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PEAK OIL AND ENERGY CRISIS NEWS ARCHIVES 2014 | ||
To Go Direct To Current Energy News Reports - Click Here To Go Direct To 2014 News Reports Archive - Click Here | ||
Peak Oil and Energy Crisis News Current Earlier Peak Oil And Energy Crisis News |
"It is now generally accepted by those actually studying the issue that
production of 'conventional oil,' which is what the early 'peakists' were talking about 10
or 15 years ago, really did stop growing back in about 2005-2008. Since then official
'oil' production numbers have continued to climb slowly, but included in the 'official'
numbers as put out by the US and international agencies is not all your grandfathers
oil. Instead the compilers of our oil statistics have learned to lump all sorts of liquid
hydrocarbons of varying utility together and tell us that oil in the form of 'all liquids'
continues to grow. Now these hydrocarbons such as natural gas liquids, biofuels, tar
sands, and shale oil have uses, but they either cost considerably more to produce than
conventional oil, or do not have the same energy content as conventional oil. In at least
one case, 'refinery gains' which are sort of like whipping up a pint of cream into gallons
of whipped cream, have no additional energy in their expanded state at all. They simply
fill more barrels and let us pretend we have more energy to use than we actually do. While
the financial press continues to chatter endlessly about the technological breakthroughs
that have brought us millions of barrels of new shale oil, sadly they have the basics of
the story wrong. It is the high prices that 'oil' has been selling for in the last ten
years, not the decades-old fracking technology that has allowed very expensive shale oil
to be produced that is new. Even with the recent $40 per barrel price decline, oil is
still selling for four times what it was going for 12 or 13 years ago. It is the surge in prices to circa $100 a barrel has allowed very
expensive oil such as that from fracked shale wells, the Canadian tar sands, and deep
offshore oil wells to be produced; now with oil selling for closer to $70 a barrel the
question is how long oil that is no longer economic to produce will keep being extracted. The other question is just how much of our oil supply is in danger of
being mothballed until prices climb again as they surely will. The reason for the current
fall in prices is still in debate. The 'oil' supply has continued to creep up in recent
years, but starting last June the demand for $100+ oil was no longer there. While demand
in the 'rich' OECD countries has been down since the 2008 oil price spike, this year it
seems to be the slowing Chinese economy and its reduced demand for raw materials that has
been behind the sinking demand. Many of the developing economies have been growing and
using more oil each year due to growing trade with the Chinese. Someday conventional wisdom will conclude that oil at circa $100+
a barrel was simply too much to sustain high rates of economic growth and so the growth
fell taking oil demand along with it. " |
|
Contact | 'We need a new way of thinking' - Consciousness Based Education |
PEAK OIL AND ENERGY CRISIS NEWSBITES |
2014 |
"Oil prices fell Wednesday and ended the
year with the worst annual price drop since 2008, reflecting the global supply glut caused
by slowing demand from China and the booming U.S. shale production. U.S. crude (West Texas Intermediate) settled down 85 cents to
$53.27 Wednesday. It dropped 46% for the year. Brent was down 57 cents Wednesday to
$57.33. It fell 48% for the year. In the past, the
Organization of the Petroleum Exporting Countries (OPEC) has cut oil output to keep price
afloat in times of supply abundance. But the group, comprised of 12 oil producing nations,
has been reluctant to lower supply this year, fearing that its market share will be eroded
by heightened competition from U.S. suppliers. While a Reuters
survey Tuesday showed that OPEC nations output fell by 270,000 barrels per day
in November and December, it still predicts 'a large excess supply next year.' 'The main
reason for oils decline is OPEC sitting on the fence,' Giovanni Staunovo, an analyst
at UBS AG in Zurich, told
Bloomberg News. 'To prevent an excessive inventory build-up, non-OPEC supply growth,
particularly U.S. tight oil, needs to decelerate or stall temporarily.'" |
"It
is now generally accepted by those actually studying the issue that production of
'conventional oil,' which is what the early 'peakists' were talking about 10 or 15 years
ago, really did stop growing back in about 2005-2008. Since then official 'oil' production
numbers have continued to climb slowly, but included in the 'official' numbers as put out
by the US and international agencies is not all your grandfathers oil. Instead the
compilers of our oil statistics have learned to lump all sorts of liquid hydrocarbons of
varying utility together and tell us that oil in the form of 'all liquids' continues to
grow. Now these hydrocarbons such as natural gas liquids, biofuels, tar sands, and shale
oil have uses, but they either cost considerably more to produce than conventional oil, or
do not have the same energy content as conventional oil. In at least one case, 'refinery
gains' which are sort of like whipping up a pint of cream into gallons of whipped cream,
have no additional energy in their expanded state at all. They simply fill more barrels
and let us pretend we have more energy to use than we actually do. While the financial
press continues to chatter endlessly about the technological breakthroughs that have
brought us millions of barrels of new shale oil, sadly they have the basics of the story
wrong. It is the high prices that 'oil' has been selling for in the last ten years, not
the decades-old fracking technology that has allowed very expensive shale oil to be
produced that is new. Even with the recent $40 per barrel price decline, oil is still
selling for four times what it was going for 12 or 13 years ago. It is the surge in prices to circa $100 a barrel has allowed very
expensive oil such as that from fracked shale wells, the Canadian tar sands, and deep
offshore oil wells to be produced; now with oil selling for closer to $70 a barrel the
question is how long oil that is no longer economic to produce will keep being extracted. The other question is just how much of our oil supply is in danger of
being mothballed until prices climb again as they surely will. The reason for the current
fall in prices is still in debate. The 'oil' supply has continued to creep up in recent
years, but starting last June the demand for $100+ oil was no longer there. While demand
in the 'rich' OECD countries has been down since the 2008 oil price spike, this year it
seems to be the slowing Chinese economy and its reduced demand for raw materials that has
been behind the sinking demand. Many of the developing economies have been growing and
using more oil each year due to growing trade with the Chinese. Someday conventional wisdom will conclude that oil at circa $100+
a barrel was simply too much to sustain high rates of economic growth and so the growth
fell taking oil demand along with it. As nearly
every action has a reactive feedback, we now are likely to see some sort of economic
revival in those countries that have had to import a large share of their energy during
the time of higher prices. Conversely the many states that have benefited from having
large quantities of excess oil to export will not be doing so well for a while. Where we
are going from here is of course the question of the day. It currently looks as if oil
prices will continue to fall a bit more. The Saudis say they expect $60 a barrel will be
the equilibrium place. If this happens in the next few months, then we clearly will see a
reduction in the drilling for high-cost to produce oil. In the case of fracked shale oil,
which requires constant drilling just to keep production even, this means we could
see a reduction in output next year despite the protestations of many shale oil drillers
that this will not happen. Should US shale oil production actually fall next year, then
global 'all liquids' production could fall too. A few astute analysts are already
mulling whether just perhaps 2014 will someday be recognized as the all-time high for
global oil production or in other words 'peak oil.' It is still years too early to
pronounce that an all-time peak in what we now call 'all liquids' has occurred, but it is
an interesting thought." |
"The
Obama administration on Tuesday bowed to months of growing pressure over a 40-year-old ban
on exports of most domestic crude, taking two steps expected to unleash a wave of
ultra-light shale oil onto global
markets. The Bureau of Industry and Security, or BIS, which regulates export controls,
said it had granted permission to 'some' companies to sell lightly treated condensate
abroad. Condensate is a form of ultra-light crude.
Some two dozen energy companies had asked the agency for clarification on permissible
exports earlier this year, but until Tuesday those requests had been put on indefinite
hold. The BIS also released guidance in the form of frequently asked questions, or FAQs,
to explain what kind of oil was generally allowed under the ban, the first effort by the
administration to clarify an issue that has caused confusion and consternation in energy
markets for more than a year. The two measures are clearest signs yet that the
administration is ready to allow more of the booming U.S. shale oil production to be sold
overseas, where drillers have said it can fetch a premium of $10 a barrel or more. They
follow a year of murky messages and widespread uncertainty over what is or is not allowed
under a trade restriction that critics say is a relic of a bygone age, when oil was seen
as scarce after the 1970s Arab oil embargo. A domestic drilling boom of the past six years
has transformed the United States into an energy powerhouse, boosting U.S. production by
more than 50 percent and reversing decades of decline. Output of very light oil has been
especially strong, leading to a glut that threatens to overwhelm domestic demand. The
constraints helped fuel bumper profits for refiners such as Valero Energy Corp (VLO.N) and PBF
Energy Inc (PBF.N),
but angered drillers such as Hess Corp (HES.N) that say
they were selling at a discount. Jamie Webster, the senior director of oil markets at
research firm IHS, said the FAQ "takes the leash off of (the U.S. Department of)
Commerce" and signals it may take additional action on crude exports after several
months of inaction." |
"A
third of Britains listed oil and gas companies are in danger of running out of
working capital and even going bankrupt amid a slump in the value of crude, according to
new research. Financial risk management group Company Watch believes that 70pc of the
UKs publicly listed oil exploration and production companies are now unprofitable,
racking up significant losses in the region of £1.8bn. Such is the extent of the
financial pressure now bearing down on highly leveraged drillers in the UK that Company
Watch estimates that a third of the 126 quoted oil and gas companies on AIM and the London
Stock Exchange are generating no revenues. The
findings are the latest warning to hit the oil and gas industry since a slump in the price
of crude accelerated in November when the Organisation of Petroleum Exporting Countries
(Opec) decided to keep its output levels unchanged. The decision has caused carnage in oil
markets with a barrel of Brent crude falling 45pc since June to around $60 per barrel. The low cost of crude has added to the financial pressure on many
UK listed drillers which are operating in offshore areas such as the North Sea where oil
is more expensive to produce and discover." |
"When
the oil worlds most important man says anything, people pay attention. But the
usually aloof Ali al-Naimi, Saudi Arabias oil minister, took market observers by
surprise last week when he did something he would never normally do talk the market down.
Rather than instil calm as the price of oil fell to a five and a half year low of around $60 a
barrel, Mr Naimis forceful and at times bellicose comments only gave those betting
on lower prices encouragement to keep selling. Opec,
led by its largest producer and effective leader Saudi Arabia, would not be cutting output
to bolster prices, said Mr Naimi, reaffirming the cartels decision at its November
meeting to keep its output target at 30m barrels a day. But he did not stop there. His
comments, in a series of interviews, went beyond any official remarks. Mr Naimi said:
cutting production was no longer in the interest of Opec producers; the price of oil may
never reach $100 a barrel again; even if non-Opec producers come to an agreement on cuts,
the cartel would not now change tack; high-cost producers may try and hold out but the
financing would sooner or later dry up. Whether his words were simply
'bravado' or articulation of a well-thought out strategy to remove some high-cost
production off the market, they represent an attempt to regain control of a situation that
many industry participants say has caught Saudi Arabia by surprise. And the message is
simple. Those energy companies and financiers invested in any high-cost production, from
US shale plays to output from Brazils deepwater fields, need to realise it is not
worth the bother. A person briefed by Saudi officials said the countrys national oil
company has been told to prepare for at least two years of lower oil prices, something
that kingdoms finance minister on Thursday also alluded to. Indeed, after releasing
the 2015 budget, Ibrahim al-Assaf, Saudi Arabias finance minister, said: 'We have
the ability to endure low oil prices over the medium term' of up to five years, even if it
means delving into fiscal reserves to cover a large deficit. But Mr Naimis remarks
that Saudi Arabia and other Gulf producers have an upper hand is predicated on a belief
that they not only have the reserves and the spare capacity, but also the relationships
with banks and access
to financing that other producers both within and outside of Opec do not. Most oil market watchers expect prices to rise eventually. While
some say the second half of next year, others say 2016. Mr Naimi himself has said the price drop is 'temporary' but what this
means exactly is anyones guess. Even if Saudi Arabia believes $60-$80 a barrel is an
acceptable level for prices for the foreseeable future, what if prices drop much lower,
hitting investments? The implication of prices going too far in the other direction as
output falls dramatically is also unclear." |
"Saudi
Arabia's 2015 state budget assumes an oil price close to current levels of around $60
(£38.56) a barrel for Brent
crude LCOC1, a shift from past budgets which were based on prices well below market
levels, analysts say. The kingdom doesn't reveal the
oil prices which it uses to calculate its annual budgets. So analysts estimate them,
making assumptions about several other variables such as planned oil exports and
production for the following year. For the 2015 budget, announced on Thursday, four analysts' oil price
estimates are in a range of $55 to $63. That does not mean Saudi Arabia necessarily expects such
prices next year -- Finance Minister Ibrahim Alassaf said on Thursday there was a great
difference of opinion over when prices would start rebounding, with some people predicting
the second half of next year and others 2016." |
"Ali al-Naimi, Saudi Arabias
veteran oil minister, has set out a comprehensive and convincing analysis of the oil
market and his countrys strategy, explaining its refusal to agree to production cuts
at the Opec meeting on November 27. 'It is not in the interest of Opec producers to cut
their production, whatever the price is,' Mr Naimi said in one interview.... The power of
Opec has often been overstated. Apart, perhaps, from during its heyday in the 1970s, the
cartels control over oil has been analogous to central banks ability to
influence exchange rates: sometimes effective in nudging prices towards where they would
eventually have gone anyway but doomed to failure if it tries to resist market forces for
too long. Mr Naimis argument, however, is that those market forces favour producers
in the Middle East, which have some of the worlds lowest costs, over the more
expensive shale industry in the US. As he has explained, it makes no sense for the Saudis
to curb their output to support prices because high-cost producers, in Russia, Africa and
Brazil as well as the US, will be forced to cut first. Mr Naimis message for the
boardrooms of international oil companies, and the banks and fund managers that finance
the US shale industry, is: you had better cut your investment and production because Opec
producers will not. US shale has been one of the first sectors to be affected because
activity can be scaled up or down relatively quickly, and many companies were already in
precarious financial positions even with the oil price at $100 a barrel. Share and bond
prices have been tumbling, and the number of rigs drilling for oil in the Bakken
shale region of North Dakota has dropped 9 per cent since its peak in October. Harold
Hamm, one of the pioneers of US shale oil, rightly observed this week that there is some
'bravado' in Mr Naimis words.... Whatever they do, the Saudis will not be able to
kill the US shale industry. The oil is still there
and production techniques are improving all the time. If the price of oil rebounds, so
will shale drilling and production. Still, investors who have been burnt in the first wave
of the boom are likely to demand clearer evidence that companies can be financially
sustainable, and that is unlikely to be possible with crude prices at their present
levels. Oil prices may yet fall further before they recover but crude at $60 is not
sustainable in the long term for either the shale barons or the Gulf sheikhs. Supply will
have to be brought back into line with demand somehow, whether by a slowdown in the US or
a U-turn from Opec." |
"Arab
OPEC producers expect global oil prices to rebound to between $70 and $80 a
barrel by the end of next year as a global economic recovery revives
demand, OPEC delegates said this week in the first indication of where the group
expects oil markets to stabilize in the medium term. The delegates, some of which are from core Gulf OPEC producing countries,
said they may not see - and some may not even welcome now - a return to $100 any time
soon. Once deemed a 'fair' price by many major producers, $100 a barrel crude is
encouraging too much new production from high cost producers outside the exporting
group, some sources say. But they believe that once the breakneck growth of high cost
producers such as U.S. shale patch slows and lower prices begin to stimulate demand, oil
prices could begin finding a new equilibrium by the end of 2015 even in the absence of any
production cuts by OPEC, something that has been repeatedly ruled out. ' The general
thinking is that prices cant collapse, prices can touch $60 or a bit lower for some
months then come back to an acceptable level which is $80 a barrel, but probably after
eight months to a year,' one Gulf oil source told Reuters. A separate Gulf OPEC source
said: 'We have to wait and see. We don't see 100 dollars for next year, unless there is a
sudden supply disruption. But average of 70-80 dollars for next year yes.'" |
"A leading figure in the UK's
oil industry, Sir Ian Wood, has told the BBC warnings the industry is close to collapse
are 'well over the top and far too dramatic'. Sir
Ian, a veteran oil man who was commissioned by the government to review the industry, said
conditions would begin to recover next year. A 50% fall in the price
of oil below $60 a barrel has prompted a spate of warnings from industry insiders. Sir
Ian did concede jobs would be lost. In fact, last week he predicted a wave of job losses
in the North Sea over the next 18 months. This morning he told BBC 5live an oil price of
around $60-$65 a barrel over the next 18 months could prompt job losses of up to 10% in
the UK oil industry, although he thinks it is more likely to be 5%. Around 375,000 people
work in the UK oil industry and half of those are in north east Scotland. Sir Ian says
that investment plans are made a few years in advance, so the impact will not be
immediate." |
"Now that oil prices have dropped to levels not seen since 2009,
helped by a flood of oil flowing from hydraulic fracturing or fracking wells
in North Dakota and Texas, it's time to ask the question: How long can the U.S. oil boom
last? In the short term, the price drop threatens profits from fracking, which is more
expensive than conventional drilling. Sure enough, permit applications to drill oil and
gas wells in the U.S declined
almost 40 percent in November. But in the long term, the U.S. oil boom faces an even
more serious constraint: Though daily production now rivals Saudi Arabia's, it's coming
from underground reserves that are a small fraction of the ones in the Middle East. That
geologic reality is easy to forget in the euphoria of the boom. Output from oil fracking
in the U.S. has tripled in the
past three years, from about one million barrels per day in 2010 to more than three
million barrels per day at the end of 2013. Total U.S. oil production has risen to more
than nine million barrels a day, a level close to 1970's historic high and nearly as
high as the 9.6
million barrels of daily oil production from Saudi Arabia. While the U.S. still relies on
imports for about 40 percent of its petroleum, oil imports have dropped since 2005
because of improved domestic supply from oil fracking, better vehicle fuel efficiency, and
depressed fuel demand as a result of the 2008 economic crash. The U.S. Department of Energy reports a growing surplus of domestic
oil. Because of all these factors, oil prices that regularly reached more
than $100 per barrel the past three years have dropped about 40 percent to $60 or
below. On December 10 the Energy Department projected an average price of $63 per barrel
for West Texas intermediate crude for all of 2015. In late November, gasoline
prices in the U.S. fell to five-year lows. Fracking oil or gas from mile-deep shales
is expensive: It requires deep
vertical and horizontal drilling and injections of chemicals, sand, and water at high
pressure. Until now, high oil prices have nonetheless made fracking a lucrative
investment. More than a million
fracked oil or gas wells exist in the U.S. With
oil prices down, so are profits. Recent analysis by Scotiabank estimates
that frackers need $69 per barrel of oil to make money. One oil executive quoted
in the Economist said he can cope as long as the oil price is above $50. Another said
the industry is 'not healthy' below $70. Businessweek reports that the 'dirty secret' of
the shale oil boom is that it
may not last. Fracked wells are short-lived, with a well's output typically declining
from more than 1,000 barrels a day to 100 barrels in just a few years. New wells must be
drilled frequently to maintain production. While wells currently pumping can survive low
market prices because they have already incurred startup and drilling costs, low oil
prices diminish the incentive to invest in new well investments. Of course, as Michael Webber of the University of Texas at Austin told
the New York Times, price fluctuations are part of a repeating cycle in the oil
business over the past century. No one thinks the current low prices are permanent. 'This
is what commodity markets do,' Webber said. 'They go to high price, and high price
inspires new production and also inspires consumers to use less. After a couple of years
of that, prices collapse. Then low prices inspire consumers to consume more and encourage
suppliers to turn off production. Then you get a supply shortage and prices go back up.' While low prices may only temporarily throttle expansion of oil
fracking, the underlying geologydeeply buried shale
rock that contains diffuse hydrocarbonslooms as a more fundamental limit on
fracking's future. Recent projections indicate that by decade's end or a few years after,
U.S. oil production from fracking will likely flatten out as supplies are depleted. 'A
well-supplied oil market in the short-term should not disguise the challenges that lie
ahead,' International Energy Agency (IEA) chief economist Fatih Birol said in releasing
the IEA's 2014 World
Energy Outlook. The IEA report projects that U.S.
domestic oil supplies, dominated by fracking, will begin to decline by 2020. 'As tight
oil output in the United States levels off, and non-OPEC supply falls back in the 2020s,'
the report says, 'the Middle East becomes the major source of supply growth.' Earlier this
year the U.S. Energy Information Agency (EIA) also forecast a plateau in U.S. oil
production after 2020. The basis for these forecasts are estimates of shale oil
reserves. A 2013 Energy Department report on technically recoverable shale
oilthe amount that's recoverable without regard to costputs U.S. potential
at 58 billion barrels. That's equivalent to a little more than eight years of U.S.
consumption at the current rate of almost 19 million barrels a
day. The Energy Department's estimate of 'proved reserves' of shale oilthose
that can be recovered economically todayis only about ten billion barrels.
