JPMorgan puts another $500 million aside for energy sector woes

(Reuters) – JP Morgan will set aside an additional half a billion dollars to cover potential bad loans to oil and gas companies in the first quarter, underlining the sharp deterioration in the U.S. energy sector.
An additional $1.5 billion will have to be reserved if oil prices remain at $25 or below for 18 months.

Original Article: http://feeds.reuters.com/~r/reuters/businessNews/~3/Jv3sGXD0LmY/story01.htm

Beyond the Oil-Industry Bloodbath

Feb 24, 2016 By Bradley Olson WSJ
Executives from BP, Hess and Suncor strike a confident stance in a protracted period of low oil prices.

HOUSTON—Beleaguered oil and gas executives gathered here for a global energy conference sounded a common message: Blood may be in the water, but it isn’t ours.

Forced to reckon with a prolonged period of low energy prices, oil chiefs at the annual IHS IHS -0.27 % CERAWeek energy gathering sought to portray themselves as steely survivors in an industry grappling with spending cuts and asset sales

Many executives counted how many previous crashes they had weathered. Some took solace in the musings of “Persian wise men” and philosophers from the 19th century.

Industry leaders nonetheless were emphatic on two points: Their companies will pull through, and whenever the price rebound comes, they will be ready to take advantage of it.

“Times are tough, you’d almost call them brutal right now,” said Lamar McKay, BP BP -1.59 % PLC’s deputy chief executive. “But we will adapt. We will make it.”

The words at times seemed at odds with immediate financial realities, although many were taking a long view. BP, for example, reported a $5.2 billion loss in 2015 and earlier this month announced an additional 3,000 job cuts.

Hess Corp. HES -0.52 % chief executive John Hess touted his company’s survival prospects, saying among other things he sees lower costs than peers in North Dakota. Yet, the company saw a loss of more than $3 billion in 2015, its first in more than a decade.

“Our company has some of the best acreage,” Mr. Hess said. “We can be more resilient as prices recover.”

The mood reflects the realization that no cavalry is coming. Energy companies are likely to stay mired—for months if not years—in a global oil glut that has sent crude prices to $30 a barrel.

That became clearer Tuesday when Saudi oil minister Ali al-Naimi told a packed ballroom here that the kingdom had no plans to cut its output to boost prices. Instead, the world’s largest oil exporter is banking on market forces to drive out companies saddled with higher production costs. That, in turn, would reduce global supplies.

Mr. Naimi said his country was prepared to withstand $20 crude if needed to thin the herd.

Oil prices, which had rallied last week on news of a tentative agreement by Saudi Arabia, Russia, Venezuela and Qatar to freeze oil output before falling on Mr. Naimi’s comments Tuesday, edged 0.9% higher on Wednesday to $32.15 a barrel.

Energy companies have cut more than 300,000 jobs world-wide since mid-2014, when crude-oil prices began their tumble from $100 a barrel, according to Houston consulting firm Graves & Co. Globally, nearly $1.5 trillion of spending will be canceled from 2015 to 2019, according to IHS, a consulting and analytics firm. The spending cuts will push U.S. shale output down by 600,000 barrels a day this year and by 200,000 barrels a day in 2017, according to a forecast unveiled here on Monday by the International Energy Agency.

Troubled energy companies also can’t count on well-financed white knights to save them by writing fat checks for oil and gas acreage—at least not until oil prices show signs of stabilizing, said Bobby Tudor, CEO of energy-focused investment bank Tudor, Pickering, Holt & Co. “There’s just no money coming into the system,” Mr. Tudor said.

At least 48 North American oil and gas producers have filed for bankruptcy protection since the beginning of 2015, imperiling more than $17 billion in debt, according to law firm Haynes and Boone.

More are soon to follow, shale pioneer Mark Papa, the former CEO of EOG Resources Inc. and now a partner at energy-focused private-equity firm Riverstone Holdings LLC, told attendees. There will be “a lot of bodies, a lot of bankruptcies,” said Mr. Papa.

