The Coal Industry May Never Recover From The Pandemic

[Adam Varga + 123]

According to analysts predictions, global coal industry will never recover from the COVID-19 pandemic as the pandemic crisis proves that renewable energy is cheaper for consumers and a safer asset for investors.

The transition from highly polluting fossil fuels to cleaner energy sources is accelerating even during the blockade, which has led to the closure of power plants in several countries and provided new evidence that coal use may finally peak after more for 200 years on stage.

http://www.economicodaily.com/the-coal-industry-may-never-recover-from-the-pandemic/ 

[Refman + 207]

Coal is dying and it's demise seems to be accelerating.

[Dan Clemmensen + 1,011]

1 hour ago, Adam Varga said:

According to analysts predictions, global coal industry will never recover from the COVID-19 pandemic as the pandemic crisis proves that renewable energy is cheaper for consumers and a safer asset for investors.

The transition from highly polluting fossil fuels to cleaner energy sources is accelerating even during the blockade, which has led to the closure of power plants in several countries and provided new evidence that coal use may finally peak after more for 200 years on stage.

http://www.economicodaily.com/the-coal-industry-may-never-recover-from-the-pandemic/ 

Coal is dying, but renewables are a small part of the reason. Utilities like to tout their new renewables, but they are adding natural gas capacity (CCGTs) at about the same rate as they are retiring coal capacity. The reason for this is that NG prices are extremely low and will almost certainly stay that way for five to ten years, mostly because large amounts of NG are being produced as a byproduct of shale oil  production. This would be happening even if there were no renewables at all. It is driven by economics. The decreased emissions of CO2 are a side effect that the industry pretends is a big reason for the switchover.

Renewables are indeed being added because their costs have declined so much that they are cost-competitive even with this extremely low-cost NG. We can expect renewables to accelerate further when the NG prices begin to rise later in the decade. This will occur as shale oil production declines, either due to field depletion or due to reduced demand for oil. My cloudy crystal ball says that reduced oil demand will affect the higher-cost oil producers first, leaving only the old-fashioned non-gassy conventional fields in production.

[Gerry Maddoux + 3,627]

Two points:

1) It's not the CO2 emissions from coal, it's sulfur--the stuff of acid rain. Sulfur is 100% removed by LNG trains. CO2 isn't hurting anything.

2) Shale oil is not going to decline, once this is all over. Why not? Because to not have it would immediately subject the United States of America--California included--to the volatile whims of the Kingdom of the Place That Spawned the Prince who had Mr. Khashoggi cut up into Tiny Pieces. 

[Dan Clemmensen + 1,011]

1 hour ago, Gerry Maddoux said:

Two points:

1) It's not the CO2 emissions from coal, it's sulfur--the stuff of acid rain. Sulfur is 100% removed by LNG trains. CO2 isn't hurting anything.

2) Shale oil is not going to decline, once this is all over. Why not? Because to not have it would immediately subject the United States of America--California included--to the volatile whims of the Kingdom of the Place That Spawned the Prince who had Mr. Khashoggi cut up into Tiny Pieces. 

I did not say (here) that the CO2 is a problem, although I think it is. I said that the PR guys talk about it because it makes the greenies happy that it is being reduced.  I did not mention the sulfur because I had forgotten about the scrubber retrofit problem. The utilities might have eked out a few more years on their coal dinosaurs if they did not need to retrofit scrubbers, but those old plants were already operating at lower and lower capacity because burning coal was more expensive than burning gas. They use the retrofit problem as an excuse so they can blame the government for the lost jobs, while they quietly take their increased profits to the bank.

Funny thing about sulfur emissions: they have a fairly large immediate effect of reducing global warming, because they act to seed clouds which reflect sunlight. It's a very short-term effect because the SO2 drops out within a year, at which point the CO2 that was produced at the same time as the SO2 takes over and keeps warming. Thus, a dramatic reduction in SO2 (as in the US in the 1970's) causes a spike on global warming.

I absolutely agree that the US needs to keep producing oil in the Permian for exactly the reason you mention: true energy independence. But the Permian will eventually run dry, estimated to happen between 2025 and 2030. By that time we can hope that a combination of reduced demand (due to EVs) and increasing supply diversity will have broken the OPEC cartel.