That's about a sixth of technically recoverable reserves, and less than a year and a
half's worth of current consumption. Proved reserves
include all currently known U.S. oil shale resources-North Dakota Bakken, Texas Eagle
Ford, Colorado and Nebraska Niobrara, Texas Barnett, and others. In contrast, the proved
reserves from just three Middle East nationsSaudi Arabia, Kuwait, and the United
Arab Emiratestotal more than 460 billion barrels. That's 46 times U.S. shale oil
reserves, and more
than 12 times the total U.S. oil reserves. Those estimates help explain why the IEA
projects the Middle East as 'the major source of future supply growth,' long after the
U.S. shale oil boom has run its course. Price is important, but whether oil exists at all
is even more so." |
"People in the UK are using less
energy even though the economy is growing, new figures confirm. Increased wealth typically
leads to increased energy use - but this link appears to have been broken by technology
and government policy. New analysis of government statistics for BBC News shows that the
average person in the UK is using 10% less electricity than five years ago. That is
despite the boom in large TVs, computers, smartphones and tablets. EU standards on household appliances have allowed people to do the same
tasks with less energy. A new A-rated model fridge-freezer saves 73% of energy, compared
with its 20-year-old counterpart, according to the
trade association AMDEA. That is about £100 a year off a household energy bill. The
controversial ban on old-style lamps means an average bulb consumes 29% less electricity
in 2013 than in 2008. And LED bulbs look likely to improve the quality of indoor light, as
well as reducing electricity demand even further." |
"A profound transformation of the global
monetary system is underway. It is being driven by a perfect storm: the need for Russia
and Iran to escape Western sanctions, the low interest rate policy of the U.S. Federal
Reserve to keep the American economy afloat and the
increasing demand for Middle East oil by China. The
implications of this transformation are immense for U.S. policy in the Middle East which,
for 50 years, has been founded on a partnership with Saudi Arabia. As economic sanctions
are increasingly part of the West's arsenal, those non-Western countries that are the
target -- or potential target -- of such sanctions are devising a counterpunch: non-dollar trading. It
would, in effect, nullify the impact of sanctions. Whether
in yuan or roubles, non-dollar trading -- which enables countries to bypass U.S. claims to legal jurisdiction --
will transform the prospects facing Iran and Syria, particularly
in the field of energy reserves, and deeply affect Iraq which
is situated between the two." Non-Dollar Trading Is Killing the Petrodollar -- And the Foundation of U.S.-Saudi Policy in the Middle East Alastair Crooke, 18 December 2014 |
"Saudi Arabias oil
minister has rejected claims that the kingdom is intent on pushing prices lower, saying
the sharp falls were a 'temporary' problem and not driven by political will. The comments
on Thursday from Ali
al-Naimi initially provided some support for the oil price, which has fallen 45 per
cent since mid-June to five and-a-half year lows.
Brent crude, the international oil benchmark, rose to $64.22 a barrel, but fell in
afternoon trading to $61.73 down 22 cents. 'I am optimistic about the future. What
we are facing now and what the world is facing is a temporary situation and will pass,' Mr
Naimi told the countrys press agency. Mr Naimi blamed the sharp falls on an
increase in non-Opec supply at a time when demand was slowing amid weaker global economic
growth. But he said the market 'must not forget the negative role of speculators' in
causing volatility. Mr Naimi countered claims of a
link between the kingdoms oil policy and wider political motives, saying it was
difficult for the Gulf nation and other members of Opec to reduce output and sacrifice
market share in the current environment. Opec, led by its largest producer, Saudi Arabia,
stuck to its 30m barrels a day output target
at its November meeting, despite calls from poorer members of the cartel for production
cuts to shore up prices. The remarks by Mr Naimi come as the minister has been
criticised domestically for not clearly communicating the thinking behind Saudi oil policy
that has contributed to further dramatic falls in the oil price and has also roiled
the countrys stock market. ... Mr Naimi also
pointed out the kingdom had the ability to withstand a period of lower prices because of
its large foreign exchange reserves. Although Saudi Arabia would push ahead with its
policy to let the market determine prices and balance supply and demand, Mr Naimi revealed
that Opec had sought co-operation from other oil producers, but 'those efforts were not
successful'. ... A meeting between ministers from Saudi Arabia, Russia, Venezuela and
Mexico ahead of the Vienna gathering last month ended with no agreement, but they said
they would reconvene in the coming months. Leading domestic commentators such as Jamal
Khashoggi have said the Saudi oil minister needed to better explain the kingdoms
decision at the recent Opec meeting to leave output unchanged. 'Saudi citizens have the
right to know because they have a special relation with oil after all, the latter
is a source of livelihood to them,' Mr Khashoggi wrote in a recent article." |
"After crude prices dropped 49
percent in six months, oil projects planned for next year are the undead -- still standing
upright, but with little hope of a productive future. These zombie projects proliferate in
expensive Arctic oil, deepwater-drilling regions and tar sands from Canada to Venezuela.
In a stunning analysis this week, Goldman Sachs found almost $1 trillion in investments in
future oil projects at risk. They looked at 400 of the worlds largest new oil and
gas fields -- excluding U.S. shale -- and found projects representing $930 billion of
future investment that are no longer profitable with Brent crude at $70. In the U.S., the
shale-oil party isnt over yet, but zombies are beginning to crash it. The chart
below shows the break-even points for the top 400 new fields and how much future oil
production they represent. Less than a third of projects are
still profitable with oil at $70. If the unprofitable projects were scuttled, it would
mean a loss of 7.5 million barrels per day of production in 2025, equivalent to 8 percent
of current global demand. Making matters worse,
Brent prices this week dipped further, below $60 a barrel for the first time in more than
five years. Why? The U.S. shale-oil boom has flooded
the market with new supply, global demand led by China has softened, and the Saudis have
so far refused to curb production to prop up prices.
Its not clear yet how far OPEC is willing to let prices slide. The U.A.E.s
energy minister said on Dec. 14 that OPEC wouldnt trim production even if prices
fall to $40 a barrel. An all-out price war
could take up to 18 months to play out, said Kevin Book, managing director at ClearView
Energy Partners LLC, a financial research group in Washington. If cheap oil continues, it
could be a major setback for the U.S. oil boom. In the chart below, ClearView shows
projected oil production at four major U.S. shale formations: Bakken, Eagle Ford, Permian
and Niobrara. The dark blue line shows where oil production levels were headed before the
price drop. The light blue line shows a new reality, with production growth dropping 40
percent. The Goldman tally takes the long view of
project finance as it plays out over the next decade or more. But the initial impact of
low prices may be swift. Next year alone, oil and gas companies will make final investment
decisions on 800 projects worth $500 billion, said Lars Eirik Nicolaisen, a partner at
Oslo-based Rystad Energy. If the price of oil averages $70 in 2015, he wrote in an email,
$150 billion will be pulled from oil and gas exploration around the world. An oil price of
$65 dollars a barrel next year would trigger the biggest drop in project finance in
decades, according to a Sanford C. Bernstein analysis last week.... these glut-driven
prices cant stay low forever. Oil production
hasnt slowed yet, but as zombie projects go unfunded, it will. This is how the boom-bust-boom of the oil market goes: prices fall, then
production follows, pushing prices higher again. The longer this standoff goes, the more
zombies will languish and the sharper the rebounding price spike may be." |
"Saudi Arabia and the Opec cartel could have reduced output at the
nod of a billionaire Arab potentate. But for reasons that are not transparent Saudi has
refused to do so. The presumption is that Saudi, with
its huge reserves and minuscule production costs, is engaging in economic warfare. The
kingdom wants, allegedly, to undercut the oil gushing from America's booming fracking
industry, which threatens Saudi power. And it supposedly wants to inflict pain on Russia,
either to reniforce US and European punishment for its Ukraine adventures for as some sort
of response to Russia being on the wrong side (in Saudi's view) in the battle to remake
the Middle East..." |
"The tumbling oil price has led
to a trebling of insolvencies among UK oil and gas services companies so far this year,
while £55bn of further oil projects reportedly under threat. Brent crude closed below $62
a barrel on Friday, a five-and-a-half-year low, amid fears of falling demand and
oversupply as the global economy slows down.... Energy consultancy Wood
Mackenzie has estimated that 32 potential European oil field developments worth more than
£55bn are waiting for approval and could be at risk if oil prices continue to slump. Wood
Mackenzies James Webb told the Sunday Telegraph that more than 70% of the reserves
at projects yet to be finalised had a breakeven price in excess of $60 a barrel." |
"Despite the glut, Opec has refused to cut its production target of
30 million barrels a day, and analysts believe it is
embarking on a price war designed to bankrupt the American shale producers who threaten
its market stranglehold. The US producers need oil to be at $80 a barrel to make a profit." |
"Whether a much lower oil price turns out to be a net positive, or
instead something rather more sinister, depends on whats causing it. If it is a
cyclical, or supply side phenomenon caused by over-investment in new sources of
production, then the effect ought on balance to be broadly positive, at least for consumer
economies. But if instead the falling price is a reflection of subdued demand, then it is
likely to be far less so. The big worry is that it is rather more of the latter than the
former. Certainly, there have been a number of
positive supply side surprises. Until quite recently, few appreciated quite how big the
American shale revolution would become. The high oil price of recent years incentivised a
tsunami of new development. Libyan and Iraqi supply has also been far less badly disrupted
by civil war than might have been expected. Even so,
the supply excess is hardly off the scale, and in any case, it remains vulnerable to
further mishap in the Middle East. In addition, there are some major speculative bets
against oil from our hedge fund manager friends in Mayfair and beyond. These have already
yielded big rewards. As they are unwound, the downward pressure on prices ought to ease.
Markets always overshoot, and it may well be that we are already in that phase. The more troubling explanation, however, is that the low price is
simply a fair representation of the impaired state of the world demand, with Europe as
flat as a pancake and China slowing fast. The scale of Chinas slowdown has almost
certainly been underestimated by most western observers, with a hard landing now a
distinct possibility after years of overexpansion and speculative excess. China has been
the single biggest source of incremental oil demand over the past decade; remove it, and
the dynamics of the entire market change fundamentally. Hard landing or not, China has
also entered a less oil-intensive phase of development. Whats more, years of high
prices have unlocked myriad innovative technologies in the energy sector, and potentially
bountiful alternative sources of supply. In any
event, all three major international forecasting organisations the International
Energy Agency, the Energy Information Administration, and the Organisation of the
Petroleum Exporting Nations have sharply cut their predictions for global demand in
recent months. For many oil producing nations, the oil price makes the difference between
survival and insolvency. Some have already been pushed beyond the so-called 'fiscal break
even' point, threatening social, political and economic upheaval, as well as a chaotic
reaction in financial markets still struggling to recover from the last crisis. The
situation looks particularly concerning in the Russian context. Like a baited bear, Putin
might lash out in response to what he imagines to be a Western conspiracy to destabilise
his country. Historically, steep price declines have always been self-correcting in the
long run. Planned new development is mothballed, production is otherwise disrupted, and
helped by low prices, demand eventually picks up. Yet these cyclical forces take time to
establish themselves. With deep structural changes at work in the oil market, they may
take even longer this time around." |
"The world's top energy watchdog has slashed its oil demand forecast
for 2015 sending Brent crude prices sharply sharply lower. The
International Energy Agency (IEA) said on Friday that world demand for oil will grow by
900,000 barrels per day (bpd) next year, a downward revision of 230,000 bpd from its
previous estimate. The Paris-based watchdog now
expects world demand to reach 93.3m bpd in 2015. The agency said: 'A strong dollar and the
lifting of subsidies have so far limited supportive price effects on demand.' Brent crude
- global pricing benchmark - fell 0.8pc to just over $63 per barrel following the release
of the report, which has added to a 45pc slump in prices since June. The IEA's market
summary will add to pressure building on the Organisation of Petroleum Exporting Countries
(Opec) to bring forward its next scheduled meeting to cut output." |
"Russia will help India build at
least 10 more nuclear reactors, Indian Prime Minister Narendra Modi has said following a
visit by Russian President Vladimir Putin. The two
countries signed a series of major energy agreements on Thursday. Russia will also remain
India's top defence supplier, said Mr Modi. Mr Putin's visit to Delhi comes as India faces
energy shortages and Russia seeks to expand its ties with Asia in the face of Western
sanctions. Mr Modi said that the two countries had outlined
an 'ambitious vision' for nuclear energy during the talks and that the new reactors
would be built over the next 20 years. He added that, under the deal, nuclear components
would be made in India. A $1bn (£630m; 800m) joint venture to support
hydro-electric power projects in India has also been agreed, according to Reuters news
agency. Meanwhile Russian oil producer Rosneft signed
a deal to supply India with 10 million tonnes of oil per year, Reuters said. Mr Putin said earlier that his country was looking to export more Russian
oil and gas to Asia because of problems with the European market. A project to build a new
gas pipeline to Europe, known as South Stream, was cancelled last week amid concerns that
it could be in breach of EU competition rules. Also, the crisis in Ukraine has led to a
bitter fall-out between the West and Russia, which has been placed under wide-ranging
sanctions by the US, EU and several other countries." |
"The collapse of the oil price
has snared its first West Australian victim with Red Fork Energy losing the support of its
major lender. The Perth-based company drills for shale gas in the United States, producing
oil and gas. But, it is completely exposed to the US shale gas industry, which analysts
say has become unviable at current oil prices.
The oil price has tumbled 40 per cent in recent months, dragging down the value and
margins of oil and gas producers. Red Fork's major lender, Guggenheim Corporate
Funding, called in the receivers this week. It has appointed KordaMentha as
receiver and Ferrier Hodgson will act as administrator. Macquarie private wealth resource
analyst Bevan Sturgess-Smith said most players in the shale gas industry were heavily in
debt. 'Their costs of production are a bit higher, they've only been in the game really
for a few years so their debt structure is a little bit higher than other companies, more
mature companies,' he said. 'Those two things are really putting pressure on them so with
the price where it is they're just not making any margin.'" |
"Opec is now 'powerless' on its
own to prevent oil prices falling further because of a 2m barrels per day (bpd) surplus of
supply in the market and the cartel should seek a deal with Russia, Norway and Mexico to
arrest the decline, according to a senior Gulf official. Speaking exclusively to the Telegraph, Abdullah bin Hamad al-Attiyah, a
senior adviser to the Emir of Qatar and a former president of the Organisation of
Petroleum Exporting countries (Opec) said: 'Opec can't solve this problem alone like
before, now it's a different story. Russia, Norway and Mexico all must sit down with Opec
to discuss making cuts.' However, Mr al-Attiyah - who was one of Opec's longest serving
oil ministers when he led the Qatari delegation - said that he doubts the group of 12
producers will agree to an emergency meeting unless producers outside the cartel agree to
also rein in production. He added that the oil market
currently was suffering from an oversupply in the region of 2m bpd, most of which is
coming from production outside the group." |
"Spurred by the demise of
Russia's South Stream gas pipeline project, Croatia has revived a decade-old idea of
building a liquefied natural gas import terminal at the deepwater oil port of Omisalj on
the island of Krk. The idea had foundered primarily
because Europe's demand for gas fell in the global financial crisis, making the project no
longer economically viable for investors, including some major European energy companies.
But the Ukraine crisis and the collapse of South Stream have refocused minds in central
and eastern European nations on their need to reduce dependence on Russian gas and their
vulnerability to disruptions of supply that come via pipelines across Ukraine." |
"North America, once a sponge
that sucked in a significant portion of the worlds oil, will instead be supplying
the world with oil and other liquid hydrocarbons by the end of this decade, according to
ExxonMobils annual long-term energy forecast. And the almost
unspeakable amount of natural gas found in recent years in the United States
and elsewhere in North America will be enough to make the region one of the worlds
biggest exporters of that fuel by 2025, even as domestic demand for it increases,
according to Bill Colton, Exxons chief strategist. The world has such an
improved outlook for supplies, Colton said in an interview. Peak
oil theorists have been run out of town by American ingenuity. In a forecast that might make economists happy but environmentalists
fret, Exxons two chief products, oil and natural gas, will be abundant and
affordable enough to meet the rising demand for energy in the developing world as the
global middle class swells to 5 billion and buys energy-hungry conveniences such as cars
and air conditioners. This is a result of advances in drilling technology that have made
it possible for engineers to reach oil and gas in unconventional rock and extreme
locations and quieted talk that the world was quickly running out of oil. And it is
despite what Exxon assumes will be increasingly strict policies around the world on
emissions of carbon dioxide and other gasses emitted by fossil fuel use that scientists
say are triggering dangerous changes to the worlds climate. Exxons outlook
forecasts world energy supply and demand through 2040 and is updated every year. It is
noted by investors and policy makers and used by Exxon to shape its long-term strategy.
Colton said the recent sharp decline in oil prices does not have much effect on the
companys long-term vision, and that the company expects prices to rise and fall,
sometimes dramatically, throughout the period. Exxons vision is broadly similar to
that of other forecasters, including those by the International Energy Agency, which
released its most recent long-term forecast last month. The use of coal, now the
worlds second most important fuel after oil, will eventually slip as countries try
to reduce air pollution and greenhouse gas emissions. Natural gas, which burns cleaner
than coal and emits half the global warming gases as coal, will supplant coal in the
number two spot. Exxon takes a relatively dim view of the prospects for renewable energy,
however. It believes that some of the aggressive targets for renewables cited by
governments are too expensive to come to fruition, and the technologies have not advanced
far enough to make them cheap or effective enough for broad adoption globally." |
"Iran and Saudi Arabia, the two arch-enemies of the Gulf, have held
secret high-level talks to try to find common ground over the threat from Islamic State.
