energy tidbits aug 11, 2019 - saf group · 8. for new readers to our energy tidbits and our blogs,...

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Energy Tidbits

Dan Tsubouchi

Principal, Chief Market Strategist

[email protected]

Aaron Bunting

Principal, COO, CFO

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Ryan Dunfield

Principal, CEO [email protected]

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Vice President

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Ryan Haughn

Principal, Energy

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Escalated Yemen Partner Infighting, Another Sign July May Have

Been Turning Point In Fight Against Houthis

Welcome to new Energy Tidbits memo readers. We are continuing to add new readers to our Energy Tidbits

memo and energy blogs. The focus and concept for the memo was set in 1999 with input from PMs, who were

looking for research (both positive and negative items) that helped them shape their investment thesis to the energy

space, and not focusing on day to day trading. Our priority was and still is to not just report on events, but interpret

and point out implications therefrom. The best example is our review of investor days, conferences and earnings calls

focusing on sector developments that are relevant to the sector and not just a specific company results/guidance.

Our target is to write on 48 to 50 weekends per year and to send out by noon mountain time.

This week’s memo highlights:

1. An eventful week, especially last 24 hours, in Yemen gave more signs that July may have been the turning point

in the Houthis fight. (Click Here)

2. A good CSIS report on Iran threat to Saudi infrastructure notes the biggest challenges are from Iran cyber threats

and the Houthis. (Click Here)

3. Reports Saudi Arabia will consider all options to support oil markets. (Click Here)

4. Several good insights from Bloomberg’s Global LNG Market Aug report. (Click Here)

5. IEA’s Oil Market Report has continued tough outlook for oil in 2020. (Click Here)

6. Bill Gates blog reminds that still need fossil fuels to provide cheap reliable energy to the world’s poor. (Click Here)

7. Please follow us on Twitter at [LINK] for breaking news that ultimately ends up in the weekly Energy Tidbits memo

that doesn’t get posted until Sunday noon MT.

8. For new readers to our Energy Tidbits and our blogs, you will need to sign up at our blog sign up to receive future

Energy Tidbits memos. The sign up is available at [LINK].

Produced by: Dan Tsubouchi

Aug 11, 2019

https://twitter.com/Energy_Tidbits

http://www.safgroup.ca/research/trends-in-the-market/


2

Energy Tidbits

Table of Contents Natural Gas – Natural gas injection of 55 bcf, storage now at 343 bcf YoY surplus ................................................5

Figure 1: US Natural Gas Storage ....................................................................................................................5

Natural Gas – NOAA reduces El Nino probability for winter 2019/2020 ..................................................................5

Figure 2: August CRC/IRI Forecast ..........................................................................................................................5

Natural Gas – Good LNG data/insights from Bloomberg’s Global LNG Monthly .....................................................5

Figure 3: Global LNG import volumes ......................................................................................................................6

Natural Gas – Europe gas storage 85.3% full sets up weak LNG prices .................................................................6

Figure 4: Europe gas storage utilization 5 year range ......................................................................................7

Natural Gas – HH prices are increasingly impacted global LNG/natural gas market...............................................7

Europe has been the big growth region for Cheniere’s LNG exports ...............................................................7

Figure 5: Cheniere LNG Exports by Destination Region ..................................................................................7

Natural Gas – Japan spot LNG prices down 53.0% YoY to $4.70 ...........................................................................8

Figure 6: Japan Monthly LNG prices ........................................................................................................................8

Natural Gas - EIA forecasts US gas supply +7.64 bcf/d YoY in 2019, +1.47 bcf/d in 2020 .....................................8

Figure 7: EIA STEO US Natural Gas Supply Forecasts By Forecast Month ...........................................................8

Natural Gas – EIA’s estimate for Nov 1/19 gas storage 3.746 tcf looks too low ......................................................8

Natural Gas – Mozambique domestic peace provides confidence for future LNG FIDs ..........................................9

Natural Gas – Nikkei Asia Review says LNG Canada shipments “as early as 2024” ..............................................9

Excerpt SAF Oct 14, 2018 Energy Tidbits re Apr 1/24 LNG Canada timing ....................................................9

Natural Gas – Tip of the iceberg, renewables start to take share from natural gas in 2020 ................................. 10

Figure 8: US electricity generation by fuel, all sectors .......................................................................................... 11

Oil – US oil rigs down 6 to 764 oil rigs ................................................................................................................... 11

Figure 9: Baker Hughes Weekly Rig Count – Total US Oil Rigs ................................................................... 11

Oil – Total Cdn rigs up 3 to 140 total rigs .............................................................................................................. 11

Figure 10: Baker Hughes Weekly Rig Count, Canadian Oil Rigs.................................................................. 12

Oil – US oil production up 100,000 b/d to 12.3 mmb/d .......................................................................................... 12

Figure 11: Weekly Oil Production .................................................................................................................. 12

Figure 12: US Weekly Oil Production ............................................................................................................ 13

Figure 13: YoY Change in US Weekly Oil Production ................................................................................... 13

Oil – EIA STEO lowers 2019 oil production due to hurricane interruptions ........................................................... 13

Figure 14: Estimated US Crude Oil Production By Forecast Month ............................................................. 14


3

Energy Tidbits

Figure 15: EIA WTI, Brent, HH price assumptions by forecast month .......................................................... 14

Oil – Whiting’s Q2 call reminds of the challenge to replace Lower 48 declines .................................................... 14

Figure 16: WLL Lower Decline Provides Competitive Advantage ................................................................. 15

Figure 17: SAF Ballpark Estimate Decline B/d To Replace Based On Whiting Q2 Call Slide ..................... 15

Oil – Haven’t yet seen wider global HSFO/LSFO diffs for IMO 2020 impact WCS diffs ....................................... 15

Figure 18: HSFO vs LSFO Diff Singapore ..................................................................................................... 16

Figure 19: WCS/WTI Diff ............................................................................................................................... 16

Oil – Rising gas/oil ratio in AB is age related, not higher IP GORs as worried in US ........................................... 16

Oil – Oil input into refineries up 786,000 b/d to 17.777 mmb/d ............................................................................. 17

Oil input into refineries up 786,000 b/d .................................................................................................................. 17

Figure 20: US Refinery Crude Oil Inputs (thousand b/d) ............................................................................... 17

Oil – US “NET” oil imports up 1.194 mmb/d to 5.283 mmb/d ................................................................................ 17

Figure 21: US Weekly Preliminary Oil Imports By Major Countries .............................................................. 18

Oil – Trump tries to re-energize Maduro regime change momentum with full sanctions ...................................... 18

Oil – IEA OMR lowers demand forecast, OPEC cuts needed thru 2020 .............................................................. 18

Figure 22: IEA OMR OPEC July 2019 Production Vs Quota Cut Levels ...................................................... 19

Oil – 4 day ceasefire around Tripoli due to major Islamic holiday ......................................................................... 19

Oil – Excellent report on Iran’s threat to Saudi critical infrastructure .................................................................... 20

Figure 23: Map of Iran Missile Ranges .......................................................................................................... 21

Oil – Saudi says considering all options to support oil markets ............................................................................ 21

Oil – Expect pressure on Iraq and Nigeria to finally comply to quota .................................................................... 21

Oil – Saudi Aramco IPO reportedly back on front burner, H1/19 call tomorrow .................................................... 21

Oil – An eventful week in Yemen, was July a turning point for Houthis fight? ...................................................... 22

Figure 24: Prior North vs South Yemen Boundary ........................................................................................ 23

Oil – Expect more Houthi drone/missile attacks post Eid al-Adha Islamic holiday................................................ 23

Oil – No surprise, air cargo oil demand indicator stays weak................................................................................ 23

Figure 25: IATA Freight Tonne Kilometers Levels, Actual And Seasonally Adjusted .................................. 24

Oil & Natural Gas – Less El Nino probability raises end of season hurricane risk ................................................ 24

Figure 26: Atlantic Hurricane Activity El Nino vs Neutral vs La Nina .................................................................... 24

Just about to move into peak Atlantic hurricane season Aug 20 thru Oct 10 ................................................ 24

Figure 27: Atlantic Peak Hurricane Season ................................................................................................... 25

Whereas El Nino years tend low Atlantic hurricane years ............................................................................. 25

Figure 28: El Nino Wind Shear Impact On Atlantic Hurricanes ..................................................................... 25


4

Energy Tidbits

Oil & Natural Gas – Updated NOAA and Klotzbach hurricane forecasts .............................................................. 26

NOAA calls for above average hurricane activity .......................................................................................... 26

Figure 29: NOAA Atlantic Hurricane Season Outlook ................................................................................... 26

Klotzbach et al call for near-normal Atlantic hurricane activity ...................................................................... 26

Figure 30: Atlantic Basin Seasonal Hurricane Forecast For 2019 ................................................................ 27

Oil and Natural Gas – EPA proposes moves to help increase pipelines .............................................................. 27

Canada gas exports should be impacted if gas pipelines can get done in NY ............................................. 27

Figure 31: Niagara Falls,NY Natural Gas Pipeline Imports From Canada .................................................... 28

Figure 32 Waddington, NY Natural Gas Pipeline Imports From Canada ...................................................... 28

Clean Energy – Gates reminds why natural gas is needed for clean energy transition ........................................ 28

Cyber – Iran suspected of hacking Bahrain water infrastructure........................................................................... 28

Cyber – UK says it wasn’t cyber that caused the massive UK blackout ............................................................... 29

Figure 33: England and Wales Power Cut: Customers Affected in Each Electricity Supply Area ................ 29

Energy Tidbits – Now on Twitter ............................................................................................................................ 29

Energy Tidbits – Sign up on our email distribution for tidbits and blogs ................................................................ 30

LinkedIn – Look for quick energy items from me on LinkedIn ............................................................................... 30

Misc Facts and Figures.......................................................................................................................................... 30

French Inventor crosses channel by hoverboard .......................................................................................... 30

Figure 34: The Hoverboard in flight ............................................................................................................... 30

50th anniversary of Woodstock ...................................................................................................................... 30

Maclean’s best communities has 9 of top 10 in Ontario ................................................................................ 31

Figure 35: Top 10 Canadian communities and major cities ranking ..................................................................... 31


5

Energy Tidbits

Natural Gas – Natural gas injection of 55 bcf, storage now at 343 bcf YoY surplus

The EIA reported a 55 bcf natural gas injection and came in just below the expectations of a 59 bcf injection to bring storage to 2.689 tcf as of August 2. This is a widening of the YoY surplus to 343 bcf vs 334 bcf YoY surplus last week, but storage is down 111 bcf against the 5 yr average. The continued expectation is for the YoY storage surplus to keep widening from higher YoY production which is holding HH prices below $2.50. Below is the EIA’s storage table from its Weekly Natural Gas Storage Report. [LINK] Figure 1: US Natural Gas Storage

Source: EIA

Natural Gas – NOAA reduces El Nino probability for winter 2019/2020

The major looking forward oil and gas impact from El Nino forecasts is for winter weather and natural gas demand. There is a much stronger correlation to cold weather and increased natural gas demand than warm weather and increased natural gas demand. In the winter, it gets cold, the natural gas furnace gets cranked up. Its why cold winters are so important. NOAA issued its monthly El Nino outlook on Thurs [LINK] and the August update calls for a lessening probability for an El Nino winter. This month, Dec/Jan/Feb is now down to a 30% probability for an El Nino winter. Its still early, but with the higher YoY storage going into the winter, a normal to cold winter is needed to bring some modest support to HH prices in 2020. Below is the CPC/IRI official ENSO forecast.

