Oil Production Slows In Shale Patch // Combined-Cycle Gas Turbine Capacity Grows // Renewable Deployments Tumble 22%

Oil Production Slows In Shale Patch

Shale companies are making hand over fist and the world is hungry for more hydrocarbons. Yet industry insiders are saying that shale patch production is starting to ebb and will keep American oil output mostly flat. Bad news for the tight international market.

"What was expected to be a banner year for U.S. oil production has failed to materialize as creeping inflation-related costs, supply-chain snarls and disappointing well performance for some companies have coalesced to limit domestic output," reports the Wall Street Journal.

The shale boom in the 2010s re-patterned oil markets and thus geopolitics. It put Texas on the map as a dominant producer in the sphere, shoulder checking Russia and OPEC out of the top spots. But it relied heavily on low-interest rates and banks willing to lend out the wazoo to boost production. With the money drying up, workers exiting the industry, and the aforementioned supply chain and inflation issues, the boom now sounds like a faint echo of itself.

"In the contiguous U.S., oil production through August has increased only 3% since December, up 288,000 barrels a day to 9.77 million, according to the Energy Information Administration," reports WSJ. "It had earlier expected total U.S. oil output—including Alaska and the Gulf of Mexico—to hit 12.64 million by December, growing more than 1 million barrels a day compared with the same month last year. It has since lowered its projection almost 500,000 barrels a day."

It would be hard to pick a worse time for a shale slowdown in America, but here it is. For a deeper dive into what's going on in O&G, check out our op-ed from Mark Hinaman of Franklin Mountain Energy, "An Oil & Gas State of the Union."

Combined-Cycle Gas Turbine Capacity Grows

This year, America has seen eight gas-fired combined cycle (CCGT) power plants come online. Together, they add 7775 MW of capacity to the grid. These projects turn around a decline in CCGT builds. According to a new report, the Energy Information Administration expects CCGT electric capacity to hit 24% of total electric generating capacity, which is about 290 GW.

"CCGT plants are one of four major sources of natural gas-fired power generation and the single largest source of both electric-generating capacity and electricity generation. CCGT plants use both a natural gas and a steam turbine," reports the EIA. "Output from the U.S. CCGT fleet will likely rise from the 1,326,278 gigawatthours (GWh) it generated in 2021, which was 32% of total electricity generation last year. Shares of coal-fired generation (22%) ranked second, and nuclear sources (19%) ranked third in terms of electric-generating capacity and electricity generation in 2021."

Between 2000 and 2006 about half of the current CCGT fleet came online. There've been steady CCGT additions to the grid over the last two decades, but according to the EIA, this 2022's additions to the CCGT fleet are 80% below the record years of 2002 and 2003.

The majority of the CCGT positions are in the PJM and MISO markets. PJM will see three new CCGT plants totaling 3918 MW of capacity. They're meant to help replace over 5000 MW of coal retiring in PJM this year, plus nearly 4000 MW of coal retirements next year.

In MISO, "1403 MW of new CCGT capacity will replace the 1,560 MW of existing coal-fired generating capacity that will retire this year."

Ostensibly, MISO and PJM will rely on imports and renewables to shore up the gap in capacity, though renewables deployments have hit serious roadblocks this summer. It appears these regions are entering deep into the fatal trifecta: over-reliance on imports, over-dependence on just-in-time natural gas, and overbuilding wind and solar.

The two CCGT plants in Florida (2222 MW of capacity) will replace nearly 1500 MW of coal capacity. It's worth noting that methane leaks aside, this pivot to natural gas in place of coal will make America's grid cleaner.

"We expect 4,215 MW of CCGT capacity will be added in 2023, when five new plants are slated to open," reports the EIA. "All of those facilities are currently under construction, and we expect operations to begin before the end of 2023."

Renewable Deployments Tumble 22%

Renewable energy developers brought only 3.5 GW of capacity online this quarter--the least in three years, says a new report from American Clean Power.

"Year-to-date installations are down 18% compared to the same period in 2021, while comparable third quarter additions fell 22%," reports ACP. "Quarterly wind installations fell 78%, while solar installations dropped 23%."

What gives?

Delays piled up because developers strained to get solar panels, struggled to sort through supply chain problems, and faced deepening interconnection queues to the grid. "In total, 14 GW of clean power capacity was delayed this quarter, adding to a growing backlog of delayed projects that totals 36 GW – 63% of which are solar projects," ACP reports.

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Conversation Starters

1. California is preparing to release a plan that will halt rooftop solar incentives. "In California, there has been a multi-year war waged over the fate of a mechanism called net energy metering (NEM). The process involves customers sending their excess solar-generated electricity to the grid and receiving a credit on their utility bill at a retail rate for all exported electricity," reports PV Mag. "A new revised NEM proposal is set to be released after the elections on November 8, 2022."

2. France's nuclear output forecasts have dropped. "France is staring down a serious risk of blackouts this winter, with French utility EDF lowering its nuclear power output forecast for this year to 275-285 terawatt hours," reports Oilprice.com. "The shift in power forecast is a sizeable one, down from its previous 280-300 TWh, which EDF attributes to strikes on maintenance schedules, and extended maintenance outages to address stress corrosion issues. Its previous forecast was already a significant revision--not to mention the third revision--and represented a 30-year low due in part to a string of backlogged maintenance during Covid." Nuclear is 70% of France's electricity generation.

3. The White House is trying to get Kyiv to the bargaining table. "The Biden administration is privately encouraging Ukraine’s leaders to signal an openness to negotiate with Russia and drop their public refusal to engage in peace talks unless President Vladimir Putin is removed from power, according to people familiar with the discussions," reports The Washington Post. "The request by American officials is not aimed at pushing Ukraine to the negotiating table, these people said. Rather, they called it a calculated attempt to ensure the government in Kyiv maintains the support of other nations facing constituencies wary of fueling a war for many years to come."

Crom's Blessing