10 energy surprises in 2017

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Chevy Bolt

Chevy Bolt

Peter Tertzakian of Oilprice.com zooms in on 10 not-so-obvious issues that may turn out to be key influencers in energy markets in 2017.

But what are the nascent items that could lead to unforgiving surprises? “When everyone looks to the right, it’s time to look left,” is an adage I always go by. So for 2017 here is a 10-item listicle that won’t be in the mainstream, but may be worthy of the left shoulder.

1. Sales of the Chevy Bolt – GM’s mass market, pure battery electric vehicle made its debut late this year. Reviews have been positive. Early sales figures in ‘17 will be a litmus test for the potential displacement of pistons, valves and gears – and also whether the long-term outlook for crude oil is acid or base.

2. Growth in African Energy Demand – If you build it they will come: Top line energy consumption on the continent is growing by about 2% per annum as infrastructure spending multiplies. A growing middle class is buying wheels and appliances. We’ve seen this movie before. The billion people living in the sub-Sahara are embracing joules generated by oil and gas in greater quantities than any other primary source (Figure 1). Is Africa the new China-and-India?

10 energy surprises fig 1

3. Fracking Goes Viral – Multi-stage hydraulic fracturing as applied to horizontal wells has been the hottest oil and gas innovation in 100 years. Technology genies never stay in a bottle, so proliferation beyond the U.S. and Canada is inevitable. Start counting rigs in places like Argentina, Russia and Saudi Arabia; they are trying to put the genie to work too.

4. Will Standing Rock Start Walking? – Pipeline protesters in North Dakota demonstrated their ability to block construction of the Dakota Access oil pipeline. With environmental groups losing influence at the high altitude of the White House, the ground-level Standing Rock playbook could spread to other US oil and gas fields. And it’s not so cold in the Southern States.

5. Escalating Oilfield Service Costs – Oil producers have been smug about how they have cut their costs by 20 to 30% over the past two years. But much of that has been accomplished by crippling the margins of the oilfield service sector. Rising rig counts are already germinating the first hints of oilfield inflation. If costs escalate again, $60/B may not be the new $90 (see past blog “$60 is in Style…For Now”).

6. The Next Boomtown – Alberta has a history of creating resource boomtowns. Drumheller was the province’s coal capital 100 years ago. Black Diamond and Turner Valley kicked off the oil boom. Medicine Hat made history with shallow gas. And of course Fort Mac is synonymous with oil sands. Next up? Watch Grande Prairie, ground zero for the next wave of oil and gas extraction.

7. Lithium, Cobalt and Graphite Prices – Lithium-ion batteries continue to fall in price and increase in utility. That’s why we’re scaling up from watch batteries, to iPhones, to electric vehicles, to home storage units and beyond. But key battery ingredients are lithium, cobalt and graphite. Commodity prices are likely to rise. All energy systems trace their baggage back to natural resource extraction; just ask anyone in the fossil fuel business.

8. Follow the Money – Oil prices should firm up into 2017, leading to a modest rise in global upstream investment. But where will the money go? Hang the theoretical cost curves. Capital allocations by leading oil companies will be a real-time test of which jurisdictions, and which methods of oil extraction are economic at oil prices above $55/B.

9. Natural Gas Market Access – In Canada, oil pipelines (or the lack thereof) have dominated talk of “market access.” But natural gas reserves are more prolific than oil in Western Canada, and of higher potential value if transportation access and costs improve. West Coast LNG terminals won’t be harbouring tankers anytime soon. Following tolling deals on pipes like the TransCanada Mainline are going to be more meaningful in the near term.

10. Nuclear Fusion – The running joke for 60 years is that nuclear fusion for unlimited power generation is always 20 years away from reality. Time lines are still long, but technological advancements and a recent shift to focus on smaller scale, faster development could cut REM-sleep dreaming to five-year increments. Companies like Lockheed Martin think they’re not far from creating a compact sun on our planet.

Next year, 2017, will be no less remarkable than the calendar we are about to close. Whatever energy system your business fancies, fossil fuels or renewables, nobody should be in denial about how disruptive change can surprise the wisest of us all, whichever way we look

Editor’s Note

The post, 10 Energy Surprises In 2017, was first published on OilPrice.com and is republished here with permission.

Comments

  1. says

    About point 3): where is Europe in that story? Still missing the political will to go for fracking, while using gas from Russia and other countries at an overall gas price in Europe three times higher than in the US? With as consequence that besides the price of labour the price of energy makes that European products get uncompetitive on the world market…

      • says

        Are Hansen, I have been working in a large chlorine/VCM/PVC plant in my working life, now retired. About 70% of the costs of the endproduct was the price of electricity (132 MW nominal use by salt electrolyses for ~500,000 tons PVC/year). 30% was raw materials (salt and ethylene), production costs and labour.