Figure 2: August CRC/IRI Forecast

Source: CRI/IRI

Natural Gas – Good LNG data/insights from Bloomberg’s Global LNG Monthly

On Wed, we tweeted [LINK] on the just released Bloomberg Global LNG Monthly August report. It is an excellent recap of July LNG markets and a look ahead to Aug LNG markets.

Good LNG data in

Bloomberg Global

LNG Monthly

YoY storage at

343 bcf YoY

surplus

NOAA reduces

El Nino

probability for

winter 2019/2020

http://ir.eia.gov/ngs/ngs.html

https://www.cpc.ncep.noaa.gov/products/analysis_monitoring/enso_advisory/ensodisc.shtml

https://twitter.com/Energy_Tidbits/status/1159094542869512192


6

Energy Tidbits

Its definitely worth adding to reference libraries. The report is a good recap of that was released on Wed. There are many great insights including: (i) Continued near-term weak LNG market, “JKM time spreads could incentivize floating storage by September”. Economics favoring LNG going into floating storage is never a good near term price signal. We are unsure if offshore floating storage gets reported or if it’s the same as oil markets where there are unreported volumes. (ii) Worldwide July LNG imports were +14.4% YoY or +3.9 mmt (+6.04 bcf/d). The European heat wave no question helped and low gas prices meant there was more switching from coal to natural gas. Europe is the biggest YoY increase by far, but down MoM as there were re-exported cargos from France and Netherlands. This is a sign of the much higher than normal Europe gas storage (see below item). (iii) Unsurprisingly LNG “spot prices hovering at three-year lows” given the steady supply (iv) In August LNG imports are expected to rise 3.4% MoM, followed by a seasonal maintenance period coming in Sept. Our Supplemental Documents Package includes excerpts from the Bloomberg Global LNG Monthly August 2019.

Figure 3: Global LNG import volumes

Source: Bloomberg

Natural Gas – Europe gas storage 85.3% full sets up weak LNG prices

We continue to highlight Europe gas storage being filled up way faster than usual. This is a negative for LNG prices, we first noted in our Sept 20, 2017 blog “Shell: Every LNG Cargo That Could Technically Be Produced In This World Has Been Produced And Has Found A Well Paying Customer” [LINK] that NW Europe is a dumping ground for surplus LNG cargos that cannot find a destination. NW Europe storage is a great data indicator if there is surplus LNG. The rate of injection into Europe gas storage slowed a bit in July which was due to factors discussed in the Bloomberg Global LNG Monthly report (see above item). The heat wave, more coal to gas switching, re-directed cargos due to low Europe gas prices, and Russian gas pipeline imports were down due to maintenance. Having said all of that, its now 85.3% full as of Aug 8, it did not reach this level until Sept 15 in 2018. This means low LNG prices (the risk of floating storage as noted earlier in memo) and a risk of LNG suppliers being forced to hold back output or find alternative homes other than Europe for their LNG. Below is the updated Europe gas storage utilization graph.

High European

gas storage

negative for LNG

prices

http://www.safgroup.ca/research/articles/shell-every-lng-cargo-that-could-technically-be-produced-in-this-world-has-been-produced-and-has-found-a-well-paying-customer/


7

Energy Tidbits

Figure 4: Europe gas storage utilization 5 year range

Source: Bloomberg

Natural Gas – HH prices are increasingly impacted global LNG/natural gas market

One of the key reasons why we follow global LNG markets is the growth of LNG, in particular in the US, is leading to an increasing linkage of US (and ultimately Cdn) natural gas prices to global LNG markets. If European gas storage get full, it will force some LNG cargos, including US LNG cargos, to find other homes or not be loaded. This week, Bloomberg TV had a very short item noting comments from BP’s VP marketing and origination at a gas forum in LA. Bloomberg wrote “The last year has seen a sharp reversal in the economics of shipping liquefied natural gas overseas. The discount between the Louisiana benchmark price and what the fuel fetches in places like Europe and Asia is now much narrower. U.S. LNG is now “just in the money” and “we have seen it dip just below the money at times,” Jared Barton, vice president of marketing and origination at BP Energy Co., a unit of the British energy company, said at LDC Gas Forums’ Rockies & West conference in Los Angeles. American shipments of LNG have surged in the past year as more export terminals come online. “Gas is no longer a continental commodity in the U.S.,” Barton said Tuesday. “Watch weather, watch global LNG demand and other geopolitical factors that could affect storage.”

Europe has been the big growth region for Cheniere’s LNG exports Cheniere held its Q2 call on Thurs. And one of their slides highlighted the increasing LNG exports to Europe in 2019. Looks like up ~1.5 bcf/d in Q1/19. Cheniere’s LNG exports to Europe have been a key contributor to high Europe gas storage. The reality is that, absent some sort of break in the Europe gas storage trend, Cheniere will be looking for other homes for LNG cargos over the next few months instead of going to Europe.

Figure 5: Cheniere LNG Exports by Destination Region

Source: Cheniere

HH increasingly

impacted by global

LNG prices


8

Energy Tidbits

Natural Gas – Japan spot LNG prices down 53.0% YoY to $4.70

LNG prices continue to be weak, this week, Japan’s Ministry of Economy, Trade and Industry reported [LINK] Japan contract-based spot LNG prices for July were $4.70, down 53.0% YoY from $10.00 in July 2018, and down $0.80 from $5.50 in June of this year. Weak LNG prices should continue in August and September driven by increasing YoY LNG supply, high Europe gas storage, and milder YoY China/Japan summer weather. Below is our table of monthly Japan LNG import prices.

Figure 6: Japan Monthly LNG prices

Source: Japan Ministry of Economy, Trade and Industry

Natural Gas - EIA forecasts US gas supply +7.64 bcf/d YoY in 2019, +1.47 bcf/d in 2020

The EIA released its monthly Short Term Energy Outlook Aug 2019 [LINK] on Tues. The continuing major natural gas price factor is the significantly higher YoY US natural gas production in 2019 vs 2018. The EIA forecasted 2019 US dry natural gas production was revised downwards by 0.32 bcf/d to 91.03 bcf/d for 2019, which is up +7.64 bcf/d YoY vs 2018 of 83.39 bcf/d. Forecast 2020 gas production was revised down by 0.29 bcf/d to 92.50 bcf/d, which is up 1.47 bcf/d YoY vs 2019. The downward revisions to both 2019 and 2020 production make sense given lower forecasted HH prices and less associated gas from oil wells with a lower oil production forecast. Below is our table comparing EIA’s STEO forecast by forecast month. Our Supplemental Documents package includes excerpts from the new STEO.

Figure 7: EIA STEO US Natural Gas Supply Forecasts By Forecast Month

Source: EIA, SAF

Natural Gas – EIA’s estimate for Nov 1/19 gas storage 3.746 tcf looks too low

One takeaway from this week’s EIA STEO [LINK] was that their estimate for Nov 1/19 gas storage looks too low. On Tues, we tweeted [LINK] “EIA STEO model incl +84 bcf plug for

2014 2015 2016 2017 2017/2016 2018 2018/2017 2019 2019/2018

Jan $10.20 $7.10 $8.40 18.3% $11.00 31.0% $8.30 -24.5%

Feb $7.60 $6.50 $8.50 30.8% $10.60 24.7% $7.50 -29.2%

Mar $18.30 $8.00 n/a $6.30 n/a $8.80 39.7% $6.40 -27.3%

Apr $16.00 $7.60 $4.20 $5.70 35.7% $9.10 59.6% $5.20 -42.9%

May $14.80 n/a $4.10 $5.70 39.0% $8.20 43.9% $5.40 -34.1%

June $13.80 $7.60 n/a n/a n/a $9.30 n/a $5.50 -40.9%

July $11.80 $7.90 $5.80 $5.60 -3.4% $10.00 78.6% $4.70 -53.0%

Aug $11.40 $8.10 n/a $5.80 n/a $10.70 84.5%

Sept $13.20 $7.40 $5.70 $6.90 n/a $10.60 53.6%

Oct $15.30 $7.60 $6.10 $8.20 34.4% $10.70 30.5%

Nov $14.40 $7.40 $7.00 $9.00 28.6% $10.80 20.0%

Dec $11.60 $7.40 $8.00 $10.20 27.5% $9.20 -9.8%

bcf/d 2017 Q1/18 Q2/18 Q3/18 Q4/18 2018 Q1/19 Q2/19 Q3/19 Q4/19 2019 Q1/20 Q2/20 Q3/20 Q4/20 2020

Aug 2019 - 79.13 81.17 84.95 88.21 83.39 89.42 90.07 91.54 93.04 91.03 91.97 92.00 92.90 93.13 92.50

July 2019 - 79.13 81.17 84.95 88.21 83.39 89.24 90.62 92.21 93.26 91.35 92.41 92.43 93.13 93.16 92.79

June 2019 - 79.13 81.17 84.96 88.22 83.40 89.14 90.14 91.17 91.93 90.60 91.80 91.84 91.97 91.54 91.79

May 2019 - 79.13 81.17 84.96 88.22 83.40 88.92 89.58 90.65 91.88 90.27 92.13 92.26 92.39 91.98 92.19