However, the two-day meeting hosted by Oman last week
broke up in acrimony, with opposing sides at odds over the slump in oil prices. The Saudi delegation, led by Muqrin
bin Abdulaziz al-Saud, the kingdom's deputy crown prince and former spy chief, dismissed Iranian pleas to rein in oil production and stabilise the
market.... Riyadh and Tehran remain poles apart, backing opposing sides in almost every
Middle East conflict. Even in Iraq, where Isis has produced a common threat, each blames
the other for the jihadist resurgence. Iran points to
the money from shadowy Arab donors that helped finance the group. Saudi Arabia blames the
sectarianism of the Shia-dominated Iraqi government, backed by Iran, for driving Sunni
recruits to the Islamists." |
"China's
state-controlled energy giant Sinopec wants to sell some long-term liquefied natural gas (LNG) import deals as a slowing economy makes them unprofitable, sources say, signalling the end of a
five-year boom fuelled by rising Chinese demand. Asia's thirst for energy has helped drive
a 'dash for gas' in producer countries from Australia
to Canada, with LNG emerging as the fastest growing fuel source since the beginning of the
century on the back of soaring Chinese imports. But
just as long-planned projects start to come on stream China's economy is stuttering, which
is likely to crimp demand and pull down domestic gas prices to levels that make imports
unprofitable. "We talk about China choking on LNG. There's just too much coming onto the
market," said Gavin Thompson, Head of Asia Gas Research at Wood Mackenzie. Analysts
say falling crude prices, which have dropped around 40 percent since June, are another
factor weighing on Chinese gas prices." |
"Oil fuels the engine of growth
and the world has spent $2.5 trillion over the past nine years chasing more oil and yet is
producing roughly the same amount of oil as it was before it spent all that money. As
Jeremy Grantham put it in his latest quarterly newsletter: 'As a sign of the immediacy of
this problem, we have never spent more money developing new oil supplies than we did last
year (nearly $700 billion) nor, despite U.S. fracking, found less replacing in the
last 12 months only 4½ months worth of current production! Clearly, the writing is on the wall.' Unless investment in oil production
really accelerates from here, new production will be swamped by existing declines. But
with oil down some 40% since June, new oil drill programs are being scrapped left and
right. New drill permits in the U.S. shale plays were
down 40% in November compared to October and for good reason: most of the plays are
uneconomical at current prices: The bottom line, though, is that without growth in oil
supplies robust economic growth is impossible to achieve. If oil prices do not recover and
quickly, the U.S. shale miracle will rapidly turn into a shale bust. The decline rates on
these wells are ferocious. With that loss of production will go the entire narrative that
says that peak oil is somewhere off in the distant future and that we can safely ignore it
for now. Worse, global oil projects are now on hold and those potential future supplies
have been pushed out further waiting for higher oil prices. No new oil means no new
economic growth. Its as simple as that. This
calls into question the sky-high valuations we currently see for stocks and bonds." |
"Maybe, just maybe, we will look
back on the last weeks as one of those moments when history turned. For they have
witnessed increasing signs that the world is beginning, unexpectedly, to reject its
dirtiest fuel. In an astonishing reversal virtually unpublicised in Britain, and
little noticed elsewhere China, which burns more coal than the rest of the world
put together, has announced it will cap its use within six years. Even more surprisingly
there are signs that it is already declining, way ahead of schedule, as the country
undergoes a largely unrecognised green revolution. The United States, the next biggest
consumer, is also taking new measures against the fuel. And Germany, Europes largest
coal consumer much-criticised for increasing use after resolving to phase out
nuclear power this week began to curb it. This could have enormous implications for
controlling climate change now the subject of negotiations in Lima, Peru: King Coal
is the biggest single emitter of carbon dioxide. But the surprise is even greater, for use
of the fossilised carbon has been increasing rapidly in recent years. That growth,
however, has been driven by China, where annual consumption has more than doubled to 3.6
billion tonnes over the last decade, while remaining relatively flat elsewhere. Famously it has been building a new coal fired power plant each week for
two decades perhaps appropriately for the country that first set light to the fuel
around 1000 BC, and where Marco Polo saw 'black stones ... which burn like logs'. But two
weeks ago following a much publicised pact with the US to tackle climate change
China announced it would cap consumption at below 4.2 billion tonnes a year and
then cut back. Beijing province, said the Chinese state Energy Research Institute, would
have to slash its use by 99 per cent by 2030, while other big consuming regions would have
to reduce it by up to 27 per cent. Yet there are signs that China which has a
record of underpromising, but overachieving, environmental targets may already be
on the downward curve. Over the first 10 months of this year the countrys coal
production dropped by 1.5 per cent while imports fell by 8 per cent. Yet stocks are at
record levels, showing they are not being drawn down to compensate for the shortfall. Some
experts believe that both coal use and national carbon dioxide emissions are now falling.
At the same time, China has pledged to install 800-1000 gigawatts of carbon-free
electricity generation capacity more than all its existing coal fired plants
by 2030. That weekly dirty power station will be replaced by its equivalent in renewable
or atomic energy. But though nuclear power is to quadruple to 58 gigawatts, it will be
dwarfed by the renewables. All this contradicts the popular belief, much touted by
sceptics, that the giant country is doing nothing to combat climate change." Is this the end of coal? Telegraph, 6 December 2014 |
"... more than a trillion
barrels of crude oil from unconventional sourcesthe equivalent of more than 30 years of extra supplyhave been
discovered in the past five years, mostly recoverable at $70 a barrel or less. About a
third are from shale, a third from deepwater drilling, and a third from oil sands. The
U.S. is in the lead of this supply surge. According to Edward Morse, Citigroups
global head of commodity research, 'Even if West Texas Intermediate prices fell below $75
for a while, production growth in the U.S. would continue at relatively high levels for
years to come.' On the demand side, at $70 crude, the internal combustion engine can now
be run more cheaply on alternate sources of fuel, including much cheaper natural
gasa conversion that is already under way for trucking fleets. With conversions also advantageous for buses, ships, and eventually
passenger vehicles, the growth in global consumption of oil could slow in the next several
years, and then flatten out. The net result: The $90
floor on the oil price has become the new ceiling, although it will likely be pierced by
occasional short-lived spikes. The new floor is probably $70, although with occasional
short-lived plunges well below that level. A crude-oil price running on a sustained basis
in the triple digits is probably a thing of the past." |
"Across America shale-shocked
executives will spend Christmas overhauling their strategies to cope with life at $70 per
barrel, even as investors dump their firms shares and bonds.... shale accounted for
at least 20% of global investment in oil production last year. Saudi Arabia, the leading
member of OPEC, has made clear it will tolerate lower prices in order to do to shale
firms finances what fracking does to rocks. Even the gods of shale disagree about
the industrys resilience. The boss of Continental Resources, Harold Hamm (whose
fortune has dropped by $11 billion since July), has said he can cope as long as the oil
price is above $50. Stephen Chazen, who runs Occidental Petroleum, has said the industry
is 'not healthy' below $70. The uncertainty reflects the diversity of activity. Wells
produce different mixes of oil and gas (which sells for less). Transport costs vary: it is
cheap to pipe oil from the Eagle Ford play, in Texas, but expensive to shift it by train
out of the Bakken formation, in North Dakota. Firms use different engineering techniques
to pare costs. Two generalisations can still be made. First, in the very near term, the
industrys economics are good at almost any price. Wells that are producing oil or
gas are extraordinarily profitable, because most of the costs are sunk. Taking a sample of
eight big independent firms, average operating costs in 2013 were $10-20 per barrel of oil
(or equivalent unit of gas) producedso no shale firm will curtail current
production. But the output of shale wells declines rapidly,
by 60-70% in their first year, so within a couple of years this oil will stop flowing. Second, it is far less clear if, at $70 a barrel, the industry can
profitably invest in new wells to maintain or boost production. Wood Mackenzie, a research
consultancy, estimates that the 'break-even price' of American projects is clustered
around $65-70, suggesting many are vulnerable (these calculations exclude some sunk costs,
such as building roads). If the oil price stays at $70, it estimates investment will be
cut by 20% and production growth for America could slow to 10% a year. At $60, investment
could drop by as much as half and production growth grind to a halt. The industrys weak balance sheet is also a vulnerability, says
Michael Cohen of Barclays, a bank. Most firms invest more cash than they earn, making up
the difference by issuing bonds. Total debt for listed American exploration and production
firms has almost doubled since 2009 to $260 billion (see chart), according to Bloomberg;
it now makes up 17% of all Americas high-yield (junk) bonds. If debt markets dry up
and profits fall owing to cheaper oil, the funding gap could be up to $70 billion a year.
Were firms to plug this by cutting their investment budgets, investment would drop by 50%.
In 2013 more than a quarter of all shale investment was done by firms with dodgy balance
sheets (defined as debt of more than three times gross operating profits). Quite a few may
go bust. Bonds in some smaller firms trade at less than 70 cents on the dollar. All this suggests looming investment cuts that within a year will
slow growth in American shale production to a crawl and perhaps even lead to slight
declines. A few firms have trimmed their budgets
already. More are expected to announce cuts in January. 'Frontier' projectson the
fringes of existing basins or in places where little commercial production has taken
placeare vulnerable, including Oklahoma. Most
firms will hunker down in the Bakken, the Eagle Ford and the Permian Basin, where they
have scale and infrastructure. Even in the Bakken, applications for drilling permits fell by almost 40% in November. OPECs wishes may seem to be coming true over the next year. But
adversity will eventually make shale stronger. It will prompt a new round of innovation,
from cutting drilling costs through standardisation to new fracking techniques that
increase output. Dan Eberhart, the boss of Canary, a Denver-based oil-services firm, says
the industry has already 'pressed fast forward' on saving costs." In a bind The Economist, 6 December 2014 |
"A
day after Vladimir Putin made his surprise move to scrap a grandiose pipeline that was to
carry fresh supplies of Russian gas to Europe for generations to come, Matteo Renzi, the Italian prime
minister, was in Algiers plotting a very different vision for Europes energy policy.
Standing beside his Algerian counterpart, Abdelmalek Sellal, in the windswept north Africa
capital, Mr Renzi suggested on Monday the east-west pipelines that have for years
nourished the continents energy demand would eventually be eclipsed. Italy imports about 90 per cent of its gas and
in the first 10 months of this year, 46 per cent of its domestic consumption was supplied
by Russia, with north Africa, northern Europe and Qatar contributing the rest, according
to data from the Italian ministry of economic development. That mix appears increasingly
untenable at a time when relations between Russia and the west are turning increasingly
hostile as they spar over Ukraine. 'At a time of geopolitical instability, diversifying
energy sources has become a very important theme,' says one senior Italian official. To encourage the north-south shift, Mr Renzi has been working
closely with Eni, Italys
largest energy group. As it happens, the company, which is 30 per cent owned by the
Italian government, is a partner in stalled South
Stream project with Russias Gazprom, and still has close ties to Moscow. Still,
Eni has made a huge bet on Africa in recent years, including a large and potentially
lucrative discovery of natural gas just off the coast of Mozambique. With Claudio Descalzi, Enis chief executive, by his side, Mr Renzi
made a groundbreaking trip to sub-Saharan Africa in July, including stops in Mozambique,
Angola and Congo-Brazzaville. Armando Guebuza, Mozambiques president, met with
Mr Renzi in Rome on Wednesday, a day after the Italian premiers visit to
Algiers." |
"Today, the Saudis are using low prices to punish their Iranian
arch-rivals and propel Tehran towards making serious and credible concessions on its
nuclear programme. And low prices, together with sanctions, are putting the squeeze on
Vladimir Putin. Both causes are very much in the US
and the western interest." |
"Some estimate that it only costs the Saudis less than $5 to extract
a barrel of oil from its fields. This is stark contrast to the much higher costs in rival
countries and offshore and of shale producers. This permits the Saudis to withstand a
protracted price slump far easier than other countries. The Saudis can use this ability as
a weapon to achieve its strategic ends. Modern U.S./Saudi relations were shaped towards
the end of WWII by negotiations between President Franklin D. Roosevelt and the Saudi King
Ibn Saud. In return for Saudi cooperation over oil, the United States guaranteed Saudi
Arabia military protection. Despite the clear ideological differences between a
conservative Wahabbi Sunni Kingdom and a Western democracy, this policy has largely held
for some 68 years. Saudi Arabia exercised moderation and consistency over oil supplies
from the Arab Gulf. In return, the United States led an impressive Allied military defeat
of an Iraqi threat to Saudi Arabia in Gulf War I. While the current dip in energy prices
clearly does hurt Saudi Arabia, it hurts her enemies far more, particularly Iran and
Russia, which has been a key enabler of Iranian power and an international pariah on its
own. Putting pressure on Russia has also become a key strategic interest of Washington.For
many oil exporting nations, the tax revenues generated from petroleum constitute a major
portion of government budgets and have become essential to the maintenance of long-term
solvency. Nations like Russia, with oil generating 50 percent of tax revenues in 2013,
according to the Ministry of Finance, are assumed to have a 'Budget Break Even Cost'
(BBEC) of around $105 per barrel based on Citi Research's data. Obviously the current
price, less than $70 per barrel, is placing a great deal of strain on President Putin's
finances. Iran has a BBEC of some $131 oil. Recovering from recent sanctions, Iran has few
currency reserves. Therefore, oil at $70 will necessitate an early cut in government
spending, risking civil discontent and possible regime change. Saudi Arabia is assumed to have a lower BBEC of some $98 per
barrel. And although current prices are lower than that, over decades Saudi Arabia
has accumulated vast foreign exchange reserves. As a result, many observers believe she
can sustain her economic budget for a considerable time with oil selling at below $93 a
barrel. Meanwhile, countries such as Russia, Iran
and, particularly, Venezuela, which already is nearing default on its debt, must start
cutting government spending to reflect depleted oil revenues. These outcomes are firmly in
the interests of both Saudi Arabia and her longtime strategic partner, the United States.
And although U.S. consumers are now enjoying the benefits of lower fuel costs, which will
help spark consumer demand, the threat to the U.S. energy industry should not be
overlooked. U.S. oil companies have invested heavily in horizontal oil drilling and
so-called fracking to increase well yields. U.S. domestic oil
production has risen significantly over the past five years and now
approaches 8 million barrels per day based on data from the U.S. Energy Information
Administration (EIA). However, much of this investment was made on the basis of $100
oil. If the price stays below $70 for long, the continued viability of some smaller U.S.
oil companies might be threatened, particularly in Texas and South Dakota. Citigroup
Inc.'s recent forecast that the U.S. would pump 14.2 million barrels per day by 2020 could
prove illusive and result in job losses." |
"Global oil and gas exploration projects worth more than $150 billion are likely to
be put on hold next year as plunging oil prices render them uneconomic, data shows,
potentially curbing supplies by the end of the decade. As big oil fields that were
discovered decades ago begin to deplete, oil companies are trying to access more complex
and hard to reach fields located in some cases deep under sea level. But at the same time,
the cost of production has risen sharply given the rising cost of raw materials and the
need for expensive new technology to reach the oil. Now the outlook for onshore and
offshore developments - from the Barents Sea to the Gulf or Mexico -
looks as uncertain as the price of oil, which has plunged by 40 percent in the last five
months to around $70 a barrel. Next year companies will make final investment decisions
(FIDs) on a total of 800 oil and gas projects worth $500 billion and totalling
nearly 60 billion barrels of oil equivalent, according to data from Norwegian consultancy
Rystad Energy. But with analysts forecasting oil to average $82.50 a barrel next year,
around one third of the spending, or a fifth of the volume, is unlikely to be approved,
head of analysis at Rystad Energy Per Magnus Nysveen said. 'At
$70 a barrel, half of the overall volumes are at risk,' he
said. Around one third of the projects scheduled for FID in 2015 are so-called
unconventional, where oil and gas are extracted using horizontal drilling, in what is
known as fracking, or mining. Of those 20 billion barrels, around half are located in
Canada's oil sands and Venezuela's tar sands, according to Nysveen. Geographically, the projects on the balance are widespread. Chevron's
North Sea Rosebank project is among those with a shaky future and a decision on whether to
go ahead with it will likely be pushed late into 2015 as the company assesses its
economics, analysts said. 'This project was not deemed economic at $100 a barrel so at
current levels it is clearly a no-go,' said Bertrand Hodée, research analyst at
Paris-Based Raymond James. He estimates a development cost of $10 billion for Rosebank,
with potential reserves of 300 million barrels - meaning the Chevron would only recoup $33
a barrel. Even with oil at $120 a barrel, the
economics of some projects around the world were in doubt as development costs soared in
recent years. Chevron's Rosebank project has already been delayed for several years. In
response to a question from Reuters, the company said 'the Rosebank project is in the
Front End Engineering and Design phase. The review of the economics and the
additional engineering work is progressing... It is premature to make any statements on an
FID date.' Hodée said any offshore project with a development cost above $30 a barrel
would most likely be put on hold in current oil prices. Norway's Statoil this week said it
had postponed until next October -- a six-month delay -- a decision to invest $5.74
billion in the Snorre field in the Norwegian Sea as its profitability was under threat.
New oil fields typically require four to five years to be developed and billions before the first drop of oil is produced.
Any cutbacks in oil production bodes ill for international oil companies that are already
struggling to replace depleting reserves as exploration becomes harder and discoveries
smaller. It also points to tighter supplies by the
end of the decade. Projects in Canada's oil sands, which require expensive and complex
extraction techniques, are the most unlikely to go ahead given their high investment
requirements and relatively slow returns. Total recently decided to postpone the FID on
the Joslyn project in Alberta, the cost of which Hodée estimated at $11 billion. Shell's
liquefied natural gas (LNG) project in Canada's British Columbia, already under
pressure from a looming supply surge, faces further strain in the current price
environment, analysts said. According to research by Citi, the project requires oil at $80
a barrel to break even.... Even in the Gulf of Mexico, one of the most attractive oil
production areas in the world, projects are facing challenges. BP last year put on hold a
decision on its Mad Dog Phase 2 deep water project in the Gulf of Mexico after its
development costs ballooned to $20 billion and the oil major is now expected to further
delay an investment on the field's development." |
"Israel wants the European Union
to decide by the end of next week whether it will invest in a pipeline project that would
link its Mediterranean gas fields with Cyprus. At a
time of heightened political tension between Russia and Europe, Israel has promoted the
pipeline project as a way for the European Union to reduce its reliance on Russian gas.
Israel's regional development minister Silvan Shalom has already spoken with energy
ministers from the EU, Italy, Cyprus and Greece and a memorandum of understanding could be
signed as early as next week. Israel sees the potential deal as a way to improve ties the
EU, which have been battered by the breakdown of peace talks with the Palestinian
leadership." |
"Theres no question that shale gas productionenabled by
hydraulic fracturing techniqueshas boomed in the US with major effects on the energy
industry. The price of natural gas fell and cleaner, more efficient gas-burning power
plants have sprung up to usurp old coal plants. This has been seen as a long-term shift in
the fossil fuel landscape, but it cant last forever. The
obvious question is just how much shale gas is down there to be had? The most recent
outlook from the US Energy Information Administration saw US production slowing from the
exponential trajectory of the 2000s, but still increasing through 2040. A news article
appearing in the journal Nature this week highlights a major research project run by a
group at the University of Texas at Austin that foresees much lower production. Their
analysis forecasts peak shale gas production in 2020, falling to half the EIAs
estimate by 2030. The reason for the difference is
mostly a matter of resolution, according to the Nature story. The EIA has relied on
county-level production statistics, while the UT-Austin researchers have drilled down to
one mile resolution. That makes it easier to account for 'sweet spots'the portions
of a shale layer with the physical characteristics most conducive to producing natural
gas. The reason for fracturing these rocks to free the gas is that theyre too
impermeable for the gas to move through them, so this isnt a case of the first few
wells bleeding the store dry. But to the extent that sweet spots can be identified,
theyre typically targeted for drilling first. That means that subsequent wells in
the area may be significantly less productive. And that could translate into the end of
the shale gas revolution arriving well ahead of schedule." |
".. the shale [gas] boom caught
everyone by surprise. It relied on fracking technology that had been around for decades
but when gas prices were low, the technology was considered too costly to use on
shale. In the 2000s, however, prices rose high enough to prompt more companies to frack
shale formations. Combined with new techniques for drilling long horizontal wells, this
pushed US natural-gas production to an all-time high, allowing the nation to regain a
title it had previously held for decades: the world's top natural-gas producer.... The EIA like nearly all other forecasters did not see
the boom coming, and has consistently underestimated how much gas would come from shale.
