallow Water Tano (ESWT) Block for both inactivity and lack of payment of rent.

Two other Nigerian owned independents with E&P assets in Ghana are Amni Petroleum and First E&P. Amni proposes to drill a well in Central Tano Block, which it operates, in 2022. First E&P, meanwhile, a beneficiary of Ghana’s 2018 Bid Round, is a relatively new entrant into the country.

 


Fieldstone Appoints Karèn Breytenbach as Senior Expert in Energy

Karèn Breytenbach has been appointed by Fieldstone as Senior Expert in Energy and PPP Systems.

The appointment is “a most important personnel addition”, the energy and infrastructure focused investment bank says in a statement “which places Fieldstone in a position to further support the energy and infrastructure aspirations of South Africa”.

“We have worked with Karèn on a number of projects over the last year and it is clear that our collaboration is now more important than ever, as South Africa needs to  position itself to achieve a just energy transition while standing as an attractive destination for much needed foreign investment”, said Fieldstone CEO Jason Harlan. “The challenge is to move from singular, limited transactional thinking to formulate broader initiatives of scale – an ethos and focus that Karèn embodies.”

As head of South Africa’s influential Independent Power Producer (IPP) Office, at the Department of Energy, from 2011-2019, Breytenbach ran and shaped one of the world’s most successful  renewable energy procurement programmes. As a result of the South African Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), under Breytenbach’s watch, “South Africa has achieved more investment via Independent Power Producers (IPPs) in four years than in the rest of Sub-Saharan Africa over the past two decades”, according to a 2017 report by the Graduate School o Business at the University of Cape Town.

“Karèn has been involved in energy and private investment in public projects over the last quarter century”, the press release by Fieldstone adds.

 

 

 

 

 


Why You Should Have an NPDC Plan

The Nigerian Petroleum Development Company (NPDC) Limited is the jewel in the crown of Nigeria’s state hydrocarbon group, NNPC. It has been handed the authority to perform the NNPC’s functions in five Oil Mining Leases (OMLs) in the last five years. The transfer of OMLs 11, 24 and 98, including the operatorship of OML 116, from Federation’s interest (NNPC) to NPDC were all approved…

Read more for a comprehensive list of its assets


Algeria Has Ended Its Gas Export to Spain via Morocco

Algerian gas exports to Spain via Morocco have ended.

The contract for Algeria to use the Moroccan section of the Gaz-Maghreb Europe (GME) pipeline to pipe gas to the Iberian Peninsula ended on 31 October, without a new agreement in place for its continued use.

The contract to deliver Algerian gas to Spain and Portugal via Morocco, the 406Billion Cubic Feet Per Year GME pipeline ran for 25 years. The line stopped flowing on November 1, 2021, not out of  any technical challenges, but due to the frosty relations between the hydrocarbon rich Algeria and  hydrocarbon starved Morocco.

In late August 2021, Algeria severed diplomatic ties with  Morocco, over what Ramtane Lamamra, the Algerian foreign minister, called “hostile, unfriendly and malicious actions against our country.”

Morocco responded that though the decision was “expected,” the allegations are “absurd.”

It is unclear whether Algeria will cease exporting gas to Spain, a crucial part of its income, or it would export into Spain through other means.

 


Libya Knocks Angola to Third Place African Oil Producer

Libyan crude oil output averaged 1.163Million Barrels Per day in August 2021.

It hardly bettered Angolan figures, which made 1.129MMBOPD in the same month.

But it’s not difficult to envision the North African country edging out Angola and becoming the continent’s second largest crude oil producer after Nigeria.

Between January and August 2021, Libyan crude oil output has ranged between 1.13MMBOPD and 1.195MMBOPD, with the average being 1.1615MMBOPD for the eight-month period.  Angolan numbers have trended lower, ranging between 1.073MMBOPD and 1.176MMBOPD. Angolan average output in that period is 1.127MMBOPD.

