Commodities outlook improves

Commodity prices are rising and new projects are being approved around the world as energy majors, having driven down costs, begin to invest some of their cash stockpiles, writes David Kershaw.

Commodity prices strengthened in the first quarter of 2018, supported by both demand growth and restricted supply.

The outlook painted by the World Bank’s latest Commodity Markets Outlook sees oil prices rising by 22 percent, from an average of USD53 in 2017 to USD65 per barrel in 2018 through to 2019.

Global demand and continued production restraint by OPEC and non-OPEC producers should serve to prop up prices. Higher oil prices are expected to eventually feed into higher natural gas prices, which the World Bank expects to increase by 8 percent in 2018.

Coal prices will continue to decline to an average USD85 per tonne in 2018, as energy demand shifts towards cleaner energy sources.

Rising oil prices and limited supply are telltale indicators that the energy majors will reach into their pockets and start investing in new exploration and production (E&P) activities. Offshore suppliers have been busy in recent years streamlining operations and reducing their cost base.

The current tailwind in the oil market is likely to propel 100 new offshore projects to be sanctioned in 2018, with a value of approximately USD100 billion, according to Rystad Energy. This compares with only 60 projects in 2017 and below 40 in 2016.

“The offshore suppliers have created their own comeback,” said Audun Martinsen, vice president of oilfield service research at Rystad Energy. “Their constant search for cost reductions and streamlining of operations has enabled them to cut offshore project costs by almost 50 percent compared with the heights of the last cycle.”

Shortening lead times

“Not only are the suppliers charging less for their services, they have also improved the efficiencies of their operations, thus shortening lead times from project sanctioning to first oil. As an example, the time required to drill and complete a well has fallen by 30 percent in the North Sea, the Gulf of Mexico and Brazil over the past four years,” Martinsen added.

Rystad forecasts that about 30 project approvals would come through in Asia this year, including Pegaga in Malaysia and D6 in India. Some 30 projects could come online in Europe, including Neptune Deep in Romania and the already sanctioned Penguins redevelopment in the UK.
Africa should approve nearly 20 projects, including Zinia 2. A similar number is predicted in the Americas, where major schemes like Vito and Mero 2 are maturing.

“E&P companies have more free cashflow at hand in 2018 than they did during the recent peak years of 2008 and 2011. In fact, 60 percent of the companies looking to finance their project development costs can do so through their cash flow. Supported by strong oil
prices, we see a very small risk of these projects not materialising,” Martinsen said.

However, Wood Mackenzie’s second annual State of the Upstream Industry survey, published in April, states that financial health rather than growth remains the priority for upstream oil and gas companies, with low-risk growth still preferred by the sector.

Mergers and acquisitions

Wood Mackenzie did suggest that asset mergers and acquisitions (M&A), as well as frontier exploration, are more attractive options this year than in 2017.

Martin Kelly, Wood Mackenzie’s head of corporate analysis, said: “The industry’s growing confidence is evident in spending expectations, too. More will be spent globally and in each region this year compared with last year. Capital investment, exploration investment and M&A spending will all increase by at least
10 percent year-on-year.”

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The Transocean Spitsbergen drilling rig. (Photo- Kenneth Engelsvold)
The Transocean Spitsbergen drilling rig. (Photo- Kenneth Engelsvold)

Renewable energy projects take off

This renewable energy project news was first reported in the CapProCon e-newsletter. To learn more, click here.

Vattenfall has been awarded the permit for the first non-subsidised wind farm in the Netherlands, the 700-750 MW Hollandse Kust Zuid project.

This is the company’s second offshore wind project in the Netherlands. Vattenfall previously announced that it intends to invest EUR 1.5 bn in growth investments in the wind power sector between 2017 and 2018.

vattenfall renewable energy ofshore netherlands

Bayerische Warenvermittlung (BayWa) will enter the Dutch solar market and acquire a 70 percent stake in a project pipeline of around 2,000 MW of solar plants from a consortium of GroenLeven Group, which will retain a 30 percent stake.

In the Middle East, Dubai Electricity and Water Authority (DEWA) has broken ground at the 700 MW fourth phase of the Mohammed bin Rashid Al Maktoum solar power plant.

The project, which features the world’s tallest solar tower measuring 260 m-tall and the world’s largest thermal energy storage capacity, will reduce 1.4 million tonnes of carbon emissions a year, says DEWA.

This development will use two technologies for the production of clean energy: the 600 MW parabolic basin complex and the 100 MW solar tower over a total area of 43 sq km. Approximately AED14.2 billion (USD3.86 bn) will be invested in the project.


