Brent Crude oil prices have seen some large fluctuations since the beginning of 2018, breaching $70/bbl in January, to then drop back down to $62/bbl. Geopolitical tension between the US and North Korea, OPEC production caps, and increased US shale production, are all major factors to influence and shape the current price of oil.
Eggborough, one of the UK’s largest coal power stations, is set to close before the end of the year as it’s become less and less economical to generate power. The power station is capable of generating power from biomass as well as coal, however after failing to obtain a Capacity Market contract in the last round of auctions. Many of the UK’s gas and coal fired power plants rely heavily on winning Capacity Market contracts in order to remain profitable, however Eggborough have missed out this time round, causing its imminent closure.
Oil markets have started the year on a volatile manner, as the first three weeks of the year has seen Brent Crude prices increase from $64/bbl to over $70/bbl. At the time of writing, Brent has eased off from 3 years highs to $68.88/bbl. To put into perspective, Brent Crude is trading 24% higher than in January 2017.
Liquefied Natural Gas is something we relate to Qatar, as the worlds’ largest exporter of the commodity in is coolest, liquid form. However, Russia are gaining some ground in this competitive market, by attempting to transfer LNG from the Arctic Yamal Peninsula to the rest of the world, including Asian markets where LNG is heavily relied upon.
Norway’s largest gas field lies on the Norwegian Continental Shelf in the North Sea. The Troll gas field has the ability to produce enough gas to supply almost 40% of the UK’s annual gas demand. The UK is the largest importer of Norwegian gas, closely followed by Germany and France. While the UK gas market is adapting to the loss of Rough – the UK largest offshore gas storage facility – the Troll gas field is anticipated to make up for some of that loss.
The Crown Price of Saudi Arabia Mohammed bin Salman, is currently leading an anti-corruption case on an unprecedented scale. His main targets are seemingly some of Saudi Arabia’s most wealthy and most influential. Arrests have included 11 princes, 4 ministers and dozens of influential business men and ex-ministers.
This winter will be the first winter that promises the delivery of power through the Capacity Market (CM) scheme. The scheme which currently sits under the Electricity Market Reform (EMR) aims to increase UK power generation and capacity during peak hours and periods of system stress. Initially the CM scheme was to be introduced in October 2018, however due to tight supply over last winter (winter 16/17), the Government brought the delivery date forward by 1 year.
The first gas has been extracted from new gas fields, located just off the coast of the Shetland Islands. The two fields, named Edradour and Glenlivet are estimated to provide around 1.9 million barrels of oil and gas equivalent in 2018. This comes at a time when gas supply in the UK is below normal as the largest offshore storage site Rough is closed, leaving only cushion gas to be withdrawn over the next few years.
The Cygnus gas development has been under construction for some years now, however the first gas has been drawn and delivered to the UK this week, marking a significant achievement for UK gas. The gas has been transported the Norfolk, across the North Sea, arriving at the Bacton gas terminal, ready for UK supply.
The first full scale floating wind farm is being implemented off the coast of Scotland, which is made up of five turbines in total, and measuring 253 meters in height. The small wind farm is anticipated to generate 30MW of electricity, which is enough to supply 20,000 UK homes. The wind farm will be fully operational by October this year, if all goes to plan.
The department for Business Energy & Industrial Strategy has delayed the implementation of the Energy Intensive Industries (EII) exemption scheme once again, after the April 2017 expected start date was not met. The changes in Government, and discussion with the European Commission have caused the delay in enforcing the new legislation, however a new start date has been proposed for the 1st January 2018. This means that the BEIS will be required to have the new calculations, etc published and ready by the end of October, which has led many to believe the start date will be pushed back once again.
Construction on Hinkley Point C nuclear power station has only recently begun, however it has already been announced that costs will increase by around £1.5 billion, with a potential for a 15 month delay for completion at site. Hinkley Point C has caused much controversy over the last 10 years, and as such the news is quite unwelcome. Originally, the power station was to be powering the UK by this upcoming Christmas, however after recent announcements, power generation will not be taking place for another 10 years.
Centrica Storage Ltd (CSL) announced in June 2017 that their largest offshore gas storage facility ‘Rough’ would be permanently closed, after experiencing a year of issues while under repair and maintenance. The aging facility has been incapable of performing injection activity since June 2016, and as a result has not managed to store much gas, while withdrawals have been significantly low. CSL confirmed that the facility was no longer economic to run due to the extent and cost of repairs required.
Recent statistics from the department of Business Energy & Industrial Strategy have shown a rapid decline in the consumption of coal in the UK. Furthermore, on a global scale, the dependence on coal fired power has dropped over the last two years. This looks set to continue, as the UK announced plans to close all coal power stations by 2025. The new Government could change things, however for now this plan of action still remains.