But as the boom unfolded, the agency substantially raised its long-term expectations for
shale gas. In its Annual Energy Outlook 2014, the 'reference case' scenario based
on the expectation that natural-gas prices will gradually rise, but remain relatively low
shows US production growing until 2040, driven by large increases in shale gas. The
EIA has not published its projections for individual shale-gas plays, but has released
them to Nature. In the latest reference-case forecast, production from the big four plays
would continue rising quickly until 2020, then plateau for at least 20 years. Other
shale-gas plays would keep the boom going until 2040 ... To provide rigorous and
transparent forecasts of shale-gas production, a team of a dozen geoscientists, petroleum
engineers and economists at the University of Texas at Austin has spent more than three
years on a systematic set of studies of the major shale plays. The research was funded by
a US$1.5-million grant from the Alfred P. Sloan Foundation in New York City, and has been
appearing gradually in academic journals1, 2, 3, 4, 5 and
conference presentations. That work is the 'most authoritative' in this area so far, says
Weijermars.... If natural-gas prices were to follow the scenario that the EIA used in its
2014 annual report, the Texas team forecasts that production from the big four plays would
peak in 2020, and decline from then on. By 2030, these plays would be producing only about
half as much as in the EIA's reference case. Even the agency's most conservative scenarios
seem to be higher than the Texas team's forecasts. 'Obviously they do not agree very well
with the EIA results,' says Patzek. The main difference between the Texas and EIA
forecasts may come down to how fine-grained each assessment is. The EIA breaks up each
shale play by county, calculating an average well productivity for that area. But counties
often cover more than 1,000 square kilometres, large enough to hold thousands of
horizontal fracked wells. The Texas team, by contrast, splits each play into blocks of one
square mile (2.6 square kilometres) a resolution at least 20 times finer than the
EIA's. Resolution matters because each play has sweet spots that yield a lot of gas, and
large areas where wells are less productive. Companies try to target the sweet spots
first, so wells drilled in the future may be less productive than current ones. The EIA's model so far has assumed that future wells will be at
least as productive as past wells in the same county. But this approach, Patzek argues,
'leads to results that are way too optimistic'....Patzek acknowledges that forecasts of
shale plays 'are very, very difficult and uncertain', in part because the technologies and
approaches to drilling are rapidly evolving. In newer plays, companies are still working
out the best spots to drill. And it is still unclear how tightly wells can be packed
before they significantly interfere with each other." Natural gas: The fracking fallacy Nature 516, 2830 (04 December 2014) |
"This week, Nature presents previously unpublished data suggesting
that the lock-in of technology into shale-gas production may be a riskier bet than
previously realized, at least in the United States. Nature has obtained detailed US Energy
Information Administration (EIA) forecasts of production from the nations biggest
shale-gas production sites. These forecasts matter because they feed into decisions on US
energy policy made at the highest levels. Crucially, they are much higher than the best
independent academic estimates. The full story is
contained in a News Feature on page
28. The conclusion is that the US government and much of the energy industry may be
vastly overestimating how much natural gas the United States will produce in the coming
decades. The EIA projects that production will rise
by more than 50% over the next quarter of a century, and perhaps beyond, with shale
formations supplying much of that increase. But such optimism contrasts with forecasts
developed by a team of specialists at the University of Texas, which is analysing the
geological conditions using data at much higher resolution than the EIAs. The Texas team projects that gas production from four of the most
productive formations will peak in the coming years and then quickly decline. If that
pattern holds for other formations that the team has not yet analysed, it could mean much
less natural gas in the United States future. Like all energy forecasts, the lower
projections from the Texas team could turn out to be inaccurate. Technological advances in
the next few decades could open up more resources at lower costs, driving
US production even higher than the EIA has predicted. But it is also possible that
the Texas forecasts are too high, and that gas production will fall off even faster than
the team suggests." |
"Curbing the worlds huge and increasing appetite for meat is
essential to avoid devastating climate change, according to a new report. But governments
and green campaigners are doing nothing to tackle the issue due to fears of a consumer
backlash, warns the analysis
from the thinktank Chatham House. The global
livestock industry produces more greenhouse gas emissions than all cars, planes, trains
and ships combined, but a worldwide survey by Ipsos MORI in the report finds twice as many
people think transport is the bigger contributor to global warming. 'Preventing catastrophic warming is dependent on tackling meat and dairy
consumption, but the world is doing very little,' said Rob Bailey, the reports lead
author. 'A lot is being done on deforestation and transport, but there is a huge gap on
the livestock sector. There is a deep reluctance to engage because of the received wisdom
that it is not the place of governments or civil society to intrude into peoples
lives and tell them what to eat.' The recent
landmark report from the Intergovernmental Panel on Climate Change found that dietary
change can 'substantially lower' emissions but there is no UN plan to achieve that. Past
calls to cut meat eating by high-profile figures, from the chief of
the UNs climate science panel to the
economist Lord Stern, have been both rare and controversial. Other scientists have
proposed a meat tax to curb consumption, but the report concludes that keeping meat
eating to levels recommended by health authorities would not only lower emissions but also
reduce heart disease and cancer. 'The research does not show everyone has to be a
vegetarian to limit warming to 2C, the stated objective of the worlds governments,'
said Bailey. The report builds on recent scientific studies which show that soaring meat
demand in China and elsewhere could tip the worlds climate into chaos. Emissions
from livestock, largely from burping cows and sheep and their manure, currently make up
almost 15% of global emissions. Beef and dairy alone make up 65% of all livestock
emissions. Appetite for meat is rocketing as the global population swells and becomes more
able to afford meat. Meat consumption is on track to rise 75% by 2050, and dairy 65%,
compared with 40% for cereals. By 2020, China alone is expected to be eating 20m tonnes
more of meat and dairy a year.... A separate
survey by the Eating Better alliance, also published on Wednesday, shows that UK
consumers are beginning to eat less meat. The YouGov poll found 20% saying they have cut
the amount of meat they eat over the last year, with only 5% say they are eating more.
Prof Keith Richards, at the University of Cambridge and one of the researchers behind the
two key scientific studies, said: 'This is not a radical vegetarian argument; it is an
argument about eating meat in sensible amounts as part of healthy, balanced diets.'" |
"U.S. oil production could
increase next year to levels not seen since the 1970s, despite OPEC's efforts to muscle
out American shale producers. While U.S. oil production is predicted to rise by another
million barrels a day during 2015 from the current 9 million barrels a day, forecasts are
coming down on expectations that OPEC's
unwillingness to cut production will keep a lid on prices well into next year. Lower
prices limit new drilling and hit high-cost wells first. ... 'Production is going to continue to grow. Could we see another
million barrels a day of growth next year over this year? We happen to think so,' said
Edward Morse, global head of commodities research at Citigroup. Morse expects an average
Brent crude price of $80 per barrel next year, but if it's lower, he says U.S. oil
production could still add 800,000 barrels per day. The rapid growth of U.S. oil
production has helped create a surplus of oil, particularly in the Atlantic Basin, and it
has already edged out West African imports the U.S. once relied on. The expectation is
that now with sharply lower prices, some shale wells will no longer be economical, and
many that were planned will not be drilled. Already,
applications for drilling permits have fallen sharply, down 40 percent to just more than
4,500 in November from October's levels, according to a Reuters report quoting industry
data firm Drilling Info. Fadel Gheit, senior energy
analyst at Oppenheimer, said U.S. shale production will keep growing, but the question is
how much, and it will be the price that determines it. 'The lowest will be that production
will increase by a half million (barrels a day). The highest will be 1.5 million. I would
say 600,000 to 700,000 would not be out of line, and we could even have 1 million barrels
a day of production growth. Some of these plays will continue because they are cash cows,'
he said. Gheit said there are more than 200 companies drilling U.S. shale, and much of the
data on their margins and production levels aren't known. He said the price of West Texas
Intermediate could remain in the $70s next year, and conceivably see a much sharper, but
temporary drop.... 'No matter how low oil prices go, there will be no (shale) production
shut in. The cash component (cost) will be, say, $15, $20, $25,' Gheit said, noting the
expenditure for land and drilling has already been made. 'Oil prices will have to go below
$30 for some of these wells to be shut in, and even then the owners need the cash to
survive. They will milk the cow until the cow drops dead.' Morse said one factor that
could keep the U.S. shale industry drilling is that there are a high number of incomplete
wells that could easily be turned into productive wells. He estimates that there are
thousands of such wells in Texas, Oklahoma, North Dakota, Ohio and Wyoming. 'There are a
very large number of incomplete wells that have been drilled, and they're the cheapest
ones to bring on. So, if companies are going to be strapped for cash, the best way to get
cash is to complete wells ... the average for that completion is $5 a barrel to complete a
well that's already been drilled,' he said. Morse said wells are much more efficient than
they were just a few years ago. 'Each well currently
being drilled in the main shale plays produces more than 550 barrels a day,' he said,
noting that it was 150 barrels on average just several years ago. Now those wells run for three months before the decline starts, and costs are much lower, at $35 to $45 per barrel, in the Bakken of
North Dakota and Eagle Ford in Texas.... Gheit said
the industry has also learned to be more efficient very quickly. 'Only five or six years ago, wells used to take 70, 80, 90 days to
compete. Today they take two weeks. That in itself is a huge accomplishment. The same rig
instead of drilling one well, can drill four. Companies now know how to drill faster than
ever before. They learned it in trial and error. Companies don't need as many rigs to
drill as many holes in the ground and that in itself is a cost saving,' he said. .... another 500,000 barrels a day of oil is expected to be produced in
the Gulf of Mexico over the next two years, taking production there to 1.9 million barrels
a day, a record high level. Just last month, Hess
saw the first flows at its majority-owned Tubular Bells offshore field. ... Morse agrees it will be exploration that will be affected by lower
prices, and that would shape production growth in the future. 'It will affect the amount
of oil in 2017 but not 2015 and 2016,' he said.
But then there will be other sources of oil coming online, he said, 'Mexico is going to
open up and there will be lower prices but nobody can afford not to be in Mexico.'" |
"The price collapse mainly reflects too much supply chasing too
little demand. Most analysts have focused on surging
U.S. production of 'shale' oil, which has increased by 3.5 million barrels a day (mbd)
since 2008, according to the consultancy IHS. But the U.S. expansion was widely
anticipated, says economist Larry Goldstein. The real
surprise, he argues, was lower-than-expected global demand. In early 2014, forecasters
predicted growth of 1.3 mbd, says Goldstein. Actual growth is about half that, 700,000
mbd, reflecting unpredicted economic weakness in Europe, Japan and China. The small
shift in the supply-demand balance resulted in significant price changes, because oil
demand is 'price inelastic.' Modest surpluses and shortages can trigger dizzying price
swings, because consumers needs in the short run are rigid. Shortages
cause a scramble for supply; surpluses produce price plunges to clear the market. As it
is, global oil consumption today is about 92 mbd, and available production capacity is
about 95 mbd, says Goldstein.... In theory, low
prices could cause oil companies to scrap new projects because they have become
unprofitable. This would dilute the effect of higher consumer spending. But for U.S. shale oil, the threat is modest, argued
Daniel Yergin of IHS in the Wall Street Journal. He cited an IHS study, based on
individual well data, finding that 80 percent of projects planned for 2015 are profitable
with oil prices between $50 and $69 a barrel. (IHS assumes that prices will stabilize at
$77 a barrel.) Longer-term, low prices would threaten costly deepwater and Arctic
projects, Yergin said. But the effect would be gradual." |
"A recent meeting in Vienna,
between the member states of Opec finally uncovered what the world had expected for
months. Saudi Arabia is playing politics with oil, forcing Opec to maintain its current
production levels at 30m barrels per day, to force down the price. Consequently oil prices have fallen 35% in 2014, tipping under the $70
mark for the first time since May 2010. The question is why the Saudis would risk the
goodwill of other Opec members, simultaneously emasculating the organisation and
undercutting their ability to use it in the future to serve their interests. It is a game
of high-stakes poker and in the long run will cause the Saudis some harm, but that is not
where their immediate thoughts lie. Since the first oil shocks following the 1973 Middle
East War, the Saudis have understood the role they can play in regional and world affairs
by turning the taps on and off. But recently, as the
US upped its production, it would have been reasonable to assume that Saudi would have
correspondingly cut surplus supply to maintain a healthy balance sheet. But instead Riyadh
has done the opposite. From Riyadh the world looks a grim place, and the Saudis have a
host of concerns that they feel are not being addressed adequately, either by their allies
in the West or by their partners in the region. Many experts talk of a Cold War between
Saudi and Iran, where on every major issue of regional concern an Iranian gain is viewed
by the Saudis as a loss, and for the House of Al Saud alarm bells are
ringing. In their view the US has effectively caved in, and allowed Iran off the
hook. The Iranians were not supposed to be allowed any domestic uranium enrichment
capacity, let alone get paid
$7bn for the privilege. Yet the US and Europeans
have spent months looking at ways to creatively offer Iran's 'moderate' President Hassan
Rouhani economic crumbs to appease the hardliners back in Tehran. For the Saudis the mild
mannered Rouhani is friendly manifestation of a regime that seeks to dominate the Middle
East, and which is trying desperately to be accepted by the world. Iran's reach across the
Middle East region worries Saudi even more than its nuclear programme. In Iraq, the
Iranians have as good as sewn up the state security apparatuses, and were it not for the
intervention of Iran's Revolutionary Guard Corps (IRGC) to assist northern areas of Iraq,
including Kurdish border regions, IS would be rampant in all but the most distinctly Shia
regions of the country. In Syria, as the US-led coalition strikes the Islamic State (IS),
the pressure on Iranian ally Bashar al-Assad appears to have lifted. Where once there was
a determination to remove him from power, rumours grow that the West will have to consider
dealing with him to help fight the bigger threat of the Islamic State. Propped up by Iranian money and proxies such as Hezbollah, and
cushioned with Security Council support by Russia, Assad looks to be safe. To make matters
worse on the Kingdom's southern and eastern borders, Shia rebels in Yemen, and
protestors in Bahrain, only contribute to the sense that the Kingdom is being
strangled by Iranian power from all sides. In the midst of the chaos from which Iran seems
to be profiting so well, Saudi Arabia has taken the decision that it has to hit back. And
given that Riyadh would prefer not to be drawn into a military confrontation with the
Iranians, it has had to seek other ways to confront Iran. The easy way it can do this is
by picking Tehran's back pocket. Iran's economy is heavily reliant on hydrocarbons, which
make up some 60% of its export revenue and provided 25% of total GDP in 2013. Deeply
committed to the fight in Syria, and Iraq, the Iranians are spending untold millions of
dollars a month to maintain their operations in the two countries, all the while
attempting to placate potential domestic unrest. Interestingly, the Iranians proposed
cutting Opec output ahead of the November conference only for the Saudis to rebuff them.
Additionally, the Saudis get a chance to deal Russia, Bashar al-Assad's stalwart ally, a
bloody nose, by driving down the cost of oil and hurting Moscow's hydrocarbon revenue
streams, which prop up a shaky domestic economy. As oil prices have fallen so has the
value of Russia's Rouble, plummeting
35% since June. Killing two birds with one stone would seem a smart policy, especially
since it is highly unlikely to result in the sort of military escalation the Saudis wish
to avoid. How long can the Saudis keep this game up? Realistically a few months, but if
the price of oil keeps falling the Saudis may have to rethink their strategy. Nevertheless
the Kingdom sits on $741bn of currency reserves and posted a $15bn surplus at the end of
last fiscal year, and the Saudis can absorb the cost of budget deficits for a few years if
needs be. This is helped by the fact that recent
mega-arms purchases have been completed and the Kingdom's future defence expenditure is
projected to fall in the coming two or three years, freeing up cash for other endeavours.
Although Riyadh has tried to stamp its authority on the region, which will undoubtedly
cause headaches in Tehran and Moscow, the oil weapon cannot reverse some of the more
critical issues facing the region. IS runs an entity roughly the size of Britain across
Iraq and Syria, its hostility to the "Al Salool" (a derogatory term for the Al
Saud family) recently made clear in a 17 minute speech by its Caliph AAbu Bakr
al-Baghdadi." |
"Canadian Oil Sands Ltd. , the largest owner of the giant Syncrude
oil-sands joint venture, said Wednesday it plans to slash its dividend by nearly half to
cope with a rising debt load and the recent swoon in global prices for crude oil. The Calgary-based company said its dividend payment will drop to 20
Canadian cents a share ($0.18) in the fourth quarter, down 43% from the 35 Canadian cents
a share it paid investors in the third quarter. It said the move was necessary to
stabilize its balance sheet in a lower oil price environment." |
"The revolutionary developments
in unconventional oil production
have already made a substantial difference to production (see chart). US production of
liquids has risen by 4mbd over the past four years. According to HSBC, US output is
expected to rise by 1.4mbd this year. Libyas
output is also recovering. Finally, unexpected economic weakness in the eurozone, Japan
and China has cut estimates of global demand by 0.5mbd this year. To sustain oil prices,
Opec needed to cut output by about 1mbd. But it or, more precisely, Saudi Arabia
has refused to do so. This has triggered the recent fall in prices. Will these low
prices last, or might they go even lower? I am not foolhardy enough to forecast oil
prices: the price elasticities are so low and the margins between supply and demand so
fine that it is all too easy to forecast wrongly. The case that the decline will prove
temporary is that Saudi Arabias desire to cripple production of unconventional oil,
which demands a high level of capital expenditure, will swiftly succeed. Moreover, the
lower oil prices, a hoped-for economic recovery and continuing rapid growth in emerging
economies could boost demand for oil. In addition,
argues HSBC, 'global spare capacity is still very tight by historical standards and
largely concentrated in Saudi Arabia'. Having made their
point, the Saudis might yet cut production." |
"Eastern
European nations reacted with shock and anger to Russias
decision to abandon South Stream, its $50bn gas pipeline across the Black Sea into
Europe, as shares in some of the companies involved in the project dived. Bulgaria, Serbia
and Hungary said they had received no advance warning that Moscow was scrapping South
Stream, even though they all have substantial financial and political capital invested.
Russia said it would export its gas to a trade hub in
Turkey instead. South Stream is so far the biggest casualty of the stand-off between
Russia and Europe over Moscows military involvement in Ukraine. The
much-vaunted project, backed by Russias state-controlled gas group Gazprom, was
designed to bring Russian gas into Europe by bypassing Ukraine. It gained momentum after a series of price disputes between Moscow and
Kiev over the past decade led to supply cuts for some of Gazproms European
customers. But there were fears in Brussels that the pipeline would cement Gazproms
domination of the European gas market. The European Commission insisted that other gas
suppliers be given access to South Stream, arguing that the idea of Gazprom both providing
the gas and owning the pipeline violated EU competition rules. However, the project was
backed by several countries in southeastern Europe, which saw it as a way to improve their
energy security. They also looked forward to earning money from transit fees for South
Streams gas as it crossed their territory. Countries
in the region lost another key supply option last year when a rival EU-backed project that
would have carried gas from Azerbaijan into the heart of Europe, called Nabucco, was
scrapped. At a meeting in Brussels of EU ambassadors on Tuesday, the Hungarian
representative asked Federica Mogherini, the new EU foreign policy chief: 'First Nabucco,
now South Stream. What are we supposed to do now?' Peter Szijjarto, Hungarys foreign
minister, said alternative sources of energy would now have to be explored, including gas
from Azerbaijan. Aleksandar Vucic, Serbias prime minister, told the countrys
RTS channel that the decision was bad news for Belgrade and said he would urgently seek to
speak with Mr Putin. 'Serbia has been investing in this project for seven years, but now
it has to pay the price of a clash between the great [powers],' he said. Italy and Austria
have also been vocal supporters of the venture, pitting themselves against the commission." |
"Russia on Monday scrapped the
South Stream pipeline project to supply gas to southern Europe without crossing Ukraine,
citing EU objections, and instead named Turkey as its preferred partner for an alternative
pipeline, with a promise of hefty discounts. The EU, at loggerheads with Moscow over Ukraine, and keen to reduce its energy
dependence on Russia, had objected to the $40 billion South
Stream pipeline, which was to enter the EU via Bulgaria, on
competition grounds. The proposed undersea pipeline
to Turkey, with an annual capacity of 63 billion cubic metres (bcm), more than four times
Turkey's annual purchases from Russia, would face no such problems. Russia offered to
combine it with a gas hub at the EU's southeastern edge, the Turkish-Greek border, to
supply southern Europe. Alexei Miller, the chief executive of Russia's state-controlled
gas exporter Gazprom, told reporters in Ankara, where he was on a one-day visit with
President Vladimir Putin, that South Stream was 'closed. This is it'. Putin accused the EU
of denying Bulgaria, heavily dependent on Russian gas, its sovereign rights, and said that
blocking the project 'is against Europe's economic interests and is causing damage'. He
announced that Russia would grant Turkey a 6 percent discount on its gas imports from
Russia for next year, supplying it with 3 bcm more than this year. Miller said Gazprom had
signed a memorandum of understanding with Turkey's Botas on the pipeline under the Black
Sea to Turkey." |
"U.S. oil producers have been
racing full-speed ahead to drill new shale wells in recent years, even in the face of
lower oil prices. But new data suggests that the much-anticipated slowdown in shale
country may have finally arrived. Permits for new wells dropped 15 percent across 12 major
shale formations last month, according to exclusive information provided to Reuters by
DrillingInfo, an industry data firm, offering the first sign of a slowdown in a drilling
frenzy that has seen permits double since last November. The Organization of Petroleum
Exporting Countries last week agreed to maintain its production quota of 30
million-barrels-per-day, despite a 30 percent drop in oil prices since June, triggering an
additional 10 percent decline. That move, many
analysts believe, was squarely aimed at U.S. oil producers driving the country's energy
resurgence: can they continue drilling at the current pace if prices don't rise?