Saudi Arabia’s refusal to cut output could bankrupt as many as half of all shale producers, Scott Sheffield, CEO of Pioneer Natural Resources Co. PXD -0.20 % Not his company, though, he said Wednesday in an interview. Pioneer lost $623 million in the fourth quarter and has cut its 2016 budget to $2 billion. But, he also voiced his concern that the industry may not be in a position to take advantage of a rebound.

“When it’s time for us to respond in 2019 and 2020, we are not going to be able to respond quick enough,” he said.

The prevailing sentiment this week was certainly a departure from the swagger of previous years, when executives emboldened by high prices and the heady promise of shale oil touted multibillion-dollar expansion plans or “moonshot” drilling programs. Still, some CEOs sought to convey confidence that, while the industry may suffer, their companies were well positioned to ride out the storm.

“We will be one of the last guys standing,” said Steve Williams, CEO of Suncor Energy Inc., SU 1.39 % which is selling assets to raise cash for dividends.

While many speakers acknowledged the current hardship, they also took comfort in the idea of an eventual rebound, asserting that the era of low prices has chastened them.

Night is darkest before dawn, said Joe Kaeser, CEO of Siemens AG SIEGY -1.84 % . His remarks captured the Darwinian mood. To survive a bear attack, one needn’t outrun the bear, just out-sprint another person running for his life, Mr. Kaeser joked.

Former BP CEO John Browne, now executive chairman of L1 Energy, quoted German philosopher Georg Wilhelm Friedrich Hegel in expressing hope that the industry will be better prepared compared with past crashes once prices rebound.

“Hegel says if there’s one thing history teaches you, it’s that history doesn’t teach you anything,” Mr. Browne said. He added: “I hope that we will actually do the things that we can do properly and just don’t get carried away as we did during the high prices.”

—Erin Ailworth, Alison Sider and Chester Dawson contributed to this article.

Write to Bradley Olson at Bradley.Olson@wsj.com

The commodities bloodbath of 2015 in one chart

  

The commodities bloodbath of 2015 in one chartNOVEMBER 30, 2015 AT 11:27 AM

Business Insider / Jonathan Marino

Commodities have been getting creamed in 2015. 
And according to Jodie Gunzberg, global head of commodities at S&P Dow Jones Indices, it isn’t going to get any better any time soon.
“Unfortunately for commodities, there’s no waking up from this nightmare.”
So far, 2015 has not yet been the worst year for any single commodity, Gunzberg noted in a November 30 report, but there are a number of commodities that are on pace for one of their worst years on record. 

“Aluminum is having its second worst year in history and gold is having its sixth worst year in history,” Gunzberg writes. 

The S&P tracked each commodity’s performance back to 1970 for its research. No fewer than 17 are having one of the their five worst years out of 45.

Natural gas is down more than 40% this year, according to S&P, and energy is down more than 30% — making 2015 the fifth-worst year for each. 

Already, Wall Street is bracing for big fallout. Wall Street banks are expecting more defaults in the energy sector as they see more loans underperforming. 

Natural Gas Drops Below $3 for First Time Since 2012 By Naureen S. Malik – Dec 26, 2014, 2:56:43 PM

Natural Gas Drops Below $3 for First Time Since 2012
By Naureen S. Malik – Dec 26, 2014, 2:56:43 PM Bloomberg

Natural gas slumped below $3 per million British thermal units in New York for the first time since 2012 on speculation that record production will overwhelm demand for the heating fuel.

Futures settled at the lowest in 27 months and have plunged 26 percent in December, heading for the biggest one-month drop since July 2008, as mild weather and record production erased a surplus to year-ago levels for the first time in two years. Temperatures will be mostly above average in the eastern half of the U.S. through Dec. 30, according to Commodity Weather Group LLC.

“We don’t see anything scary in the forecast,” said Stephen Schork, president of Schork Group Inc., a consulting group in Villanova, Pennsylvania. “You had this psyche where people were worried about a polar vortex; we had a cold October and a cold early November, and boom, if you were long you are wrong.”

Natural gas for January delivery fell 2.3 cents, or 0.8 percent, to settle at $3.007 per million Btu on the New York Mercantile Exchange. Futures touched $2.973, the lowest intraday price since Sept. 26, 2012. Volume was 54 percent below the 100-day average for the time of day at 2:32 p.m. Gas dropped 13 percent this week.

