Last updateFri, 01 Jul 2016 3pm


U.S. Natural Gas Making Up for Coal Plant Closures

"Five years ago, opponents of newly proposed clean-air rules sounded dire warnings of blackouts and surging electricity prices if coal-burning plants were shuttered," Bloomberg reports.

"Instead of rising, the price of electricity in the nation’s largest grid is now 40% lower than it was back then, even as a record 346 coal-burning units, producing enough electricity to supply 40 million homes, were retired. The difference: America’s shale boom unleashed cheap and abundant natural gas that burns more cleanly than coal."

U.S. Crude Storage Capacity Utilization Rises Even as Capacity Grows

Weekly U.S. commercial crude oil inventories have increased by more than 71 million barrels (15%) since the end of September, pushing crude oil storage capacity utilization to a near record high of 73% for the week ending June 10.

The U.S. Energy Information Administration (EIA) measures crude oil storage capacity twice each year. From September 2015 to March 2016, the United States added 34 million barrels (6%) of working crude oil storage capacity, the largest expansion of commercial crude oil storage capacity since EIA began tracking such data in 2011.

The expansion of crude oil storage capacity helped to accommodate the growth in U.S. crude oil inventories, which surpassed 500 million barrels at the end of January 2016. 

Oil Sands Production Forecast to Grow by Nearly 1M bpd

IHS, in its outlook for Canadian oil sands production through 2025, expects continued growth through the period. IHS anticipates a new phase driven primarily by the expansion of existing facilities with more attractive economics.

Oil sands production is forecast to grow by nearly one million barrels per day (bpd) by 2025—a significant pace of growth that, though lower than historical levels, will keep Canada among the largest sources of global oil supply growth. Canada is part of the “G-5+2”—a group of low-cost Middle East oil-producing countries (the Gulf-5) plus the U.S. and Canada. Collectively, they will account for most of the world’s oil supply growth. 

Construction of Chemical Processing Facilities Begins in Louisiana

This month, LACC LLC, the joint-venture company formed by Axiall Corporation and Lotte Chemical Corporation, held a groundbreaking ceremony at its Calcasieu Parish, LA construction site. This follows a Dec. 17, 2015 announcement that the boards of Lotte and Axiall reached final investment decisions to construct an ethane cracker facility adjacent to Axiall’s existing Lake Charles complex. In addition to constructing the ethane cracker that is expected to produce 1 million tons of ethylene a year, Lotte Chemical will also construct an adjacent plant to produce 700,000 tons annually of ethylene glycol (EG). The total capital investment in the facilities is estimated to be $3 billion. 

Global Upstream Spending Slashed by $1 Trillion

Global upstream development spending from 2015 to 2020 has been cut by 22% or $740 billion since the oil price started to drop two years ago, according Wood Mackenzie's research. When you include cuts to conventional exploration investment, the figure increases to just over $1 trillion. Expect to see further cuts throughout the year and investment levels continue to shrink as more projects are dropped and companies struggle to break even.

On a more positive note for operators, cost deflation has played a major role in driving down spend. For example, costs in the U.S. unconventional sector in 2015 fell by 25% on average from peak in 2014. Wood Mackenzie's models show 2016 is likely to yield another 10%. 


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