12 outside the box energy predictions for 2019
A month-by-month roundup of what to expect in the year to come
As a tumultuous year in energy closes, 2019 is set to be another as technology, markets, politics and macroeconomics collide. Here’s what I predict.
The year opens with sunshine, as January’s World Future Energy Summit in Abu Dhabi features numerous clean energy highlights. During the year, Dubai achieves another world record for the lowest concentrated solar power price and the largest plant, as bidders go far beyond the requested 300 megawatt scope. Meanwhile, Abu Dhabi, Oman and Saudi Arabia beat the once unthinkable level of 2 US cents per kilowatt-hour for solar photovoltaic projects.
In February, an Arabian Gulf national oil company (NOC) makes its boldest step yet internationally, taking advantage of depressed valuations and acquires a large western upstream player. The NOC wants technology and experience for shale, heavy oil and liquefied natural gas (LNG), and a portfolio of oil and gas to trade. Constrained by Opec restrictions from growing at home, it can now expand abroad. And with growing pressure on pension funds and endowments to divest from fossil fuels, it helps to have a shareholder with no such qualms.
Brexit’s chaotic deadline arrives in March. Long queues of lorries at British ports and grounded planes hit fuel demand. Along with Russian president Vladimir Putin, Donald Trump congratulates Britons on their democratic choice, but at home, the “Trump slump” deepens. A rudderless administration battles possible impeachment instead of its deepening trade war with China and a recession moving from Wall Street to Main Street.
In April, Asian refiners stop loading Iranian crude cargoes again, not sure whether they will receive US waivers when the six-month grace period expires in May. With Europe still struggling to set up payment channels even for humanitarian supplies, President Hassan Rouhani comes under intense domestic pressure to cease cooperation with the joint nuclear deal. Yet above its known exports, some 300 000 barrels per day of Iranian crude still avoids US detection, keeping its economy afloat.
That month’s Opec meeting is acrimonious, Tehran charging that Saudi Arabia and Russia run the organisation and are taking market share at its expense. Minister Zanganeh walks out, and even talks of withdrawing from Opec, leaving Riyadh and its allies to go it alone. Iraq announces a further jump in production as ExxonMobil expands its export capacity, pushing prices down further.
The regional economic outlook is gloomy. In May, more refugees flee eastern Syria as the Kurdish-led Syrian Democratic Forces, pro-Turkish forces, and Assad, with his Iranian allies, try to seize their spheres of influence over the area’s oil and water, and pockets of ISIL fighters re-emerge. Israeli air-strikes in Syria raise worries over a new conflict in Lebanon.
Beirut’s precarious fiscal balancing act topples over with a run on its banks and currency. The panic spreads to two other weaker regional countries, as remittances fall, borrowing costs spike and low oil prices drive ballooning deficits. Saudi Arabia and the UAE bail them out to prevent contagion.
In June, electric cars take a step towards the mainstream. Outside China, twelve new models launch in a record year. The Audi e-tron challenges Tesla in sportscars; the Kia Soul, Volkswagen ID and Mini E fill the more affordable range; Mahindra’s eKUV 100 electrifies the giant Indian market. Beijing affirms that from 2030, all new vehicles will have to be electric. China boasts five of the world’s top ten electric carmakers, trying to leapfrog conventional manufacturers.
July brings no relief from the US oil glut, as new pipelines from the Permian Basin open. The country’s production surges above 12 million barrels per day, an all-time record for any country. But lower prices are finally dampening drilling.
It’s a hot Gulf August. A record heatwave here, Arctic ice-melt, drought in the western US and Australia, coincide with a massive hurricane that inundates Miami. The one bright spot for the climate is that the slowing world economy pumps out less carbon dioxide.
The region’s energy industry is rattled in a torrid September. A cyberattack shuts down oil loadings at Saudi Arabia’s Ras Tanura for several days, with confusing fingerprints of Russian, Iranian or perhaps other hackers. A remote-controlled boat bomb puts one of Iraq’s offshore tanker loading points out of service for months; ISIL claims responsibility, but again suspicion falls on Iranian-backed groups retaliating over sanctions.
Russia reacts quickly, offering its aid to keep the Gulf safe for navigation, and, in October, sets up a small naval base in a Gulf country. The move stirs unease in regional capitals, Washington and Beijing.
November sees the International Maritime Organisation’s rules on cleaner shipping fuels starting to bite. Vessels have to empty their tanks in preparation for the rules’ adoption in January 2020. Prices for heavy, high-sulphur fuel oils plunge, but cleaner diesel rises as refiners cannot make enough to meet the new demand. The impact is blunted by low oil prices, but comes as another blow to struggling world trade.
A difficult year closes with Christmas presents for the new energy economy. Gulf countries push ahead with a series of privatisations, including 10 per cent of a national oil company. They pour the receipts into advanced technologies including an American carbon capture company, a joint venture with a Chinese electric carmaker, and a European breakthrough battery.
The outlook for oil remains negative and volatile, so the exporters have placed some big bets on its competitors. In 2020, those start paying off. As turbulent as 2019 was, the energy news the year after takes the world by storm.
Robin M. Mills is CEO of Qamar Energy, and author of The Myth of the Oil Crisis
Updated: December 30, 2018 10:50 AM