Apr 2019 - 79.13 81.17 84.96 88.20 83.39 88.93 90.42 92.06 92.55 91.00 92.51 92.58 92.58 92.21 92.47

Mar 2019 - 79.13 81.17 84.96 88.03 83.35 89.34 90.52 91.29 91.75 90.73 91.74 92.00 92.22 92.13 92.02

Feb 2019 - 79.13 81.17 84.96 87.67 83.26 88.48 90.16 90.80 91.18 90.16 91.63 92.11 92.16 92.31 92.05

Jan 2019 79.13 81.17 84.95 87.87 83.31 89.39 90.17 90.43 90.77 90.19 91.48 91.98 92.37 93.05 92.22

Dec 2018 74.77 79.14 81.19 85.00 87.76 83.30 89.31 90.07 90.30 90.26 89.99 - - - - -

Nov 2018 74.77 79.14 81.19 84.92 87.54 83.23 88.85 88.49 89.78 90.17 89.58 - - - - -

Oct 2018 74.77 79.14 81.21 84.36 85.86 82.67 86.83 87.36 87.91 88.80 87.73 - - - - -

Sept 2018 73.55 78.46 80.38 82.01 82.92 80.96 83.87 84.53 84.84 85.35 84.65 - - - - -

Aug 2018 73.57 78.50 80.50 82.20 82.13 81.10 83.88 84.15 84.09 84.28 84.10 - - - - -

July 2018 73.57 78.53 80.95 82.44 83.37 81.34 84.11 84.37 84.46 84.97 84.46 - - - - -

June 2018 73.57 78.54 81.31 82.05 82.83 81.20 83.73 83.79 83.68 83.93 83.78 - - - - -

May 2018 73.57 78.49 80.31 81.15 81.85 80.46 83.03 83.46 83.42 83.39 83.33 - - - - -

EIA forecasts 2019

gas supply +7.64

bcf/d

EIA gas storage

forecast for winter

looks too low

Japan spot LNG

prices down

53.0% YoY

https://www.meti.go.jp/english/statistics/sho/slng/result/pdf/201907_e.pdf

https://www.eia.gov/outlooks/steo/




9

Energy Tidbits

Nov 1/19 #NatGas storage 3.746 tcf, +509 bcf YoY. Ave weekly YoY storage gains +33 bcf/wk in refill season, now +334 bcf YoY w/ 14 wks to Nov 1/19. Plugged +509 bcf YoY looks low? Need cold winter for HH price to rally”. The EIA gas supply/demand model includes a plug factor to balance. It isn’t huge, but the plug adds 84 bcf to gas supply to Nov 1 ie. their +509 bcf YoY storage for Nov 1/19 includes this +84 bcf plug. Even still, the math to get to the EIA’s forecast Nov 1 storage is average weekly YoY storage gains in the next 14 weeks will need to be just ~10 bcf per week. Average injections have been 33 bcf per week during injection season so unless there is a supply shortage or huge ramp up in demand it seems unlikely that there will only be a +509 bcf YoY surplus on Nov 1/19. Bottom line is that the EIA gas storage forecast looks low going into the winter, which means their 2020 HH gas price assumption is likely to be lowered in the coming months. It also means that we can expect to see some changes to their forecast model items for natural gas in coming months.

Natural Gas – Mozambique domestic peace provides confidence for future LNG FIDs

Last week’s (Aug 4, 2019) Energy Tidbits noted how Papua New Guinea govt looks to be backing off on any significant demands on the Total/Exxon/Oil Search next PNG LNG phase. It will put that project soon in the LNG order. And the other LNG area high on Exxon’s list is Mozambique LNG. Mozambique’s country operating environment got a boost this week. FT wrote [LINK] “Mozambique peace pact boosts chance of unlocking gas riches” that reported on a new peace deal in Mozambique. The country has seen 42 years of conflict between the ruling Frelimo party and the country’s largest opposition party. The new agreement signed this week between the two parties will provide confidence the next wave of Mozambique LNG projects waiting to go to FID. For example, Exxon to the starting up of Mozambique LNG from multiple projects. Using Exxon as one example. Exxon is in the Coral floating LNG that is scheduled to start up in 2022, and is expected to FIC on the next stage (2 trains) in 2019 for start up in 2024. Our Supplemental Documents package includes the FT story.

Natural Gas – Nikkei Asia Review says LNG Canada shipments “as early as 2024”

Earlier this morning, we tweeted [LINK] on today’s Japan’s Nikkei Asian Review story “Canada LNG project to ship gas to Asia as early as 2024”, which is a recap of LNG Canada. LNG Canada went FID in Oct 2018 and, rightfully so, LNG Canada has stayed away from giving a hard date for first LNG shipments. The Nikkei Asian Review story only says as early as 2024. However, we have seen prior indications that note the target is for first LNG shipments to Japan by Apr 1, 2024. Our Oct 14, 2018 Energy Tidbits wrote that Mitsubishi (one of the LNG co-venturers) signed a heads of agreement with Toho gas to deliver LNG in Japan for Apr 1, 2024. Below is an excerpt from the Oct 14, 2018 Energy Tidbits memo. Our Supplemental Documents package includes the Nikkei Asian Review story.

Excerpt SAF Oct 14, 2018 Energy Tidbits re Apr 1/24 LNG Canada timing Natural Gas – One LNG Canada company commits to supply LNG to Japan for Apr 1, 2024. Looks like we have better clarification of the timing for first LNG from LNG Canada. Last week’s (Oct 7, 2018) Energy Tidbits memo noted the LNG Canada FID, but that Shell only said LNG Canada start “before the middle of the next decade” ie inferring sometime before 2025. Also, on Wed, Bloomberg Terminal posted a story “LNG Canada CEO Says Project Won’t be Rushed to Execution” that reinforced the middle of the next decade timing. Bloomberg wrote “For a development scheduled to begin exporting gas in the middle of the next decade, accelerating the startup would be “worth a lot of money,” LNG Canada Chief Executive Officer Andy Calitz said in Calgary on Wednesday. At the same time, any delay “would destroy a lot of value”. However, also on Wed, we saw that LNG Canada (or at least one of the LNG partners, Mitsubishi) has committed to deliver LNG for April 1, 2024 to Japan. (i)

Peace deal should

help Mozambique

LNG

LNG Canada

shipments “as

early as 2024”

https://www.ft.com/content/908bfd80-b858-11e9-96bd-8e884d3ea203



10

Energy Tidbits

Toho Gas Group announced it signed a heads of agreement with Mitsubishi to purchase LNG from the LNG Canada “from FY2024”. Elsewhere on the Toho website, they note “FY2017 (April 1, 2017-March 31, 2018), which then suggests FY2024 starts April 1, 2014. One other item to note is that Toho says “Change of Destination – Feasible”, which we assume means they have flexibility of destination.. Below is the excerpt from the Toho Oct 10 press release. No surprise that Toho also highlighted supply diversification as a reason for the deal. Toho said ““We accurately keep track of any change in the environment for procuring energy, and strive for LNG procurement diversification, including diversification of the price index, supply sources and types of contracts to ensure a stable energy supply to customers at a competitive price. From this perspective, we have positioned this project as a strong candidate of the new LNG supply sources and have negotiated with Seller regarding a purchase of LNG. In accordance with the agreement, we will annually purchase approximately 300,000 tons of LNG for 15 years from FY2024. We plan to procure LNG from the U.S. from FY2019 in addition to current procurement areas, Indonesia, Australia, Malaysia, Qatar and Russia. Adding Canada as a new procurement area will contribute to further stabilization of our procurement”. (ii) Tokyo Gas also announced a deal to buy LNG Canada LNG from Mitsubishi, but did so starting 2026. “This LNG project, of which Mitsubishi Corporation holds 15% interest, is expected to produce 14 million tons per annum (mtpa) of LNG by liquefying natural gas from large reserves in Western Canada at LNG liquefaction plant to be built in West Coast of Canada. Of all the volumes to be produced, DGI will offtake 2.1 mtpa, and Tokyo Gas will purchase LNG from DGI for the period of 13 years starting in 2026, for volume of up to 0.6 mtpa delivered on Ex-Ship (with destination flexibility). On top of the access to abundant natural gas in Canada, the proximity of the project to Japan, which allows the shipment to take only about 10 days, promises a stable long-term supply of LNG.”

Natural Gas – Tip of the iceberg, renewables start to take share from natural gas in 2020

There was one other interesting natural gas takeaway from the EIA STEO and that was on renewables and natural gas. It may not be material for 2020, but it is indicative of the trend. Renewables are unpredictable and vary in seasons, but we still look at renewables as being part of baseload electricity generation. The more renewables, the higher the baseload prior to natural gas. Renewables end up taking share from any non baseload fuels such as natural gas or displace any declining baseload (ie. coal retirements). The EIA doesn’t say this or explain this in the STEO, but the numbers tell the story even its only the tip of the iceberg for now. The STEO says “The share of U.S. total utility-scale electricity generation from natural gas fired power plants will rise from 34% in 2018 to 37% in 2019 and then decline slightly in 2020. EIA forecasts that the share of U.S. generation from coal will average 24% in 2019 and in 2020, down from 28% in 2018. The forecast nuclear share of U.S. generation remains at about 20% in 2019 and in 2020. Hydropower averages a 7% share of total U.S. generation in the forecast for 2019 and 2020, similar to 2018. Wind, solar, and 3 other non hydropower renewables together provided 10% of U.S. total utility-scale generation in 2018. EIA expects they will provide 10% in 2019 and 12% in 2020.”

Renewables

expected to take

share from natural

gas in 2020


11

Energy Tidbits

Figure 8: US electricity generation by fuel, all sectors

Source: EIA

Oil – US oil rigs down 6 to 764 oil rigs

Baker Hughes reported its weekly rig data on Friday. US oil rigs were down 6 to 764 oil rigs as of August 9. Increases were in the Permian +2 and Granite Wash +1. Decreases were in Others -6 and Cana Woodford -3. In the major services company Q2 earnings calls that are happening now, there is consistent feedback that the prior view on drilling bottoming out in Q2 is no longer true. US drilling activity is now expected to drop in Q3 and likely again in Q4. The service company views are based on customer orders and indications, meaning US producers are lowering their activity for H2/19. Below is our graph of the Baker Hughes weekly US oil rig data.