These figures may appear too close-less than 40,000BOPD- to declare that Libya has surpassed Angola in crude oil output, but Libya is coming from a low base; a situation created by conflict.

Whereas it had not, in those eight months, returned to the 1,213MMBOPD high that it made in November 2020, it has shown significant hunger and considerable headroom to grow.

Libya’s security issues loom menacingly in the background, threatening its output and there is hardly enough money to deliver on field optimization and basic day to day operations.

But Angola doesn’t suffer the scale of these challenges that Libya confronts.  Apart from investment fatigue, which also affects Libya, the Angolan problem is almost squarely about geology. With proven reserves less than 10Billion barrels, it hardly has the hub sized reservoirs in enough quantity to view a line of sight to, say 1.5MMBOPD by 1H 2022.

Libya meanwhile, is all of a 44Billion barrel oil tank, the largest repository of crude on the continent. Years of under investment caused by both a peculiar brand of politics as well as conflict, have, however stifled exploration, development and field optimization. But Libya has managed to add more than 1 Million Barrels of Oil Per Day since September 2020, after its two warring factions — the UN-backed Government of National Accord and the self-styled Libyan National Army — agreed to a peace deal. And now the state hydrocarbon company says it is sure of ” producing 1.45MMBOPD by the end of 2021, if it gets the budget and the country is better secured. Just two fields can deliver the 300,000BOPD that will take the country to that goal: one in the Sirte basin and the other in Ghadames Basin.

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Was the NNPC Operationally Profitable in 2020?

While the Nigerian state hydrocarbon firm congratulated itself on making a net profit after tax for the first time in its 44-year history, Africa Oil+Gas Reports examination of the audited reports of each of its 21 subsidiaries indicate that Nigeria’s most integrated oil and gas company struggled with revenues in 2020, operationally, in the entire value chain, than it did in 2019.

There was a depressing upstream showing, a midstream failure and a mixed bag of fortunes in the downstream.

Even the supposedly bespoke investment vehicles: for the investment firms (NAPIMS, Duke Global Energy) performed…

Read more

 


IVS Industrial Valve Summit – May 25th>26th, 2022

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LEADING THE GLOBAL MARKET FLOW

Industrial Valve Summit is the leading international event for the Oil&Gas valve technologies and flow control solutions.
A real Information Hub, where you can keep up-to-date with market trends, meet the global key-players, the manufacturing excellence and look for the latest technology innovations.

By the industry, for the industry

Thanks to the combination of high-quality exhibitors and highly focused conferences IVS offers the best opportunities to grow your business.

Reasons for choosing IVS 2022:

  • Meet buyers and suppliers interested in purchasing or providing the best valve technologies and flow control solutions
  • Discover the latest industry innovations and trends in valve design, as well as engineering, construction, operation and maintenance of industrial plants
  • Learn and share know-how and expertise with professionals and industry specialists
  • Present your company, products and services to an exclusive and targeted professional audience
  • Strengthen your company business image by exhibiting alongside the world’s leading manufacturers
  • Get high-performance corporate visibility thanks to the IVS promotional activities

AN EXHIBITION IN THE HEART OF ITALIAN CULTURE AND TRADITION

Come to IVS and discover Bergamo. Bergamo is a wonderful city with a medieval heart, perched on a hill and encircled by the imposing UNESCO World heritage Venetian Walls. Surrounded by lakes and mountains, Bergamo is fascinating for its history, culture, food and landscape. Moreover, its position is strategic to easily reach the most beautiful Italian destinations like: Milan, Garda Lake, Franciacorta, Verona and Venice.


AfDBank Approves ~$58Million Loan to Eskom for Battery Storage

The Board of Directors of the African Development Bank has approved a $57.67Million loan to Eskom Holdings SOC Ltd, South Africa’s public electricity utility—and Africa’s largest— to harness battery storage technology that will increase electricity generation from reliable and efficient renewable energy sources.

