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Friday, 27 November 2015 21:00

Two monsters getting ready to dictate terms to the global economy for long Featured

As early as 10 years ago nobody could suppose that shares of the coal companies would fall by 90% and coal-fired power plants would start yielding to gas-fired power stations in terms of profitability.

The number of coal-fired stations in the USA used to be 593 in 2009 while now their number fell down to 518, their total capacity declined down to 303 GW. According to the data of the Department of Energy, the capacity declined by another 3.3 GW over the last year while a 12.9% decline is expected this year, FT writes.

Meanwhile, it is predicted that the total capacity of the American wind and gas-fired power plants will rise by 9.8 GW and 4.3 GW respectively.

The market conditions led the coal producing countries to a catastrophe. Peabody Energy, the leader in this sector, has lost 98% of capitalization since April 2011 while shares of Arch Coal and Alpha Natural Resources fell by 99.2% and 99.6% respectively. Teck Resources, the second biggest exporter of coking coal in the world, will stop production on its 6 mines in Canada.  Grande Cache Coal announced about a temporary shutdown of the coal mine in Albert.

Coal production volumes of Teck Resources fell by 22% in the third quarter, or by 1.5 mln tonnes, down to 5.7 mln tonnes.

According to estimates of analysts of TD Securities, the surplus of coal in the market is estimated at 15-20 mln tonnes.

Experts noted that the current price of coking coal has fallen below a 7-year minimum amid the global overproduction and slow down of demand in China. Besides, the benchmark prices for the third quarter were below $90 per tonne.

As the The Canadian Press reports, the Canadian coal market which consists mainly of the metallurgical coal, used in the steel industry, reached its peak in 2011 when the prices were over $300 per ton. Prices for metallurgical coal were below $90 per ton in the third quarter because of the surplus and decline of demand in China.

Starting from 2017 Germany will put 13% of coal-fired power plants out of commission by choosing facilities scoring the highest air pollution indicators.

Chosen thermal power plants with an estimated total capacity of 2.7 GW will stay out of operation for four years wherafter they will be closed forever, the report of the Ministry of Economy of Germany says. 

This step will let Germany reduce CO2 emissions by 11 mln tons.

Apart from this, the government intends to lower emissions by another 11 mln tons by lowering power production volumes at buildings, industrial enterprises and railway transport. Besides, it is also planned to shift to operation of more energy efficient gas turbines.

 Coal generation of the Italian Enel makes 29% of the volume of energy supplied to 40 countries. Nevertheless, General Director of Enel Francesco Starace told the British The Guardian that these power plants obsolete in fact.

The coal station opened in Chile this year will be the last coal-fired station of Enel group. Gas-fired power plants pollute the environment two times lower than coal-fired stations. Construction of gas fired stations does not take long. Their construction wil probably make sense till 2025, Starace says. 

The Ministry of Industry, Energy and Tourism of Spain has decided to lower the volume of coal fuel sale for thermal power plants. Purchases will be reduced from 6 mln tons (in 2014) down to 3.8 mln tons in 2015. Such reduction of supplies can lead to minimization of thermal plant’s share in the total balance of generation, which will be offset by increase of the number of facilities producing renewable energy.

What caused the occurrence of such situation in this area? The answer is simple, low prices for ecologically clean natural gas drove out the coal-use in thermal plants and shifted private households in the UCA to an autonomous gas heating over the past few years. The pressure on coal industry is rising in economically developed countries due to the decline of emission of harmful emissions. According to the surveys of Bloomberg New Energy Finance, wind farms generate the cheapest electricity in Germany and Great Britain without including government subsidies

In the USA wind energy generates the cheapest electricity owing to government subsidies for now. Solar power plants lag behind considerably. However, the prime cost of their energy is regularly falling. Meanwhile, solar plants in Germany generate as much electricity as NPPs. 

In addition to the governments, oil companies have also finally realized the depth of the global warming problem. Becoming more technological, they started producing and investing into production of ecologically clean energy which surprisingly turned out competitive even in conditions of low prices for conventional crude.

Thus, in upcoming 5 years Italian energy concern Eni is planning to invest 9 bln GBR in solar and wind energy.