Edited June 20, 2020 by Dan Clemmensen
sorry, I meant 2025, not 2050

[Gerry Maddoux + 3,627]

3 hours ago, Dan Clemmensen said:

Funny thing about sulfur emissions: they have a fairly large immediate effect of reducing global warming, because they act to seed clouds which reflect sunlight. It's a very short-term effect because the SO2 drops out within a year, at which point the CO2 that was produced at the same time as the SO2 takes over and keeps warming. Thus, a dramatic reduction in SO2 (as in the US in the 1970's) causes a spike on global warming.

We're running a much better experiment: The reduction of sulfur emissions from oceangoing vessels is massive, much, much more than any reduction ever in the history of the industrialized world. I doubt seriously that we see increased CO2, or global warming, but expect just the opposite--a dramatic reduction in acid rain and even a reduction of measurable CO2, not that the latter really matter. 

3 hours ago, Dan Clemmensen said:

But the Permian will eventually run dry, estimated to happen between 2025 and 2030.

Have you looked at a map of the shale basins? All the talk about the "core" and the "sweet spots" is massively over-touted. I know a lot more about the (faltering) Bakken because I have more property there, but in the Bakken there is zero correlation between "sweet spots" and productivity. In fact, the largest wells--the most profitable the quickest and yes, those exist--have been on formerly "condemned" property that was adjudged to be Tier 2 or 3. The need for shale oil will likely diminish on a sharper slope than the ability of the shale basins to yield up significant quantities of oil. 

 

3 hours ago, Dan Clemmensen said:

reduced demand (due to EVs)

Agree, it's the car of the future.  

[Dan Clemmensen + 1,011]

1 minute ago, Gerry Maddoux said:

We're running a much better experiment: The reduction of sulfur emissions from oceangoing vessels is massive, much, much more than any reduction ever in the history of the industrialized world. I doubt seriously that we see increased CO2, or global warming, but expect just the opposite--a dramatic reduction in acid rain and even a reduction of measurable CO2, not that the latter really matter.

SO2 reduction does not reduce (or increase) measurable CO2. SO2 reduction reduces cloud cover, and this reduces the amount of sunlight that is reflected into space. The sunlight hits the ground or sea instead and increases the temperature.

The largest "experiment" of this type in recent times was the SO2 released by Mount Pinatubo in 1991.

I would have guessed that the scrubbers installed on the coal plants in the 1970's had a larger effect than the current switch away from high-sulfur bunker fuel, but I have no basis for my guess. Do you have a reference?

[Dan Clemmensen + 1,011]

24 minutes ago, Gerry Maddoux said:

 

Have you looked at a map of the shale basins? All the talk about the "core" and the "sweet spots" is massively over-touted. I know a lot more about the (faltering) Bakken because I have more property there, but in the Bakken there is zero correlation between "sweet spots" and productivity. In fact, the largest wells--the most profitable the quickest and yes, those exist--have been on formerly "condemned" property that was adjudged to be Tier 2 or 3. The need for shale oil will likely diminish on a sharper slope than the ability of the shale basins to yield up significant quantities of oil.

This is the better scenario for energy independence. The Permian (and maybe other basins) can continue to impose an upper bound (at perhaps $60) on OPEC's prices as we move array from oil: demand-side peak oil. Supply-side peak oil is a whole lot nastier for the country.

[Wombat + 1,028]

21 minutes ago, Dan Clemmensen said:

This is the better scenario for energy independence. The Permian (and maybe other basins) can continue to impose an upper bound (at perhaps $60) on OPEC's prices as we move array from oil: demand-side peak oil. Supply-side peak oil is a whole lot nastier for the country.

Aha! Now you see my point that not only "lowest-cost producers" will survive? Permian not dead, as you say, it will impose an upper bound on OPEC prices instead. In other words, OPEC and Russia have no choice but to cut production and make way for US shale. Still, none of them seem to have figured it out yet and insist on destroying their own balance sheets   I say they can keep cutting their noses off to spite their collective faces all they like  

[Gerry Maddoux + 3,627]

24 minutes ago, Dan Clemmensen said:

Supply-side peak oil is a whole lot nastier for the country.

