Upstream oil investment 'crucial' during transition says IEA
It is crucial that the oil industry continues to invest in the upstream (exploration and production) sector as it will take years to shift global transport fleets away from internal combustion engines to EVs and other low-carbon alternatives, according to the IEA's Oil 21 report.
Key energy sectors such as aviation, shipping and petrochemicals will continue to rely on oil for some time, it states, yet only a marginal rise in global upstream investment is expected this year after operators spent one-third less in 2020 than they planned at the start of the year.
To meet the growth in oil demand to 2026 in the IEA report’s base case, supply needs to rise by 10m bpd by 2026 - but it is projected to increase by 5m bpd, although a production capacity cushion of a record 9m bpd could keep global markets comfortable in the near term.
The Middle East, led by Saudi Arabia, is expected to provide half that increase, largely from existing shut-in capacity. Asia will continue to dominate growth in global oil demand, accounting for 90% of the increase between 2019-2026.
To watch the Oil 2021 report conference video, click here
The need for ongoing upstream investment illustrates the challenges facing the industry as it is increasingly preoccupied with decarbonization and meeting clean energy and net zero targets. Minimising emissions from core operations, notably methane, remains an urgent priority.
Moreover the Covid-19 demand shock, large scale expansions and expectations of a long‑term structural decline in demand are creating an overhang that can only be eradicated through massive closures.
"The Covid-19 crisis caused a historic decline in global oil demand – but not necessarily a lasting one. Achieving an orderly transition away from oil is essential to meet climate goals, but it will require major policy changes from governments as well as accelerated behavioural changes. Without that, global oil demand is set to increase every year between now and 2026," said Dr Fatih Birol, the IEA’s Executive Director.
"For the world’s oil demand to peak anytime soon, significant action is needed immediately to improve fuel efficiency standards, boost electric vehicle sales and curb oil use in the power sector."
A third wave of worldwide refinery rationalisation is currently underway. Global shutdowns of 3.6 mb/d have already been announced, but a total of at least 6 mb/d will be required to allow utilisation rates to return to above 80%.
China, the Middle East and India continue to drive new capacity growth. As a result, Asian crude oil imports are forecast to surge to 27m bpd by 2026, requiring record levels of Middle Eastern crude and Atlantic Basin production to fill the gap.
The petrochemical industry will continue to lead demand growth, with ethane, LPG and naphtha together accounting for 70% of the forecast increase in oil product demand to 2026. Gasoline demand may have peaked, though, as efficiency gains and the shift to electric vehicles offset mobility growth in emerging and developing economies.
Demand for aviation fuels, the area that was hardest hit by the pandemic, is forecast to gradually return to pre-crisis levels. But a shift to online meetings and conferences – along with persistent corporate efforts to cut costs and hesitation by some citizens to resume leisure travel – could permanently alter travel trends.
McKinsey has highlighted three decarbonization levers, focusing on optimising operations, sustainable design and balanced portfolios.
"Over the years, upstream operators have responded to market and technological disruptions with innovation and resilience," it states. "With an accelerated energy transition, they must do so again."
Form Energy receives funding power for iron-air batteries
Form Energy believes it has cracked the conundrum of commercialising grid storage through iron-air batteries - and some of the biggest names in industry are backing its potential.
The startup recently announced the battery chemistry of its first commercial product and a $200 million Series D financing round led by ArcelorMittal’s XCarb innovation fund. Founded in 2017, Form Energy is backed by investors Eni Next LLC, MIT’s The Engine, Breakthrough Energy Ventures, Prelude Ventures, Capricorn Investment Group and Macquarie Capital.
While solar and wind resources are the lowest marginal cost sources of electricity, the grid faces a challenge: how to manage the multi-day variability of renewable energy, even in periods of multi-day weather events, without sacrificing energy reliability or affordability.
Moreover, while Lithium-ion batteries are well suited to fast bursts of energy production, they run out of energy after just a few hours. Iron-air batteries, however, are predicted to have theoretical energy densities of more than 1,200 Wh/kg according to Renaissance of the iron-air battery (phys.org)
The active components of Form Energy's iron-air battery system are some of the cheapest, and most abundant materials: iron, water, and air. Iron-air batteries are the best solution to balance the multi-day variability of renewable energy due to their extremely low cost, safety, durability, and global scalability.
It claims its first commercial product is a rechargeable iron-air battery capable of delivering electricity for 100 hours at system costs competitive with conventional power plants and at less than 1/10th the cost of lithium-ion and can be optimised to store electricity for 100 hours at system costs competitive with legacy power plants.
"This product is our first step to tackling the biggest barrier to deep decarbonisation: making renewable energy available when and where it’s needed, even during multiple days of extreme weather, grid outages, or periods of low renewable generation," it states.
Mateo Jaramillo, CEO and Co-founder of Form Energy, said it conducted a broad review of available technologies and has reinvented the iron-air battery to optimise it for multi-day energy storage for the electric grid. "With this technology, we are tackling the biggest barrier to deep decarbonization: making renewable energy available when and where it’s needed, even during multiple days of extreme weather or grid outages," he said.
Form Energy and ArcelorMittal are working jointly on the development of iron materials which ArcelorMittal would non-exclusively supply for Form’s battery systems. Form Energy intends to source the iron domestically and manufacture the battery systems near where they will be sited. Form Energy’s first project is with Minnesota-based utility Great River Energy, located near the heart of the American Iron Range.
Greg Ludkovsky, Global Head of Research and Development at ArcelorMittal, believes Form Energy is at the leading edge of developments in the long-duration, grid-scale battery storage space. "The multi-day energy storage technology they have developed holds exciting potential to overcome the issue of intermittent supply of renewable energy."
Investors in Form Energy's November 2020 round included Energy Impact Partners, NGP Energy Technology Partners III, and Temasek.
In May 2020, it signed a contract with Minnesota-based utility Great River Energy to jointly deploy a 1MW / 150MWh pilot project to be located in Cambridge, MN. Great River Energy is Minnesota's second-largest electric utility and the fifth largest generation and transmission cooperative in the US.
Last week Helena and Energy Vault announced a strategic partnership to identify additional opportunities for Energy Vault’s waste remediation technologies as the company begins deployment of its energy storage system worldwide. It received new investment from Saudi Aramco Energy Ventures (SAEV) in June.
Maoneng has revealed more details of its proposed 240MWp / 480MWh Battery Energy Storage System (BESS) on Victoria’s Mornington Peninsula in Australia (click here).
The BESS represents hundreds of millions of dollars of investment that will improve electricity grid reliability and network stability by drawing energy from the grid during off-peak periods for battery storage, and dispatching energy to the grid during peak periods.