Pipeline Boom may Be a Bubble
April 30, 2019
An oil and gas building spree in the United States might have a serious boomerang effect that could hit the industry as hard as a changing fundamentals landscape hit the coal industry in the 2010s, a report from Global Energy Monitor has warned.
According to the report, there is US$232.5 billion worth of new oil and gas pipelines being planned and built right now in North America, with most of this in the United States. This expansion, however, does not rely on an increase in domestic demand for oil and gas. It relies almost exclusively on demand growth in Asia, much like the coal expansion in the 2010s. That, however, went awry, decimating the coal industry.
The factors that could ruin the pipeline expansion in the United States include demand patterns in that key Asian market everyone is targeting as well as changing attitudes—and legislation—concerning climate change and the oil and gas industry.
Asia, and particularly China and India, the continent’s largest economies, have become the top target market for all commodity industries, but the Asian markets are particularly important for the energy industry. Demand for fossil fuels in Europe, for example, is falling steadily under the pressure of climate change-related legislation and changing climate attitudes.
Even in the United States, the EIA has projected a slowdown in oil and gas demand growth, which, according to Global Energy Monitor, means the domestic market would not be able to take all the additional oil and gas coming in from the shale plays that are driving the overall growth in fossil fuel production. In China and India, conversely, energy demand, including oil and gas demand, is on the rise. For now.
Referring to a term coined by John Maynard Keynes—“animal spirits”—the report explains the ambitious expansion plans of energy companies in the U.S. with a misleading sense of optimism that the current supply and demand dynamics will continue. In other words, pipeline builders falsely believe Asian markets will continue to be as thirsty for U.S. oil and gas—especially gas—as they are now. This, according to Global Energy Monitor, is not the case.
Natural gas supply from the Middle East, for one, is on the rise and this rise will hit 65 percent between 2017 and 2040, according to the IEA. What’s more, China’s own domestic production of natural gas is set for a jump of 142 percent by 2040. A strong increase in gas production is expected in Africa and South America as well, with the global total rise at 46 percent, versus 36 percent in the United States. In other words, the U.S. is by far not the only place where gas production is on the rise, which means a lot more intense competition in the coming decades.
Then there is the climate change factor that is increasingly likely to begin pressuring demand for oil and gas in all markets. As one of the authors of the report put it in an interview with Engineering and Technology, “The IPCC has made it clear that emissions in the oil and gas sector need to level out quickly and significantly decline in the next decade. That is incompatible with investments in more oil and gas infrastructure.” Related: Shocking Evidence Suggests Much Faster Global Warming
While it remains doubtful how successful governments’ efforts in the emission-cutting respect will be, the fact remains that such efforts are being made, including in that most desirable of all Asian market where reducing oil and gas consumption is not just a question of emissions reduction, but of reducing the energy import bill.
It seems the risk comes from the belief that the status quo will continue indefinitely. This, however, is not the case and investors should think twice before taking part in new pipeline construction, Ted Nace, executive director of Global Energy Monitor said.
“The oil and gas industry is shaped by the familiar patterns of the boom/bust cycles that characterise extraction,” he told Engineering and Technology. “It’s easy to shift drilling rigs in and out of deployment. But midstream infrastructure is fundamentally different. Investments are for 40 to 50 years. The industry does not seem to realise how quickly the landscape is shifting as costs for renewables and storage fall very rapidly.”
Climate Denial Crock of the Week 
May 1, 2019 at 4:21 am
Well the good news in this Oilprice article is that Asia is moving away from Coal, which is by far the worst of the fossils for the atmosphere.
“Asia continues to pivot away from coal”
https://www.hellenicshippingnews.com/asia-continues-to-pivot-away-from-coal/
Now with crude approaching $70+ US a barrel, is the time for the clean alternates and microgrid industries to convince those “Key Asian Markets” to change.