Oh, there's a supply shock coming, Dan, no doubt about it. There has been NO exploration since 2014. The only major find has been Guyana, and it is almost too gassy to produce (the money-starved government of Guyana just throttled Exxon because of venting 9T BTU of pure methane). By the end of August, unless something happens to the contrary, U.S. oil production will be down to 6-7M bod. Russia is struggling. There is one rig running in all of Venezuela. At these prices we'll be down to 150 rigs in the entire U.S. 

Under those conditions, there is no conceivable way to avoid a supply shock, save a major resurgence of Covid-19, with associate high mortality rates. We're hearing of a drastic increase in numbers of cases, but very slow increase in deaths. Has it already picked off the most vulnerable or has it mutated to less of a killing machine? Anyway, an oil shock is coming. It will be a strong catalyst to the renewables industry. 

[Wombat + 1,028]

2 minutes ago, Gerry Maddoux said:

Oh, there's a supply shock coming, Dan, no doubt about it. There has been NO exploration since 2014. The only major find has been Guyana, and it is almost too gassy to produce (the money-starved government of Guyana just throttled Exxon because of venting 9T BTU of pure methane). By the end of August, unless something happens to the contrary, U.S. oil production will be down to 6-7M bod. Russia is struggling. There is one rig running in all of Venezuela. At these prices we'll be down to 150 rigs in the entire U.S. 

Under those conditions, there is no conceivable way to avoid a supply shock, save a major resurgence of Covid-19, with associate high mortality rates. We're hearing of a drastic increase in numbers of cases, but very slow increase in deaths. Has it already picked off the most vulnerable or has it mutated to less of a killing machine? Anyway, an oil shock is coming. It will be a strong catalyst to the renewables industry. 

Gerry, I think the coming financial shock will somewhat negate the supply shock. Demand not gonna recover in a hurry and then u have massive inventories plus OPEC will resume production plus more EV's on the road. Combined, these factors make a supply shock less likely, or at least not severe. I think there will be over-production for decades to come. Already, US shale operators plan to increase production by half a million barrels/day by the end of this month, by bring wells back online. Same thing occurring in off-shore. The real problem in the oil industry is over-investment, not under-investment.

[Dan Clemmensen + 1,011]

1 hour ago, Wombat said:

Aha! Now you see my point that not only "lowest-cost producers" will survive? Permian not dead, as you say, it will impose an upper bound on OPEC prices instead. In other words, OPEC and Russia have no choice but to cut production and make way for US shale. Still, none of them seem to have figured it out yet and insist on destroying their own balance sheets   I say they can keep cutting their noses off to spite their collective faces all they like  

We are operating on two timescales here. US shale will continue to produce until for as long as demand keeps the price of oil above shale's breakeven point and there is still oil in the US shale oil fields. Gerry believes demand will drop before the US runs out of shale oil: I have no experience with this so I just accepted conventional wisdom.

I feel that we will reach peak demand if we have not already, and as demand declines, the cartel will finally break. Only at that point will market economics finally assert itself, and the lowest-cost producers will prevail, finally leading to cessation of US shale production.

[ralfy + 55]

The catch, which is mentioned only briefly in the article, is that much of the global economy is still developing. That means even coal won't be enough to meet its basic needs.

 

[Gerry Maddoux + 3,627]

5 minutes ago, Dan Clemmensen said:

I feel that we will reach peak demand if we have not already, and as demand declines, the cartel will finally break. Only at that point will market economics finally assert itself, and the lowest-cost producers will prevail, finally leading to cessation of US shale production.

If the cartel "breaks," then production by the cartel will be willy-nilly. As the KSA lopes toward bankruptcy, they will produce more, then less. At some point the United States will leave them to their own devices--then they'll really fall apart. 

Okay, against that backdrop will come a growing population in countries that are third-world now, so they'll be lower still. They will need materials and cars and air conditioning. LNG is their best bet and ICE automobiles and trucks will be their vehicles of default. In this rather dystopian world, especially if the weather starts getting cooler, the clamor for renewables will be met with a deafening silence from all quarters. 

For military supply, and to maintain the current state of living, U.S. shale will steadily pick up--there is no other real alternative and you would be surprised what a world without oil and gas would be like. 