'Currently, the market is focused on U.S. shale as the place where spending and production
must be curtailed,' Roger Read, a Wells Fargo analyst, said in a note Friday. 'There is little doubt, in our view, that lower oil and gas prices
will result in lower spending and lower shale production in 2015 to 2017.' A cutback of U.S. production could play into the hands of Saudi Arabia,
which has suggested over the past few months that it is comfortable with much lower oil
prices. Most analysts predict U.S. oil producers can
maintain their healthy production rates in the first half of 2015 - thanks in part to
investments made months ago. Some oil service companies have suggested that a slowdown
might be held off, as they continue to buy key drilling components. But, the data suggests
that production is likely to eventually succumb to lower prices. 'The first domino is the price, which causes other dominos to fall,' said
Karr Ingham, an economist who compiles the Texas PetroIndex, an annual analysis of the
state's energy economy. One of the first tiles to
drop: the number of permits issued, Ingham said. Texas issued a record number of permits,
934, before dropping to 885 in October. The 885 is still more than double levels seen in
the same month in 2010 when the shale revolution was just starting, but it shows a cooling
off that hasn't been seen to the same degree in the past two years. A drop in the rig
count is expected two to four months after a decline in permits - and production growth
would likely start to slow six months later. 'This
is a pull back from the acceleration. People are being careful,' said Allen Gilmer, chief
executive officer of DrillingInfo. While permits have declined at other times, Gilmer says
there is currently an early indication of a slowdown in the rig count. DrillingInfo said
for 10 shale formations, a permitting slowdown was noted in October. For one formation,
data was not available, and for two, the Barnett shale in Texas and the Bakken in North
Dakota, permits rose slightly. The permitting
slowdown was particularly pronounced in two Texas formations, the Permian Basin and Eagle
Ford shale, which saw new permits decline by 13 and 22 percent respectively." |
"Citibank (C) analysts estimate that the world is producing about 700,000
barrels a day more than total demand requires. With international oil prices
below $70 for the first time since 2010, most OPEC member countries will have trouble
keeping their budget deficits in check. According to an estimate
by Goldman Sachs (GS) last month, only Kuwait, the UAE, and Qatar are
safe below $70. OPECs idea is to try to knock
out U.S. shale producers by driving prices lower than they can afford. That way Saudi
Arabia, the cartels biggest exporter, can keep its market share in the U.S. But the damage to its fellow oil exporters could be severe. In Russia,
for example, the ruble
is plummeting. Iraq is already having trouble fighting ISIS, and lower oil prices
wont help. Libya is in chaos. Venezuelas economy, already on life support,
depends on oil for 95 percent of its export revenue. Irans oil minister on Friday
told Bloomberg News that he has doubts the strategy will even work: 'Theres no fact
or figure to say that shale production will definitely decrease,' he said. U.S. production
probably will decrease, even if it takes a while. At
$65 a barrel, its unlikely the U.S. can keep up its record-setting pace of expanding
oil production. U.S. oil has jumped from about 5 million barrels a day in 2008 to more
than 9 million. Even before OPECs decision, forecasters were calling for a
slowdown. Last May, for instance, the Energy Information Agency forecast that total U.S.
production would peak just shy of 10 million barrels per day before 2020. The question is:
How soon will prices start eating into that growth? It might actually take most of next
year. Money is already invested in wells that are producing right now; its future
wells that are at risk as oil companies slash investment for the next few years.
'Dont hold your breath for a production response, since there will be a six-month
lag between a drop in rigs and a slowdown in production,' writes Manuj Nikhanj, head of
energy research at Investment Technology Group. That will have a major impact in the next
few years, especially since U.S. shale accounts for about 20
percent of all crude oil investment in the world. For the next several months, though,
the U.S. will likely keep flooding the market with crude, which should continue to make it
cheaper. Theres already talk of prices
hitting $40. On average, the Bakken formation in North Dakota and Montana has a higher
cost than some of the other big shale plays in Texas, such as the Eagle Ford and Permian.
The Bakkens biggest operator, Continental Resources (CLR), run by billionaire Harold Hamm, holds about 1.2
million acres of land in the region. Thats well above the next largest leaseholder,
Exxon Mobil (XOM), which holds 845,000 acres, according to data
from Bloomberg Intelligence. The Bakken has been one
of the primary engines of growth for the U.S. Since 2007, oil production there has risen
from less than 200,000 barrels a day to more than 1 million. The
boom happened so fast, pipeline companies didnt have time to build enough lines to
the fields. The result has been a bonanza for railroad companies, which have quickly
filled the gap. For the past two years, most of the oil that has left North Dakota has
done so on a train." |
"Saudi Arabia and the core Opec
states are taking an immense political gamble by letting crude oil prices crash to $66 a
barrel, if their aim is to shake out the weakest shale producers in the US. A deep slump
in prices might equally heighten geostrategic turmoil across the broader Middle East and
boomerang against the Gulfs petro-sheikhdoms before it inflicts a knock-out blow on
US rivals.... Chris Skrebowski, former editor of
Petroleum Review, said the Saudis want to cut the annual growth rate of US shale output
from 1m barrels per day (bpd) to 500,000 bpd to bring the market closer to balance. 'They
want to unnerve the shale oil model and undermine financial confidence, but they
wont stop the growth altogether,' he said. There is no question that the US has
entirely changed the global energy landscape and poses an existential threat to Opec. America has cut its net oil imports by 8.7m bpd since 2006, equal
to the combined oil exports of Saudi Arabia and Nigeria. The country had a trade deficit
of $354bn in oil and gas as recently as 2011. Citigroup said this will return to balance
by 2018, one of the most extraordinary turnarounds in modern economic history.... Opec has misjudged the threat. As late as last year, it was
dismissing US shale as a flash in the pan. Abdalla El-Badri, the groups
secretary-general, still insists that half of all US shale output is vulnerable below $85.
This is bravado. US producers have locked in higher
prices through derivatives
contracts. Noble Energy and Devon Energy have both hedged over three-quarters of their
output for 2015. Pioneer Natural Resources said it has options through 2016 covering two- thirds of its likely
production. 'We can produce down to $50 a barrel,' said Harold Hamm, from Continental
Resources. The International Energy Agency said most
of North Dakotas vast Bakken field 'remains profitable at or below $42 per barrel.
The break-even price in McKenzie County, the most productive county in the state, is only
$28 per barrel.' Efficiency is improving and drillers are switching to lower-cost
spots, confronting Opec with a moving target. 'The (price) floor is falling and may not be
nearly as firm as the Saudi view assumes,' said Citigroup. Mr
Morse says the 'full cycle' cost for shale production is $70 to $80, but this includes the
original land grab and infrastructure. 'The remaining capex required to bring on an
additional well is far lower, and could be as low as the high-$30s range,' he said.
Critics of US shale may have misunderstood its economics. There is a fast decline in
output from new wells but this is offset by a 'long-tail phase' for a growing number of
legacy wells. The Bakken field has already reached 1.1m bpd, and this is expected to
double again over the next five years.... Other oil projects around the world may be more vulnerable to a
price squeeze, including the North Sea, the ultra-deepwater ventures in the Atlantic off
Brazil and Angola, Canadian oil sands, or Russias contentious plans for the Arctic
in the 'High North'. But the damage will be gradual.
In the meantime, oil below $70 is already playing havoc with budgets across the global
petro-nexus. The fiscal break-even cost is $161 for
Venezuela, $160 for Yemen, $132 for Algeria, $131 for Iran, $126 for Nigeria, and $125 for
Bahrain, $111 for Iraq, and $105 for Russia, and even $98 for Saudi Arabia itself,
according to Citigroup. Opec may not be worried
about countries such as Nigeria, but even there a
full-blown economic and political crisis could turn the north into a Jihadi stronghold
under Boko Haram. The growing Jihadi movements in
the Maghreb combining with events in Syria and Iraq clearly pose a
first-order security threat to the Saudi regime itself. The Libyan city of Derna is
already in the hands of the Salafist group Ansar al-Shariah and has pledged allegiance to
Islamic State. Terrorist movements in the Egyptian Sinai have also rallied to the black
and white flag of IS, prompting Egypts leader Abdel al-Sisi to call last week for a
'general mobilisation' of all leading Arab and Western powers to defeat the spreading
movement. The new worry is Algeria as the Bouteflika regime goes into its final agonies.
'They have an entrenched terrorist problem as we saw in the seizure of the Amenas gas
refinery last year. These people are aligning themselves with Islamic State as part of the
franchise,' said Mr Newton." |
"England's bid to host the 2018 World Cup gathered intelligence about
suspected corruption in the rival Russian camp in a two-year campaign, a dossier published
by parliament has revealed... It reports intelligence that Russia and Qatar were suspected
of trading votes through the deal that gave the Gulf state accesss to massive gas reserves
in Siberia's Yamal Peninsula.... The Yamal reserves
are the biggest on the planet and run to trillions of cubic metres. Qatar is the biggest
exporter of liquid natural gas but its own reserves are set to run out in 30 years." |
"A recently discovered form of
carbon graphite the
material in pencil lead has turned out to have a completely unexpected property
which could revolutionise the development of green energy and electric cars. Researchers
have discovered that graphene allows positively charged hydrogen atoms or protons to pass
through it despite being completely impermeable to all other gases, including hydrogen
itself. The implications of the discovery are immense as it could dramatically increase
the efficiency of fuel cells, which generate electricity directly from hydrogen, the
scientists said. The breakthrough raises the
prospect of extracting hydrogen fuel from air and burning it as a carbon-free source of
energy in a fuel cell to produce electricity and water with no damaging waste products.
'In the atmosphere there is a certain amount of hydrogen and this hydrogen will end up on
the other side [of graphene] in a reservoir. Then you can use this hydrogen-collected
reservoir to burn it in the same fuel cell and make electricity,' said Professor Sir
Andrei Geim of Manchester Univeristy. Ever since its discovery 10 years ago, graphene has
astonished scientists. It is the thinnest known material, a million times thinner than
human hair, yet more than 200 times stronger than steel, as well as being the worlds
best conductor of electricity.... The study, published in the journal Nature, shows that
graphene and a similar single-atom-thick material called boron nitride allowed the
build-up of protons on one side of a membrane, yet prevented anything else from crossing
over into a collecting chamber. In their scientific paper, the researchers speculate that
there could be many applications in the field of hydrogen fuel cells and in technology for
collecting hydrogen gas from the atmosphere, which would open up a new source of clean
energy. 'Its really the very first paper on the subject so what were doing is
really to introduce the material for other experts to think about it,' Sir Andrei said. |
"Above all else, the shale boom has been the real game-changer for
the oil industry, as it is driving a remarkably quick jump in U.S. oil production,
evidenced in the following chart. It's this U.S. production OPEC sees as a real threat to
its control of the oil market. If OPEC cut its production, this would only fuel greater
development of U.S. oil supplies, which are currently costlier to develop. So, by keeping its output steady, OPEC is hoping to keep a lid on
American oil output, as it knows U.S. producers will have no choice but to cut investments
as prices grow weaker. That being said, American oil producers can still make plenty of
money even as oil prices weaken. Producers have made a lot of progress on getting costs
down by developing new technologies to extract more oil out of shale plays per dollar
spent. Because of this, some companies can still earn
adequate returns even if oil fell below $40 per barrel." Oil News: OPEC Looks to Stomp Out American Rival Before it Loses Control The Motley Fool, 29 November 2014 |
"If you have built up enough
foreign currency reserves in the good years (as Saudi Arabia has) and you want to make
life tough for your new rivals in the marginal oilfields of North Dakota, you might feel a
couple of years of cheap crude is a price worth paying. The excess supply created by Americas shale revolution has been
disguised in recent years by capacity reductions in war-torn countries such as Libya. But
the producers luck has run out this year as supply has picked up around the world
even as Chinas slowdown and stagnation in Europe and Japan has reduced demand. The
jockeying for position by Saudi Arabia and others might sound like a game, but it really
matters. With world oil exports amounting to around 40m barrels a day, the $40 drop in the
oil price since June represents a transfer from oil exporters to oil consumers of more
than $400bn a year. US consumers have an extra $70bn
in their pockets, money they used to spend on fuel and can direct towards eating out,
buying electronic gizmos or going on holiday. Even with the usual lag before consumers see
the benefit of falling petrol prices, we are starting to feel the impact. Last weeks
revision to third quarter US GDP, from 3.5pc to 3.9pc, was in part a reflection of more
confident consumers with higher disposable incomes.
Americans increased purchasing power could hardly have come at a better time, as the
annual Black Friday and Cyber Monday consumption splurge gets under way. With consumption
accounting for two thirds of the US economy, this is one key benefit of the oil price
slide. But it is not the only one. Cheap energy is rapidly replacing cheap labour as the
key differentiator between countries competing for investment in a global marketplace. As
emerging markets wage bills rise, Americas energy advantage becomes ever more
significant. Europe, which missed out on the first big shift, looks like being squeezed as
badly by the second. No wonder companies like BASF
are choosing to build any new chemical capacity on the shores of the Gulf of Mexico and
not the banks of the Rhine. The third key benefit of cheap oil for the developed world,
and America in particular, is the downward pressure it applies to an inflation rate that
might otherwise have started to pick up on the back of a recovering housing market and
falling unemployment. Low inflation is providing the cover needed by central banks such as
the Fed to keep monetary policy much looser for longer. Even when rates do start to rise, probably in the middle of next year in
America and later still in the UK, the trajectory will be shallower and the end point
lower in a world of cheap energy. The falling oil price is not unqualified good news. For
every consumer business looking at a Thanksgiving bonanza this weekend there is an
over-borrowed oil drilling company that took advantage of super-cheap debt in the junk
bond market and is now wondering how it will pay the coupon. Energy companies represent
16pc of the US high-yield bond market, compared with 4pc a decade ago. Junk bonds can be
the canary in the mineshaft for the stock market. But that is a problem for another day.
In the short-term, the US markets string of new highs is a logical response to the
emergence of the new lucky country." Shale and cheap oil make America the new lucky country Telegraph, 29 November 2014 |
"Remember the global financial crisis, triggered six years ago when
billions of dollars of dodgy loans - doled out by banks to subprime borrowers and then
resold numerous times on international debt markets - began to unravel and default? Stock
markets plunged, banks collapsed and the entire global financial system teetered on the
brink of catastrophe. Well a similarly chilling economic scenario could be set off by the
current collapse in oil prices. Based on recent
stress tests of subprime borrowers in the energy sector in the US produced by Deutsche
Bank, should the price of US crude fall by a further 20pc to $60 per barrel, it could
result in up to a 30pc default rate among B and CCC rated high-yield US borrowers in the
industry. West Texas Intermediate crude is currently trading at multi-year lows of around
$75 per barrel, down from $107 per barrel in June. 'A shock of that magnitude could be
sufficient to trigger a broader high-yield market default cycle, if materialised,' warn
Deutsche strategists Oleg Melentyev and Daniel Sorid in their report. Five years ago at
the beginning of what has become known as the US shale oil revolution, drillers started to
load up on debt to fund their operations and acquire new acreage as vast areas of North
America started to open up for exploration. In 2010, energy and materials companies made
up just 18pc of the US high-yield index which tracks sub-investment grade borrowers
but today they account for 29pc of the measure after drilling firms spent the past
five years borrowing heavily to underwrite the operations. The result of this debt splurge
has been a spectacular rise in US oil and gas output. Latest estimates suggest that by the
end of the decade the US will have outstripped even Saudi Arabia and Russia in terms of
oil production. The development of new shale resources in North America and the opening up
of fields in the Arctic seas off Alaska could see the country pumping 14.2m barrels per
day (bpd) of oil and petroleum liquids by 2020, up from 7.5m bpd in 2013. This rush to
pump more oil in the US has created a dangerous debt bubble in a notoriously volatile
segment of corporate credit markets, which could pose a wider systemic risk in the
worlds biggest economy. By encouraging ever more drilling in pursuit of lower oil
prices, the US Department of Energy has unleashed a potential economic monster and pitched
these heavily debt-laden shale oil drilling companies into an impossible battle for market
share against some of the worlds most powerful low-cost producers in the
Organisation of Petroleum Exporting Countries (Opec). Its a battle the US oil
fracking companies wont win. The problem is that much of Americas shale oil is
expensive to produce and the industry is comprised of numerous small companies who were
forced to leverage their operations with debt to fund the high cost of drilling wells
through a process known as hydraulic fracturing, or fracking. Should oil prices fall for a
prolonged period of time many who have been forced to borrow at a higher rate could be
forced out of business and ultimately default. According to
research from JP Morgan Asset Management, of the 12 largest shale oil basins in the US,
80pc are barely profitable, with prices of oil below $80 per barrel. More worrying is that these projections dont include interest
payments on debt made by shale producers. These guys have taken on a lot of debt to fuel
their operations in the US,' said Alex Dryden, an analyst at JP Morgan Asset Management.
'As the oil price has fallen we have started to see a sell-off in debt and equities in
this energy space in the last few months.' According to Mr Dryden, the market has become
increasingly concerned about the risks of US shale drillers being caught up in an oil
price war with members of the Organisation of Petroleum Exporting Countries (Opec). He
argues this has already been reflected recently in the US high-yield index and the
increasing cost of insuring US high-yield assets in the shale oil industry." Oil price slump to trigger new US debt default crisis as Opec waits Telegraph, 29 November 2014 |
"Falling crude oil prices may
boost European demand for oil-indexed gas next year, such as pipeline gas from Russia,
when its price is likely to fall below spot prices. Brent
crude oil fell to an intraday four-year low of $71.12 a barrel on Friday, the day
after OPEC decided not to cut supply, which dragged down other energy prices. The drop in crude could make long-term gas supplies agreed between
European utilities
and Russia, Algeria and Norway
cheaper thanks to their link to oil prices.
Utilities have spent years reducing their exposure to oil prices in their gas contracts by
renegotiating deals and buying more gas on Europe's growing, freely traded spot market,
which has been cheaper. Now this trend may go into reverse." |
"Falling crude oil prices may boost European demand for oil-indexed
gas next year, such as pipeline gas from Russia, when its price is likely to fall
below spot prices. Brent
crude oil fell to an intraday four-year low of $71.12 a barrel on Friday, the day
after OPEC decided not to cut supply, which dragged down other energy prices. The drop in crude could make long-term gas supplies agreed between
European utilities
and Russia, Algeria and Norway
cheaper thanks to their link to oil prices.