Figure 9: Baker Hughes Weekly Rig Count – Total US Oil Rigs

Source: Baker Hughes, SAF

Oil – Total Cdn rigs up 3 to 140 total rigs

Cdn producers are being very careful with capex in light of terrible gas prices, weak stock prices and no real access to capital. It has shown up in the Cdn rig count coming out of spring break up. Notwithstanding its gas prices that are in the tank, the normal post spring break up increase has hit oil rigs more than natural gas rigs. Baker Hughes reported Cdn rigs were up 3 to 140 total rigs as of August 9. Cdn oil rigs were up 3 to 94 oil rigs (down 46 from 140 a year ago). Cdn gas rigs were flat at 46 Cdn gas rigs, vs last spring’s bottom of 43 gas rigs on June 1. The ramp up post the break up trough has been very slow, only +79 rigs in the 14 weeks since Cdn rigs bottomed at 61 total rigs. This compares to 2018, where Cdn rigs increased by 130 in the 14 weeks post the 2018 spring bottom. For Cdn oil rigs, they have moved from 17 to 94 oil rigs (+77 oil rigs) in 2019 vs 32 to 140 oil rigs (+108 oil rigs in

Total Cdn rigs +3

this week

US oil rigs were

-6 this week


12

Energy Tidbits

2018. For Cdn gas rigs, in spring break up Cdn gas rigs were at 40, but dropped down to 32 in mid July, and are now at 46 gas rigs in 2019, whereas Cdn gas rigs increased from their spring bottom of 43 to 69 gas rigs (+26 gas rigs) in 2018. Below is our graph of the Baker Hughes weekly Cdn oil rig data.

Figure 10: Baker Hughes Weekly Rig Count, Canadian Oil Rigs

Source: Baker Hughes, SAF

Oil – US oil production up 100,000 b/d to 12.3 mmb/d

EIA reported US oil production was up 100,000 b/d to 12.3 mmb/d for the August 2 week. Lower 48 production was flat at 11.8 mmb/d. These numbers are almost perfectly aligned with the lower August STEO numbers. The new EIA Short Term Energy Outlook forecasted Q3/19 production to average 12.29 mmb/d, which was revised down from the July forecast due to hurricane impact. Below we pasted an excerpt from the EIA weekly oil production data. [LINK]

Figure 11: Weekly Oil Production

Source: EIA

US production

at 12.3 mmb/d

http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCRFPUS2&f=W


13

Energy Tidbits

Figure 12: US Weekly Oil Production

Source: EIA, SAF

Figure 13: YoY Change in US Weekly Oil Production

Source: EIA, SAF

Oil – EIA STEO lowers 2019 oil production due to hurricane interruptions

The EIA new STEO for August [LINK] reduces its estimate for US oil production forecast and and reflects a widening WTI-Brent diffs even with the updated assumptions on pipeline pricing costs to the US Gulf Coast. 2019 US oil production is now +1.28 mmb/d YoY in 2019 at 12.27 mmb/d, revised down 90,000 b/d vs the July forecast. The EIA’s 2020 estimate is unchanged, but the YoY is now +0.90 mmb/d due to the lowering of 2019. The 2019 revision must be due to the hurricane interruptions. The July 2019 STEO lowered the 2019 WTI price forecast $1.71 to $57.87, and 2019 Brent forecast price was lowered $1.36 to $65.15. The EIA is calling for Q3 oil production of 12.29 mmb/d and Q4 at 12.87 mmb/d. Despite 2020 WTI prices being lowered by $3.50, the 2020 oil production forecast remained the same as in the July STEO. Below is our ongoing table showing the EIA’s forecast by forecast month, and the EIA table of price assumptions in the July STEO.

EIA lowers oil

production

forecast for 2019



14

Energy Tidbits

Figure 14: Estimated US Crude Oil Production By Forecast Month

Source: EIA, SAF

Figure 15: EIA WTI, Brent, HH price assumptions by forecast month

Source: EIA, SAF

Oil – Whiting’s Q2 call reminds of the challenge to replace Lower 48 declines

Our July 28, 2019 Energy Tidbits highlighted the Core Labs Q2 call and mgmt’s specific warning “Remember, the decline curve still always wins and never sleeps.” This week, we were reminded of Lower 48 decline rates in the Whiting Q2 call. On Mon, we tweeted [LINK] “Whiting Q2 call slide reminds of challenge to replace Lower 48 declines. Lower 48 is 11.8 mmb/d, 30% decline is 3.5 mmb/d, 25% is 2.95 mmb/d. Ballpark eyeball of Whiting decline rates gives 0.84 mmb/d to replace on 2.4 mmb/d, ~35% decline on 20% of current Lower 48.” Whiting included the below slide showing corporate decline rates. Whiting didn’t provide the exact % decline, but we eyeballed the graph to come up with a rough cut of the amount of decline that needed to be replace. This rough cut estimate was that these producers needed to replace 0.84 mmb/d on a base of 2.4 mmb/d for an approx. overall 35% decline rate on approx. 20% of US Lower 48 production. It really reinforced the challenge to replace decline rates. Below is the Whiting Q2 call slide and our rough estimate based on the Whiting graph.

(million b/d 2017 Q1/18 Q2/18 Q3/18 Q4/18 2018 Q1/19 Q2/19 Q3/19 Q4/19 2019 Q1/20 Q2/20 Q3/20 Q4/20 2020

Aug 2019 - 10.27 10.54 11.25 11.89 10.99 11.81 12.09 12.29 12.87 12.27 13.00 13.17 13.33 13.53 13.26

July 2019 10.23 10.54 11.24 11.81 10.96 11.82 12.19 12.55 12.86 12.36 12.97 13.17 13.34 13.56 13.26

June 2019 10.23 10.54 11.24 11.81 10.96 11.81 12.20 12.44 12.83 12.32 13.05 13.24 13.32 13.44 13.26

May 2019 - 10.23 10.54 11.24 11.81 10.96 11.86 12.35 12.58 13.00 12.45 13.27 13.39 13.42 13.45 13.38

Apr 2019 - 10.23 10.54 11.24 11.81 10.96 11.91 12.36 12.51 12.76 12.39 12.93 13.08 13.07 13.30 13.10

Mar 2019 - 10.23 10.54 11.24 11.77 10.95 11.98 12.30 11.32 12.58 12.30 12.79 12.99 13.03 13.29 13.03

Feb 2019 - 10.23 10.54 11.24 11.79 10.96 12.15 12.41 12.42 12.65 12.41 12.97 13.18 13.20 13.45 13.20

Jan 2019 - 10.23 10.54 11.24 11.70 10.93 11.93 12.07 12.04 12.24 12.07 12.55 12.78 12.89 13.23 12.86

Dec 2018 9.35 10.23 10.54 11.25 11.50 10.88 11.82 12.10 12.10 12.23 12.06 - - - - -

Nov 2018 9.35 10.23 10.54 11.24 11.57 10.90 11.83 12.04 12.05 12.31 12.06 - - - - -

Oct 2018 9.35 10.23 10.54 11.03 11.14 10.74 11.41 11.66 11.78 12.16 11.76 - - - - -

Sept 2018 9.35 10.23 10.53 10.80 11.06 10.66 11.31 11.46 11.45 11.78 11.50 - - - - -

Aug 2018 9.37 10.23 10.54 10.77 11.17 10.68 11.50 11.69 11.68 11.94 11.70 - - - - -

July 2018 9.35 10.24 10.71 10.91 11.29 10.79 11.61 11.78 11.76 12.02 11.80 - - - - -

June 2018 9.35 10.24 10.72 10.88 11.31 10.79 11.64 11.75 11.67 11.97 11.76 - - - - -

WTI Spot Brent Spot HH Spot $/mcf

2018 2019 2020 2018 2019 2020 2018 2019 2020

Aug 2019 $65.06 $57.87 $59.50 $71.19 $65.15 $65.00 $3.27 $2.64 $2.85

July 2019 $65.06 $59.58 $63.00 $71.19 $66.51 $67.00 $3.27 $2.72 $2.87

June 2019 $65.06 $59.29 $63.00 $71.19 $66.69 $67.00 $3.27 $2.88 $2.87

May 2019 $65.06 $62.79 $63.00 $71.19 $69.64 $67.00 $3.27 $2.89 $2.88

Apr 2019 $65.06 $58.80 $58.00 $71.19 $65.15 $62.00 $3.27 $2.92 $2.88

Mar 2019 $65.06 $56.13 $58.00 $71.19 $62.78 $62.00 $3.27 $2.95 $2.91

Feb 2019 $65.06 $54.79 $58.00 $71.19 $61.03 $62.00 $3.27 $2.93 $2.90

Lower 48 decline

rate challenge



15

Energy Tidbits

Figure 16: WLL Lower Decline Provides Competitive Advantage

Source: Whiting

Figure 17: SAF Ballpark Estimate Decline B/d To Replace Based On Whiting Q2 Call Slide

Source: SAF, Whiting, Company Reports

Oil – Haven’t yet seen wider global HSFO/LSFO diffs for IMO 2020 impact WCS diffs

Later in the memo, we note the IEA Oil Market Report and how the IEA notes refiners are already started producing less high sulfur fuel oil (HSFO) as the IMO 2020 deadline approaches. Our SAF Commodities team advises that HSFO bunker access is getting very tight at major ports in Sept, which is driving a big widening in the global HSFO vs LSFO (light sulfur fuel oil) diffs. These global diffs started to widen in July. That impact hasn’t flowed thru yet to Cdn heavy oil diffs that are still in the US$12 range. Below are current HSFO/LSFO

Ballpark Est Corporate Decline

Producer Symbol Last QT Oil mb/d % Mb/d

High Point Resources HPR Q2 19,400 48% 9,312

Extraction Oil & Gas XOG Q1 39,800 48% 19,104

Centennial CDEV Q1 40,500 48% 19,440

Jagged Peak Energy JAG Q1 28,200 45% 12,690

EOG Resources EOG Q2 454,900 42% 191,058

PDC Energy PDCE Q1 50,300 42% 21,126

SM Energy SM Q1 60,000 41% 24,600

Cimarex XEC Q1 79,400 38% 30,172

Apache APA Q2 100,000 37% 37,000

Parsley Energy PE Q1 106,000 36% 38,160

Pioneer PXD Q1 273,000 35% 95,550

Continental Resources CLR Q1 194,000 34% 65,960

Chesapeake CLK Q1 109,000 33% 35,970

Oasis Petroleum OAS Q1 66,000 32% 21,120

Concho Resources CXO Q2 206,000 31% 63,860

Whiting Petroleum WLL Q2 104,000 31% 32,240

Noble Energy NBL Q2 117,000 31% 36,270

Anadarko APC Q2 207,000 26% 53,820

Devon DVN Q1 138,000 23% 31,740

2,392,500 839,192Notes :

1. Please note these are approximate or ba l lpark only, did not have actual decl ine rates in Whiting table

2. Approximate or ba l lpark decl ine rates based on Whiting Q2 ca l l s l ide

3. Represents about 20% of current Lower 48 US l iquids produciton of 11.8 mmb/d

4. Most are US onshore crude oi l only, a few are l iquids in tota l

5. Excl GoM

6. Excludes Cabot, Range and Southwestern as a l l are predominately natura l gas

WCS diffs stay in

$12 range


16

Energy Tidbits

Singapore diffs that shows a widening in July when most years HSFO/LSFO diffs narrow in Q3, and the current WCS/WTI diffs.