“Instead of conventional energy which uses fossil fuel, half of investments meant for development of business group of Enel and worth 9 bln GBR will be invested into solar and wind energy in upcoming 5 years, which account for 7% of generation”, Francesco Starace said.

According to the plans of the company, one third of investments will be spent on infrastructure of networks. The rest funds are planned to be spent on completion of construction of operating steam power plants, including water power plants. Addressing the meeting of OPEC members in Vienna, Chairman of the Board of RoyalDutch Shell Ben Van Berden stated that the conventional energy should immediately start the process of integration and joint operation with renewable energy sources in order to ensure reliable and economically beneficial power supply in future.

The necessity of shifting the global energy from coal consumption to the system, in which renewables, natural gas use and reduction of CO2 will prevail, has been emphasized.

Meanwhile, three oil-gas companies Chevron, Exxon and Idemitsu Kosan have for the first time fallen into the list of Top 100 Global Innovators in 2015, made by Thomson Reuters (TR).

Oil-gas companies fell into the list owing to survey of hydrofracturing technologies, designed for natural gas production, and the work carried out in the field of alternative energy. No company, representing this industry, fell into the rating in 2014.

Such favor that majors give to unconventional sources arises mainly from the rising risks of global climate change, which already impacts on the prices of energy resources, leaving the upstream projects on edge of starvation.

Certainly, the policy of OPEC, Federal Reserve System of USA, shale hydrocarbons, weak forecasts about development of China, and finally the geopolitics are objective factors, which highlighted the current price crisis in oil markets and even became a “play game” in hands of such mega factors as the global warming and growth of alternative energy technologies. It seems line that two monsters are getting ready to dictate major terms to the global economy for long. It is what the revival of certain segments of the insurance market, activation of oil-gas majors, and the globality of the forth coming UN Summit (heads of over 120 states to attend this event) for climate change in Paris due from November 30 till December 12, stems from. “The weather has now been a more considerable driver for the European energy market, it impacts on the demand for gas and prices for electricity”, Director of Endurance Global Weath Ralph Renner told participants of the European gas market summit. Temperature, solar and wind power are the factors which currently became key business drivers of energy companies. Open and windless winter is considered as the most considerable risk by companies which broadly depend on gas sale at cold weather. Open winter is a strong risk in Europe. Demand for hedging of weather risks is increasing at conventional markets as well as in south and east parts of Europe”, R. Renner said. Great Britain, Germany, Netherlands and France are the largest markets of derivatives for weather in Europe.

On the threshold of the UN summit in Paris the oil-gas companies created as early as summer 2014 a Coalition for climate and clear air, which fights for lowering contaminating substances in the atmosphere. It also combines its efforts with governmental and international environmental organizations in order to reduce emissions of methane, power greenhouse gas associated with oil-gas production.

The Council for natural resources protection and the Fund for environmental protection of the USA, as well as governments of large oil-gas producing countries, including USA, Mexico, Nigeria and Norway have joined this initiative.
Realizing that the point of no return has been passed, and coal, the leading environmental polluter, will become the thing of the past in coming 5-10 years, majors realized that the next turn will be for oil, the second environmentally exceptionable polluter. The current continuous oil crisis of oversupply is another indication of that. The question is how the two above mentioned monsters will act. It is already impossible to stop them. With a broad support of governments and community, they seem to be influencing over the downstream sector as well. Industrial ecologically clean technologies of production are gaining momentum. Among them noteworthy is production of polyethylene out of thistle, organic light led lamps imitating sun light while ecologically clean vehicles printed on 3D printers and commercialized seemed to be an adventure not too long ago.   

In two decades new technologies will change the petrochemical industry beyond recognition. Solar energy will become so effective and cheap that it will be not beneficial to build new power plants consuming fossil fuel, Bloomberg writes on basis of the strategic forecast about development of global energy up to 2040. By 2026 industrial solar energy will have been competitive at most of the markets thereby making unbeneficial not only the construction of traditional power generating units but also operation of existing ones.  

 

Natalya Aliyeva

President and Editor-in-Chief

Caspian Energy International Media Group

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