Markets

Reacting to soaring global coal prices, the Malaysian government continues to levy a surcharge on electricity rates for industrial customers for the second half of 2018. With this move, the Energy Commission for Peninsular Malaysia is factoring in the surge in Australian thermal coal prices to nearly US$120 per ton and helps power generators to hand down fuel costs to end-customer.

Major American utilities, representing about 70% of total U.S. electric load, have nearly doubled their capital investment in power distribution systems. Spending on grid expansions and upgrades has risen 54% over the past two decades, rising from $31 billion to reach $51 billion annually.

Dominion Energy is seeking to divest the 1,240-MW Fairless Power Station in Pennsylvania and the 450-MW Manchester Street Power Station in Providence, Rhode Island. JPMorgan Chase is assisting Dominion to arrange the sale, with the proceeds set to be used to pay down debt.

The spread in natural gas prices between the Permian Basin, as priced at the Waha Hub in western Texas, and the U.S. national benchmark Henry Hub in Louisiana has grown considerably. Prices at Waha are now nearly $1/MMBt lower than Henry hub due to growing production and pipeline constraints that limited the onward transport of the rising gas supply from the Permian Basin.

Baker Hughes, a GE company, has signed an agreement to sell its Natural Gas Solutions (NGS) business to focus exclusively on energy. The NGS business has been sold to two separate entities, First Reserve and Pietro Fiorentini, for a combined value of $375 million.

Uniper CEO Klaus Schäfer has put forward ideas for a gradual phase-out of coal-fired power plants in Germany in reaction to the launch of a coal-exit commission by the German government. The idea is to preliminarily shut down lignite-fired plants and only allow units to be reactivated in “extreme situations”, before they would be taken offline permanently.

Financial investment decisions (FIDs) in the electricity sector have become less market-driven and more dependent on policy support mechanisms, such as capacity markets. According to the IEA’s 2018 World Energy Investment report, over 95% of global energy investment is made by companies whose revenues are fully regulated or affected by mechanisms to manage the risk associated with variable prices on competitive wholesale markets.

Nigeria’s federal government has stepped up efforts to increase the number of decentralized power plants across the country in an effort to reign in notorious power shortages. Though installed generating capacity is about 10,000 MW, there is only 5,000 MW readily available for use while the others are idle due to gas shortages or technical issues.

Full-scale development of Russia’s enormous Kharasaveyskoye gas and condensate field will start in 2019, Gazprom chairman Alexey Miller disclosed. Situated onshore in the Yamal Peninsula and partly in the Kara Sea, the field holds reserves of 2 trillion cubic meters (Tcm). Tapping the Cenomanian-Aptian deposits will be a priority, Miller said, with production start slated in 2023 at a design capacity of 32 Bcm/y.

Royal Dutch Shell is investing in hydrogen and has singled out the fuel in its Future Energy Scenarios as one of the world’s energy pathways towards reaching the emission reduction targets of the Paris agreement. Hydrogen, produced by electrolyzing water, can be stored in the gas network for later use as a fuel in the transport and power sectors.

Oman Power and Water Procurement Company (OPWP) is taking steps to reduce its complete dependence on natural gas for power generation. By 2024, natural gas is meant to provide four fifths of the country’s electricity needs while the remainder will come from renewables and Oman’s first coal-fired independent power project (IPP).

The U.S. Federal Energy Regulatory Commission (FERC) has given the green light for the proposed merger of Dominion Energy and SCANA Corp. The regulator ruled the combination of the two companies was “consistent with the public interest.” Dominion is now pushing to complete the transaction before the end of this year.

China’s shift to cleaner-burning fuels in the power sector has increased the country’s gas demand and turned it into one of the world’s largest importer of American shale gas. US LNG exports in 2017 averaged 1.9 billion cubic feet per day and of that amount, 15% went to China, making it the third-largest importer of U.S. LNG behind Mexico and South Korea.

Gas-fired power plants will supply 37% of U.S. electricity generation during the summer month of June, July, and August, while the contribution of coal power will drop slightly to 30% in summer 2018, according to the EIA’s July 2018 Short-Term Energy Outlook (STEO). The fuel switch is driven by low-cost supply with delivered cost of gas forecast to average $3.16/MMBtu this summer, 2% lower than in the previous year.

Importing LNG for power generation helps Pakistan not only to avert energy shortages – it also saves up to $3 billion in fuel costs. Running on regasified LNG, power stations with 62% efficiency can generate electricity at an average of Rs7-8 per unit which is about half of the cost of generating electricity based on furnace oil.

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