Figure 18: HSFO vs LSFO Diff Singapore

Source: Bloomberg

Figure 19: WCS/WTI Diff

Source: Bloomberg

Oil – Rising gas/oil ratio in AB is age related, not higher IP GORs as worried in US

Q2 reporting season is almost over. In the US, it has seen a focus on the big variance in key tight/shale oil play well results. On the negative US tight/shale oil plays, the focus has been driven by parent/child issues and how that impacts water/oil ratios, gas/oil ratios, rate and EUR, in particular how high the water/oil and gas/oil ratios are in the early production. Whereas in Canada, it has been mostly uneventful for the well performance side. I had an interesting natural gas takeaway from Todd Kepler (Laurentian Managing Director Oil & Gas Research). And one that highlighted the difference to the US tight oil plays. All oil wells with associated natural gas will show increasing gas/oil ratios as the wells mature. In Canada, an increasing gas/oil ratio are due to the maturity of the wells and Cdn oil players not really drilling for growth. Whereas we are seeing in the US the higher gas/oil ratio some of the new tight oil plays because they are finding the zone to be initially gassier than expected. Todd highlighted “A notable takeaway from Q2 reporting so far has been the number of Alberta oil producers that have shown rising gas production. We believe this situation represents collateral damage from the Alberta government oil production curtailments. The reasoning is as follows: AB producers are dis-incentivized to grown oil production while the curtailments

Slightly

increasing

gas/oil ratio in

Alberta


17

Energy Tidbits

are in place, as such the drilling activity is more maintenance than growth. But overall, it has been insufficient to offset existing wells’ rising gas-oil ratios as they mature. It is this rising GOR issue that is driving higher gas weighting in Q2 numbers (BOE production targets are being met, but with slippage in liquids weighting). We need to emphasize that this is a short term issue that will be corrected once the curtailments are lifted, but on a macro level, the rising associated gas is contributing to an already over-supplied gas market in AB. Despite the number of drier gas well shut-ins that have been announced in response to weak western Canadian gas prices, AB production levels (as measured by NGTL field receipts) has remained fairly flat in the 11-12 bcf/d range. We believe this is due to oil well associated gas increases offsetting gas well shut-ins. It will be interesting to see what action the AB government implements to assist gas producers facing low AECO pricing (royalty breaks have been proposed). Will it have the desired effect on prices knowing that rising associated gas is partially offsetting any pure gas well curtailments?”

Oil – Oil input into refineries up 786,000 b/d to 17.777 mmb/d

For the reported August 2 week, crude oil inputs to refineries were up big, with a 786,000 b/d increase to 17.777 mmb/d for the August 2 week. Crude oil inputs are now higher YoY, with refineries coming back online post the heavy maintenance season in preparation for IMO 2020 and any halts during the hurricane. Crude oil inputs should still go higher in Aug. Refinery utilization was up by 3.4% this week at 96.4%. Below is our graph of the EIA weekly crude oil input to refineries.

Figure 20: US Refinery Crude Oil Inputs (thousand b/d)

Source: EIA, SAF

Oil – US “NET” oil imports up 1.194 mmb/d to 5.283 mmb/d

US “NET” imports were up this week, with a 1.194 mmb/d increase to 5.283 mmb/d. US imports were up 485,000 b/d to 7.148 mmb/d. US exports were down 709,000 b/d to 1.865 mmb/d. (i) Canada was up 265,000 b/d to 3.728 mmb/d for the August 2 week, which is in line with PADD II imports being up 305,000 b/d with Canada being basically all of this market. (ii) Saudi Arabia was down big 142,000 b/d to 277,000 b/d for the August 2 week. The EIA data goes back to 2010, and 277,000 b/d is the lowest level of US imports from Saudi Arabia on record. (iii) Colombia was -115,000 b/d to 235,000 b/d, which is right below average YTD imports from Colombia (iv) Iraq was -225,000 b/d to 199,000 b/d. (v) Venezuela remained at 0 due to US sanctions. (vi) Mexico was +67,000 b/d to 737,000 b/d this week. Below is our table of the US oil imports by major country.

Oil input into

refineries up

786,000 b/d

US NET oil

imports up 1.194

mmb/d


18

Energy Tidbits

Figure 21: US Weekly Preliminary Oil Imports By Major Countries

Source: EIA, SAF

Oil – Trump tries to re-energize Maduro regime change momentum with full sanctions

On Tues morning, we tweeted [LINK] “Trump pulls out big gun to drive Maduro regime change. WSJ “Trump administration imposed a total economic embargo” vs Maduro govt. Executive order not yet posted, potentially huge. Not just oil shipments, what happens to CITGO dealings? PDVSA, Venezuela debt holders? ....” and [LINK] “.... be interesting if Maduro can hang onto power. Venezuela move to Iran, North Korea level despite no nuclear threat. Not many plays left if further action needed. what is left? physical embargo? direct action? should help support heavy oil diffs moving into winter.” The move was a bit of a surprise that Trump escalated to the same level as Iran and North Korea, but the movement for regime change has been stalled. The issue will be what happens if Maduro can keep hanging on to power. This isn’t a nuclear threat situation. It just seems hard to believe the US going to war and sending troops in to Venezuela to force regime change. Our view remains that the longer Maduro can hang on to power, it will help provide support to heavy oil prices, which is needed as IMO 2020 starts to kick in.

Oil – IEA OMR lowers demand forecast, OPEC cuts needed thru 2020

The IEA published its monthly Oil Market Report on Friday morning. They only release very limited public info, but, fortunately, the Bloomberg terminal provides the key data tables and a number of insights in its IEA OMR wrap. (i) Overall, the message from the oil supply/demand outlook is negative for oil as the oil supply/demand outlook means OPEC+ will need to continue cuts thru 2020 (not end at March 31, 2020) if it wants to maintain oil price stability in 2020. World demand is forecasted to be +1.3 mmb/d YoY in 2020, but non-OPEC oil supply should be +2.2 mmb/d. That is absent a major supply disruption. (ii) Oil demand growth lowered by 100,000 b/d in 2019 to +1.1 mmb/d YoY, and by 50,000 b/d in 2020 to +1.3 mmb/d YoY. We were surprised it wasn’t lowered further although the IEA said, “the outlook is fragile with a greater likelihood of a downward revision than an upward one”. Unfortunately, there was limited public detail, but the IEA said January to May demand was way less than expected. The IEA also said “Oil demand growth estimates have already been cut back sharply: in 1H19, we saw an increase of only 0.6 mb/d, with China the sole source of significant growth at 0.5 mb/d. Two other major markets, India and the United States, both saw demand rise by only 0.1 mb/d.” IEA is forecasting the normal seasonal big pickup in demand in Q3 vs Q2, as this happens every year. IEA forecasts Q3/19 demand +1.6 mmb/d to 101.3 mmb/d, up from 99.7 mmb/d in Q2/19. Note for 2020, the forecasted Q3/20 demand is +1.7 mmb/d vs Q2/20. (iii) There was nothing in IEA release on oil stocks at June 30, the only thing we saw was a Bloomberg headline “OECD stocks rose 32M bbl in June to 67M bbl above 5-yr Ave: IEA”. If so, that is a massive increase in the surplus to the 5-yr average, which was 6.7 mmb at May 31.” If this is right, this is a big negative to oil and will reflect the

June 7/19 June 14/19 June 21/19 June 28/19 July 5/19 July 12/19 July 19/19 July 26/19 August 2/19 WoW

Canada 3,683 3,688 3,219 3,642 3,945 3,535 3,725 3,463 3,728 265

Saudi Arabia 425 437 565 681 501 435 466 419 277 -142

Venezuela 0 0 0 0 0 0 0 0 0 0

Mexico 874 556 462 445 515 809 488 670 737 67

Colombia 431 192 372 409 406 297 341 350 235 -115

Iraq 441 345 247 365 362 342 357 424 199 -225

Ecuador 21 221 89 288 130 110 184 191 256 65

Nigeria 334 333 160 259 0 240 308 167 282 115

Kuwait 110 0 0 0 0 0 0 0 88 88

Angola 0 0 0 0 0 0 0 0 0 0

Top 10 6,319 5,772 5,114 6,089 5,859 5,768 5,869 5,684 5,802 118

Others 1,292 1,695 1,542 1,496 1,443 1,064 1,159 979 1,346 367

Total US 7,611 7,467 6,656 7,585 7,302 6,832 7,028 6,663 7,148 485

IEA OMR

continued

negative outlook

for 2020

US moves

Venezuela to Iran

sanctions level




19

Energy Tidbits

increasing demand drop fears, another downward revision to demand seems likely next month. (iv) There has been a massive increase in floating storage, mostly attributed to Iran barrels. Bloomberg notes “July Short-Term Floating Oil Storage Surges to 23-Mo. High: IEA” “Short-term floating storage of crude oil rose by 31.9m bbl in July, led by a surge in volumes in the Middle East, notably Iran, IEA says in monthly Oil Market Report. * Crude storage on water rose to 55.9m bbl in July, highest since August 2017, IEA says, citing EA Gibson data * Middle Eastern figures rose by 29.8m bbl to 49.8m bbl, mainly due to increased volumes held by Iran, while storage in the Mediterranean rose by 2.1m bbl”.(v) The biggest changes in OPEC were Saudi Arabia’s July production being down 120,000 to 9.650 mmb/d. Saudi is also 661,000 b/d below their quota of 10.311 mmb/d. This week, Saudi has been signaling they will be keeping production below 9.7 mmb/d for Sept. Given their signaling this week that they will deal with oil markets, Saudis will likely put pressure on Iraq to comply with cuts since Iraq is currently the biggest cheater. Iraq July production was +60,000 b/d MoM to 4.780 mmb/d, which is 268,000 b/d above quota. Nigeria was 65,000 b/d above quota. (vi) The Non-OPEC oil supply growth forecast was lowered by 0.1 mmb/d to +1.9 mmb/d YoY in 2019 but raised by 0.1 mmb/d to +2.2 mmb/d YoY in 2020. Unfortunately, there is almost zero commentary on Non-OPEC supply growth. Given the overall negative tone of the report, OPEC+ cuts will very likely need to be extended past March 31/2020 through the whole year if prices are to remain steady. (vii) Bloomberg “Refiners produced less high-sulfur fuel oil as the IMO 2020 deadline draws nearer, contributing to a margin spike in Singapore last month, according to the IEA’s monthly Oil Market Report”. Below is our table showing IEA OPEC July oil production vs quota. Our Supplemental Documents package includes the IEA OMR release and Bloomberg terminal tables/stories.

