Today’s Key Takeaways: Maintenance, modification, and operations (MMO) market for the renewable/low-carbon energy industries will near $250 billion by 2030. Spring oil slump explained. ConocoPhillips, Qatar, and the world’s largest LNG project. Economic benefits of mining in Alaska.
NEWS OF THE DAY:
Rystad: MMO Market For Renewables To Hit $250B By 2030
Paul Anderson, Rigzone, June 20, 2022
Rystad Energy predicts the MMO market for the renewable and low-carbon energy industries will hit close to $250 billion by 2030.
Energy research company Rystad Energy expects the maintenance, modification, and operations (MMO) market for the renewable and low-carbon energy industries will edge close to $250 billion by 2030, presenting ample opportunities for operators to reap rewards from the energy transition.
The oil and gas industry has dominated the MMO sector, but that is set to change as green energy sources increasingly account for a greater percentage of the world’s energy mix.
Rystad Energy research shows that annual MMO spending, including in oil and gas, will surpass $600 billion in 2030, up from $367 billion in 2019, before the Covid-19 pandemic disrupted the industry. Out of that spending, the MMO market for renewables and low-carbon energy is set to almost quadruple from $63 billion in 2019 to $244 billion in 2030.
In 2019, global MMO spending was dominated by the fossil fuel industries, with 82% of total expenditure originating from the oil and gas industry. By 2030, that total will drop to only 60% as renewables and low-carbon energy sources pick up steam and take an increasingly large slice of the pie.
“With the rapid adoption of renewable and low-carbon energy infrastructure expected by the end of the decade, there will be ample opportunities for MMO players to take advantage. The suppliers who can adapt quickly and service the maintenance needs of these growing industries will be in pole position to seize a significant portion of this expenditure towards 2030,” said Ulrik Eriksen, energy services analyst with Rystad Energy.
The MMO sector comprises many activities and operations, including inspection of facilities and equipment, surface treatment, pipe maintenance, and transport and logistics. In their attempts to adapt to the energy transition, there are synergies from which MMO suppliers can benefit, such as similarities in required activities across energy sectors and a low degree of specificity for the activities within the MMO sector.
For instance, drones are already used for offshore oil and gas inspections, which can easily be adapted and used for offshore wind facilities. Similarly, suppliers that offer various access solutions within offshore oil and gas can also use similar solutions for offshore wind. Companies conducting pipe maintenance can utilize these capabilities also for process equipment within the renewables and low-carbon sectors.
MMO players are among the best positioned to thrive in the energy transition due to a high level of adaptability and a low degree of specificity. However, their exposure to renewable energy is somewhat limited to date, as oil and gas still dominate the market. Increasing capital expenditure investments, as seen in the engineering, procurement, construction, and installation (EPCI) market, will increase demand for MMO players as more renewable and low-carbon assets come online and operational spending follows capital investments.
Rystad Expects Rise in Oil and Gas Spending
Breaking down the expected spending by 2030, growth is widespread, but certain areas are expected to soar. Upstream, midstream, and downstream spending in the oil and gas industry is expected to rise. Combined MMO expenditure in the oil and gas industry is forecast to jump from $303 billion in 2019 to $364 billion in 2030. However, the most remarkable growth will be visible in other areas.
As mentioned above, total non-fossil fuel MMO expenditure is projected to surge by 2030, driven primarily by growth in solar, wind, geothermal, and carbon capture and storage (CCS). The maintenance market in the solar industry is expected to be worth $64 billion in 2030, up from only $12 billion in 2021. The onshore and offshore wind markets are also projected to spend an increasing amount on MMO, with combined spending hitting $143 billion by the end of the decade – a considerable jump from the 2021 total of about $39 billion.
CCS and geothermal, two technologies expected to gain significant momentum in the coming years, will also provide opportunities for maintenance operators. The CCS industry is expected to spend close to $7 billion on MMO in 2030, up from $1 billion in 2021, while the comparatively small geothermal sector will reach $1.6 billion in maintenance expenditure by the turn of the decade.
Regionally, the main driver of global growth will be Asia, including China. MMO spending in the region is expected to grow rapidly from $35 billion in 2021 to $125 billion in 2030, more than half the global market value. North America and Europe will also attract significant spending but even combined, the two will fall far short of Asia’s total. Expenditure in North America in 2030 is projected to be $37 billion, while the European market will top $53 billion.
OIL:
Here’s Why Global Oil Demand Slumped This Spring
Charles Kennedy, OilPrice.Com, June 20, 2022
World oil demand dropped in April to 97 percent of the 2019 level as demand in Asia weakened, according to data from the Joint Organisations Data Initiative (JODI) cited by Reuters.
Weaker oil demand in China amid weeks-long strict lockdowns in Shanghai spooked the oil market in April and most of May as the Chinese “zero COVID” policy resulted in mass testing and lockdowns in the Chinese financial center that is home to 26 million residents.
Global commercial oil stocks increased in April after months of continuous falls, but they were still below the five-year average for this time of the year.
Following nearly two years of declines, observed global oil stocks increased by 77 million barrels in April, the International Energy Agency (IEA) said in its latest Oil Market Report last week. OECD industry stocks also rose, by 42.5 million barrels, or 1.42 million bpd, in April, helped by government stock releases of nearly 1 million bpd. However, OECD industry stocks were 290.3 million barrels below the 2017-2021 average, the IEA said. According to preliminary data for May, total OECD stocks increased by 6 million barrels last month, the agency added.