You are right: we are running a dangerous experiment all over the world. Oil prices are not sustainable for anyone. The U.S. national debt stands at $25T, the global debt at $265T. Money is being printed and fiat currency is being debased at an astounding rate. That drives inflation: there is no other way shy of monetary collapse on a grand scale. As the interest rate rises, there will be no way to pay back debts of this level, so defaults will occur, mostly at local municipalities but also on a state basis. More money has to be printed and the debt load has to be expanded to bail them out--this is still the United States of America and the world is still filled with our brothers and sisters in this mad march to the long sleep. 

In this quagmire lies the oil and gas business--which has just about had its fill. Exxon is near being in trouble. Occidental is in bad trouble. BP has thrown in the towel. Total likewise. Chevron is the only supermajor with lots of money and they don't seem to know whether to spend it or invest it in dividend paying stocks. A lot of people have to eventually throw in the towel and stop drilling and fracking. The offshore guys have quit. When Saudi Arabia begins to spend its sovereign fund just to stay alive--which they are now doing--they will get pretty desperate, as will Iran. Deals are being struck with China, as we speak, because it is widely held that China may come out of this with global hegemony, including holding the reserve currency in the form of a gold-backed digital yuan. 

Okay, we're up to the endgame. At that dispositive moment in history--world history--only very few options remain. One of them is the elaborate build-out and exploitation of the only readily available source of hydrocarbons: shale. Does anyone thing for a moment that R&D has stood still? They've had nothing to do but sharpen the pencil. Already, before the crash, the boys in the Bakken were putting wells on line for about $6M, with IP production of 5,000 bopd. Already, they were gas lifting, keeping pressure curves constant to slow down the decline curve and improve profitability. Refracks were booming--as many as 50% of those wells can be refracked. I've already commented that the biggest wells were coming in on Tier 2-3 properties previously condemned to everlasting hell. 

If that's being done in the Bakken, it's being done twice-over in the bountiful Permian. Don't bury shale quite yet, and don't put an EV in every driveway already. With all due respect, the sentence referenced above lost its way. Key words and phrases: decline, peak oil, cartel will break, market economics will prevail, lowest cost producers will prevail, cessation of U.S. shale. There are not enough "lowest cost producers" in the shale basins to produce a million barrels a day. Market economics demand either more effective recovery or higher prices. If the cartel breaks the price will zoom and war will break out all over the ME. If there is cessation of shale, we will be either held hostage by third world countries or we'll have to go get some oil at gunpoint. 

I don't believe we are at the end of this giant adventure. When Tesla goes from $200 to $1,000/share and the oil company shares are going the other direction, it's easy to pile on and follow the yellow brick road. Somewhere in there is a middle ground.  

[Javier Cabal + 2]

The reduction of coal use would depent mainly on the policy that a country takes after this pandemic. It have been historically proof that the uses of coal increase after an economic break down because it represents an easier but dirtier way to stimulate the economy, as it happened with the assian recession. Maybe this time the goverments could give an opportunity to new energy source or maybe they are going to take the easy path.   

[ronwagn + 6,290]

8 hours ago, Adam Varga said:

According to analysts predictions, global coal industry will never recover from the COVID-19 pandemic as the pandemic crisis proves that renewable energy is cheaper for consumers and a safer asset for investors.

The transition from highly polluting fossil fuels to cleaner energy sources is accelerating even during the blockade, which has led to the closure of power plants in several countries and provided new evidence that coal use may finally peak after more for 200 years on stage.

http://www.economicodaily.com/the-coal-industry-may-never-recover-from-the-pandemic/ 

Coal use has been increasing in China, up until the pandemic that started there. They burn roughly half of what all other nations combined do. They show no strong indications of changing. They want the cheapest fuel possible and for them that is coal and they have their own. Hopefully they will burn more natural gas and oil imported from around the world. They do well with hydro if there is no drought. Wind and Solar are still minor sources of energy in China.