Figure 22: IEA OMR OPEC July 2019 Production Vs Quota Cut Levels

Source: IEA, SAF

Oil – 4 day ceasefire around Tripoli due to major Islamic holiday

We expect that we should see a bit of a fighting reprieve in some of the key Middle East/North Africa regions for the next four days. A major Islamic holiday leads to a 4 day ceasefire in Libya. Yesterday, it was announced that both the Tripoli based govt and Haftar’s forces agreed to a 4 day ceasefire during the Eid al-Adha Islamic holiday. It is supposed to run Sun Aug 11 evening and ending Thurs Aug 15 evening. Wikipedia describes it as ““Eid al-Adha (Arabic: عععععع ععع , romanized: ʿīd al-ʾaḍḥā, lit. 'Feast of the Sacrifice', IPA:

OPEC

(thousand bpd)

Reference

Production

Voluntary

Adjustment

Voluntary

Production

Level

IEA OMR For

July 2019

July Less

Quota

IEA OMR For

June 2019 July Less June

Algeria 1,057 -32 1,025 1,030 5 1,010 20

Angola 1,528 -47 1,481 1,400 -81 1,400 0

Congo 325 -10 315 340 25 350 -10

Ecuador 524 -16 508 540 32 530 10

Eqauatorial Guinea 127 -4 123 120 -3 110 10

Gabon 187 -6 181 200 19 220 -20

Iraq 4,653 -141 4,512 4,780 268 4,720 60

Kuwait 2,809 -85 2,724 2,690 -34 2,680 10

Nigeria 1,738 -53 1,685 1,750 65 1,770 -20

Saudi Arabia 10,633 -322 10,311 9,650 -661 9,770 -120

UAE 3,168 -96 3,072 3,070 -2 3,050 20

OPEC Quota 26,749 -812 25,937 25,570 -367 25,610 -40

Iran 2,230 2,280 -50

Libya 1,100 1,130 -30

Venezuela 810 870 -60

Total OPEC 29,710 29,890 -180

Note: Totals may not add due to rounding Note: Bloomberg shows rounded total 29,900

4 day ceasefire

in Tripoli


20

Energy Tidbits

[ʕiːd ælˈʔɑdˤħæː]) or Eid Qurban(Persian: ععععع ععع ), also called the "Festival of the Sacrifice", is the second of two Islamic holidays celebrated worldwide each year (the other being Eid al-Fitr), and considered the holier of the two. It honours the willingness of Ibrahim (Abraham) to sacrifice his son as an act of obedience to God's command. But, before Abraham could sacrifice his son, God provided a lamb to sacrifice instead. In commemoration of this intervention, an animal is sacrificed and divided into three parts. One share is given to the poor and needy, another is kept for home, and the third is given to relatives.”.

Oil – Excellent report on Iran’s threat to Saudi critical infrastructure

On Mon, we tweeted [LINK] “Must read CSIS “Iran’s Threat to Saudi Critical Infrastructure” report. Missile risk to oil/gas, desalinization, electricity grid, cyber on SCADA. US/Saudi should focus on deterring Iran escalation, but may be impossible to stop cyber and Houthis.” A few items to note: (i) It includes some excellent tidbits and satellite pics. (ii) All of Saudi, incl all of Saudi’s oil and gas assts, is threatened by Iranian missiles – this should not surprise anyone. CSIS says ““All of Saudi Arabia is threatened by Iranian missiles, and the number of Iranian missiles capable of reaching the country would overwhelm virtually any missile defense system”. (iii) They note Houthis ability to “assemble” missiles. They don’t say Houthis can reach all of Saudi oil and gas, but they note in the report that Houthis have hit the pumping stations on the East-West pipeline, also Riyadh. They say “other targets in Saudi Arabia”, but don’t mention Dammam, Dammam is the area that is all of the most significant Saudi oil infra such as Abqaiq and Ras Tanura export port. CSIS notes the Yemens can assemble missiles, “The Houthis have also used Borkan-2H mobile, short-range ballistic missiles to strike Riyadh and other targets in Saudi Arabia”. (iv) CSIS also notes Houthis are a key wildcard risk to Saudi Arabia. (v) Good reminder is that CSIS reminds that the Iran risk is also to Saudi Arabia’s desalination plants. Ie. the world’s largest desalination plant is “Ras al-Khair, located on the Persian Gulf coast of Saudi Arabia just north of Jubail. The plant was commissioned in 2014 and has a daily production capacity of 1.025 million cubic meters of desalinated water.57 The majority of the water produced (some 800 cubic meters per day) goes directly to Riyadh, while the other 200 cubic meters is distributed to Figure 5: Ras Tanura Oil Terminal – Offshore Loading”. (vi) Linked risk to electrical grid because oil is input for nearly 2/3 of Saudi electricity generation. CSIS said “Beyond the problems caused by the infrastructure itself, Saudi Arabia’s electrical grid offers at least four potential vulnerabilities in the event of an Iranian attack. First, a successful attack on the oil and gas sector could also impact the electrical grid. Due to its significant oil reserves and heavily subsidized domestic oil prices, Saudi Arabia is largely dependent on hydrocarbons as fuel for the electricity sector. Crude oil is used as the input in nearly two-thirds of electricity generation, and natural gas serves as fuel for most of the remaining portion.” (vii) SCADA (Supervisory Control and Data Acquisition) systems risk. This is the primary risk for cyber attacks as SCADA is critical for electrical, pipelines, power transmission, water distribution systems, etc. And CSIS notes some of the prior cyber attacks on SCADA systems. (viii) Focus should be on deterrence but there are wildcards with the biggest risks being Iran cyber and the Houthis. CSIS writes “The challenge, however, is that it will be difficult—and perhaps impossible—to deter Iran from some types of offensive cyber operations and irregular attacks from partners, such as the Houthis. This is the nature of irregular warfare.” (ix) Good Abqaiq recap and satellite photo. (x) Good recap of Ras Tanura loading terminal and excellent satellite pics. (xi) Recap of Yanbu on the Red Sea, but no satellite pic. We couldn’t attach excerpts from the CSIS report [LINK], but we recommend downloading to reference libraries.

Iran’s threat to

Saudi

infrastructure


https://csis-prod.s3.amazonaws.com/s3fs-public/publication/Jones_IransThreatSaudi_layout_v8.pdf


21

Energy Tidbits

Figure 23: Map of Iran Missile Ranges

Source: CSIS

Oil – Saudi says considering all options to support oil markets

Oil rallied on Thurs mostly on the reports from unnamed Saudi officials that Saudi was considering all options to halt the slide in oil. Bloomberg terminal reported the significance “Sometimes it can feel like your world is coming apart. In Saudi Arabia’s case, that is unfortunately somewhat true. Which is presumably why reports the country is considering all options to halt the slide in oil prices have bubbled to the surface over the past 24 hours. This isn’t the first time Saudi Arabia has deployed the whatever-it-takes weapon to beat back the bears. In May 2017, energy minister Khalid Al-Falih used that exact phrase when Brent crude had slipped below $50 a barrel. It sparked a brief rally, followed by a brief dip again, that ultimately segued into a sustained march toward $86 by the fall of 2018.” Our Supplemental Documents package includes Bloomberg terminal story “Saudi ‘Whatever It Takes' Hits Oil's ‘Whatever’: Liam Denning”

Oil – Expect pressure on Iraq and Nigeria to finally comply to quota

It now looks like we know the agenda for the next OPEC+ JMMC (Joint Ministerial Monitoring Committee) meeting on Sept 12 in Abu Dhabi. The JMMC is the committee that reviews oil markets and makes the recommendations to the OPEC+ ministers. And with the Saudis saying they are considering all options, we have to believe this will set the tone for the JMMC meeting views and potential actions. And that one of the obvious actions is that there will be increased pressure on the cheaters, in particular Iraq and Nigeria, to comply with quota.

Oil – Saudi Aramco IPO reportedly back on front burner, H1/19 call tomorrow

We expect the market strong response to the reports that Saudi Arabia is considering all options to support the oil market were also supported by the other emerging story that the Saudi Aramco IPO plans were being revived. The thesis being that Saudi Arabia will want to seriously deal with oil markets to support a high valuation for Saudi Aramco. We can’t disagree with that logic, but we think there are may be other reasons for the oil market support. Tomorrow (9am MT) Saudi Aramco will be having its Half Year 2019 results webcast [LINK], which we expect will be a well viewed/listened to event. Our Supplemental Documents package includes the WSJ IPO story.

Saudi Aramco H1

call tomorrow

Saudi reportedly

considering all

options

JMMC meeting

is Sept 12

https://webcast.openbriefing.com/5366/player/index.php?player_id=30282


22

Energy Tidbits

Oil – An eventful week in Yemen, was July a turning point for Houthis fight?

