From Platts via ZeroHedge:
Energy transition
Energy transition is going to be ever-present, driving discussions
and strategic planning in 2020. World leaders in both politics and
industry are under mounting pressure from consumers – particularly in
the West – to deliver increased energy produced with dramatically lower
emissions and in more sustainable ways.
Heightened awareness by the Extinction Rebellion movement and the
activist Greta Thunberg has put both governments and companies on notice
of people’s expectations that action must be taken to keep the global
average temperature rise at no more than 2 degrees Celsius.
While it is certain that this shift will require huge investment, the
way forward is still emerging. Numerous technologies and solutions are
vying for the same investment dollars that are already shifting away
from traditional higher-carbon intensity industries. There will likely
be a heavy reliance on subsidies, which in turn are dependent on policy.
No one single approach is likely to win out, at least in the short
term.
In terms of transportation, the focus has been predominantly on electric vehicles,
while there is also increased investment and research into the use of
hydrogen for heavy duty and long-distance transportation. But biofuels
look set to take center stage in 2020, as favorable economics and the
consumer-led call for immediate action have revitalized support for the
fuel, particularly in Europe.
Biofuel blending looks
to be the fastest route to reducing emissions, with consumption
expected to increase in 2020, eating into gasoline and diesel’s share of
the market and adding renewed pressure on oil refiners.
With more than 1 billion conventional cars in the global fleet, road
transport currently accounts for 20% of global carbon emissions, a
number that is not likely to fall without a bigger solution for
infrastructure. Based on this trend, S&P Global Platts Analytics
forecasts that global oil production will need to increase to meet
rising demand from road transport over the coming years.
In the US, the situation is more complex, with tensions apparent
between federal and regional policies. At the same time, natural gas is
cheap, putting pressure not only on coal use for electricity production,
but also on cleaner nuclear, renewables and energy storage.
Of course, the race to renewables alone will not be enough to meet
aggressive carbon reduction targets. To deliver these significantly
lower emissions, every type of energy and product needs to reduce its
carbon intensity – we will need carbon capture and storage and consumers
will need to be more energy efficient.
Economic slowdown in China
Tariffs and trade wars will continue to dictate global pricing and
trade flows for multiple commodities in 2020, but the consequences of
the ongoing dispute between China and the US, particularly, are now
rippling out into the economy, sparking fears of another recession.
The dispute – now in its 21st month – has exacerbated a change in
local Chinese policy that aims to wean state-owned enterprises and banks
off stimulus packages. The combined effect is that the rate of China’s
economic growth has slowed to a pace not seen since 1992.
The effects of this domestic slowdown and weaker fuel demand growth
have resulted in increased gasoil, gasoline and jet fuel exports,
putting pressure on Asian commodity prices and refinery margins.
Platts Analytics expects that exports of gasoline, gasoil and
kerosene in 2019 will reach an estimated 54.5 million mt (1.17 million
b/d) if no more rounds of export quotas are released by the year end.
This is nearly a tenth of the country’s crude imports, which is roughly
equivalent to Saudi Arabia or India’s refined exports – both regions
where refineries also cater heavily to export markets.
This figure is likely to rise in 2020, with the significant growth in
new refineries resulting in total capacity reaching 18.71 million b/d,
with another 320,000 b/d still under construction.
China’s crude imports have remained robust in 2019 as a result,
surging 17% year on year to hit a historical high of 10.76 million b/d,
or 45.51 million mt in October. Sinopec, the largest refiner in the
country, forecasts that imports could reach 500 million mt in 2019....
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