Prices broke below several technical support levels, including $3.046 and then $3, and may be headed toward $2.80 or lower, said Schork.

Playing Short

“I am playing this market short,” he said. “Anyone who is selling now is trying to trigger a panic selloff.”

February $2.50 puts were the most active options in electronic trading. The price slipped 0.1 cent to 2.6 cents on volume of 557 as of 2:36 p.m.

Above-normal temperatures in the East this week will give way to mostly seasonal readings from Maine to Florida through Jan. 9, according to Commodity Weather in Bethesda, Maryland. The central states will see below-normal readings on Dec. 31 through the first week of January.

The high in New York tomorrow may be 50 degrees Fahrenheit (10 Celsius), 10 more than usual, data from AccuWeather Inc. in State College, Pennsylvania, show. Chicago temperatures may reach 46 degrees, 13 above normal.

Fracking

An estimated 49 percent of U.S. households use gas for heating, led by the Midwest and Northeast, according to the Energy Information Administration.

“We haven’t seen a lot of cold weather this winter,” said Carl Larry, a Houston-based director of oil and gas at Frost & Sullivan. “The warmer it stays, the more pressure on natural gas. Gas production is not dropping and demand is not that high.”

Rising Output

In the absence of extreme weather, rising production will leave inventories at an all-time high above 4 trillion cubic feet by the end of October 2015, BNP Paribas SA said in a report Dec. 23.

BNP Paribas lowered its estimate for average 2015 gas prices to $3.60 per million Btu from $3.75.

“Unseasonably warm weather this month now necessitates extreme conditions ahead in order to avert a surplus,” Teri Viswanath, director of commodities strategy for the bank in New York, said in the report.

Gas stockpiles fell by 49 billion cubic feet to 3.246 trillion cubic feet in the seven days ended Dec. 19, below the five-year average withdrawal for the fourth straight week, EIA data show.

Supplies were 150 billion, or 4.9 percent, higher than year-earlier levels. The surplus will “balloon to just shy of 200 billion cubic feet” by the start of next year, according to JPMorgan Chase & Co.

Record-High Production

Production of the heating and power plant fuel expanded in 2014 to an all-time high for the fourth consecutive year, rising 5.5 percent to 74.26 billion cubic feet a day, EIA data show. Daily output will rise another 3.1 percent next year to 76.58 billion, marking a decade of gains as technologies such as hydraulic fracturing, or fracking, made it more economic to extract fuel from shale rock.

The Marcellus formation in the East has emerged as the biggest driver of gas production growth in the U.S. Production from the shale formation may average 16.3 billion cubic feet a day in January, up 19 percent from a year earlier, the EIA said in its monthly Drilling Productivity Report on Dec. 8.

“This market continues to look oversupplied,” Aaron Calder, senior market analyst at Gelber & Associates in Houston, said by phone on Dec. 24.

Bears’ Takeover

Low gas prices are “eventually going to provide some sort of floor” by prompting power generators to switch from burning coal, said Calder. “This withdrawal shows that it’s going to be a while coming. In the meantime, we are going to see bears take over this market.”

The relative strength index, a technical momentum indicator, declined to 28.8 at 2:36 p.m., falling below 30, a reading considered by some traders to be a buy signal, for the first time since July. The RSI had risen to more than 74 in October before the recent selloff.

“A lot of people came in trading natural gas not really understanding what a powder keg it is in the energy sector,” Schork said. “This is the most volatile market but had been lying dormant for four or five years. The fact that its breaking the $3 barrier, at this point buy at your own risk.”

To contact the reporter on this story: Naureen S. Malik in New York at nmalik28@bloomberg.net

To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net Charlotte Porter,

Natural Gas Slides to Near a Two-Year Low Unseasonably Warm December Helps Allay Concerns About Supply Shortage

By TIMOTHY PUKO WSJ

Updated Dec. 22, 2014 7:48 p.m. ET

Mild temperatures across the U.S. have sent natural-gas futures tumbling to their lowest level in nearly two years, more good news for consumers already reaping the benefits of a 30% decline in gasoline prices.