The Bank’s financing, a concessional loan, will come from the Clean Technology Fund, a multi-donor trust fund under the Climate Investment Funds. The pioneering Battery Energy Storage Systems Project is being co-financed with the World Bank and the New Development Bank.

The project involves the development of 200MW of battery storage with four hours of energy storage capacity per day, or 800MW in total, at seven sites in South Africa’s Western Cape, Northern Cape, Eastern Cape and KwaZulu-Natal provinces.

Once onstream, Eskom will be able to dispatch electricity sourced from variable renewable energy that would otherwise have been wasted, reducing reliance on fossil fuel-generated electricity at peak times of the day.

Daniel Schroth, the AfDB’s Acting Director for Renewable Energy and Energy Efficiency, says:: “The approval of the Climate Technology Fund facility reflects the African Development Bank’s strong commitment to support South Africa’s Just Energy Transition plans, prioritizing investment in new low-carbon generation capacity and new technologies such as battery storage. This comes at a critical moment as the world is gearing up for action at COP26.”

The large utility-scale battery storage project, the first of its kind in Africa, is expected to contribute to a reduction in CO2 emissions of as much as  0.292Million tons. It will also inform the rollout of similar projects across the continent. Many African countries are implementing an energy transition as they strive to meet net zero emissions targets.

The project also contributes to South Africa’s ambitious Nationally Determined Contribution, part of compliance with the Paris climate agreement.

The $5.4Billion Clean Technology Fund promotes low-carbon technologies with significant potential to reduce long-term greenhouse gas emissions. The African Development Bank has been an implementing entity of the Climate Investment Funds since 2010.

 


SEPLAT Starts Commissioning an Alternative Pipeline, Ten Years after Construction Began

Seplat Energy has struggled for uptime in pumping its crude through the Trans Forcados Pipeline, a frequently vandalized facility in Nigeria’s Western Niger Delta.

Now the company has commenced commissioning of the Amukpe-Escravos Pipeline (AEP) and looks forward to oil flow “in December 2021”, it says in its latest update.

The AEP will provide an alternative evacuation route to Trans Forcados Pipeline, which was down for two weeks in September 2021, pushing Seplat’s gross (operated) output to less than 60,000BOPD.

Seplat had anticipated, in its second quarter 2021 (2Q 2021) update “to introduce hydrocarbons into the line by the end of September, 2021 and during 4Q to lift our crude via the Escravos terminal upon completion of the crude handling agreements (CHA) with Chevron”.

But the September 2021 deadline passed. “Procedure is being reviewed and we’re working to close out a few open switches prior to introducing Hydrocarbon”, explain management sources at the Nigerian Petroleum Development Company (NPDC), the state hydrocarbon firm in joint venture with Seplat in the Western Niger Delta.

Construction of the 160,000Barrels of Oil Per Day (BOPD) evacuation facility was begun by the Nigerian independent, Pan Ocean Overseas, in October 2011. It is a 20”X67km Crude Oil pipeline which is meant to serve as an alternative (ultimately the mainstay) to the existing Seplat/Shell 24”/28” export pipeline to the export terminal at Forcados on the Atlantic Ocean.

“The completion of minor tie-in works on the Pipeline, which are not within Seplat Energy’s direct control, have been slower than anticipated due to a combination of challenges associated with access to the Escravos terminal owing to Covid-19 protocols and providing clarifications with the owners of the pipeline”, Seplat explained in the briefing last July.

“Our partner, NPDC owns a direct stake in the pipeline and are now actively working with Seplat Energy and the pipeline owners and their respective banks, to enable the final completion of the project. The construction of the entire pipeline system – including the metering facilities, is effectively complete and the precommissioning process is progressing well. This process involves functional testing of key components and operating systems integration with the receiving terminal facilities.

“The imminent conclusion of this project will significantly improve our assets’ production uptime compared with the TransForcdos Pipeline TFP (81% in H1 2021) and reduce losses from crude theft and reconciliation (12.1% in H1 2021)”, the Seplat update explained.

 

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