Utilities have spent years reducing their exposure to oil prices in their gas contracts by
renegotiating deals and buying more gas on Europe's growing, freely traded spot market,
which has been cheaper. Now this trend may go into reverse." Oil price drop may drive Europe back to Russian gas next year Reuters, 28 November 2015 |
"The International Energy
Agencys chief economist on Friday urged oil producers to boost investment in new
projects to meet an anticipated rise in demand, a move that he said may avoid oil price
spikes in coming years. Speaking in Madrid during the presentation of the IEAs
annual report, Fatih Birol said that a tumble in oil prices makes it hard to believe a
supply crunch may happen any time soon, but the slow pace of development of new projects
makes it imperative to act. 'We shouldnt just
ignore tomorrows challenges,' Mr. Birol said. 'This is hard point to make in this
context of lower oil prices, but we need to invest now.'" IEA Chief Economist Urges Oil Producers to Invest in New Projects Wall St Journal, 28 November 2014 |
"Libya's self-proclaimed prime minister
has warned that attempts by a rival government in the east to assert control over the oil
industry could escalate the political conflict dividing the OPEC member state and force it
to break in two. Libya has
had two governments competing for power since August when a group called Operation Libya
Dawn, which opponents say is backed by Islamists, seized Tripoli and forced the elected
Prime Minister Abdullah al-Thinni to flee 1,000 km to a small city near the border with Egypt. Both sides have so far avoided talking
publicly about prospect of a split. The warning by Omar al-Hassi, prime minister of the
rival government, came after Thinni's government claimed air strikes on Tripoli's Mitigate
airport this week, escalating a confrontation that started with an attack by Libya Dawn on a rival force in Tripoli in July. The new rulers in the
capital are not recognized by the United
Nations and world powers but have taken over ministries, oil facilities, airports and
much of western and central Libya. In a step to assert control over the oil industry,
Thinni's government said on Wednesday it had appointed a new chairman of the National Oil
Corp. Thinni had initially retained the state oil firm's previous head, Mustafa Sanallah,
but he remains in Tripoli. The conflict gripping Libya three years after the overthrow of
Muammar Gaddafi poses a legal dilemma for oil traders, who are left wondering who owns
Libya's oil exports, worth more that $10 billion a year. The country sits on Africa's
largest oil reserves. 'Libya's oil has become part of
the war,' Hassi told Reuters in an interview. 'We
had hoped that oil would not be part of this conflict.' Hassi said Libya might break up if
the international community allowed Thinni to appoint its own NOC chairman and eventually
form an eastern oil company." |
"The dramatic slide in oil
prices has underscored the fragility of Stephen Harpers entire resource-based
approach to the economy [in Canada]. For this government, Albertas oilsands were the
key to Canadas
economic future. Alberta heavy oil would be sold to the world at premium prices. Spin-offs would provide jobs for Canadians across the country. It was a
coherent vision. But it rested on one thin reed: an oil price high enough to cover the
cost of extracting bitumen from the tarsands. Now, with oil prices expected to remain low
for the indefinite future, the entire project looks increasingly iffy. That became
glaringly obvious in the stock markets late this week as investors bailed out of energy
companies. The reasons for the oil price collapse are varied. Chinas energy-reliant
economy is slowing down. New shale oil production from the U.S. is creating a glut. The
cartel known as the Organization
of the Petroleum Exporting Countries has been unwilling or unable to enforce high
prices. If prices follow their historical pattern, they wont stay down forever. But
no one knows whether this slide will last a few weeks, two years or a decade." |
"In the late 1990s, oil, in nominal dollars, fell to $10 a barrel and
the Economist famously predicted that $5 oil was coming, a call that, 25 years later,
still haunts the magazine like an obsessed lover from your youth. Of course, the low price
stimulated demand and drivers flooded into showrooms to buy rolling, gas-slurping pigs
like Ford Explorers. At the same time, the low price choked off exploration and
development, constraining supply. By 2005, oil was at $60 and would more than double again
before peaking out and crashing during the financial crisis just as low prices cure
themselves, so do high prices. We dont know if
the current price of $70 a barrel can be considered low, but we do know that prices in the
$60-to-$70 range will hurt the high-cost producers, a group that would include the
deep-well offshore operators, the oil sands and some of the short-life U.S. shale oil
wells (Société Générale says the big American shale plays, such as the Bakken, need
about $65 to keep pumping). As capital expenditure
budgets get crunched and theyre getting crunched now supply will
eventually fall. But that may not happen quickly because the big production projects that
are already under construction cant be cancelled or slimmed-down. But rest assured, it will happen.... conventional oil and
condensate the 'black' oil that comes out of the ground easily and relatively
cheaply and can be refined into gasoline reached a production level of 73 million
barrels a day in 2005. Guess what? Almost a decade later, conventional oil production has
not climbed even though prices were high for most of that time.... What drove global production up
to the current 92 million barrels a day or so was non-conventional production the
oil sands, U.S. shale oil, biofuels and natural gas liquids. The problem is that most of
this production is highly expensive and a lot of it,
like the gas liquids, is refined into heating fuels, such as butane, not transportation
fuels, which are the biggest oil products market. Barring
a technological breakthrough, the world has probably seen 'peak' conventional oil
production. That means any significant production gains will have to come from
non-conventional oil. Continued low prices can only
damage that production." |
"Renewable
energy in Scotland from wind farms, hydro power plants and other clean technologies
provided the single largest source of electricity to the country for the first time, in
the first half of 2014, new industry figures will show on Thursday. Analysis
by the trade body Scottish Renewables shows that renewables produced nearly one third
more power than nuclear, coal or gas in the first six months of the year, generating a
record 10.4 terawatt hours (TWh) during the six-month period. The analysis was compiled by comparing Energy Trends data produced by the
Department of Energy
and Climate Change (Decc) on renewable energy output with figures produced by National
Grid on coal, gas and nuclear power. Niall Stuart, chief executive of Scottish Renewables,
said the record figures marked 'an historic' moment for the renewable energy industry, as
well as a major milestone for the Scottish governments plans to generate 100% of its
electricity from renewable sources by 2020.... The Decc data reveals onshore wind and
hydro power remain Scotlands main sources of renewable energy, but Stuart said there
is significant potential for offshore wind and wave and tidal power if they receive
sufficient government support, including new grid connections to Scottish islands.
Scotlands Business, energy and tourism minister, Fergus Ewing, said the figures
highlight the potential that renewable energy has to replace nuclear power." Renewable energy overtakes nuclear as Scotland's top power source Guardian, 27 November 2014 |
"Declining production levels,
record low exploration levels and falling oil prices combined with rising costs -
are producing a pernicious cocktail of uncertainty on the United Kingdom Continental Shelf
(UKCS). One of the oil and gas industrys most respected industry surveys highlights
these fears, with the North Seas major operators and contractors reporting
plummeting optimism. The findings, from the 21st bi-annual Oil and Gas Survey, conducted
by Aberdeen & Grampian Chamber of Commerce and sponsored by law firm Bond Dickinson,
reveal that for the first time since 2008, more operators and contractors are pessimistic
about their UKCS activity than they are optimistic. The
survey of firms, representing around one-sixth of the industry, shows that 15% of
businesses are more confident than a year ago, while 46% are less optimistic. The findings
tally with Oil & Gas UKs investment analysis which shows spending reached a
record-breaking £14.4bn last year and while it is likely to hit £13bn in 2014, if there
is no change in industry dynamics it could halve by 2016. This worrying situation has led
to renewed calls for additional Government support to ensure all is done to secure the
remaining reserves in the North Sea and boost the nations energy security." Confidence falls in the North Sea oil and gas industry The Journal, 26 November 2014 |
"The question of how well the US
shale oil industry can survive with these lower prices is yet to be decided. The industry
only really took off about four years ago, and has benefited from US benchmark crude above
$90 for most of that time. It is now having to adjust to a price of about $75. Pearce Hammond, an analyst at Simmons & Co, an investment bank
specialising in the energy industry, argued in a recent note that the smaller and midsized
US companies that have led the shale revolution have been achieving higher output from
their wells as a result of adjustments to their production techniques. He added that 'the
resource abundance of US tight oil could make US oil production more resilient than many
currently surmise, even at a lower price'. If US production remains strong for longer, it
could drive oil prices down more. Yet whatever happens in the next two years, the
long-term picture shows there is still enormous unmet demand for energy worldwide." |
"Israel has proposed
that EU countries invest in a multi-billion euro pipeline to carry its natural
gas to the continent, noting that the supply from Israel would reduce Europes
current dependence on natural gas from Russia. A proposal
for the 'massive' project was introduced by Israels Energy Minister Silvan Shalom to
energy ministers from Euro-Mediterranean countries who met in Rome earlier this week,
Israels Channel 2 reported on Thursday. It said the project would require a
multi-billion euro investment from Europe to build a pipeline from Israels
Mediterranean cost to Cyprus, from where the gas would be carried on to Greece and Italy.
The TV report said Cyprus, Greece and Italy were all supportive of the idea, and that
Israel would make a formal presentation of the project to European representatives in
Brussels in three weeks time. It would be cheaper for Europe to work on a supply
route with Egypt, but this could expose the Europeans to instability because of the
unpredictable political developments in Egypt, the report noted. Similarly, a pipeline
from Israel to Turkey would be less expensive, but bilateral relations rule this out so
long as Recep Tayyip Erdogan, a prominent critic of Israel, holds power there. In
September, Israel signed a deal to supply Jordan with $15 billion worth of
natural gas from its Leviathan energy field over 15 years. The deal was
Israels largest collaboration with Jordan to date, and will make Israel its
chief supplier. Representatives of the gas companies involved, Delek Group Ltd. and
Nobel Energy Inc., were in Jordan to sign the agreement. Shalom hailed that deal as
'a historic act that will strengthen the economic and diplomatic ties between Israel and
Jordan.' Thursdays report underlined that Israel hopes a natural gas partnership
with Europe would also boost diplomatic relations with the EU, which are strained by major
differences over policy on the Palestinians. Israel decided last year to export 40 percent
of the countrys offshore gas finds, and has since also signed a 20-year, $1.2
billion deal with a Palestinian firm. In June it signed a letter of intent to supply
energy to an Egyptian facility as well." Israel pitches massive natural gas pipeline plan to Europe Times of Israel, 20 November 2014 |
"Nineteen shale regions in the
U.S. are no longer profitable with oil at $75 a barrel, data compiled by Bloomberg New
Energy Finance show. Those areas, including parts of
the Eaglebine and Eagle Ford in Texas, pumped about 413,000 barrels a day, according to
the latest data available from Drillinginfo Inc. and company presentations. Domestic oil
output slipped 59,000 barrels a day in the week ended Nov. 14 to 9 million after reaching
the highest level since at least 1983, Energy Information Administration data show. Hess,
based in New York,
said in a conference call Nov. 10 that itll cut its rig count to 14 next year in
response to the lower oil prices. Apache, with headquarters in Houston, will reduce
spending in North America by 25 percent next year, a company statement issued yesterday
shows. ... While rig counts have fallen, productivity
has surged to record levels across all major fields, with oil output per rig expected to
rise to a record 543 barrels a day in the Bakken in December, the EIA said." Drilling Slowdown on Sub-$80 Oil Creeps Into Biggest U.S. Fields Bloomberg, 21 November 2014 |
"With crude at $75 a barrel, the
price Goldman Sachs Group Inc. says will be the average in the first three months of next
year, 19 U.S.
shale regions are no longer profitable, according to data compiled by Bloomberg New
Energy Finance. Those areas, which include parts of the Eaglebine and Eagle Ford in East
and South Texas, pumped
about 413,000 barrels a day, according to the latest data available from Drillinginfo Inc.
and company presentations. That compares with the 1.03 million-barrel gain in daily
national output over the past year, government figures show. The expansion of U.S. oil supply to more than 9 million barrels a day is contributing to a global
glut, driving down prices by as much as 32 percent since June. The data compiled by BNEF, which take into account the costs of drilling,
royalties and transportation, show that certain shale patches fail to make money at the
current price. Companies such as SandRidge Energy Inc. (SD) and Goodrich Petroleum Corp. (GDP) said they expect to
pump more oil for less money so they can withstand the rout. 'Everybody
is trying to put a very happy spin on their ability to weather $80 oil, but a lot of that
is just smoke,' said Daniel Dicker, president of MercBloc Wealth Management Solutions with
25 years experience trading crude on the New York
Mercantile Exchange. 'The shale revolution doesnt work at $80, period.' .... Estimates of the price that
drillers need to break even have varied. The Paris-based International
Energy Agency said about 96 percent of U.S. shale production remains profitable at $80
a barrel. Analysts at Sanford C. Bernstein LLC said one-third of the output added in the
first three months of 2014 is uneconomic with WTI at $80. About 80 percent of
potential growth from U.S. shale oil in 2015 would remain economic at $70 a barrel, IHS
Inc. said in a report today. At an average annual price of $77 a barrel, output will rise
by 700,000 barrels a day in 2015, compared with more than 1 million barrels a day this
year, the Englewood, Colorado-based data provider said." |
"China, a week after
unveiling an accord aimed at limiting carbon emissions, plans to cap the increasing rate
at which it consumes energy to 28 percent for the seven-year period to 2020. The nation is
targeting energy use equivalent to an annual 4.8 billion metric tons of standard coal by
2020, according to a statement issued by the State Council today.
Chinas energy use surged 45 percent in the seven years to 2013, according to data from the National Bureau of Statistics. The statement
marks the latest attempt by Chinas policy makers to limit the nations appetite
for energy. Reflecting its rapid industrialization and economic growth, China has become a
voracious consumer of energy, changing global energy markets and the geopolitics of energy
security." China Plans to Slow Energy Consumption Increase to 28% by 2020 Bloomberg, 19 November 2014 |
"... the whispered secret accord
between the US and Saudi Arabia over the geopolitics of energy policy seems to me to be
the real deal. One thing is for certain; the Saudis are behaving decidedly oddly. While
the price of oil has fallen off the map, having dropped below $80 per barrel to its lowest
level in four years (in late spring it was perched at a lofty $115), the petro-kingdom has
done absolutely nothing. Equally interestingly, given their masterly inactivity, until
last week they had also said absolutely nothing. Finally, Saudi oil minister al-Naimi
blandly intoned that Riyadhs energy strategy was merely to follow the economic
fundamentals. But an economics-only energy strategy would surely dictate that the Saudis
still the crucial swing producer in the Opec cartel should reduce pumping to
stabilise the global oil price, what with markedly weakening demand in Europe and Asia,
and the US shale revolution changing the face of the global energy market. Yet they have
not done so. There are only two possible explanations as to what is going on here. The first can be thought of as the John D Rockefeller gambit, whereby the
Saudis steal a trick from the old nineteenth century oil tycoons playbook. When
confronted with a nimble, if smaller, adversary well before modern anti-trust laws
came onto the books Rockefeller would continue pumping oil even at a loss, all the
while knowing that the plunging price would finish off his weaker rival well before it
really began to damage his firm Standard Oil. According to this theory, in the face of the
challenge posed by US fracking, Riyadh may be ruthlessly defending its market share, while
knobbling its great, emerging American rival in the process. Knowing that, at $80 per
barrel, the economics of fracking begin to grow at least somewhat dicey whereas
given their colossal foreign reserves, the Saudis can easily handle selling oil for years
at well below its current subterranean market price Riyadh may merely be pressing
its advantage. But knowing a little bit about byzantine Saudi manoeuvring from my
Washington days, I imagine this amounts to a secondary reason. Instead of aping Rockefeller, I would argue that Riyadh is
hearkening back to the 1980s, when a then-secret deal to drive down the price of oil
negotiated between the Saudi monarchy and President Reagan helped to
economically destroy the Soviet Union. To answer
minister al-Naimi, here is one concrete example of where the Saudis devised an energy
policy for reasons other than economics. US secretary of state John Kerry was summoned to
meet Saudi King Abdullah on 11 September this year. It
is being openly whispered that they struck a compact, whereby they agreed to keep pumping
in an effort to cripple the Saudis mortal enemy Iran (for the Americans, the
differing but complementary interest involves pressuring Tehran to the point that it does
a nuclear deal with Washington in the near term). In addition, both Riyadh and Washington have scores to settle with
Vladimir Putins Russia, the Americans over Ukraine and the Saudis over his critical
support for their great enemy, the murderous Assad regime in Syria. While the break-even price for the Saudis to balance the books (not taking
into account their immense foreign reserves of over $735bn) is $84 a barrel according to
the IMF, it is considerably higher for Iran ($153) and Russia (north of $100). In other
words, the Saudis enemies will run into real economic trouble well before Riyadh
begins hurting." |
"Polands much-hyped shale
gas boom could take as long as six more years to become commercially viable, as foreign
oil and gas companies abandon their exploratory plans, citing bureaucratic tangles and an
unfriendly investment climate. Poland dreamt of
domestic shale gas providing both an alternative to relying on politically unpalatable
Russian energy and a windfall to state tax coffers. Global petrochemical companies
such as ExxonMobil, Total and ConocoPhillips
flocked to the country, snapping up concessions and making Poland Europes biggest
shale gas market by drilled wells. But instead exploratory wells have failed to meet
expectations and many drillers have grown impatient with regulatory delays that executives
say have smothered their ambition. Of the 11 foreign
companies that invested in the countrys shale gas market over the past four years,
seven have abandoned the market, after
spending a cumulative £500m. That has left
domestic, state-backed companies such as PKN Orlen, Lotos and PGNiG with
the financial and regulatory backing of the government, and a handful of well-funded
global players, to wait for a change in fortunes. 'We gave it our best shot. We got to a
point where we could not justify carrying on. We demonstrated some potential, but our
company could not justify committing further capital based on the results so far,' says
Kamlesh Parmar, chief executive of British driller 3Legs Resources,
which pulled out of Poland in September. 'It is going to take longer and cost more money
than most people imagine. Those operators that continue will have to have the funding and
patience to give their projects the best chances of success.' The
steady withdrawal of investors and explorers and rising disillusion with Polands
shale gas prospects is not likely to be helped by the recent sharp fall in global oil
prices, which have cast doubt on the financial credibility of the fuel even in
well-established drilling markets such as the US....
Today, the ministry reckons the country may have around 55 years worth of gas, if it
can be extracted. So far 66 wells have been drilled, according to the government. None are
producing gas in commercially viable quantities. 'I think its fair to say that there
was a little too much expectation, too much hope,' says Jacek Libucha, principal at the
Boston Consulting Group in Warsaw." Polands shale gas dreams put on hold Financial Times, 16 November 2014 |
"LONDON-based oil and gas
exploration company Premier Oil yesterday announced plans to slow progress at its Sea Lion
project in a bid to cut costs as protection from lowered oil prices. Premier Oil chief
executive Tony Durrant said that new projects would be sanctioned 'if they are robust at
our long term-oil price' currently less than $80 a barrel. The reduction will come from a reduced amount of wells drilled at the
north and east part of the Sea Lion oil field. Currently, Premier expects to drill 10 firm
exploration and appraisal wells over the next years, the first of which is expected to
spud next month or January. The Sea Lion project kicked off development during November
2012 in the North Falkland Basin, south east of Argentina." Premier Oil slows Sea Lion project to guard against falling oil prices CITY AM, 16 November 2014 |
"Although it is impossible to
accurately predict the future today, we are seeing companies restructuring their drilling
budgets for 2015 due to the change in oil prices. Right here in Louisiana, some companies
like Halcon and Sanchez have already announced reductions in their budget for 2015 in the
Tuscaloosa Marine Shale directly due to falling oil prices. Unfortunately, Louisiana is
not home to any cheap oil plays. The TMS is a good example of an expensive play,
especially now with $77 a barrel oil. The Gulf of Mexico has already seen companies
reducing manpower and scaling back drilling budgets for 2015. To say the market in the
United States is not being negatively affected is simply not an accurate assessment of the
situation. What is the reasoning behind this drop in
oil prices? For starters, U.S. production is up from 5 million barrels of oil a day to
right around 8.7 million barrels a day. The Energy Information Administration is
predicting that U.S. production will be at 9.5 million barrels of oil a day by 2015. For a
mental comparison, this 9.5 million barrels a day figure is the same barrel count of 1971
when our nation reached peak oil.... as analysts are
indicating everything is still OK for the U.S. market, the company executives that are
cutting jobs and reducing drilling budgets most likely do not agree with the television
commentators. Something to keep in mind as oil
prices drop is the fact that investors are not looking to simply break even on oil prices.
These investors need an actual return on their investment, as this is what will keep the
U.S. economy strong for the future." Don Briggs is president of the Louisiana Oil and Gas Association Price drop prompts uneasiness in the oil industry The Advertiser, 15 November 2014 |
"The U.S. shale boom does not appear to be slowing in response to the
oil-price slump, with the countrys output of petroleum liquids rising above 12
million barrels a day for the first time, according to the International Energy Agency.