Please post to Chinese websites also.Good luck!

https://en.wikipedia.org/wiki/Renewable_energy_in_China

[ronwagn + 6,290]

7 hours ago, Dan Clemmensen said:

Coal is dying, but renewables are a small part of the reason. Utilities like to tout their new renewables, but they are adding natural gas capacity (CCGTs) at about the same rate as they are retiring coal capacity. The reason for this is that NG prices are extremely low and will almost certainly stay that way for five to ten years, mostly because large amounts of NG are being produced as a byproduct of shale oil  production. This would be happening even if there were no renewables at all. It is driven by economics. The decreased emissions of CO2 are a side effect that the industry pretends is a big reason for the switchover.

Renewables are indeed being added because their costs have declined so much that they are cost-competitive even with this extremely low-cost NG. We can expect renewables to accelerate further when the NG prices begin to rise later in the decade. This will occur as shale oil production declines, either due to field depletion or due to reduced demand for oil. My cloudy crystal ball says that reduced oil demand will affect the higher-cost oil producers first, leaving only the old-fashioned non-gassy conventional fields in production.

I think that my prophecy is better Dan. There will be abundant natural gas for many decades and it will be available at lower prices than oil and for decades after oil becomes too expensive. Gasoline and diesel can also be made from coal and natural gas but that is wasteful IMO, and pollutes more. 

Do not believe the prophets of low priced wind and solar until they have proven their case in overall lifespan figures that bring lower prices to the end consumer including all costs of maintenance, transmission and subsidies. I personally do not like the visual and chemical pollution from wind turbines and solar panels either. I am also not too concerned about CO2 although natural gas has enabled America to have the greatest improvement in CO2 levels of all major nations.

[ronwagn + 6,290]

7 hours ago, Dan Clemmensen said:

I did not say (here) that the CO2 is a problem, although I think it is. I said that the PR guys talk about it because it makes the greenies happy that it is being reduced.  I did not mention the sulfur because I had forgotten about the scrubber retrofit problem. The utilities might have eked out a few more years on their coal dinosaurs if they did not need to retrofit scrubbers, but those old plants were already operating at lower and lower capacity because burning coal was more expensive than burning gas. They use the retrofit problem as an excuse so they can blame the government for the lost jobs, while they quietly take their increased profits to the bank.

Funny thing about sulfur emissions: they have a fairly large immediate effect of reducing global warming, because they act to seed clouds which reflect sunlight. It's a very short-term effect because the SO2 drops out within a year, at which point the CO2 that was produced at the same time as the SO2 takes over and keeps warming. Thus, a dramatic reduction in SO2 (as in the US in the 1970's) causes a spike on global warming.

I absolutely agree that the US needs to keep producing oil in the Permian for exactly the reason you mention: true energy independence. But the Permian will eventually run dry, estimated to happen between 2025 and 2030. By that time we can hope that a combination of reduced demand (due to EVs) and increasing supply diversity will have broken the OPEC cartel.

Dan, you do not want to face the fact that natural gas is far more abundant than oil alone. It is true all around the world, not just in America. It can run any ICE engine of any scale from the smallest to the largest ship engines.We already have a massive spider web of natural gas pipelines nationwide and worldwide. 

[Dan Clemmensen + 1,011]

49 minutes ago, Javier Cabal said:

The reduction of coal use would depent mainly on the policy that a country takes after this pandemic. It have been historically proof that the uses of coal increase after an economic break down because it represents an easier but dirtier way to stimulate the economy, as it happened with the assian recession. Maybe this time the goverments could give an opportunity to new energy source or maybe they are going to take the easy path.   

There is a huge difference this time: the world is awash in natural gas at ridiculously low prices, and hundreds of LNG carriers have been built. Depending on the circumstances in each country, it may be cheaper to just use natural gas.

[Eyes Wide Open + 3,554]

3 hours ago, Gerry Maddoux said:

We're running a much better experiment: The reduction of sulfur emissions from oceangoing vessels is massive, much, much more than any reduction ever in the history of the industrialized world. I doubt seriously that we see increased CO2, or global warming, but expect just the opposite--a dramatic reduction in acid rain and even a reduction of measurable CO2, not that the latter really matter. 