2018: great expectations

Steve Sawyer, secretary general at the Global Wind Energy Council (GWEC) suggests that 2017 will have been a year of modest growth for the renewable energy sector, although he has entered 2018 with great expectations for renewables.

“Plummeting prices both on and offshore wind means that the appetite for new wind power continues to grow across the globe – although not as evenly or as quickly as we would like.

“In particular the offshore sector is expected to be exciting, with the European market now really hitting its stride, the Chinese market finally reaching escape velocity, and new markets in the USA, Taiwan and potentially a whole list of others (including India) making progress in 2018,” said Sawyer.

US renewables dodge bullet

He said the industry in the USA “dodged a bullet” with the preservation of the production tax credit (PTC) at the end of 2017. He also pointed out that Canada, Brazil, Colombia and Argentina have demonstrated exciting potential. “The impasse in South Africa looks like it might finally end, and we’re going to see the beginnings of new markets in Russia and Saudi Arabia this year, along with build-out in Morocco, Egypt, Kenya and probably elsewhere on the African continent,” he added.

In Europe, Sawyer expects 2018 to be “a year of reckoning in the climate negotiations”, as EU the determines its post-2020 climate targets.

Finally, Sawyer said the renewable energy in Asia, aside from China and India, remains a “tough nut to crack”, although GWEC will be “working on Vietnam and perhaps the Philippines, as well as looking for opportunities elsewhere in the region. The Indian market took a hit this year with a policy gap while the auction system was put in place, but we expect a return to growth in 2018.”

This article on renewables was first reported in the CapProCon e-newsletter. Learn more here!

Renewable energy, offshore wind, capital projects. wind energy.

Sun shines on African solar projects

Solar power projects continue to win favour in Africa, with Senegal and Nigeria approving new projects in recent weeks. The projects below were reported in the most recent edition of CapProCon.

African solar

Vinvi Energies’ subsidiary Omexom has been awarded a contract by Société d’Electricité du Sénégal (Senelec) for the construction of eight solar PV power plants in Senegal.

With a combined capacity of 17 MW in Senegal, the projects represent a EUR26.8 mn (USD32.04 mn) investment, financed by the German bank KFW and Senelec. Handover is scheduled in July 2018.

The new plants, made up of a total of 62,850 solar panels, will be spread over four large regions: the Saloum Islands and the Thiès region in the western part of the country and the Tambakounda and Kolda regions in the east.

The Thiès plant, which will be directly connected to the grid, will have installed capacity of 15 MW. The other seven plants, which have a hybrid (PV-diesel) design, some with battery storage, will have a total combined capacity of 2 MW.

Wärtsilä inks first solar EPC

Wärtsilä has been awarded the engineering, procurement and construction (EPC) contract for its first utility-scale solar photovoltaic (PV) power plant.

Pan Africa Solar is developing the 75 MW plant that will be the largest of its kind in Nigeria.
“Our contract bid was successful because we were able to bring added value to the project in various areas, including local support and technical advisory services. Pan Africa Solar and Wärtsilä are currently finalising the EPC contract and in the meantime, this letter of award is a major milestone,” says Javier Cavada, president, Wärtsilä Energy Solutions.

This project is one of 14 solar PV projects by IPPs (independent power producers) signed in July 2016 by the Nigerian Bulk Electricity Trader (NBET), part of Nigeria’s Federal Ministry of Power. The total power generated by these projects when completed will be 1.2 GW, all of which will be transmitted to the national grid.

African solar

Africa: power generation ramps up with new projects

The following power generation projects have been published in previous editions of Capital Projects and Contracts (CapProCon).

300 MW Mozambique development

Ncondezi Energy has signed a deal to enter into exclusive negotiations with China Machinery Engineering Corporation (CMEC) and General Electric South Africa (GE) over a 300 MW coal power project in Mozambique.

The parties have agreed the terms of a non-binding offer (NBO) related to the development, construction and operation of the coal-fired power project, as well as an open pit coal mine in Tete province.

540 MW gas-fired Qua Iboe power plant

A joint venture including Nigerian National Petroleum Corporation (NNPC), Dangote Group and Black Rhino Group will build the 540 MW gas-fired Qua Iboe power plant (QIPP) in Akwa Ibom, Nigeria. The deal was signed with Mobil Producing Nigeria and power is scheduled to start flowing in 2021.

Three for Angola

Wärtsilä has signed a framework supply contract to supply power generation equipment for three new power plant projects under development by Dongfang Electric in Angola. The three new baseload plants will be located in Luena, Benguela and Saurimo, and will each have an electrical output of approximately 23 MW. The generator sets are scheduled for delivery in the first quarter of 2018.