U.S. production of crude oil, condensate and natural gas liquids climbed to 12.2 million
barrels a day last month, the Paris-based energy adviser said today in its monthly oil
market report. That indicates many producers are able
to continue pumping in the short term even after West Texas Intermediate, the regional
benchmark, fell 12 percent last month, the IEA said. 'Production growth shows few signs of
abating,' the agency said. 'Efficiency gains in
light, tight oil production have been constant, and price pressures would only provide
more impetus for producers to cut costs further.' Oil has collapsed into a bear market as
leading members of the Organization of Petroleum Exporting Countries resisted calls to cut
production and instead reduced export prices to the U.S., where crude output has climbed
to the highest level in three decades. 'While some
companies are rethinking big-ticket projects from Canada to Angola, delays or spending
cuts would affect the longer-term supply outlook rather than short-term,' the IEA said. U.S. light, tight oil output advanced by 100,000 barrels a day to 3.9
million last month, it said. Most oil production in the Bakken shale formation remains
profitable at or below $42 a barrel, the IEA said, citing a report from the State of North
Dakota. Bakken oil traded at an average price of $77.63 a barrel in October, it said. U.S.
crude oil production climbed 1 percent to 9.06 million barrels
a day last week, exceeding 9 million for the first time in more than 30 years, according
to data from the U.S. Energy Information Administration." |
"Across the world, efforts are
underway to improve the way we store and distribute energy, as we move towards more
sustainable but intermittent forms of energy generation, such as wind and solar power.
Improving the way we store energy is important for the UKs energy security, as it
will allow us to decouple energy generation and its usage. If we can find a better way to
store energy it will allow us to save it when its generated and use it when
its required, replacing our current awkward system where generation has to match
demand in real time. The UKs first two-megawatt
(MW) lithium-titanate battery is to be connected to the energy grid as part of a new
research project to tackle the challenges of industrial-scale energy storage. The project aims to test the technological and economic challenges of
using giant batteries to provide support to the grid." Giant batteries connected to the grid: the future of energy storage? Guardian, 14 November 2014 |
"The latest China-Russia gas deal, declared on the arrival of
Russian President Vladimir Putin in Beijing this week, got far more attention than it deserved... What, in fact,
did Putin and Chinese President Xi Jinping agree to? The memorandum of understanding
they signed differs in some significant ways from the previous, major gas deal inked in May. In that deal, Moscow
and Beijing agreed on the terms to deliver 38 billion cubic meters of natural
gas a year from Russias as-yet-undeveloped gas fields in eastern Siberia to the
heavily populated eastern corridor of China. The
new deal, in contrast, is not binding and lacks agreement on key elements, most
notably price. The decade-long negotiations that preceded the May deal produced
a handful of similar memorandums over the years, which became somewhat routine and merely
suggestive of a continued intent to pursue the contours of a deal. It was not until Gazprom and the Chinese National Petroleum Corporation
successfully tackled the issue of price that the May deal, worth $400 billion at
the time, was finalized. With the issue of price outstanding, this week's
agreement seems more like a political statement." |
"President Vladimir Putin said
Russia is bracing itself for a 'catastrophic' slump in oil prices. as the worlds
leading energy forecaster warned that the price rout had yet to run its course. The price
of oil has fallen 30 per cent since mid-June. But the
International Energy Agency said on Friday that it had further to fall, with downward
price pressures likely to build further in the first half of next year. 'It is
increasingly clear that we have begun a new chapter in the history of the oil markets,' it
said. Brent, the international benchmark, hit a four-year low of $76.76 a barrel on Friday but later
bounced back to $79. However it was still down
almost 5 per cent on the week. The plunge in the oil price has spread alarm among energy
producers from Saudi Arabia to
Venezuela. Citi analysts have calculated that if crude remains at $80, members of the Opec
producers cartel could see their annual revenue fall by $150bn. Russia has been
particularly hard hit. The rouble has plunged 23 per
cent against the dollar in the past three months, and the central bank is forecasting
zero growth for 2015. Weak oil prices have come as Moscow struggles to cope with the
effects of western sanctions. Arriving at the G20
summit in Brisbane on Friday, Mr Putin faced warnings of further penalties unless
Russia pulls back from Ukraine. 'Were considering all the scenarios, including the
so-called catastrophic fall of prices for energy resources, which is entirely possible,
and we admit it,' said Mr Putin, ahead of the summit. But he said that Russias
$400bn of reserves would cushion the blow from further price slides. Shares in some of the
largest oil companies have also been hit, as investors fear tumbling oil prices could put
at risk their ability to develop high-cost projects and maintain dividend payments. Royal Dutch Shells
shares are down 7.8 per cent since mid-June, and BPs
have fallen 15 per cent. But more broadly lower oil prices could provide a lift for
western economies wrestling with weak growth. Cheaper energy amounts to a tax cut for consumers, and
can also help contain inflationary pressures, ensuring that interest rates remain at low
levels. Each 10 per cent drop in the oil price adds about 0.1 per cent to gross domestic
product, says Richard Batley at Lombard Street Research. But the effect may take some time
to feed through. 'The maximum impact occurs around four quarters after the price reaches
that level,' he said. Yet businesses that are big energy users, such as those in the
transport, manufacturing and construction sectors, can see large benefits relatively
quickly. 'Top-line growth is struggling so cheaper oil gives them immediate margin
improvement,' says James Henderson, who manages income funds at Henderson Global
Investors. The price fall has been driven by weaker than expected oil demand in Asia and
Europe coinciding with robust growth in US production and a stronger dollar." Russia braced for catastrophic oil plunge Financial Times, 14 November 2014 |
"Oil prices are likely to
continue falling well into 2015, the International Energy Agency has said. The
IEA, a consultancy to 29 countries, said weak demand and the US shale gas boom meant
crude's recent fall below $80 a barrel was not over. On Friday, Brent crude, one of the
major price benchmarks, traded at $78.13 a barrel, near a four-year low. 'It is increasingly clear that we have begun a new chapter in the history
of the oil markets,' the IEA said. 'Barring any new supply problems, downward price
pressures could build further in the first half of 2015.'" |
"Although there are no
scientific grounds to ban fracking, shale gas will do little to solve Europes energy
supply security problems, according to a new report by the European Academies Science
Advisory Council (EASAC). Best practices have
'greatly reduced the environmental footprint of shale gas fracturing,' the EASAC said,
claiming that risks can be appropriately managed. These include the replacement of
potentially harmful chemicals and the full disclosure of all the additives used in the
hydraulic fracturing or fracking process, notes the report published on
Thursday (13 November). Moreover, regulatory systems are already in place in most
countries to minimise the impact on health, safety and the environment, the report said.
'In Germany, for example, no hydraulic fracturing is allowed without prior proof of the
technical integrity of the well,' the EASAC notes, saying existing rules are sufficient to
take care of safety issues. EASAC is formed by the national science academies of the 28 EU
member states, which gives the report considerable authority. However, the potential for shale gas extraction in the EU is 'uncertain' because of
limited geological data on the accessibility of gas, the report adds, dampening hopes that
shale can one day be exploited on a significant scale on the continent. The largest
reserves are located in Poland and France, with 4.19 and 3.88 trillion cubic metres
respectively, according to the US Energy Information Administration (EIA). This compares
with the USAs 16tcm. But the European geology is 'more complicated' than in the US,
with rock formations 'older' and 'more fractured' which has 'implications for technical
and economic viability of gas extraction,' the report adds. This means 'only a fraction' of the reserves are considered economically recoverable
in Poland, while the supposed presence of gas in the Paris basin was shown 'not to exist' in the latest geological studies. Moreover, the EASAC report is sceptical
about claims that shale gas can help mitigate global warming, saying this depends on the
quality of the extraction process and "well integrity". Shale gas does offer an attractive alternative to Russian gas imports in
the current tense geopolitical context, the EASAC notes however, saying it could make 'a
valuable contribution to energy security' by allowing some degree of 'import
substitution'. As new horizontal drilling techniques become available, the land impact can
also be limited, making it possible to locate shale gas well pads closer to densely
populated areas. 'Technically, horizontal wells with
a reach of up to 12 km are possible (although such wells would at present be
uneconomic), but even with clusters of only 3km radius, it becomes viable to produce
unconventional gas in heavily populated areas. This
is a key contribution to reducing impacts in Europe,' the EASAC report says. This
reduction in land use burden also reduces the challenges of land reclamation after use and
associated post-closure financial liability, it notes. But any large-scale drilling
operation will require broad public acceptance and trust, the report says, which makes
community involvement and openness 'critical', especially when it comes to the monitoring
of potentially adverse effects on the environment." |
"Energy consultant group Wood
Mackenzie said it expects U.S. Gulf of Mexico oil production to enter a period of
decline after peak output is
reached in 2016. New fields -- Heidelberg and
Jack/St. Malo -- should boost output from the Gulf of Mexico with 115,000 barrels of oil
equivalent in new production by 2016. Overall production, including the expansion of older
fields, means output from the Gulf of Mexico will pass a peak first set in 2009. 'We
expect production from 2014 to 2016 to grow 18 percent annually,' analyst Imran Khan
said in a Thursday statement. After that, the analyst group said a steady level of
investment will be needed to sustain production from the gulf basin. Several new discoveries have been made in deeper waters, where
development can cost as much as three times higher than elsewhere in the region. In Khan's analysis, capital spending next year will be 30 percent higher
than in 2013. After hitting a peak production rate in 2016, production
should at best plateau for the rest of the decade. 'The current slide in oil prices
does not help the long-term outlook either, especially if the downward trend continues for
a prolonged period,' the analysis reads. The
assessment follows a report from the International Energy Agency stating U.S. shale output
should level off by the 2020s, after which Middle East producers return to dominance. IEA's report this week said the 'apparent breathing space' from rising
U.S. oil production offers little reassurance long term given the long lead times for new
developments. While U.S. shale diversifies the market now, the Paris-based agency said the global economy of the future will rely on only a few
producers." Wood Mac: Gulf of Mexico oil production fades UPI, 14 November 2014 |
"The 30 per cent plunge in crude
since the middle of this year, to below $80 a barrel this week, is likely to have a big
effect on LNG. Many Asian customers are locked into contracts linked to the Japan
Custom-cleared Crude index, or JCC (nicknamed the Japanese Crude Cocktail). By early next
year, crudes slide should be reflected in LNG prices. The coming decline could have several effects. First, it would lower
costs for consumers, even though some benefits in Japan are offset by the recent depreciation of the yen. Second, some
analysts also say it could surprisingly temper buyers urgency to break
down the old, rigid oil-based pricing system. Finally, the prospect of lower gas prices to
Asia has ignited debate over the viability of new LNG projects planned in Australia and
the US, which Wood Mackenzie forecasts will be the first and third-largest exporters by
2020. If crude holds steady or keeps falling, this debate will intensify." |
"Weakening oil prices have
prompted Premier Oil to scale
back plans to pump oil from disputed waters around the Falkland Islands, as the British
group moved to cut costs. The FTSE 250 group on
Thursday said it would develop fewer wells in its Sea Lion oilfield project north of the disputed islands and scaled
back its initial estimated requirement of capital expenditure to below $2bn on the
project." |
"Belt-tightening by big energy
majors faced with plunging oil prices is battering the finances and share prices of their
suppliers, as investors reassess the sectors ability to keep gushing cash. A growing
list of delayed or canceled projects, seen by some investors as a healthy move by majors to rein in capital
spend after a poor history of returns is working its way through corporate earnings; it has already pummelled the share price of some European suppliers seen
as financially fragile. Fugro, once seen as a blue-chip on Amsterdams benchmark
index, has had more than 30 percent of its stock-market value wiped out in a week since
scrapping its dividend. It is seeing trade swings more suited to a small-sized firm: on
Thursday its one-day gain was 28 percent. The worst of this volatility may yet be to come,
analysts and fund managers warn, as the recent fall in oil prices triggered by a
supply glut as well as worries over cooling demand and the delayed effect of
capital-expenditure cuts keeps up the pressure on companies to plug balance-sheet
gaps...Brent crude prices have tumbled nearly 30 percent in the past five months, to $82 a
barrel a level not seen in four years, with some expecting the supply-demand
mismatch to get worse. A recent Reuters poll of economists and analysts shows that Brent
is seen averaging $93.70 in 2015 and $96.00 in 2016. This has caught oil majors, not just
suppliers, off-guard French group Total for
example still uses $100 per barrel in its projections and is starting to seriously
dampen their plans to ramp up investment. But oil
majors by and large are bigger and more diversified than their suppliers, allowing them
leeway to protect payouts. BP even announced a dividend increase last month." |
"Mikhail Gorbachev believes the world is
on the brink of a new Cold War. If so, this new clash between East and West will be
settled in the same way as the last one, which ended with the collapse of the Berlin Wall
25 years ago. However, it wasnt political ideology, the failure of Mr
Gorbachevs so called Perestroika reforms, or the desire of most people
behind the iron curtain to own a pair of Levis jeans and listen to pop music that
saw the Kremlins power crumble. It was the collapse in oil prices engineered by
Saudi Arabia, which literally bankrupted the old Soviet Union and ripped up the post-war
map of Eastern Europe that had been brutally created in the aftermath of Adolf
Hitlers downfall by the equally ruthless Joseph Stalin. Michael Reagan, the son of
the late US President Ronald Reagan, writing recently on the US conservative political
online magazine Townhall.com
had this say to say on the matter based on his knowledge of his fathers role in
ending the Cold War: I suggest that President Obama might want to study how Ronald
Reagan defeated the Soviet Union. He did it without firing a shot, as we know, but he had
a super weapon - oil. "Oil was the only thing the Soviets had in the 1980s that
anyone in the rest of the world wanted to buy, besides ICBMs and H-bombs, and they weren't
for sale. "Since selling oil was the source of
the Kremlin's wealth, my father got the Saudis to flood the market with cheap oil.
"Lower oil prices devalued the ruble, causing the USSR to go bankrupt, which led to
perestroika and Mikhail Gorbachev and the collapse of the Soviet Empire. In 1985, Saudi Arabia during the last throws of the Soviet Union opened
its spigots under the excuse of defending its global market share. The result was to
shatter the economies of many other major oil producers including its partners in the
Organisation of Petroleum Exporting Countries (Opec). The Soviet Union suffered the
biggest economic blow when virtually its sole source of foreign currency earnings was
obliterated overnight. Within five years Moscow was bankrupt and unable to prop up the
decrepit Eastern Bloc of client states it had co-opted since the fall of Berlin at the end
of the Second World War. Although 25 years have passed since the Berlin Wall signalled the
end of the last Cold War it appears that the US and its allies are fighting Russias
belligerent President Vladimir Putin with the same economic weapon that defeated his
masters when he served in the KGB. Saudi Arabias unwillingness to respond to a
global glut of crude oil and weakening demand from Asia has already seen 28pc wiped off
the value of Brent since it reached its year high of $115 per barrel in June." |
"I think we've forgotten many important lessons of the Cold war. I
have to say that when I entered this field in the mid 80's as the newly born world
champion, it was not as dangers. So Gorbachev badly needed to reconcile with the west. The
soviet economy was in terrible shape. Oil prices were
sharply falling thanks to the cooperation between Reagan's administration and the Saudis." |
"The $147 peak oil price reached in 2008 was a turning point for the
industry. In response to it, both the EU and the U.S. forced vehicle makers to achieve
rapid and significant fuel-efficiency gains. Which they have done. That helps explain why American motorists, to pick an example, are still consuming less
than 19 million barrels a day, down from 21 million in 2005, despite population growth and
economic recovery over the past nine years." |
"The accelerating United States
energy boom allowed America to record its highest
level of oil exports in 57 years and its second highest level since 1920 in the month
of July. After becoming the worlds largest producer of natural gas in 2010, the
United States also became the worlds
largest producer of petroleum last month. With
U.S. production and exports driving crude oil prices down and forcing other producers to
crank up production to maintain cash flow. The U.S. Energy Information Agency (EIA)
has been compiling statistics on American and
international energy trends since 1920. For 40 years through 2010, domestic energy
production had been steadily trending down. But since the beginning of 2010, fracturing of shale to
exploit 'tight oil'
has allowed the U.S. liquid fuels production to double to 8.5 million
barrels per day (bpd) through July, 2014. The
rate of increase in the three months since July is truly staggering, as U.S. production
leaped from 8.5 million bpd to an estimated 9 million bpd, according to Stratfor Global
Intelligence. The American supply shock to the
upside has caused
the price of oil to plummet by 25% in the longest streak of continuously falling
prices in 13 years. International oil producers panicked as their export revenue withered.
According to Stratfor, Libya cranked up production from about 200,000 bpd to more than
900,000 bpd. Saudi Arabia, Nigeria and Iraq also hit the accelerator pedal on production
increases. To put the impacts of the 3.5 million bpd
annualized rate of global production increase in perspective, the International Energy
Agency only projected
that worldwide oil demand would grow by 700,000 bpd in 2014. The only OPEC members with enough financial flexibility to reduce
oil production voluntarily are the United Arab Emirates, Kuwait and Saudi Arabia. Libya, Algeria, Iraq, Iran, Nigeria and Venezuela all need to
maximize oil output (at high prices) to finance their budgets and social spending
programs. But rather than leading in cuts, Saudi Arabia is prioritizing a greater market
share over higher prices, according to Stratfor. The
401,000 bpd level of U.S. crude oil exports in the month of July must have risen over the
last three months in line with production increases. Facing a domestic oil glut, President
Obama loosened
the four-decade ban on U.S. oil exports on July 24. Prior to the ruling, most U.S.
crude oil exports were limited to Canada. But it appears some oil exported to Canada was
quietly re-exported
to Switzerland, Spain, Italy, and Singapore." |
"Hindsight can be cruel. In 1932, amid a global economic slump, the
impoverished Saudis came to London looking for a loan. They also had an offer: would
Britain like to try drilling for oil? A disdainful Foreign Office mandarin gave the
fateful reply, writes Matthew Teller - no loan, and no drilling....Oil had been discovered
in neighbouring Persia and Mesopotamia (Iran and Iraq), but geologists doubted whether
Arabia held any reserves....[Sir Lawrence] Oliphant was no fool. In a glittering career at
the Foreign Office he guided British relations with Persia and Arabia for more than 30
years, rising to a wartime ambassadorship. His stance, though possibly over-cautious and
imbued with colonial high-handedness, made perfect sense at the time. So his emotions at the news of 31 May, that American prospectors had struck oil in
Bahrain - off the Saudi coast - just two weeks after he had sent the Saudis packing, can
only be imagined. Within a year Ibn Saud handed the concession to search for Saudi oil to
an American consortium - and in 1938 they discovered the world's largest reserves of
crude. Saudi Arabia was 'a little-known country' no longer, and the US had begun
supplanting British power in the Gulf." |
"In the wake of falling oil
prices, the world's biggest offshore rig contractor said its drilling machines are worth
billions of dollars less, and a leading U.S. shale-oil producer plans to pull back
operations. The developments this week are the latest industry signals that the nation's
roaring energy production surge is likely to slow down and that next year could be the
first since the oil boom's start that producers in Texas and North Dakota make serious
cuts in their gusher of spending. These latest hints
come as Saudi Arabia undercuts U.S. oil company prices and holds firm on Middle East
production at a time when crude prices have fallen about $20 a barrel in recent months.