Natural-gas prices dropped 9% Monday, their largest decline since February. It extended a losing streak to three sessions since the government said gas stockpiles rose above year-ago levels for the first time in 2014.

Record U.S. oil-and-gas production, which has played a major role in driving the 48% decline in crude prices since June, is overwhelming tepid demand for home-heating fuels amid an unseasonably warm December.

Many investors who earlier this year placed bets on rising gas prices have had to reverse course and cover those bets, as strong production has now closed a stockpile shortage that had lingered for nearly a year.

As recently as November, colder-than-normal weather had traders expecting high demand and higher prices. But the warm spell has led to an about-face as investors recognize that there isn’t enough demand to absorb the record supply.

“The market was pricing in the chance for a cold winter,” said Greg Sharenow, a portfolio manager at Pacific Investment Management Co. But with warmer temperatures recently, “that price was unsustainable.”

U.S. Energy Boom’s Other Winner: Utilities Industrial Demand for Electricity Surges in Shale-Gas Counties as Plants Expand

By REBECCA SMITH WSJ

Dec. 12, 2014 7:33 p.m EST

New or expanding manufacturing plants tied to the U.S. energy boom are increasing demand for electricity, reversing years of stagnant power use in the country, utility executives say.

Leo Denault, chief executive of New Orleans-based Entergy Corp. , said his company is witnessing “a renaissance in the industrial South” as heavy manufacturing returns to take advantage of abundant U.S. fuel supplies that are bringing down prices for natural gas and electricity.

For example, Big River Steel broke ground in September on a $1.3 billion steel mill in Osceola, Ark., that will melt scrap metal and make 1.6 million tons a year of flat-rolled steel using a massive electric furnace. The inexpensive electricity produced by Entergy’s Arkansas utility helped entice the company to locate on the Mississippi River site.

“There are three things we need—power, power, power,” said Mark Bula, Big River’s chief commercial officer.

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Entergy’s utilities serve Texas, Louisiana and Mississippi, in addition to Arkansas. Industrial demand for electricity jumped 5.3% from a year earlier during the company’s latest quarter, compared to a decline of 0.2% in residential sales and a slight 0.9% increase in commercial and government sales.

Growing demand for power isn’t limited to the Gulf Coast. American Electric Power Co. , which owns utilities from Texas to Michigan, including several in Rust Belt areas, said eight of 10 industrial sectors it serves consumed more electricity in the third quarter than a year earlier.

Industrial electricity sales in counties with shale-gas production jumped 28% in the third quarter when compared with the same period of last year, said Nick Akin, chief executive of Columbus, Ohio-based AEP. Gains were especially notable in Texas and Ohio, he said, lifted by energy production in the Eagle Ford and Utica Shale formations.

Total industrial electricity sales rose 1.2% in AEP’s most recent quarter. That might seem staid, but utilities consider growth of 1% to 2% a year good because their customer bases are enormous.

Mr. Akin said industrial spending leads to job creation and new-household formation, both of which stimulate power demand. He expects commercial and residential usage to grow too, though AEP hasn’t had a comparable uptick in electricity sales in those sectors yet. Because companies buy electricity in bulk, profit margins on industrial sales are roughly a third the size of margins on sales to residential customers.

Industrial electricity sales began drifting lower for AEP in late 2008 and then dropped sharply during the 2009 recession. Power sales have grown between 2010 and 2014, but overall industrial-electricity sales are still 5% below pre-recession levels, the company said.

The Energy Information Administration, the statistics arm of the Department of Energy, expects residential power sales to remain flat next year but thinks sales to commercial and industrial consumers will grow.

Power sales to heavy industrial users have been a mixed bag for Exelon Corp. But the Chicago-based utility owner expects manufacturing employment will increase in most markets it serves next year, which should stimulate electricity sales.

Citing IHS Economics research, Exelon says it expects manufacturing employment to rise 1.7% in 2015 in parts of Pennsylvania served by its PECO utility, reversing 14 years of declines. The research also projects manufacturing employment growth of 1.4% in parts of Illinois served by Commonwealth Edison, Exelon’s hicago utility.