Interesting week (and crazy last 24 hours) in Yemen on a number of fronts, in particular how the fiercest fighting wasn’t against the Houthis, rather it was the southern Yemen partners fighting and killing each other and then today Saudi coalition reportedly air strike against the southern separatists in Aden. It doesn’t mean there isn’t a big civil war with the Houthis to unite all of Yemen, it looks like there may be another smaller civil war within South Yemen to unite or lead all of South Yemen. We tried to summarize the significance of the past week and month Houthi events in our tweets on Sat morning tweets [LINK] “Increasing fighting southern Yemen separatists vs Yemen govt forces (two Saudi/UAE coalition backed partners fighting the Houthis). Was July a turning point in Houthis fight? Did the UAE troop redeployment create an on the ground coaltion leadership void in south Yemen ...” and [LINK] “… who kept the partners focused on fighting the Houthis? Is this a squabble or the start of a partners fight to see who leads South Yemen? UAE troop deployment, partner fighting, increasing Houthi drone/missile capability, was July the turning point for the Houthis?”, and then our tweet earlier this morning [LINK] “Last 24 hrs. Separatists take more Yemen govt positions in Aden, Saudi calls f/ urgent talks/ceasefire, parties onside, separatists then say won't negotiate under threat, today Saudi reported air strike on separatist target in Aden. Was July turning point for the Houthis?” As of 6am MT this morning, the estimate it that 40 dead and 260 injured in the Aden fighting this week. It was really the last 24 hours that seem to have taken the Yemen partner fighting to new levels. The separatists took over more Yemen govt positions, the Saudis calling for an urgent meeting between the separatists and Yemen govt, both parties reportedly agreeing to a lowering of the fighting, then the separatists saying they won’t negotiate under threat, and then the news early this morning reportedly of a Saudi air strike against a separatist target in Aden. Absent a quick de-escalation and an agreement to go back to focusing on the Houthis, it seems like these parties are more interested in fighting to see who will lead South Yemen. We don’t think it is a coincidence that this happened post the UAE July decision to redeploy its troops from Yemen to the Gulf Coast. Our July 8 tweet [LINK] noted the UAE troop redeployment and highlighted this “Interesting change in Saudi coalition military capability? UAE reducing troops as it moves from “military-first strategy to a peace first strategy” in Yemen. UAE has been the lead in coalition ground troops/attack”. We have to believe the removal of the boots on the ground UAE position may have signaled the July start to a turning point in the Houthi fight. On July 10, we tweeted [LINK] “Will UAE’s “peace first”/troop withdraw lead to pre 1990 North/South Yemen split and a UAE backed South. Does Saudi stop fighting, or is Saudi left facing a Houthi North and continued fighting/geopolitical risk premium? Interesting year ahead.” We think that the year ahead holds additional options for what may lie ahead in the next year. Our Supplemental Documents package includes yesterday and today reports of the partner fighting.

Eventful week in

Yemen, mostly

not involving the

Houthis







23

Energy Tidbits

Figure 24: Prior North vs South Yemen Boundary

Source: althistory.fandom.com

Oil – Expect more Houthi drone/missile attacks post Eid al-Adha Islamic holiday

On Fri, the Houthis announced that its leader’s brother, Ibrahim Badreddin al-Houth, was assassinated by Saudi/UAE coalition. Al Jazeera reported [LINK] “Yemen's Houthi rebel movement has said the brother of their leader has been killed by the Saudi-UAE-led coalition they have been battling since 2015. The announcement by the Houthi-run Ministry of Interior in the capital, Sanaa, was posted on Friday on the group's official Al Masirah website. "The treacherous hands affiliated with the US-Israeli aggression and its tools assassinated Ibrahim Badreddin al-Houthi," it said, citing the ministry's statement.” The Houthis, as we expected, were quick to resume their drone/missile attacks in SW Saudi Arabia and we won’t be surprised to see an acceleration ost the Eid al-Adha Islamic holiday. The biggest question will be if the killing will trigger a longer range drone/missile attack?

Oil – No surprise, air cargo oil demand indicator stays weak

On Wed, the IATA (International Air Transport Association) posted its June “Air Freight Market Analysis”, which is another leading indicator for a slowing global economy. For some reason, the global air freight data hasn’t seemed to get much attention in what it says about global economy. IATA said June “global air freight markets showing that demand, measured in freight tonne kilometers (FTKs), decreased by 4.8% in June 2019, compared to the same period in 2018. This marks the eighth consecutive month of year-on-year decline in freight volumes.” “Capacity growth remains subdued and the cargo load factor continues to fall. Globally, trade growth is languishing, and business uncertainty is compounded by the latest tariff increases in the US-China trade dispute.” The IATA notes a cloudy outlook, “We noted last month that there were tentative indications of a thawing in trade relations between the US and China; recent developments have, however, cast renewed doubt over this. The risk of further deterioration in global trade remains a key risk to the outlook for air cargo.” Our Supplemental Documents package includes the IATA June analysis. [LINK]

Global air cargo

remains weak

Brother of

Houthi leader is

killed

https://www.aljazeera.com/news/2019/08/houthis-saudi-uae-led-coalition-killed-leader-brother-190809104415884.html

https://www.iata.org/publications/economics/Reports/freight-monthly-analysis/freight-analysis-jun-2019.pdf


24

Energy Tidbits

Figure 25: IATA Freight Tonne Kilometers Levels, Actual And Seasonally Adjusted

Source: IATA

Oil & Natural Gas – Less El Nino probability raises end of season hurricane risk

We hadn’t planned to talk about the new El Nino forecast and summer as we are in August, but the new El Nino outlooks that call for a weakening of the El Nino conditions in Aug thru Oct caught our eye as this is peak hurricane period. The NOAA outlook above shows a big weakening of El Nino conditions in Aug thru Oct and now the strong expectation of Neutral conditions. The forecast is 67% neutral conditions and down to 28% for El Nino conditions in Aug, Sept, Oct. Neutral years tend to be high hurricane years. The Weather Channel had the below graph in a Aug 2018 story [LINK]

Figure 26: Atlantic Hurricane Activity El Nino vs Neutral vs La Nina

Source: Weather Channel

Just about to move into peak Atlantic hurricane season Aug 20 thru Oct 10 Our prior Energy Tidbits have noted before how peak Atlantic hurricane season is in the Aug/Sept/Oct. Last year, the Weather Channel had a good graphic (see below) and wrote [LINK] “Historically speaking, September has recorded the most Atlantic hurricane formations since 1851 with 404. That's an average of two or three forming

https://weather.com/storms/hurricane/news/2019-07-12-el-nino-weakening-enso-neutral-busier-atlantic-hurricane-season

https://weather.com/storms/hurricane/news/2018-08-27-tropical-atlantic-about-to-wake-up-september-peak-hurricane-season


25

Energy Tidbits

in the month every year, according to NOAA. August ranks second with 245 hurricanes, and October ranks third with 205. The period between Aug. 20 and Oct. 10 accounts for 60 percent of all Atlantic Basin hurricanes and 75 percent of all major hurricanes (Category 3 or stronger) in that basin, according to Dr. Phil Klotzbach, a tropical scientist at Colorado State University.”

Figure 27: Atlantic Peak Hurricane Season

Source: Weather Channel

Whereas El Nino years tend low Atlantic hurricane years As noted in the Weather Channel graph, El Nino years tend to be low Atlantic hurricane years. Our prior Energy Tidbits over the years said “The hurricane forecasters note that warm El Nino years tend to have less hurricane activity in the Atlantic and Gulf of Mexico, but typically more hurricane activity in the Pacific. The primary explanation for the decline in hurricane frequency during El Niño years is due to the increased wind shear in the environment. It is commonly explained that “In El Niño years, the wind patterns are aligned in such a way that the vertical wind shear is increased over the Caribbean and Atlantic. The increased wind shear helps to prevent tropical disturbances from developing into hurricanes. In the eastern Pacific, the wind patterns are altered in such a way to reduce the wind shear in the atmosphere, contributing to more storms”. This is the common explanation, and we referenced the University of Illinois’s description because they also had a good simple graphic (see below). We double checked the link this week, and it is still active, the University of Illinois explanation is found at [LINK]

Figure 28: El Nino Wind Shear Impact On Atlantic Hurricanes

Source: University of Illinois

NOAA increases

chance for

above-normal

hurricane season

http://ww2010.atmos.uiuc.edu/(Gh)/guides/mtr/hurr/enso.rxml


26

Energy Tidbits

Oil & Natural Gas – Updated NOAA and Klotzbach hurricane forecasts

As noted above, we just now moving into the peak period for Atlantic hurricane activity and the expectation for end of summer to be more neutral and not El Nino conditions means there is increasing potential for hurricanes. We put the summer hurricane commentary in oil and natural gas section because of the increasing Gulf Coast oil and LNG exports. ie. increasing infrastructure for both oil and natural gas. This week, we saw updated Atlantic hurricane forecasts by NOAA and Klotzbach et al.

NOAA calls for above average hurricane activity NOAA’s updated hurricane forecast calls for above normal hurricane season. NOAA says “NOAA forecasters monitoring oceanic and atmospheric patterns say conditions are now more favorable for above-normal hurricane activity since El Nino has now ended. Two named storms have formed so far this year and the peak months of the hurricane season, August through October, are now underway… Seasonal forecasters with NOAA’s Climate Prediction Center have increased the likelihood of an above-normal Atlantic hurricane season to 45% (up from 30% from the outlook issued in May)”. Our Supplemental Documents package includes the NOAA hurricane forecast. [LINK]

Figure 29: NOAA Atlantic Hurricane Season Outlook

Source: NOAA

Klotzbach et al call for near-normal Atlantic hurricane activity Kotzbach et al (Colorado State University) issued their updated Atlantic hurricane forecast that was slightly increased. Klotzbach said “We continue to predict a near-normal 2019 Atlantic hurricane season. The forecast number of hurricanes has increased slightly to account for short-lived Hurricane Barry which formed in July. Sea surface temperatures in the tropical Atlantic remain near average.” It was interesting to see them specifically address the lessening El Nino temperatures and the wind shear factor noted above. They said “While the odds of a weak El Niño persisting through August-October have decreased, vertical wind shear in the Caribbean remains relatively high.” Their table splitting showing their forecast of hurricane activity post July 31 really reminds that we are just moving now into peak hurricane season. Our Supplemental Documents package includes excerpts from the Klotzbach et al forecast. [LINK]

https://www.noaa.gov/media-release/noaa-increases-chance-for-above-normal-hurricane-season

https://tropical.colostate.edu/media/sites/111/2019/08/2019-08.pdf


27

Energy Tidbits

Figure 30: Atlantic Basin Seasonal Hurricane Forecast For 2019

Source: Colorado State University

Oil and Natural Gas – EPA proposes moves to help increase pipelines

This week, the EPA announced [LINK] it had issued “a proposed rule to implement Section 401 of the Clean Water Act (CWA).” Reuters had a good explanation of the implications. Reuters wrote “The Trump administration on Friday unveiled a proposal that would curb state powers to block pipelines and other energy projects, part of the Trump administration’s effort to boost domestic oil, gas and coal development” “ “The EPA's proposal is centered on changes to Section 401 of the Clean Water Act, which allows states and tribes to block energy projects on environmental grounds, it said www.epa.gov/cwa-401. In its 163-page proposal, the EPA said a section 401 review “must be limited to considerations of water quality.” Trump and EPA chief Andrew Wheeler have accused some states of denying permits for reasons that go beyond water protection such as climate change impacts. The proposal says a state or authorized tribe must act on a section 401 certification request “within a reasonable period of time, which shall not exceed one year” in an effort to speed up the permitting process.” Our Supplemental Documents package includes the Reuters story [LINK].