I wouldn’t cry for the speculators expanding the oil & gas pipeline infrastructure too much, if their plan backfires in their greedy faces.
“These Are the Asian Markets to Watch After Crude Oil’s Spike”
“The market is waking up to the fact that the external oil dependence is quite high” for India.
https://www.bloomberg.com/news/articles/2019-04-23/the-asia-markets-to-watch-after-crude-oil-s-spike-taking-stock
May 1, 2019 at 4:51 am
“Then there is the climate change factor that is increasingly likely to begin pressuring demand for oil and gas in all markets.”
Still need convincing then Potsdam can help. . .
“We find a strong relation between the pattern and persistent heat extremes in Western Europe, North America and the Caspian Sea region. This pattern was present during other years with extreme weather events such as the heat waves in Europe during summer 2015, 2006 and 2003. Moreover, its frequency and duration have in fact increased over the last two decades.“ In the two decaces before 1999, there were no summers that saw a stalling wave pattern lasting for two weeks or more, but since then we have seen already seven such summers.”
https://www.pik-potsdam.de/news/press-releases/summer-extremes-of-2018-linked-to-stalled-giant-waves-in-jet-stream
May 1, 2019 at 5:07 pm
“decases” – spelling error by PIK – shock/horror ?
May 1, 2019 at 9:02 am
Continuing to build pipelines tells me that we will never make climate change goals. Pipelines have to pay for themselves if we keep transferring all this oil we are screwed. It is possible that that someone will get left holding the bag and they will be abandoned, but I’m betting we burn up the planet before we stop using fossil fuels!
May 3, 2019 at 7:32 am
My worry too. Politics in Alberta have both our last and our present government demanding pipelines, even though it seems uncertain that they’ll ever pay off (and the rational among us have to hope they won’t, with ROI over decades required to make them profitable). The Federal government even bought the pipeline to protect the project, but are still treated as an enemy to Alberta and its bitumen production despite that (threats over national unity by the new ‘all-in’ on oil and gas government are the latest symptom of the madness). Oil-dependency ranges from workers used to good wages and desperate to continue that life to executives and politicians who desperate to extract every last drop of wealth. An inadequate carbon tax makes a pretty tattered fig leaf, but even that’s rejected by the “Conservatives”, who think they can win an election by opposing even that (and lying about the rebates that put most Canadians ahead, financially, after the tax and rebates are paid).
If that’s the best we can do, in a stable, wealthy country, we’re in very bad shape.
May 1, 2019 at 11:26 am
China:
https://www.reuters.com/article/us-exxonmobil-china-lng/exxonmobil-agrees-20-year-lng-deal-with-chinas-zhejiang-energy-idUSKCN1RZ069
https://www.chron.com/business/energy/article/Auto-sales-in-China-India-will-push-oil-demand-13744192.php
May 1, 2019 at 11:32 am
India:
https://www.businesswire.com/news/home/20190404005359/en/India-LNG-Business-Market-Outlook-2019-2030-MoPNG
So, potentially 2030 to 2040 there could be peak demand in those countries, most probably for oil, but probably not until then.
What happens then?
Here’s recent news about coal:
https://www.npr.org/2019/04/29/716347646/why-is-china-placing-a-global-bet-on-coal
May 1, 2019 at 3:44 pm
Well into 2019 and finally the penny seems to have dropped in the U.K with a conservative government voting positive . .
Perhaps old fashioned public protests still work.
“UK Parliament declares climate change emergency”
MPs have approved a motion to declare an environment and climate emergency.
https://www.bbc.com/news/uk-politics-48126677
May 1, 2019 at 9:45 pm
Did you not know that the yanks don’t give a shi!t what the UK is doing? Even though they expect the Brexitarians to join the US as the 50th state.
Anyhow, amazing to see the Commons agreeing one something. Fair enough.
May 2, 2019 at 12:11 pm
Commenting on this plus several previous posts of yours, all U.S. Americans support Trump like all UK citizens support Brexit.
