Commodity Markets In 2020
Sugar industry needs to outsource field production, upgrade technology
Sugarcane is one of the highest yielding crops for producing biofuel in the world. In Brazil sugarcane’s total energy content is 437.7 GJ/ha with only Oil Palm in Indonesia coming close at 329.2 GJ/ha. Corn falls intermediate between these two.
Sugarcane is one of the most efficient plants on earth and has a photosynthetic efficiency of 1 to 2 percent. With good soil, tested varieties and excellent management production techniques assisted with advanced crop monitoring apps, sugarcane production should be in the vicinity of 80-110t/ha. Some sources have the potential for 470t/ha.
The model proposed here is outsourcing the field production system to farmers who will be made up of ex employees of the industry in the first place, followed by the general public thereafter and commercial holdings. 10-20ha would be good to be outsourced for the small farmer and this can be increased as the efficiency of the farmer is monitored.
EIA revises up brent oil forecast by $0.48 for 2020
The US Energy Information Administration (EIA) has revised up its Brent crude oil price forecast for 2020 by $0.48 per barrel, according to its monthly Short-Term Energy Outlook (STEO) report for September released on Wednesday.
The international benchmark is now expected to average $41.90 per barrel this year, up from its previous estimate of $41.42 a barrel.
Brent crude prices averaged $50 per barrel during the first quarter of 2020 and $29 per barrel during the second quarter of this year. The administration now forecasts $43.9 a barrel in the third quarter of 2020 and $44.1 a barrel in the fourth quarter of the year.
The EIA said it estimates that Brent will average $49 per barrel next year, as oil markets become more balanced.
The administration said it expects high inventory levels despite expected inventory draws in the coming months with surplus crude oil production capacity limiting upward pressure on oil prices.
The EIA revised down its US crude oil production estimate for this year to 11.4 million barrels per day in 2020 and 11.1 million barrels per day in 2021. The average production in 2019 was 12.2 million barrels per day.
In September, the EIA expects production to rise to 11.2 million barrels per day, as production in the Gulf of Mexico returns.
Carbon-neutral lng to increase costs of natural gas production, consumption
The growing market for carbon-neutral LNG will add a price premium to LNG cargoes, thereby increasing the cost of LNG imports and consumption, with some additional costs passed on to the end-user, according to experts at the Gastech Virtual Summit this week.
The price premium, while distributed between companies in the supply chain, risks increasing the cost of LNG at a time when low natural gas prices are key to displacing competing fuels like coal and penetrating new price-sensitive markets in emerging Asia.
The estimated costs for pricing a carbon-neutral LNG can vary.
One estimate by Australia’s Origin Energy showed that for a standard LNG cargo with average CO2 emissions of 304,000 tons, the “Green Premium” can indicatively be assessed at 80 cents-$1.70/MMBtu assuming an average offset/abatement cost of $10–$20/ton of CO2.
The S&P Global Platts JKM for October was assessed at $4.613/MMBtu on Sept. 9, which means that the premium for a carbon-neutral LNG cargo could be between 17 percent-37 percent of the price of an LNG cargo in the current market. At $4.613/MMBtu a full LNG cargo would cost around $15.7 million, while the same cargo could cost around $18.4 million to $21.5 million if its carbon footprint was fully offset.
“The full cost should be shared along the value chain,” Mark Schubert, Origin’s Executive General Manager, Integrated Gas, said. He said producers and importers will have to reduce the carbon intensity of their supply chain, and take responsibility for some additional costs through regulations or markets.
“Consumers will equally be held accountable for the carbon intensity of their products and a meaningful share of the green premium will have to be absorbed directly as extra cost though some of this could be recouped via premium applied to their final products,” Schubert added.
Another cost estimate by law firm Baker Botts showed that Certified Emissions Reductions verified under the Kyoto Protocol trade between 27 euro cent(32 cents) and 28 euro cent per ton of CO2 for each month remaining in 2020, as of Aug. 6, 2020, yielding a cost of Eur67,500 to Eur70,000 per LNG cargo.
However, carbon offsets through reforestation can easily raise the carbon cost to $10/ton of CO2 or more, which means that offsetting one LNG cargo with average emissions of around 250,000 tons of CO2, could cost $2.5 million per cargo, or 60 cents/MMBtu, Baker Botts said, citing data from GIIGNL.
Steven Miles, senior counsel at Baker Botts, said prices can vary so much due to the different markets for compulsory and voluntary carbon offsets.
Unleashing coal: inside India’s plans to open up commercial coal mining
India is energy hungry. The country, and its roughly 1.3 billion inhabitants, is the third largest energy consumer in the world and it is estimated to have the fastest growing power needs of any nation.
Around three-quarters of India’s electricity supply comes from coal-fired power stations, a number of which are fed by pricey imports. To boost domestic supply, the government is opening up the country’s vast coal reserves to commercial development.
In June, Prime Minister Narendra Modi launched the auction of 41 coal mines, which have an estimated annual production capacity of nearly one-third of the total national output. The move, Modi said, was tantamount to ‘unshackling reserves from decades of lockdown’, adding that he hoped it could lead to India becoming a net exporter of the fuel.
The plans, however, go against the country’s climate change commitments in line with the 2015 Paris Accord, which are contingent on India reducing its dependence on coal power, as well as the global trend of divesting from coal.