Best in Energy – 2 November 2022

[MUST READ] South Africa’s transition from coal ($FT)

Maersk predicts container volume down 2-4% in 2022

UAE advised against cutting OPEC⁺ output target ($WSJ)

Russia oil exports predicted to fall by 0.5-1.0m b/d ($FT)

Europe’s industrial base at risk from high energy prices

U.S./Europe compete to attract investment ($FT)

United Kingdom tests plan to restart power grid ¹

Black start – planning for a complete grid failure

China’s coal production situation (trans.)

China’s updated city classification list (trans.)

California plans to repurpose gas network ($WSJ)

¹ This article seems to be merging the related but separate concepts of rotating power cuts to cope with possible electricity shortages caused by insufficient gas-fired and renewable generation this winter with restarting the grid after a total failure such as might be caused by an accident or sabotage.

“Yarrow” sounds like a plan for a “black start” of generation, transmission and distribution systems following complete failure. Electricity network managers in the United Kingdom and other countries have planned for a black start for decades. It is one of those remote “high impact low probability” risks commonly used in scenario planning.

The United Kingdom has never had to undertake a nationwide black start though a regional one was necessary in parts of the southeast following damage caused by the Great Storm of October 1987.

Black starts involve a complicated series of steps and would take several days to complete. Designated generating units would have to be started up autonomously, following by limited energisation of the transmission grid, first regionally and then nationally.

Black start sites often have auxiliary diesel-fired generators maintained at a high state of readiness that can restart without external power. The auxiliary generator is then used to start one or more main generators (usually oil, coal or gas-fired) on the same site which are then reconnected to the grid.

Progressively more generators would be started up and synchronised to the network, which would start to provide limited power to the local distribution systems. Protected sites would start to receive power and then more customers as sufficient power becomes available.

The process could take up to 5-7 days in the event of total failure. In the meantime most customers would receive no power or be subject to rotating power cuts to limit demand while generation is restored gradually.

The complexity and time needed for a full black start explains why grid managers attempt to avoid them at all costs. Temporary but controlled load-shedding directed by grid managers is preferable to uncontrolled cascading failure of the power grid leading to collapse and forcing a black start.

Black start should be a very remote risk in a well-run grid. But the sabotage of the Nord Stream pipelines has focused attention on the risks of deliberate attacks on energy infrastructure and will make black start a higher priority for emergency planners.

EUROZONE manufacturers reported an accelerating decline in activity last month as the region’s economy was hit by inflation, soaring energy prices, supply chain problems, Russia’s invasion of Ukraine and the EU sanctions imposed in response. The composite purchasing managers’ index slipped to 46.2 in October (12th percentile for all months since 2006) from 48.4 in September (24th percentile) and 58.3 in October 2021 (92nd percentile). The composite index has been below the 50-point threshold dividing expanding activity from a contraction for four months running, confirming the zone’s economy is entering a recession:

Best in Energy – 20 May 2022

China accelerates purchases of Russian crude*

China increases crude inventories*

China boosts energy imports from Russia ($BBG) *

U.S./China talks on Russia strategic oil purchases*

U.S./China top diplomats hold telephone talks*

United States open to Russia oil secondary sanctions*

China cuts mortgage rates sharply to boost economy

Italy boosts Russian oil imports ($FT)

Germany prepares for rationing industrial gas supply

China completes Daqing coal rail maintenance (trans.)

U.K. postal service to raise prices again as costs surge

U.K. consumer confidence lowest since at least 1974

Finland prepares for end of Russian gas flows ($BBG)

U.K. grid practises black start with renewables ($BBG)

* An interesting cluster of stories has emerged over the last 24 hours about China increasing crude oil purchases from Russia, but using the extra volumes to replenish strategic reserves, which the White House says would not violate any sanctions. The first six items should all be read in this context.

China does not report commercial or strategic reserves and there is less distinction between them than for IEA countries, so there is no way of ascertaining whether extra crude is really going into strategic inventories or being added to commercial stocks to be refined or depleted later. The concept of “replenishment” of strategic stocks is also curious because China did not join the U.S.-led emergency oil releases in late 2021 and early 2022.

An outside observer might conclude China is boosting its purchases of deeply discounted Russian crude, but the White House has decided to ignore it, at least for the time being, because it does not want to risk triggering a further rise in prices, especially before congressional elections in November, where inflation is emerging as the dominant political issue.

U.S. FINANCIAL CONDITIONS were tightening rapidly even before this week’s tumble in equity prices, as access to credit and risk capital becomes more restricted and expensive:

EUROPE’s GAS FUTURES summer-winter calendar spread from July 2022 to January 2023 has moved into a small contango of €2/MWh, down from a record backwardation of more than €70 in early March, as storage fills at record rates and inventories become more comfortable:

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