Have you looked at a map of the shale basins? All the talk about the "core" and the "sweet spots" is massively over-touted. I know a lot more about the (faltering) Bakken because I have more property there, but in the Bakken there is zero correlation between "sweet spots" and productivity. In fact, the largest wells--the most profitable the quickest and yes, those exist--have been on formerly "condemned" property that was adjudged to be Tier 2 or 3. The need for shale oil will likely diminish on a sharper slope than the ability of the shale basins to yield up significant quantities of oil. 

 

Agree, it's the car of the future.  

https://www.theguardian.com/environment/2009/apr/09/shipping-pollution

https://www.livebunkers.com/bunker-fuel-pollution

https://www.wired.com/story/container-ships-use-super-dirty-fuel-that-needs-to-change/

https://www.dailymail.co.uk/sciencetech/article-1229857/How-16-ships-create-pollution-cars-world.html

Cars are not even a speedbump in world wide pollution.

Edited June 21, 2020 by Eyes Wide Open

[ronwagn + 6,290]

1 hour ago, Dan Clemmensen said:

We are operating on two timescales here. US shale will continue to produce until for as long as demand keeps the price of oil above shale's breakeven point and there is still oil in the US shale oil fields. Gerry believes demand will drop before the US runs out of shale oil: I have no experience with this so I just accepted conventional wisdom.

I feel that we will reach peak demand if we have not already, and as demand declines, the cartel will finally break. Only at that point will market economics finally assert itself, and the lowest-cost producers will prevail, finally leading to cessation of US shale production.

But what will happen to all of the natural gas in the meantime? Will we allow it to be vented off, used, or exported? What will happen with Canadian oil and natural gas? Offshore American coastlines? 

[ronwagn + 6,290]

1 hour ago, ralfy said:

The catch, which is mentioned only briefly in the article, is that much of the global economy is still developing. That means even coal won't be enough to meet its basic needs.

 

We should help them develop and transport natural gas as CNG and LNG or piped. 

[Dan Clemmensen + 1,011]

5 minutes ago, ronwagn said:

Dan, you do not want to face the fact that natural gas is far more abundant than oil alone. It is true all around the world, not just in America. It can run any ICE engine of any scale from the smallest to the largest ship engines.We already have a massive spider web of natural gas pipelines nationwide and worldwide. 

I am fully aware of this. It's not just the pipelines any more, it's also the massive existing LNG infrastructure and the NG storage infrastructure.

NG works very well for big engines such as ships where LNG (not CNG) tanks make sense. It also works for fixed generators at any scale where it distribution pipes are in place. It's a bit more awkward for smaller transportation such as cars and trucks because of the energy density.

In addition to transport and electrical generation, NG is used for residential and commercial heating and cooking. It is also used in massive amounts for making ammonia. NG is not going to go away for awhile.

But eventually, and sooner than you might think, the cost of producing CH4 from solar and wind will drop below the cost of drilling and production of NG. In both cases, you raise capital to create your production system (NG well or solar/wind plus E==>CH4 system) and you then start producing gas. In the case of NG, the cost for some production is lower because it's a byproduct of oil production. in the case of E==>CH4, the cost of some production is lower because it's a byproduct of primary electricity production.

[Dan Clemmensen + 1,011]

10 minutes ago, ronwagn said:

But what will happen to all of the natural gas in the meantime? Will we allow it to be vented off, used, or exported? What will happen with Canadian oil and natural gas? Offshore American coastlines? 

When it becomes uneconomic, you just leave it in the ground, like the thousands of years worth of coal in the ground.  Future generations may find an economical way to use all that carbon without turning it into atmospheric CO2.

[ronwagn + 6,290]

26 minutes ago, Eyes Wide Open said:

https://www.theguardian.com/environment/2009/apr/09/shipping-pollution

https://www.livebunkers.com/bunker-fuel-pollution

https://www.wired.com/story/container-ships-use-super-dirty-fuel-that-needs-to-change/

https://www.dailymail.co.uk/sciencetech/article-1229857/How-16-ships-create-pollution-cars-world.html

I scanned all of these articles and none of them mentioned using LNG fueled engines. It is the obvious answer for shipping ocean cargo. 

https://maritime-executive.com/article/world-s-largest-lng-powered-car-carrier-sails-for-north-america

https://www.marineinsight.com/tech/10-noteworthy-lng-fueled-vessels/