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By John Kemp

• Welcome to Power Up. Oil and gas prices have reverted towards long-term inflation-adjusted averages as the energy crisis of 2022 and 2023 fades. Big increases in fossil and non-fossil energy production have met with subdued growth in consumption as the industrial economy struggles. Investors and project developers face an increasingly tough challenge eking out returns in subdued markets characterised by overcapacity.  

   

  Today’s top headlines: 

  • Valero’s profit falls on lower fuel prices 
  • New York holds offshore wind auction 
  • Germany seeks to diversify LNG imports 

   

Solar panels with a view of the neighborhood and lower Manhattan. REUTERS/Brendan McDermid

Clean electricity generation in the United States hit new highs in 2023 but expanded by its smallest margin since 2012, due to below-normal wind speeds and a drought-driven drop in hydro power, Gavin Maguire reports.  

Supply chain disruptions alongside increases in materials and labour costs caused a sharp slowdown in wind project installations last year. At the same time, unusually low wind speeds – especially during April, May, June and November – resulted in a nearly 3% drop in total wind generation.  

Hydro was also down owing to low river levels in western states. Only a big increase in solar installations and output ensured clean generation eked out small gains. But growth should resume in future if wind speeds revert to normal.

Logo of energy services firm Baker Hughes is displayed during the LNG 2023 energy trade show in Vancouver, British Columbia. REUTERS/Chris Helgren

U.S. oil and gas companies will reduce spending on drilling and completion services by low to mid-single digits in 2024, Baker Hughes warned investors in its earnings call, Sourasis Bose reports.  

Shale producers have looked to reduce drilling to counter weak prices. Many are pumping only enough oil to keep production flat and turning over more profit to investors.

Weisweiler coal power plant of German utility RWE in Germany. REUTERS/Wolfgang Rattay

Germany’s top policymakers held talks about a big expansion in gas-fired generation as part of a plan to prevent the phase-out of coal leading to power shortages caused by the intermittency of renewable generation, Markus Wacket reports.  

Germany wants to use some 24 gigawatts of hydrogen and gas-fired power plants to cover gaps in wind and solar supply but has been at odds with Brussels on allocating public funding for them.  

The power plant strategy was meant to be completed last year,but was delayed after a constitutional court ruled out some 60 billion euros earmarked for climate projects, forcing the government to revise its budget.

Technicians stand next to an oil rig manufactured by Megha Engineering and Infrastructures Limited (MEIL) in the western state of Gujarat, India. REUTERS/Amit Dave

India’s petroleum consumption climbed to a new record last year and the country is on course to overtake China as the primary driver of incremental oil consumption before 2030.  

Urbanisation, industrialisation and the growth of the middle class are driving a rapid increase in consumption of petroleum products for heating, lighting, cooking, transportation and petrochemicals. 

China’s demand for transportation is increasingly satisfied by electric vehicles, but India’s is still mostly met by internal combustion engines owing to their greater affordability. 

While China’s oil consumption is expected to peak before the end of the decade and start to fall, India’s will continue increasing through the 2030s. 

Asia and Africa have replaced Europe as the top destinations for Russian crude oil exports since Moscow was slapped with European sanctions on sales of energy products following its invasion of Ukraine in February 2022, Gavin Maguire reports.  

Russian exporters have been forced to slash oil prices to grow business in far-flung markets and divert record volumes of crude previously transported by pipeline onto tankers. 

Deep discounts resulted in steep jumps in Russian oil purchases by Asia and Africa and record high overall crude imports by both continents in 2023. Cheap prices are likely to continue spurring additional purchases in the coming years even as other regions cut reliance on fossil fuels.

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