Tuesday, March 15, 2016

The world oil market March 2016

The world oil market is complex. Governments and private companies play various roles in moving oil from producers to consumers. Government-owned national oil companies (NOCs) control most of the world's proved oil reserves (75% in 2014) and oil production (58% in 2014). International oil companies (IOCs), which are often stockholder-owned corporations, make up the balance of global oil reserves and production. Proved oil reserves consist of the amount of oil in a given area, known with reasonable certainty, that current technology can recover cost effectively. Worldwide proved oil reserves in 2014 were almost 1.7 trillion barrels, and global oil production averaged roughly 93.2 million barrels a day.

World Proved Crude Oil Reserves

There are different types of oil companies

There are three types of companies that supply crude oil to the global market. Each type of company has different operational strategies and production-related goals:
International oil companies (IOCs): These companies, which include ExxonMobil, BP, and Royal Dutch Shell, are entirely investor owned and primarily seek to increase their shareholder value. As a result, IOCs tend to make investment decisions based on economic factors. These companies typically move quickly to develop and produce the oil resources available to them and sell their output in the global market. Although these producers are affected by the laws of the countries in which they produce oil, all decisions are ultimately made in the interest of the company and its shareholders, not in the interest of a government.
National oil companies (NOCs): These companies operate as an extension of a government or a government agency, and they include Saudi Aramco (Saudi Arabia), Pemex (Mexico), the China National Petroleum Corporation (CNPC), and PetrĂ³leos de Venezuela S.A. (PdVSA). These companies support government programs financially and sometimes strategically. These companies often provide fuels to domestic consumers at a lower price than the fuels they provide to the international market. These companies do not always have the incentive, means, or intention to develop their reserves at the same pace as investor owned international oil companies. Because of the diverse objectives of their supporting governments, these NOCs pursue goals that are not necessarily market oriented. The goals of these companies often include employing citizens, furthering a government's domestic or foreign policies, generating long-term revenue to pay for government programs, and supplying inexpensive domestic energy. All NOCs belonging to members of the Organization of the Petroleum Exporting Countries (OPEC) fall into this category.
NOCs with strategic and operational autonomy: The NOCs in this category function as corporate entities and do not operate as an extension of the government of their country. This category includes Petrobras (Brazil) and Statoil (Norway). These companies often balance profit-oriented concerns and the objectives of their country with the development of their corporate strategy. Although these companies are driven by commercial concerns, they may also take into account their nation's goals when making investment or other strategic decisions.

In 2014, 100 companies produced 82% of the world's oil. NOCs accounted for 58% of global oil production.

Share of world oil production by type of company

OPEC members seek to work together to influence world oil supplies

OPEC is a group that includes some of the world's most oil-rich countries (see OPEC member countries in the Did you know? box). Together, these countries controlled approximately 73% of the world's total proved oil reserves in 2014, and they produced 39% of the world's total oil supply that year. Each OPEC country has at least one NOC, but most also allow international oil companies to operate within their borders.

OPEC seeks to manage the oil production of its member countries by setting crude oil output targets for each member except for Iraq, for which there is no current target. The track record of compliance with OPEC quotas is mixed because production decisions are ultimately in the hands of the individual member countries.

In general, there are three main factors that determine OPEC's market power, or how effectively the organization can influence oil prices:
How unwilling or unable consumers are to move away from using oil
How competitive non-OPEC producers become as the price of oil increases
How efficiently OPEC producers can supply oil compared with non-OPEC producers

OPEC's oil exports represented about 56% of the total seaborne crude oil traded internationally in 2014, according to data from Lloyd's List Intelligence tanker tracking service. The difference between market demand and oil supplied by non-OPEC sources is often referred to as the call on OPEC. Saudi Arabia, the largest oil producer within OPEC and the world's largest oil exporter, historically has had the largest share of the world's spare production capacity. As a whole, OPEC maintains the world's entire spare capacity for oil production. It is generally not cost-effective for international oil companies to develop and maintain idle spare production capacity, because the IOC business model maximizes revenue by continuing to produce oil as long as the price of selling that commodity is higher than the cost of getting an additional barrel of oil to market.

world Oil Market Spare Capacity

EIA defines spare capacity as the volume of oil production that can be brought online within 30 days and sustained for at least 90 days. Spare capacity can also be thought of as the difference between a country's current oil production and its maximum oil production capacity. Should a supply disruption occur, oil producers can use spare capacity to moderate increases in world oil prices by boosting production to offset lost oil supplies.

Friday, March 4, 2016

Crescent Dunes Solar Energy begins producing electricity


Crescent Dunes Solar Energy, a 110 megawatt (MW) concentrating solar power (CSP) electricity plant, began full operation in February, according to its press release. Crescent Dunes uses an energy storage system that developers expect will be able to store enough thermal energy to generate electricity for up to 10 hours after sunset or on cloudy days when direct sunlight is unavailable.

Through December 2015, CSP made up 8% of total U.S. solar electric generating capacity, while utility-scale solar photovoltaic (PV) made up 53%, and distributed solar PV made up 38%. Solar thermal electricity power plants differ from PV technology, which uses solar cells to convert direct and diffuse sunlight directly into electricity. Solar thermal plants rely on direct sunlight to focus the sun's heat energy onto collectors. Most of the earlier utility-scale CSP projects use parabolic trough technology, where curved mirrors focus sunlight onto receiver tubes of water or some intermediary fluid. EIA data now show 1,777 MW of operating CSP capacity in three states: California, Arizona, and Nevada. Concentrated solar power technologies use mirrors that direct sunlight to heat an intermediary fluid, which then heats water into steam to drive a turbine. Crescent Dunes is the second CSP plant, after California's 400 MW Ivanpah plant, to use thousands of sun-tracking mirrors called heliostats to capture and focus sunlight onto a receiver in a tall central tower.

us cumulative total solar thermal electricity generation

Unlike most other CSP plants that use synthetic oil as the intermediary fluid, Crescent Dunes uses molten salt, which has more advantageous thermal properties. Liquid salt in a 640-foot central tower is heated by concentrated sunlight. When electricity is needed, the molten salt is pumped through a heat exchanger to turn water into steam that spins a turbine to generate electricity. Cooler salt flows back to a storage tank and the cycle repeats. Unlike the Ivanpah CSP plant, Crescent Dunes will not use natural gas as a secondary fuel. Crescent Dunes developers expect it to generate more than 500,000 megawatthours annually, equivalent to 1.3% of Nevada's 2015 utility scale net generation from all sources.

Large renewable projects like Crescent Dunes rely on many forms of financing. Developer and owner SolarReserve LLC received a $737 million loan guarantee from the U.S. Department of Energy. Ivanpah, the earlier power tower project, received $1.6 billion. Crescent Dunes is also eligible for the 30% federal investment tax credit. Two more CSP projects could come online by the end of 2017, but neither has received regulatory approval or begun construction.

Although individual CSP projects can be large, total installations of CSP systems have been small compared with PV systems, as 2,950 MW of utility-scale solar photovoltaic plants began operating in 2015 alone. Given its significant cost advantage, PV technology is expected to provide nearly all further growth in U.S. solar power in the foreseeable future.