Cameroon hydro

Finally, Platinum Power pre-qualified seven consortia for the design and construction of a 365 MW hydropower power generation near Makay, Cameroon.

Siemens secures Pakistan power order

Siemens has received a USD200 mn order from China Machinery Engineering Corporation (CMEC) for a complete power island for the new combined-cycle Punjab power plant in Jhang, Pakistan. CMEC is building the 1.3 GW power plant, located 250 km southwest of Lahore, on behalf of Punjab Thermal Power.

The power island from Siemens includes two SGT5-8000H gas turbines, one SST-5000 steam turbine, two heat recovery steam generators as well as control and auxiliary systems. Siemens will also be responsible for engineering and project management as well as for the associated on-site services.

Siemens' SGT5-8000H gas turbine.
Siemens’ SGT5-8000H gas turbine.

Source: Siemens

ABB and Northvolt to build Europe’s largest battery factory

ABB and Northvolt have signed a memorandum of understanding (MOU) for a supply and technology partnership. The deal includes the construction of Europe’s largest lithium-ion battery factory.

Battery factory build

Northvolt will build Europe’s largest and most advanced lithium-ion battery factory  in Sweden. ABB will support the project with its industrial automation expertise. The factory is expected to start production in 2020. A demonstration line will be ready by 2019.

Source: ABB

Doosan Škoda Power secures Asnæs deal

Doosan Škoda Power has signed a contract with Dong Energy for the supply of a complete machine hall for Asnæs power station.

The contract is valued at approximately EUR14 mn (USD16.73 mn). The scope of the project includes the supply of a double-casing extraction turbine with a generator, auxiliaries, along with equipment for the machine hall, with a maximum capacity of 30 MW.

A Doosan Škoda Power turbine generator set to help reduce CO2 emissions in Denmark
A Doosan Škoda Power turbine generator set to help reduce CO2 emissions in Denmark

Source: Doosan Škoda Power

Senvion completes prototype installation

Senvion has successfully completed the installation of the first 3.6M140 EBC (Eco Blade Control) turbine prototype at the Windtestfeld Nord near Husum, in Schleswig-Holstein, Germany, for 4testwind.

The Senvion 3.6M140 EBC is one of Senvion’s biggest onshore turbines designed for moderate and strong wind speeds.

“Senvion is committed to reducing the levelized cost of energy,” said Jürgen Geissinger, CEO at Senvion. “With this new turbine, we have combined core product developments to create a machine that is targeted towards optimal energy efficiency. The combination of the 140 meter rotor diameter and the upgrade to 3.6 megawatts allows additional output at the same site. Even with the larger 68.5 meter rotor blades, the 3.6M140 EBC can be installed in the same amount of time as a smaller turbine, ensuring an effective solution for our customers.”

Source: Senvion

Costs tumble for UK wind developers

The UK’s renewable energy sector received a welcome shot in the arm this week following an offshore wind auction that showed a sharp fall in subsidy costs.

The subsidies offered to wind farm developers dropped dramatically, with offers from developers falling as low as GBP57.50 (USD75.9) per megawatt hour (MWh), far below forecasts and well below the average GBP117.14 (USD154.63) MWh allocated to offshore schemes in the last comparable subsidy auction in 2015.

The latest auction saw three projects approved: Dong Energy’s Hornsea 2 off the coast of Yorkshire, Innogy and Statkraft’s Triton Knoll off the coast of Lincolnshire, and the Moray East development off the northeast coast of Scotland. The combined capacity of the projects is 3.2 GW.

Renewable energy development costs tumble

The offshore wind prices announced are significantly cheaper than the cost of the 35-year contracts awarded for new nuclear power, which hit GBP92.50 (USD122.1) per MWh. It is also cheaper than the levelised cost of gas, according to figures from the Department of Business, Energy and Industrial Strategy.

RenewableUK’s chief executive Hugh McNeal said: “We knew today’s results would be impressive, but these are astounding. Record-breaking cost reductions like the ones achieved by offshore wind are unprecedented for large energy infrastructure. Offshore wind developers have focused relentlessly on innovation, and the sector is investing GBP17.5 bn (USD23.1 bn) into the UK over the next four years whilst saving our consumers money.

“[These] results mean that both onshore and offshore wind are cheaper than gas and nuclear. But this young, ambitious industry can go even further. The government can help us by continuing to hold fiercely competitive auctions for future projects, as it has promised, and by putting offshore wind at the heart of its upcoming Industrial Strategy,” he added.
Dong Energy’s Hornsea 2 project

Source: RenewableUK
Source: Dong Energy