Southern Co. , which operates power utilities in four Southeastern states, said commercial and residential electricity sales fell during its latest quarter, compared to the prior-year period, but power sales to industrial consumers jumped 4.8%. The strongest growth came from industries that work with metals, stone, clay, glass, lumber and transportation; six of 10 industries moved back to pre-recession levels.

Industrial power demand isn’t limited to heavy manufacturing. Tom Farrell, chief executive of Virginia-based Dominion Resources Inc., said his utility is selling a lot more electricity to data centers that are constantly expanding.

“Half the nation’s Internet traffic runs through data centers in Virginia,” he said. “The biggest cost for them is the cost of electricity.”

Write to Rebecca Smith at rebecca.smith@wsj.com

Solar and Wind Energy Start to Win on Price vs. Conventional Fuels NOVEMBER 23, 2014 AT 7:57 PM NYT > Business Day / By DIANE CARDWELL

For the solar and wind industries in the United States, it has been a long-held dream: to produce energy at a cost equal to conventional sources like coal and natural gas.

That day appears to be dawning.

The cost of providing electricity from wind and solar power plants has plummeted over the last five years, so much so that in some markets renewable generation is now cheaper than coal or natural gas.

Utility executives say the trend has accelerated this year, with several companies signing contracts, known as power purchase agreements, for solar or wind at prices below that of natural gas, especially in the Great Plains and Southwest, where wind and sunlight are abundant.

Those prices were made possible by generous subsidies that could soon diminish or expire, but recent analyses show that even without those subsidies, alternative energies can often compete with traditional sources.

In Texas, Austin Energy signed a deal this spring for 20 years of output from a solar farm at less than 5 cents a kilowatt-hour. In September, the Grand River Dam Authority in Oklahoma announced its approval of a new agreement to buy power from a new wind farm expected to be completed next year. Grand River estimated the deal would save its customers roughly $50 million from the project.

And, also in Oklahoma, American Electric Power ended up tripling the amount of wind power it had originally sought after seeing how low the bids came in last year.

“Wind was on sale — it was a Blue Light Special,” said Jay Godfrey, managing director of renewable energy for the company. He noted that Oklahoma, unlike many states, did not require utilities to buy power from renewable sources.

“We were doing it because it made sense for our ratepayers,” he said.

According to a study by the investment banking firm Lazard, the cost of utility-scale solar energy is as low as 5.6 cents a kilowatt-hour, and wind is as low as 1.4 cents. In comparison, natural gas comes at 6.1 cents a kilowatt-hour on the low end and coal at 6.6 cents. Without subsidies, the firm’s analysis shows, solar costs about 7.2 cents a kilowatt-hour at the low end, with wind at 3.7 cents.

“It is really quite notable, when compared to where we were just five years ago, to see the decline in the cost of these technologies,” said Jonathan Mir, a managing director at Lazard, which has been comparing the economics of power generation technologies since 2008.

Mr. Mir noted there were hidden costs that needed to be taken into account for both renewable energy and fossil fuels. Solar and wind farms, for example, produce power intermittently — when the sun is shining or the wind is blowing — and that requires utilities to have power available on call from other sources that can respond to fluctuations in demand. Alternately, conventional power sources produce pollution, like carbon emissions, which face increasing restrictions and costs.

But in a straight comparison of the costs of generating power, Mr. Mir said that the amount solar and wind developers needed to earn from each kilowatt-hour they sell from new projects was often “essentially competitive with what would otherwise be had from newly constructed conventional generation.”

Experts and executives caution that the low prices do not mean wind and solar farms can replace conventional power plants anytime soon.

“You can’t dispatch it when you want to,” said Khalil Shalabi, vice president for energy market operations and resource planning at Austin Energy, which is why the utility, like others, still sees value in combined-cycle gas plants, even though they may cost more. Nonetheless, he said, executives were surprised to see how far solar prices had fallen. “Renewables had two issues: One, they were too expensive, and they weren’t dispatchable. They’re not too expensive anymore.”