I thought we already had 50 states.
The U.S. has always had a fascination and interest in the UK, far more than in any other country. We’re tied historically, culturally, and linguistically. Although, of course, we have more interest in ourselves, as any other ethnocentric human does. Is Ireland different?
Here’s another picture of the States, besides the one you seem to have formed:
https://www.bostonusa.com/events/special-events/st-patricks-day/
May 2, 2019 at 5:41 pm
Hawaii is just occupied.
May 2, 2019 at 10:18 pm
Now you know that would make Harold Wilson light up his pipe and be very happy . .
THE FORMER Labour prime minister Harold Wilson discussed with US President Lyndon Johnson the possibility of Britain becoming America’s 51st state in the 1960s, one of his aides claimed yesterday.
Discussions took place twice, in 1966 and 1967, just before and just after French leader General Charles de Gaulle vetoed Britain’s entry to what was then the Common Market,
https://www.independent.co.uk/news/wilson-wanted-uk-to-be-us-state-1075874.html
May 2, 2019 at 10:04 am
Ha ha. I throw a pale of cold water on this post and then you go and send this. There’s a lot of hopium when it comes to climate change, and I think this Oilprice article is an example of that. Sure, oil and NG will quite possibly hit peak demand in India and China, but it won’t happen any time soon (next ten years), and how long exactly does it take to pay off a pipeline? Additionally, peak demand doesn’t equal zero demand, and there are a lot of other developing countries out there after China and India.
However, the UK declaration is a real source of good news. Right now, it’s just words, but they have taken a lead internationally in at least declaring it a high priority.
“This proposal, which demonstrates the will of the Commons on the issue but does not legally compel the government to act, was approved without a vote.”
May 2, 2019 at 10:05 am
d’oh. pail.
May 2, 2019 at 10:55 am
Nothing wrong with “pale” to describe the container of water—-synonyms are feeble, weak, puny, ineffectual, ineffective, lame, tame, pathetic—–and that’s what it is when you try to extinguish flaming hopium
May 2, 2019 at 10:48 pm
There is science behind Climate Change – the obfuscation is purely created by man. If finally leaders of every nation understand the perilous situation we have gotten into, we can at least give hope to our descendants.
We can do it, but we need to think positively and the people we vore for also need to behave the same.
“Hopium” is an artificial word, you will not find it in a decent dictionary. Hope is an outstanding word. Don’t knock it. It is all we can hang onto.
May 3, 2019 at 7:51 am
Hopium = false hope, which is a sedative to action. It just creates the unrealistic belief that things are going positively, when in reality they are not.
There are a handful of signs of real hope. This Oilprice article, which sources an organization formerly known as Coalswarm, seems to me a good example of false hope. There are plenty of signs that China and India will not reach peak demand in the next decade. I could link plenty of them. During the next decade, the total oil and NG use in those countries will rise, and after that, even after a peak, it will have a plateau period. Then, there are the multiple other developing countries.
False hope.
May 1, 2019 at 8:25 pm
Relying on the Asian Markets for oil exports a bit a a gamble – some positive news domestically from CNN –
America’s renewable energy set to surpass coal for the first month ever
Coal, long the king of the power sector, has already been dethroned by natural gas, a much cleaner burning fossil fuel. Now, coal is facing intensifying pressure from wind and solar power.
“Five years ago this never would have been close to happening,” Dennis Wamstead, research analyst at IEEFA, said in an interview. “The transition that’s going on in the electric sector in the United States has been phenomenal.”
https://edition.cnn.com/2019/04/29/business/renewable-energy-coal-solar/index.html
May 4, 2019 at 11:43 pm
Hopiate, Hopium or hunky-dory hope
“Japanese utilities turn away from coal plans amid green energy boom
These moves come as renewable energy is on the rise in Japan and elsewhere, and as the government brings in stricter regulations on new coal-fired power plants.