        To sell VCM, the monomer for the production of PVC, the negotiations on the world market were about fractions of a euro per tonne. If the price of electricity increases with a few percent, then you can forget the world market, it is that simple. In Germany, The Netherlands and Belgium all the subsidies for green power are paid by the households, not the industry, or that would be the end of the (chemical) industry in Europe. The CEO of BASF has said to Merkel to only make future investments in their US subsidiaries, because gas and power prices are much lower there…

        • Are Hansen says

          Yes, that is probably right for the products you mentioned. However, Europe exports a lot of things and services beside chemicals for plastic production

          • says

            Are, besides agricultural products, services and technology are the main moneymakers for Europe by now, but if that will last for long? Look at what happened with many industries in Europe: the fiber industry e.g. was blooming in Europe, including research and development. First the clothing industry moved to Asia, then fiber manufacturing, then research and development. Only high technological fibres and looms manufacturing survived until now… The same is happening for steel manufacturing, electronics (light bulbs: what remains from Philips LED/light research?),… Still much research is done in Europe, but the Chinese are buying now everything, from raw materials in Africa to technology and research in Europe and the US. Like Volvo cars and using that technological knowledge to build cars for the Chinese market, if not for the world market in the future. Like power distribution networks in Greece (and nearly happened in Flanders/Belgium)…

            • Are hansen says

              Yes, Ferdinand, China is fast becoming the world’s economic superpower. Like it has always been (well, at least for the last couple of thousand years or so). The last 200 years of European dominance was a short lived aberration.
              And there is nothing you or anybody else can do about it. It’s time to start learning Chinese :-)

        • Bas says

          The cost price of aluminum produced by the smelters is also strongly dependent on the price of electricity.
          Yet, they alu smelters in Germany do fine compared to the alu smelters in UK, US, etc.

          • says

            Bas, yes they still are doing fine in Germany (and one in The Netherlands too, if I remember well), because the industrial price for power is kept low and the households are paying the difference…

            Indeed hydro and geo energy are the best natural and cheap energy sources where they are available. Unfortunately most of us don’t live on an (near) active volcano or even in mountain ranges. So in many countries the availability of abundant, cheap no-fossil power is very limited or even completely absent, with the exception of nuclear, but that seems a forbidden option in Europe…

            • Bas says

              Ferdinand,
              Nuclear killed itself as its far more expensive than renewable and has so many accidents.

              Just look at the costs (incl. subsidies & guarantees) for Hinkley C (>€150/MWh) and compare with those of our offshore wind (~€50/MWh) and realize that renewable costs are widely predicted to reduce further during next decade.

              Our only NPP in NL, Borssele, is making losses of >30% as the market price is now €30/MWh and its operational costs only are >€40/MWh. Which situation creates extra dangers as it hasn’t the money to implement the post-Fukushima safety measures (EU stress test).
              They didn’t close yet as they hope they may get subsidies to close (need €1billon) when the CDA is in govt after next elections.

              In USA small accidents (radiation leakages, circumventing NRC safety rules as SONGS did) also contributed to premature closures.

  2. Are Hansen says

    The Chevy Bolt is a good car, but don’t expect it to directly change the auto markets. GM does not plan to scale up production of this car much, or push it aggressively in the market. Demand will outstrip supply the whole year.
    However, it can and will have a symbolic effect, changing the way EVs are seen by ordinary consumers.
    During coming summer Tesla starts production of their Model 3. And they are working feverishly on scaling up production drastically – the goal is 500.000 cars by 2018. Combined with their large network of SuperCharger stations and their head start on autopilot systems, GM will not be able to compete.

    And nuclear fusion? Nah, sorry, still always 20 years into the future :-) And with the prices of renewable energy falling so fast and strongly, probably nobody will ever finance such a complex (clumsy) tech

    • says

      Karel, with sentences like:
      The report recommends that light vehicle emission standards should be pursued as a relatively cheap way of supporting electric vehicles.
      With other words, force people to buy far more expensive cars, so that we can use them as battery backup for intermittent power…

      I haven’t read the whole report, so can’t comment on the many pitfalls I fear there are in that report. Will see in next days…

    • Are Hansen says

      No, but electricity generation is the largest emitter of CO2. So switching to renewables would probably solve at least the climate problem. Bu there is also methane leaks, and CO2 emissions from things like cement and iron production

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