According to the Solar Energy Industries Association, the main trade group, the price of electricity sold to utilities under long-term contracts from large-scale solar projects has fallen by more than 70 percent since 2008, especially in the Southwest.

The average upfront price to install standard utility-scale projects dropped by more than a third since 2009, with higher levels of production.

The price drop extends to homeowners and small businesses as well; last year, the prices for residential and commercial projects fell by roughly 12 to 15 percent from the year before.

The wind industry largely tells the same story, with prices dropping by more than half in recent years. Emily Williams, manager of industry data and analytics at the American Wind Energy Association, a trade group, said that in 2013 utilities signed “a record number of power purchase agreements and what ended up being historically low prices.”

Especially in the interior region of the country, from North Dakota down to Texas, where wind energy is particularly robust, utilities were able to lock in long contracts at 2.1 cents a kilowatt-hour, on average, she said. That is down from prices closer to 5 cents five years ago.

“We’re finding that in certain regions with certain wind projects that these are competing or coming in below the cost of even existing generation sources,” she said.

Both industries have managed to bring down costs through a combination of new technologies and approaches to financing and operations. Still, the industries are not ready to give up on their government supports just yet.

Already, solar executives are looking to extend a 30 percent federal tax credit that is set to fall to 10 percent at the end of 2016. Wind professionals are seeking renewal of a production tax credit that Congress has allowed to lapse and then reinstated several times over the last few decades.

Senator Ron Wyden, the Oregon Democrat, who for now leads the Finance Committee, held a hearing in September over the issue, hoping to push a process to make the tax treatment of all energy forms more consistent.

“Congress has developed a familiar pattern of passing temporary extensions of those incentives, shaking hands and heading home,” he said at the hearing. “But short-term extensions cannot put renewables on the same footing as the other energy sources in America’s competitive marketplace.”

Where that effort will go now is anybody’s guess, though, with Republicans in control of both houses starting in January.

Two Big Trends Will Fuel The Renewable Energy Boom For Years

This is the big picture.

Carlos Barria/Reuters
The renewable energy revolution is happening faster than many expected.
According to recent report from Citi Research, renewables will continue their market share grabs from coal and gas forSome of this can be explained by the need for cleaner energy.

“Environmental pressures on coal consumption are rising not only in Europe and North America, but also in China and other emerging markets,” according to the Citi analyst’s note. “The most significant change has been in China, where increasing regulations and the establishment of carbon markets should limit the attractiveness of coal power. Moreover, the country is aggressively pursuing an ‘everything but coal’ development plan for the power sector, with rapid growth in capacity for alternative energy sources.”

Coal power plants are increasingly being pushed into “retirement.”

Most people have been expecting natural gas to be coal’s major substitute. However, Citi’s forecast suggests that growth in natgas demand is going to be way less than previously anticipated.

Renewables should take ever-increasing amounts of market share in an environment like this, according to the report.

In the figure above, you can see that coal’s utilized capacity (measured in GW) is projected drop from 198 GW in 2011 down to 181 GW by 2020. Natural gas slightly increases from 115 GW in 2011 to 132 GW by 2020, although that number is less than previously expected (and you can see there’s a dip from 2012 to 2014). Nuclear sees no major change in either direction, starting at 90 GW and ending at 92 GW.

On the flip side, renewables in 2011 were at 50 GW and are expected to rise to 68 GW by 2020.

two reasons.

First, renewables are rapidly becoming cost-effective, and second, environmental restrictions are becoming an increasingly high hurdle.

Renewables Are Getting Cheaper

Thanks to tech advances, the cost of renewables is finally dropping to affordable levels, which is allowing them to proliferate, according to Citi.

“Costs for solar and wind energy are falling rapidly, with learning rates of around 30% for solar and 7.4% for wind,” the report states.

Wind power has already achieved cost parity with the most expensive coal power plants in Europe (slightly above $80/MWh), and by the end of the decade it’s expected to reach cost parity with the majority of plants (around $70/MWh).

Solar is still the most expensive major electricity source at the moment (around $160/MWh), but Citi is projecting that by 2020 solar will drop to wind’s current prices (slightly above $80/MWh).