A total of 19 Japanese companies, including Sony Corp and Fujifilm Holdings, have joined RE100, an organisation whose members commit to move to 100 percent renewable electricity.”
https://www.reuters.com/article/uk-japan-coal-idUKKCN1S507P
May 5, 2019 at 12:29 pm
It’s hopium when the wording suggests Japan is actively moving towards a carbon-neutral plan, when it’s not. It’s hopium when it cherry picks small bits of positive news and fails to mention bad news. To understand where we are, and where we need to be, we need the full picture – not just little bits of positive spin.
So, taking Japan and FF, let’s look at that. Here’s a paragraph from the article you linked:
“Of Japan’s plans in 2012 to build 50 new coal-fired power units with total capacity of 23.23 GW, 13 units, or 7.03 GW, have been scrapped since 2017, according to data from environment group Kiko Network. ”
Another way to look at that is that Japan still has plans to build or has already built 37 coal plants since 2012. This article gives a clearer picture:
https://www.japantimes.co.jp/news/2019/04/23/business/corporate-business/japans-jera-strives-scale-coal-power-reliance-become-global-leader-renewables/
The Japanese government’s current plan is to reduce coal from 33% in 2016 to 25% in 2030. There are no current plans to end it.
What about NG? Japan is a major importer of LNG:
https://www.reuters.com/article/us-lng-jera-shell/japans-jera-to-buy-up-to-1-2-million-tonnes-per-year-of-lng-from-canada-project-idUSKCN1RL0QA
That contract is from 2024 to 2039.
May 5, 2019 at 12:31 pm
Japan is also a world-leading researcher of methane hydrates:
http://www.bbc.com/future/story/20181119-why-flammable-ice-could-be-the-future-of-energy
So, yes, Japan is going to build more renewables, but that’s not the full story, is it?
May 6, 2019 at 2:55 am
I spend much of my waking day,trawling through University internet boards, and media releases on climate change news for the day. Whilst I realize no story reports the whole picture, I still think it is worth publishing to interested people who follow my group – most are hard working and do not have time to spend the hours trawling the press like retired me.
Your answer demonstrates to me the value of people like Greta Thunberg, who are succeeding in getting the common message across international borders.
There needs to be awareness and movements in all countries, especially in these times when populism is spreading across many populations.
If Japan has a significant population movement trying to reel in carbon emissions – local national governments will take note, unfortunately there are still far to many who are completely oblivious to the perils, many who do not yet see the problem.
May 6, 2019 at 4:12 am
and by the way there are plenty of activists already in Japan – now is not the time to be silent and accepting anywhere on this planet.
https://www.japantimes.co.jp/news/2018/10/13/national/japanese-organizations-officials-gather-tokyo-support-paris-climate-accord/
May 6, 2019 at 5:08 am
Not sure your age or occupation, those were a bit old & boring, so here’s some younger activists (including from the land of the rising sun).. .
https://www.theguardian.com/commentisfree/2019/mar/15/young-climate-activists-striking-today-campaigners
May 6, 2019 at 10:51 am
You have the need to see the bright side of things, and that’s fine. That news is definitely part of the story. Overall, though, I think humans are better served by seeing the whole picture. You keep doing what you do, and I’ll do what I do. And best wishes to you – I don’t doubt your sincerity or efforts.
If I’m fortunate enough to live to 2050, I’ll be 80.
May 6, 2019 at 3:12 am
More pipelines = more oil spills
“Oil spills don’t make the news very often unless they are big, like the 2010 Deepwater Horizon spill, which killed 11 people and spewed an estimated 205 million gallons of oil into the Gulf of Mexico. But spills happen frequently. According to data from the U.S. National Oceanic and Atmospheric Administration (NOAA), there were 137 oil spills in 2018, about 11 per month.”
https://cleantechnica.com/2019/05/05/there-were-137-oil-spills-in-the-u-s-in-2018-see-where-they-happened/