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An unforgettable year

Published by , Editorial Assistant
World Pipelines,


The global pipeline industry has experienced more challenges this year than in any other, with low energy demand, falling oil and gas prices, geopolitical conflict and the onset of the COVID-19 pandemic. Against this backdrop, Dr. Hooman Peimani provides an overview of 2020’s major pipeline projects, and what lies in store for their progress in 2021.

By every account, 2020 has been an unforgiving year for the global energy sectors, with a long-term impact on pipeline activities. Singling out the COVID-19 pandemic as the main culprit for their current poor performance has become a fashion. However, while the pandemic is surely a reason, it is not the only cause of this disappointing reality, which will likely last long after the pandemic’s full containment.

Exceptions aside, the ongoing poor global economic performance – with its corresponding lowering demand for energy and record low oil and gas prices – is the result of a host of developments, which started prior to the pandemic’s outbreak. Briefly, economic malfunction began in this century’s first decade, leading to a global recession prompted by the fiscal mismanagements in the US to spillover to Europe (with its own economic weaknesses) to facilitate a continental recession.

The development’s domino impact spared no country, particularly the Asian heavyweights, namely Japan, South Korea, Taiwan and China, although the last one experienced it in a lower GDP growth rate as the global market was shrinking. By and large, the recovery in the major global economies, particularly the EU ones, was weak and achieved over a long period of time well into the second decade.

Donald Trump’s ascension to power in January 2017 and his declared policy of America first at the expense of all other countries, including the US allies, has been translated into a US-led trade war targeting all the economic heavyweights, including the EU, Russia, Canada, China, Japan, South Korea, India and Turkey. Its tightening of sanctions on its present enemies has affected many oil and gas-exporting countries, particularly Iran and Venezuela. The contracting global markets have been further shrunk by various armed and political conflicts in fossil energy-exporting countries (Algeria, Iraq, Egypt, Libya, Sudan, South Sudan, Nigeria, Yemen and Venezuela) affecting their energy export capabilities adversely while shrinking their markets.

A series of devasting natural disasters on all continents (e.g., hurricanes and forest fires) have further damaged the global economies, reducing demand for energy, while damaging oil and gas production. It is reflected in Hurricane Delta, which, as of 8 October, “led to the shut-in of almost 62% of gas and 91.5% of oil supply in the Gulf of Mexico” as reported by Natural Gas World.

Within this context, the growing concern about global warming has helped expand renewables, especially wind and solar farms, encouraged further by their falling prices along with those of their required batteries. Charged by those farms during their operation, they have created hope for addressing wind and solar energy’s intermittency.

Of course, these intermittent and the continuous types of renewable energy (mainly hydro and geothermal) cannot fully replace fossil energy to meet the current electricity demand (27004.7 TWh in 2019; total renewables: 7027.7 TWh; equal to 26%, BP 2020) to last in the foreseeable future. Generating electricity with renewables to satisfy the energy requirements for all other purposes is unrealistic. As reported by BP in June 2020, total energy demand in 2019 was 583.9 EJ of which the share of renewables, including hydro-electricity, was 66.64 EJ (11.41%).

Briefly, achieving low-carbon and, ideally, zero-carbon economies necessitates reliable alternative energy to fossil fuel. It therefore requires not only renewable and nuclear energy, but also other non-CO2 emitting types, particularly as replacements for liquid and gaseous fuels for sea, land and air transportation and industrial, agricultural, residential and commercial needs. That excludes biofuels because of their pollutive and/or water and energy-intensive production process.

However, the expansion of renewable energy globally while nuclear energy is expanding mostly in Asia (e.g. China, India, Iran, Turkey and UAE), has surely been another factor in lowering demand for oil and gas, keeping many operating pipelines under-utilised, slowing down the implementation of pipeline projects and shelving many others in the absence of certainty about a sustainable demand during their life span. Against this background, the lockdowns implemented in reaction to the COVID-19 pandemic triggered a global recession by shutting down all the activities deemed unessential to push energy demand to the lowest, as especially reflected in the case of oil. In September, the International Energy Agency warned of ‘even more fragile’ world oil markets due to a new wave of COVID-19, and projected that oil demand for the entire year of 2020 will plunge by 8.4 million bpd from last year.

Although, by varying degrees, the loosening of lockdowns has prompted some industrial normalcy in a few countries (e.g., China), the global economic recovery will not be rapid due to the unsustainable nature of such normalcy in the absence of a significant economic revitalisation in other countries, and the potential for further waves of the pandemic.

In fact, it is uncertain whether the pre-pandemic level of economic activities and its corresponding energy demand could be restored in the near future. It is equally uncertain what the long-term energy demand will be, given the prominence of environmental concerns in the pandemic era translated into a demand and/or planning for a low or zero-carbon global economy, to encourage an increasingly lower consumption and eventual phasing out of oil, gas and coal.

Uncertainty about the long-term energy demand and its sustainability creates doubts as to the wisdom of full restoration of energy production and transportation capabilities, as well as investment in new projects. Thus, the end of the pandemic is a necessity, but not the only requisite, for ensuring a large, sustainable global energy demand and for the implementation of delayed and downsized energy projects.

No wonder if heavyweight BP suggested in September that oil had already peaked when another oil major, Total, predicted oil would peak near 2030. Reportedly, many hydrocarbon corporations, including BP and Shell, are planning to become energy companies with a more balanced portfolio to include significant shares of renewables. BP, for example ‘wants 50 gigawatts (GW) of renewables such as wind, solar and hydropower in its portfolio by 2030, up from just 2.5 GW now and more than the total renewable capacity in the United Kingdom at the moment’, as Reuters reported in August. Based on the most-recent data (2019) provided by IRENA, the UK’s installed renewable capacity is 7.26 GW.

Against a falling global demand, an increasing global supply of oil and gas – with the effect of lowering their prices – makes their respective operations unprofitable, prompting downsizing (e.g., BP and ExxonMobil) and heavy losses (e.g. Occidental Petroleum, US$8 billion 2Q20). Due to its high production cost compared to conventional oil, the Canadian oilsands producers have experienced a combined loss of CAN$8.8 billion and CAN$2.4 billion in this year’s first and second quarters, respectively, as reported by an Oil Price.Com Intelligence Report in August.

Certain factors have also affected the energy situation in some of the major oil and gas-producing regions, with implications for pipeline activities.

To continue reading this article, which goes on to explore the energy situation in various major oil and gas-producing regions, click here.

Read the article online at: https://www.worldpipelines.com/special-reports/24122020/an-unforgettable-year/

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