Canada gas exports should be impacted if gas pipelines can get done in NY The proposal still has to get enacted and then the test will come if it helps pipelines get over the hump in areas like New York. But if natural gas pipeline capacity can be expanded in New York state, then we have to believe it will impact Cdn natural gas pipeline exports to New York state. The story of the Marcellus has been to wipe out Cdn natural gas exports to almost all of New York, or basically all areas that Marcellus can somehow reach. Below we pasted the EIA Cdn natural gas import graphs for two entry ports in New York. Niagara Falls that was ~1 bcf/d in 2007 and was down to zero by 2012. Waddington in upstate New York that was >1.1 bcf/d in 2007, but has been relatively flat at around 0.5 bcf/d since 2014. We have to believe any increased capacity within New York state would ultimately wipe out Cdn gas imports at Waddington, just like happened at Niagara Falls.

EPA proposal will

help pipelines

https://www.epa.gov/newsreleases/administrator-wheeler-issues-proposed-rule-clean-water-act-quality-certification

http://www.epa.gov/cwa-401

https://www.reuters.com/article/us-usa-epa-energy/trump-administration-moves-to-limit-state-powers-to-block-pipelines-terminals-idUSKCN1UZ1QV


28

Energy Tidbits

Figure 31: Niagara Falls,NY Natural Gas Pipeline Imports From Canada

Source: EIA Figure 32 Waddington, NY Natural Gas Pipeline Imports From Canada

Source: EIA

Clean Energy – Gates reminds why natural gas is needed for clean energy transition

On Wed, we tweeted [LINK] on Bill Gates latest blog “The hidden costs of unreliable electricity” [LINK] on the challenge for the “nearly 1 billion people who live in energy poverty” “to have access to cheap, reliable energy”. Gates notes that “The good news is that, since 2016, the number of people living without reliable electricity has dropped by more than 200 million. That’s two hundred million more people who can now study after sundown, use electronic appliances, and charge their phones at home”. Gates specifically says that innovation is needed get clean energy to the stage needed to provide cheap, reliable energy for the nearly 1 billion poor people. He doesn’t specifically identify natural gas as the key fossil fuel for the transition to clean energy, but we think it is fair to assume that Gates wasn’t referring to coal or oil as the key fossil fuel. Gates said “The problem is that many of today’s low carbon energy technologies aren’t a viable alternative yet. While deploying wind and solar in many places around the world is going to be hugely important for tackling climate change, we need innovation in things like storage to make them realistic solutions for the world’s poorest. Plus, many people experiencing energy poverty live in areas without access to the kind of grids that are needed to make those technologies cheap and reliable enough to replace fossil fuels.” Our Supplemental Documents package includes the Gates blog.

Cyber – Iran suspected of hacking Bahrain water infrastructure

In the CSIS Iran threats item above, CSIS highlighted Iran’s cyber attacks as one of the biggest challenges for the Saudis to protect on their infrastructure including their desalination water infrastructure. CSIS wrote “The challenge, however, is that it will be difficult—and perhaps impossible—to deter Iran from some types of offensive cyber operations and irregular attacks from partners, such as the Houthis. This is the nature of irregular warfare.”

Fossil fuels still

needed for clear

energy transition

Iran suspected

hacking of

Bahrain water

infrastructure


https://www.gatesnotes.com/Energy/The-hidden-costs-of-unreliable-electricity?WT.mc_id=20190807165743_Life-in-the-Dark_BG-TW&WT.tsrc=BGTW&linkId=71688962


29

Energy Tidbits

This week, there was an excellent example of this key Iran cyber risk. On Thurs, we tweeted [LINK] on the WSJ story “Suspected Iranian Hackers Hit Bahrain – WSJ” posted on the Bloomberg terminal. WSJ reports of suspected Iran hacks on Bahrain in multiple areas including “On July 25, Bahrain authorities identified intrusions into its Electricity and Water Authority. The hackers shut down several systems in what the authorities believed was a test run of Iran's capability to disrupt the country, the person said. "They had command and control of some of the systems," the person said”: Our Supplemental Documents package includes the WSJ story as posted on the Bloomberg terminal.

Cyber – UK says it wasn’t cyber that caused the massive UK blackout

One of the big global power stories was the UK blackout that impacted ~1 million customers in England and Wales. The official explanation was that the blackout was caused by a natural gas generation facility (at Little Barford, Bedfordshire in east central England) followed 2 minutes later by an offshore wind farm going off line. This was on Thurs and the there were still many questions on the causes as of our cutoff this morning. The UK also said it wasn’t due to a cyber attack. Yesterday, the BBC reported [LINK] “But director of operations Duncan Burt told the BBC that its systems "worked well" after the "incredibly rare event" of two power stations disconnecting. He said he did not believe that a cyber-attack or unpredictable wind power generation was to blame”. We don’t mean to be a skeptic, but we regularly wonder how many times cyber attacks are acknowledged? The only reason we wonder is that if it was a cyber attack, is it one big warning? Figure 33: England and Wales Power Cut: Customers Affected in Each Electricity Supply Area

Source: BBC

Energy Tidbits – Now on Twitter

Thanks to Eric Nuttall for bringing many of his followers to our Twitter. Eric has been a great resource to me over the past >15 yrs, being able to bounce ideas/views off him to get direct comments that inevitably lead me to tweak or even shift my views to make them better. For new followers to our Twitter, we are trying to tweet on breaking news or early views on

UK says cyber

didn’t cause

blackout

Energy Tidbits now

on Twitter


https://www.bbc.com/news/uk-49302996


30

Energy Tidbits

energy items, most of which are followed up in detail in the Energy Tidbits memo or in separate blogs. Our Twitter handle is @Energy_Tidbits and can be followed at [LINK]. We wanted to use Energy Tidbits in our name since I have been writing Energy Tidbits memos for over 19 consecutive years. Please take a look thru our tweets and you can see we aren’t just retweeting other tweets. Rather we are trying to use Twitter for early views on energy items. Our Supplemental Documents package includes our tweets this week.

Energy Tidbits – Sign up on our email distribution for tidbits and blogs

Please note that we have set up our Energy Tidbits memo on our Stream Asset Financial website alongside our blogs. The distribution for the Energy Tidbits memo will be via the same notification system used for our blogs. To ensure you receive Energy Tidbits memos, please go to our blog sign up. We will be using the blog notification list for Energy Tidbits. The blog sign up is available at [LINK].

LinkedIn – Look for quick energy items from me on LinkedIn

I can also be reached on Linkedin and plan to use it as another forum to pass on energy items in addition to our weekly Energy Tidbits memo and our blogs that are posted on the SAF Energy website [LINK].

Misc Facts and Figures.

During our weekly review of items for Energy Tidbits, we come across a number of miscellaneous facts and figures that are more general in nature

French Inventor crosses channel by hoverboard

Our July 14, 2019 Energy Tidbits noted the Franky Zapata hoverboard display at Bastille Day in Paris. We couldn’t help but note the huge leap from his Bastille Day display in Paris to making it across the English Channel is just 20 min this week on his hoverboard. The Guardian posted a video [LINK] “Franky Zapata: French inventor crosses Channel by hoverboard”. On his second attempt after a crash last month, inventor Franky Zapata was able to complete a 22-mile (35 km) trip from Sangatte France to Britain in just 20 minutes. The hoverboard was able to travel at astonishing speeds of 160 - 170 kilometres per hour as it flew across the English Channel.

Figure 34: The Hoverboard in flight

Source: Techspot

50th anniversary of Woodstock

Baby boomers will remember 50 years ago was Woodstock in New York. It was an unheard of crowd size of more than 400,000 young people at times during the 3+ days music festival (Aug 15 thru morning of Aug 19) which became know as much for its

Look for energy

items on LinkedIn

Sign up to receive

future Energy

Tidbits memos

https://twitter.com/Energy_Tidbits

http://www.safgroup.ca/research/trends-in-the-market/

http://www.safgroup.ca/

https://www.theguardian.com/uk-news/video/2019/aug/04/franky-zapata-french-inventor-crosses-channel-by-hoverboard-video


31

Energy Tidbits

peace, love and drugs. Unfortunately, it rained during part of the festival so it ran over to Monday morning after when Jimi Hendrix was the last act. It was also unique because the acts played around the clock on Sat night and Sun night.

Maclean’s best communities has 9 of top 10 in Ontario

On Thurs Maclean’s released it’s 2019 “Canada’s Best Communities” [LINK] report. It measured the quality of 415 Canadian communities by ranking factors that impact a resident’s quality of life. Some were the economy, affordability, demographics, taxes, commuting, crime, weather, health, amenities and culture in the location. An interesting result is that 9 of the top 10 ranked communities were in Ontario. The only non Ontario community in the top 10 was Salmon Arm BC. Smaller towns for the most part came in ahead of the major Canadian cities.

Figure 35: Top 10 Canadian communities and major cities ranking

Source: Maclean’s, SAF

2019 Ranking City Province

1 Burlington ON

2 Grimsby ON

3 Ottawa ON

4 Oakville ON

5 New Tecumseh ON

6 Salmon Arm BC

7 Brant ON

8 Niagra-on-the-Lake ON

9 Russell ON

10 Tecumseh ON

19 Toronto ON

28 Canmore AB

33 Calgary AB

39 Kelowna BC

74 Regina SK

79 Edmonton AB

83 Saskatoon SK

112 Vancouver BC

121 Victoria BC

131 Halifax NS

233 Charlottetown PEI

251 Winnipeg MB

262 St. Johns NL

296 Montreal QC

313 Saint John NB

https://www.macleans.ca/best-communities-canada-2019-full-ranking-tool/