“Natural gas has already eroded coal’s cost competitiveness in the US, with decreasing costs for wind, solar and ex-US natural gas to follow,” according to Citi.

Below is the global electricity cost curve.

Citi Research
Environmental Restrictions Favor Renewables

Historically there has been a correlation between economic growth and electricity demand growth. But right now we’re seeing the opposite: during a period of economic growth, electricity demand growth has been relatively flat or declined for some regions.

Some of this can be explained by the need for cleaner energy.

“Environmental pressures on coal consumption are rising not only in Europe and North America, but also in China and other emerging markets,” according to the Citi analyst’s note. “The most significant change has been in China, where increasing regulations and the establishment of carbon markets should limit the attractiveness of coal power. Moreover, the country is aggressively pursuing an ‘everything but coal’ development plan for the power sector, with rapid growth in capacity for alternative energy sources.”

Coal power plants are increasingly being pushed into “retirement.”

Most people have been expecting natural gas to be coal’s major substitute. However, Citi’s forecast suggests that growth in natgas demand is going to be way less than previously anticipated.

Renewables should take ever-increasing amounts of market share in an environment like this, according to the report.

In the figure above, you can see that coal’s utilized capacity (measured in GW) is projected drop from 198 GW in 2011 down to 181 GW by 2020. Natural gas slightly increases from 115 GW in 2011 to 132 GW by 2020, although that number is less than previously expected (and you can see there’s a dip from 2012 to 2014). Nuclear sees no major change in either direction, starting at 90 GW and ending at 92 GW.

On the flip side, renewables in 2011 were at 50 GW and are expected to rise to 68 GW by 2020.

U.S. Gas Exports Unlikely to Ease Tensions Over Ukraine

U.S. Gas Exports Unlikely to Ease Tensions Over Ukraine

Europe Will Still Rely on Russian Gas as First U.S. Shipments Are Two Years Away

By

SELINA WILLIAMS
March 18, 2014 12:50 p.m. ET
LONDON—Natural gas exports from the U.S. are unlikely to help ease the tensions between Europe and Russia over Ukraine as the first such shipments are about two years away, a senior executive from oil and gas company BG Group PLC said Tuesday.

The U.S. has vast supplies of cheap natural gas thanks to the fracking boom and could become one of the world’s top three exporters of liquefied natural gas by 2025, BG said. Over the past week, some U.S. politicians have urged the Obama administration to speed up oil and natural gas exports to weaken Russia’s hand over Ukraine.

Russia supplies about 30% of Europe’s gas requirements, half of which transit via Ukraine, a factor some believe has stifled European opposition to Russia’s annexation of Crimea.

Federal law places heavy restrictions on U.S. companies from exporting natural gas to countries, like those in Europe, that aren’t among its free-trade partners.

Applications have already been made to export a total of over 260 million metric tons a year of LNG from the U.S. Even so BG, one of the biggest participants in the global LNG market, said it expects only about 60 million tons to 70 million tons of annual export capacity to be developed by 2025.

Andrew Walker, BG’s vice president of global LNG, said the company didn’t expect much fast-tracking of export applications unless there was a significant change in external circumstances.

BG clinched the first contract to export U.S. natural gas from the Sabine Pass, La., terminal in 2011. It expects those exports to commence in late 2015 or early 2016.

Mr. Walker said that the situation for gas prices and supplies in Europe was “fairly relaxed,” despite political tensions. The region only imported a net 35 million tons of LNG last year, the lowest level in nine years, with demand subdued due to weak economic growth, he said.

Meanwhile, global LNG supplies leveled off for a second consecutive year as new production was offset by unplanned outages, declines in output from existing plants and new projects ramping up more slowly than anticipated. This trend will keep LNG markets tight until at least the end of the decade, BG said in its annual global LNG outlook.

“We’re an industry in hiatus. Developing new supply, rather than demand is the principal challenge the industry faces,” Mr Walker said. Last year, only one in 10 new LNG projects awaiting final investment decisions was sanctioned.

Write to Selina Williams at selina.williams@wsj.com