Still, the IEA expects in its first outlook for 2023 that oil demand will accelerate next year, with global demand averaging a record 101.6 million barrels per day (bpd) and exceeding pre-COVID levels.
“While higher prices and a weaker economic outlook are moderating consumption increases, a resurgent China will drive gains next year, with growth accelerating from 1.8 mb/d in 2022 to 2.2 mb/d in 2023,” the IEA said in its closely-watched Oil Market Report for June.
Next year, global oil supply may even struggle to catch up with demand, the agency said, as sanctions on Russia would curtail more supply when they officially enter into force at the end of this year.
“Global oil supply may struggle to keep pace with demand next year, as tighter sanctions force Russia to shut in more wells and a number of producers bump up against capacity constraints,” the IEA said last week.
GAS:
QatarEnergy, ConocoPhillips tie up for LNG expansion project | Nasdaq
Reuters, June 20, 2022
QatarEnergy [RIC:RIC:QATPE.UL] on Monday signed a deal with ConocoPhillips COP.N for the Gulf state’s North Field East expansion, the world’s largest liquefied natural gas (LNG) project, following agreements with TotalEnergies TOTF.PA and Eni ENI.MI.
Qatar is partnering with international companies in the first and largest phase of the nearly $30 billion expansion that will boost Qatar’s position as the world’s top LNG exporter.
The companies will form a joint venture that will take a 12.5% stake in North Field East and ConocoPhillips will have a 25% stake in that joint venture.
The arrangement is similar to that announced with Eni on Sunday and implies a 3.12% stake in the overall North Field East project for ConocoPhillips.
QatarEnergy CEO Saad al-Kaabi said the partnerships with international companies would be for a period of 27 years.
Oil majors have been bidding for four trains – or liquefaction and purification facilities – that comprise the North Field East project.
In all, the North Field Expansion plan includes six LNG trains that will ramp up Qatar’s liquefaction capacity from 77 million tonnes per annum (mtpa) to 126 mtpa by 2027. The fifth and sixth trains are part of a second phase, North Field South.
The North Field is part of the world’s biggest gas field that Qatar shares with Iran, which calls its share South Pars.
Sources have said Exxon Mobil Corp XOM.N would also participate in the North Field East expansion.
MINING:
The McKinley Group prepared an in-depth report on the Economic Benefits of Alaska’s Mining Industry for AMA and the Council of Alaska Producers (CAP). It can be downloaded here
POLITICS:
From the Washington Examiner, Daily on Energy:
GAS TAX POLITICS: President Joe Biden and states blue and red are currently all over the map where gas tax politics are concerned.
Press Secretary Karine Jean-Pierre wasn’t prepared to endorse a gas tax holiday from the podium as recently as last Monday, but Biden told reporters this morning that he’s considering it and hopes to have a decision on the matter by the end of the week.
Treasury Secretary Janet Yellen also said yesterday that Biden is ready to work with Congress on a solution to high prices and called suspension of the federal gas tax “an idea that’s certainly worth considering.”
Biden has already tried out others of the “tools” immediately available to him to bring down fuel prices — opening the Strategic Petroleum Reserve, enabling more E15 to be sold, and jawboning oil companies whom he’s accused of gouging drivers to invest more in production — while also maintaining his support for ending new drilling on federal lands and overseeing a phaseout of fossil fuels.
Support for a federal gas tax holiday is a holdout. Backing it would catch him up with some of his fellow Democrats in the Senate and with some state-level Democrats, who have overseen suspensions of state fuel taxes.
What’s happened in Congress: Sens. Mark Kelly and Maggie Hassan introduced a bill in early February, before the war in Ukraine began and when the average price of gasoline was about $1.50 lower per gallon than it is now, that would suspend the 18.4-cent federal gasoline tax through the end of the year.
The bill has no Republican cosponsors and has yet to move through committee, with Democratic leadership preferring instead to target oil companies by advancing anti-price gouging legislation.
Meanwhile, opponents of the tax holiday proposal have come from both sides of the aisle, where objections have largely been about the consequences of reducing revenues for the federal transportation fund.
Those same debates have been playing out in various states, too.
What states are doing: States are diverging widely on the gas tax holiday schemes, and in some cases, are increasing motor fuel taxes where others are suspending them.
Maryland jumped at the chance to suspend the state’s fuel tax shortly after the war in Ukraine began, and the tax holiday ran through April 17 before being reinstated. But faced with a scheduled seven-cent fuel tax increase, and associated pressure from Hogan to prevent it from happening, Senate President Bill Ferguson and House Speaker Adrienne Jones have insisted that the state needs the money for transportation and other projects (Both Democrats supported the gas tax holiday).
In Virginia, the Democrat-led state Senate just voted down a proposal endorsed by Republican Gov. Glenn Youngkin to suspend the state’s 26-cent gasoline tax. Democratic Sen. Joseph Morrissey noted complaints he gets about potholes in his district and said the state needs the tax revenue.
California, which has the highest gas prices in the nation, will also oversee an increase to its fuel tax next month by almost 3 cents per gallon against the wishes of its Republican minority, while Gov. Gavin Newsom wants to send car owners $400 rebates to help them shoulder the costs of record prices.
Other states have taken a different tack. Republican-led Georgia extended its gas tax holiday through July 14, while New York drivers won’t be paying the state’s excise tax on either gasoline or diesel fuel through the end of the year.