... Even as a handful of U.S. oil companies hint at lower spending, falling crude prices
will likely have a diminished impact on the amount of oil they can extract compared to two
years ago. That was before operators used a slew of new technologies that lower costs and
the point at which low crude prices make shale plays unprofitable, said Lynn Westfall,
director of energy markets and financial analysis for the Energy Information
Administration. For example, in the Eagle Ford Shale in South Texas, the number of
drilling rigs active in the area had barely moved, while daily
oil production from average wells has increased from 300 to 550 barrels over the past two
years, according to the EIA. In Texas, Colorado, North Dakota and other regions, companies are
using multi-well production platforms called pads to drill faster, and they're doubling or
tripling the amount of sand used in hydraulic fracturing to extract more oil. They're also
drilling longer horizontal sections within each well and use a more effective mix of
chemicals to seal production zones, so that oil doesn't migrate away from the wells. 'The reality is, the further we get into this oil boom, the more
resilient production is to oil prices,' said R.T. Dukes, a senior analyst at Wood
Mackenzie. Onshore oil drilling will likely shift to
core regions with the most pliant shale rock, observers say. Investors have battered offshore drillers' stocks in recent weeks as
demand falls, but it's hard to say whether the U.S. oil industry will favor onshore wells
over offshore fields, observers say." |
"U.S. oil drillers from Texas to
North Dakota are scaling back plans to drill new wells next year as crude prices tumble.T he benchmark U.S. oil price has plunged more than 25% since late June to
trade below $80 a barrel this week, in part because Saudi Arabia has cut its prices to
wrest back market share. Oil fell 77 cents to $77.91 a barrel on Thursday. Continental Resources Inc., a major oil producer in North
Dakotas Bakken Shale, said Wednesday that the company wouldnt add drilling
rigs next year. ConocoPhillips Co. said that next years budget would fall below the
$16 billion spent this year, dropping plans for some new wells in places such as
Colorados Niobrara Shale." |
"On an otherwise barren strip of
the Louisiana coast, a crew of more than 4,000 workers has spent the past two years
building what will be the largest supercooling facility for natural gas in the U.S. When
its finished late next year, Cheniere Energys (LNG) Sabine Pass liquefaction terminal will begin
chilling natural gas to -260F so it can be loaded onto tankers and sold to customers in
Europe and Asia. It will be the first facility to export natural gas from the contiguous
U.S. The first phase of the Sabine Pass project will
cost more than $12 billion and seemed unlikely after Cheniere bet the wrong way on the
U.S. natural gas market. In 2008 it spent $2 billion to build an import terminal that
quickly became useless when abundant natural gas in the U.S. ended demand for imports,
cutting the price from $13 per million BTUs to less than $3 in the U.S. For the next two
years, Chenieres stock price hovered just above $1 a share as the Houston-based
company flirted with bankruptcy. In 2010, Chairman and Chief Executive Officer Charif
Souki bet on the shale boom and proposed the export terminal. Despite the risks, he
managed to line up billions in financing; thats given Cheniere a two-year head start
on the half-dozen other LNG export terminals planned along the Gulf Coast. In 2013, Souki
was the highest-paid CEO of a U.S. public company ($142 million), and Cheniere is now
poised to become one of the most important exporters in the global LNG market. 'The impact
were having on the rest of the world sometimes surprises us,' says Souki.
'Were going to represent 25 percent of the gas sold to Spain. Were going to
feed enough gas to England to heat 1.8 million homes.' Cheniere says it will be the
largest buyer of U.S. natural gas by 2020. Its liquefaction plant in Louisiana and another
planned for Texas will allow it to ship about 6 percent of all the gas produced in the
U.S. Its locked buyers into 20-year contracts based on the cost of natural gas
within the U.S., which averaged $4.47 per million BTUs for the first nine months of 2014.
For a new customer in Asia, a delivery based on September prices would cost about $11.64,
after fees. A customer in Europe would pay about $9.64. 'This is the first time that there
will be LNG on the market that is truly price-sensitive and totally open to the
destination that needs it most,' says Souki. 'You wont have a few producers able to
decide arbitrarily what they want to charge.'" |
"Green levies on energy bills
will more than double by 2020 and treble by 2030, new government analysis shows. Every
household now pays £68 a year to subsidise renewable energy projects such as wind farms,
solar panels and biomass plants and to fund carbon taxes, according to official analysis
published on Thursday. The policies, which are
intended to help tackle global warming, account for about 5 per cent on an annual energy
bill of £1,369, Government documents show. But that sum is forecast to rise significantly
in order to fund more wind farms and new nuclear plants, rising carbon taxes and a new
scheme to ensure there are enough back-up power plants when the wind doesnt blow. By
2020 such levies are forecast to total £141 a year 11 per cent of an annual bill
of £1,319 - and by 2030 they will hit £226 or 15 per cent of an annual bill of
£1,524....Ministers insisted that the overall effect of all Government policies would be
to leave energy consumers significantly better off, due to efficiency schemes and other
regulation that should result in households using less energy. A typical households
gas usage is expected to fall by 5 per cent and electricity usage by 14 per cent by 2020
as a result of the policies. This should more than outweigh the cost of all the green
levies, and the funding of energy efficiency schemes, leading to average bills that are
£50 lower than today and £92 lower than they would otherwise have been, ministers
claimed. But critics warned that the efficiency savings were not guaranteed, would require
households to spend huge sums on new energy-efficient equipment, and would vary greatly
from house to house, with some missing out on schemes altogether." |
"President Vladimir Putin has
suggested that the fall in global oil prices that is hurting Russia's economy was caused in part by political manipulation. In an interview
with Chinese media published on Thursday, Putin did not blame any particular country for
the price drop, but some Russian political commentators have depicted it as a Saudi-U.S.
plot against Moscow. 'Of course, the obvious reason
for the decline in global oil prices is the slowdown in the rate of (global) economic
growth which means energy consumption being reduced in a whole range of countries,' Putin
said, according to a text released by the Kremlin. 'In addition, a political component is
always present in oil prices. Furthermore, at some moments of crisis it starts to feel
like it is the politics that prevails in the pricing of energy resources.' The price
of Russia's flagship Urals crude oil blend has fallen by about a quarter since the end of June,
following the trend in global oil prices. Trading at over $80 per barrel, it is well below
the $114 required to balance the Russian budget. That will further weaken an economy already hurting from Western sanctions over the crisis in Ukraine.... Russia
supplies Europe with a third of its gas needs. It has already
started pumping more oil to China, and
aims to double the volumes this decade. Russia's top gas producer, Gazprom, has also
agreed to start shipping gas via a pipeline to China from
2019 and to eventually ship up to 38 billion cubic meters a year -- more than any single
European country is buying from Russia.
Putin said Russia's relations with China had reached 'the highest level of comprehensive
equitable trust-based partnership and strategic interaction in their entire history.' By
contrast, relations with the United States are at their lowest ebb since the Cold War,
because of the crisis in Ukraine." |
"Recent tumbles in the value of
oil on global markets have been the creation of politicians, Vladimir Putin, President of
Russia, suggested on Thursday. The Russian state has
been heavily exposed to slumping oil values, widely viewed to be the result of a supply
glut. 'The obvious reason for the decline in global oil prices is the slowdown in the rate
of [global] economic growth which means consumption is being reduced in a whole range of
countries', Mr Putin said. In addition to this, 'a political component is always present
in oil prices. Furthermore, at some moments of crisis it starts to feel like it is the
politics that prevails in the pricing of energy resources', he added. Mr Putin also
referred to a "distinct direct link" between physical oil markets and "the
financial platforms where the trade is conducted", in explaining part of oil price
changes." |
"The sharp decline in the price of a barrel of oil from over $100
last summer to $80 has predictably generated all manner of commentary as to its cause. Not
surprisingly, the vast majority of it is wholly false.Some have suggested that the drop
signals a weaker global economy for what is very much a global commodity, and then others
have pointed to increasing supplies of the commodity thanks to 'fracking' as the source of
the decline. Both miss the real story by a mile. Considering the supply argument, missed
by those who employ it is that as Gregory Zuckerman pointed out in his 2013 book Frackers,
by the 2013 'the United States was producing seven and a half million barrels of crude oil
each day, up from five million in 2005.' Yet while a barrel averaged $50 in 2005, by
2013 the average had risen to $89. The supply argument is discredited by the very
production numbers promoted by frackings greatest enthusiasts. What about the
economic growth argument? Its similarly revealed as wanting by those same numbers.
Whatever the state of the global economy today, no one would mistake any presumed modern
weakness for what prevailed up to 2013 when global growth remained very limp. The only true answer to falling global crude prices is whats
always moved them: the U.S. dollar. As the late Wall Street Journal editorial page editor
Robert Bartley explained in a 1986 speech given to the Forum Club in Houston, 'Throughout
the instabilities of recent decades, the price of oil in gold has demonstrated a powerful
tendency to return to the area of 12-14 barrels an ounce.' Gold, thanks to its historical stability as a measure of value, is the
best measure of the value of the dollar. When gold rises its a signal of a weakening
greenback, and when it falls its a signal of renewed dollar strength. As evidenced
by the declining price of gold to roughly $1170, the dollar has strengthened quite a bit
of late, and its strength is revealing itself as one would predict through falling crude
prices. At $79/barrel, a gold ounce presently buys 14 barrels of oil. This is all
elementary. The dollar is rising as the gold price signals, so oil priced in dollars is in
decline. Oil hasnt become cheap, rather the dollar has been exhibiting renewed
strength.... Houston, TX-based Baker Hughes BHI +1.57%
of the worlds most prominent oilfield service companies, and recently USA Today reported some very sobering statistics
provided by Baker about the 'break-even price in the U.S. for most shale oil
producers or the point where its no longer feasible for companies to launch
new drilling projects.' The range of prices came in around
$55 to $70 barrel. In North Dakotas Bakken Core
its $61-$70, at Eagle Ford in South Texas its $53-$60, in New Mexico its
$68." |
"Crude oil prices have hit a four-year low after Saudi Arabia
unexpectedly cut the price of oil sold to the US. Brent
crude fell to near $82 (£51.24) a barrel as worries about global growth also spooked
investors. Earlier, the European Commission reduced its growth forecasts for the eurozone.
Investors are concerned about the US oil industry in
the face of slowing growth and lower prices. Some worry that low oil prices could hurt
domestic US producers dependent on high prices for profitability. The price cut also sent shares in many energy firms lower, pushing down
all three US share indexes." |
"Saudi Arabia and the United
States have decided to use oil prices as a weapon -- not only to punish Russia, but also
Iran, which is a stauncher ally of the Assad regime than Russia. Like Russia, Iran also
pins hopes on oil price hikes to overcome the economic difficulties that it is facing
because of the crippling US sanctions. Besides, the US-Saudi oil price weapon is also
connected to US-Israeli moves to pressurise Iran to stop its nuclear programme. Parallel
to these moves, the European Union is assisting Ukraine to obtain some of its gas supplies
from sources other than Russia. A long term
plan is for Ukraine to get Middle Eastern gas via Europe. For this to happen, Assad must
go. If he goes, oil and gas from Saudi Arabia, the UAE and Qatar could reach the European
markets via pipelines to be built across Syria. As per the secret deal entered into during
US Secretary of State John Kerrys talks in Jeddah last month with King Abdullah and
Prince Bandar, Saudi Arabia, the worlds second largest oil producer after Russia,
has agreed to flood the market and sell oil to some of its key customers such as China at
prices well below the market price. Accordingly,
Saudi Arabia is said to be selling oil to China at US$ 50-60 a barrel. This concession is
also perhaps to discourage China from buying Russian oil. Joining the Saudis in flooding the oil market are Kuwait and the UAE.
Their move has shattered the oil cartel OPECs collaborative unity and has forced
Iran, the fourth largest oil producer, also to flood the markets. This way, Iran seeks to
minimise its losses as a result of the plummeting prices." |
"Russia is to renew its claim to
a huge swathe of the Arctic in the hope it can secure the rights to billions of tons of
oil and gas. Moscow has long seen the seabed off its
northern coastline as a mine of valuable hydrocarbons and is keen to fend off rival bids
for control over the regions resources. Sergei Donskoy, minister for natural
resources, said Russia had completed research on its submission to the UN, under which it
hopes to gain an extra 1.2 million square km (460,000 square miles)." |
"Russia has agreed to resume gas
supplies to Ukraine over the winter in a deal brokered by the European Union. The deal
will also ensure gas supplies to EU countries via Ukraine are secure. 'There is now no reason for people in Europe to stay cold this winter,''
said European Commission President Jose Manuel Barroso. European Union energy chief
Guenther Oettinger said he was confident that Ukraine would be able to afford to pay for
the gas it needed. He added that the agreement might be the "first glimmer" of
hope in easing tensions between Russian and Ukraine." |
"This week the Post Carbon Institute (PCI) released a detailed study
of the prospects for US shale oil and shale gas production entitled Drilling Deeper A Reality Check on
the US Government Forecasts for a lasting Tight Oil and Shale Gas Boom. This new study
takes a hard, detailed look at what has actually happened during the shale boom to date
and at the EIAs projections.....the PCI study
says that shale oil production from the two top fields, the Bakken and Eagle Ford which
account for more than 60 percent of U.S. shale oil production, is likely to peak around
2017 and that all shale oil production will be declining rapidly by 2020. This is in marked contrast with the EIA assessment which sees U.S. shale
oil production gradually contracting so that in its most likely case production will only
drop from 4.5 million b/d to 3.5 million in the next 25 years. Given that production from
the average shale oil well declines by 72 percent in its first year of production, the
likelihood that the tens of thousands of these $8 million wells that would be have to be
drilled as new well productivity drops markedly means the EIAs scenario is highly
unlikely. The EIAs projection for the future of U.S. shale gas production is even
more far-fetched. While the PCI study acknowledges that U.S. shale gas production will be
cheap and abundant for the next few years, it questions whether growth will continue much
beyond 2020 about the time the U.S. is supposed to be ramping up LNG export
terminals and switching coal fired plants to natural gas that will bring about large
increases in demand. The PCI estimates that
production from the seven major natural gas fields that provide about 88 percent of U.S.
shale gas will peak in 2016-2017. To maintain
production much less increase it for another 20 years will require unprecedented drilling
programs and very large capital investments, even if satisfactory places to drill are
found. Shale oil and gas have a limited number of
highly productive 'sweet spots' inside the larger regions where the fuels are found. Once
these sweet spots are exhausted, new wells become increasingly less productive although
the costs of drilling them (some $6-8 million a well) remain the same. It is this well-known phenomenon that the EIA seems to ignore in its
projections. There is a cost aspect to oil and gas production and at some point the cost
of production becomes more than the markets will pay." |
"Many industry executives say
that, after nearly 50 years of production, Britains oil sector has reached a crucial
point. To put it bluntly, Britains offshore oil industry has entered old age. The
size of discoveries has tailed off sharply, a classic sign of maturity. Production has
fallen 37 percent from 2010 levels, while costs, thanks in part to the need to maintain
creaky infrastructure, have soared. All of this adds up to sharply reduced profitability
of the oil and gas fields, to a point where some of them lose money. Executives say that
unless the British government and energy companies adjust to the new realities, the
industry could find itself in deep trouble. 'We are
starting to run out of time,' said Gordon Ballard, a senior oil services executive who is
co-chairman of the British Oil and Gas Industry Council, an advisory body. Mr. Ballard
said the industry needed to keep putting money into aging infrastructure like pipelines
and production platforms or risk having to shut them down. Already, there are signs of
stress in the industry. Some companies, including Chevron, the American giant, are cutting
staff in Aberdeen, the Scottish oil city that has boomed in recent years, while the
salaries for some contract personnel are being reduced. About 43 billion barrels of oil
and gas have been produced since the first North Sea fields came online a half-century
ago. While some optimists say the industry could still pump out more than 20 billion
barrels much of it still undiscovered a more subdued assessment comes from
the Edinburgh-based consultants Wood Mackenzie, who estimate that the combination of
economics and geology means that only about eight billion more barrels are likely to be
produced. 'That is the amount we believe to be commercial,' said Erin Moffat, a Wood
Mackenzie analyst.... Recent trends are not helping the picture. The number of exploration
wells drilled in British waters has fallen to an average of 20 per year in the past five
years, compared with an average of 35 a year from 2004 to 2008, the Oil and Gas Council
said. Those wells have had little success, with fewer than 100 million barrels of oil and
gas discovered over the past two years about 20 percent of what British waters are
now producing in a year.... Not only are taxes on oil production high in Britain, at about
81 percent of profit from older fields, but rising costs are also a problem. Operating
expenses per barrel produced have risen 62 percent since 2011.... Such high costs mean
that with production falling some older fields lose money and are shut down permanently,
while some projects to develop new fields have been put on hold, including a large project
led by Chevron, called Rosebank, on the frontier west of the Shetland Islands. Lower oil
prices may further discourage investment in expensive new projects while accelerating the
trend of closing down old fields. Some contractors are already responding to a slowdown in
activity and higher costs. Wood Group, for example, has cut pay by 10 percent for its
contract personnel..... Last year, the level of investment in offshore oil and gas was the
highest in three decades, at £14.4 billion, or about $23 billion, according to Oil &
Gas UK, an industry group, and the spending is expected to generate substantial new
output. Oil & Gas UK estimates that the industry supports about 450,000 jobs in
Britain, many of them in Scotland and northern England, and generates close to £15
billion a year in exports of equipment and services. But the big investments mask less
sanguine trends like poor exploration results and increasing shutdowns related to the need
for maintenance.Analysts say there could be a slight lift in British output over the next
few years because of the recent rise in investment. But the increase is unlikely to last
and production may fall to below one million barrels a day by 2023, less than a fourth of
the peak level in 1999, according to Wood Mackenzie. Many of the big new fields in British
waters have been known about for years but developed only recently because of advances in
technology. The frontier
zone in British waters is the margins of the Atlantic Ocean, west of the Shetland
Islands, where severe weather and other challenges raise the costs." |
"After years of false starts,
Goffart confirmed suspicions that the French energy giants foray into mining bitumen
from Northern Albertas oil sands was a dud. The companys $11-billion Joslyn
mine was being shelved indefinitely, he said. Costs were too high. Workers had to be let
go150 Canadian staff by year-end. Totals partnership with Canadian oil giant
Suncor Energy, Occidental Petroleum and Inpex Canada 'is facing the same challenge that
most of the industry worldwide is,' Goffart explained. That challenge, in a word: costs.
The price of developing megaprojects like Joslyn has soared, and not just in the oil
sands. Consider Chevrons Gorgon natural gas project in Australia. The cost has
jumped 45 per cent from initial estimates, to $54-billion (U.S.). Look, also, at Kashagan.
The plan to pump oil from the Caspian Sea using a series of man-made islands will cost a
consortium that includes Exxon Mobil, Royal Dutch Shell and Total at least $50-billion. In cancelling Joslyn, designed to produce 100,000 barrels a day next
decade, Goffart underscored why wringing oil from Albertas oil sands is, by
Totals reckoning, getting harder to justify. Not only are costs inflating, but
returns on a barrel of the provinces ultra-viscous crude 'are remaining stable at
best,' squeezing margins, he said. The combination 'cannot be sustainable in the long
term.' (Just ask Norways Statoilit decided in September to postpone its Corner
oil sands venture, blaming high costs and delays building multibillion-dollar
pipelines.)... Not all oil sands projects are created
equal, of course. Cenovus, which uses super-hot bursts of steam to melt seams of bitumen
buried too deep to mine, says it can coax oil from the sands for between $35 and $65
(U.S.) per barrel, depending on geology and other input costs. Thats 'among the lowest-cost globally,' chief executive officer
Brian Ferguson told New York bankers recently.... According to the Canadian Energy
Research Institute, however, costs for a typical steam-driven operation are up 4.4 per
cent from a year ago. In a recent study, CERI put the
West Texas Intermediate (WTI) break-even price for a steam-driven oil sands project at
$84.99 per barrel, assuming a 12.5 per cent return. For a new mine, its $105.54. By comparison, oil can still be tapped for under $10 per barrel in some
jurisdictionsa fraction of oil sands supply costs, which, besides perks for
employees, account for the cost of capital, plus operating and sustaining costs, taxes and
royalties paid on production, plus that healthy rate of return. U.S. shale oil is
estimated to break even at $60 to $80 a barrel, according to the International Energy
Agency....With commodity prices softening, the scene is causing jitters. Despite endless
bluster about cost-cutting and the benefits of new technologies, the oil sands, long
considered a safe harbour for companies accustomed to fuel theft and other nasty business
in far-off lands, havent licked their stature as one of the highest-cost locales to
pump crude. As one corporate director and former industry executive says: 'It remains
vulnerable to a sharp drop in prices.'" |
"Steel plants and car makers fear National Grids plans to keep
the lights on this winter may force them to cut their use of electricity. On Tuesday,
National Grid will announce its estimate of how much reserve power capacity the UK will
have over the coming winter. Earlier this year,
energy regulator Ofgem estimated peak demand this winter to be about 54.5 gigawatts, with
a safety margin of up to 10 per cent on top. But
three power station fires and problems with nuclear reactors have led to fears that
capacity margins will be squeezed and even that consumers will experience
brown-outs, when lights fade as power is restricted. The Governments
plans to move the country towards a low carbon, renewable energy future has seen
coal-fired power stations close, but while renewable energy plants, like wind farms,
require conventional back-up, gas powered plants have been slow to open. And on Friday,
European Union leaders agreed to cut greenhouse gas emissions by 40 per cent from 1990
levels by 2030. What price do we have to pay to make sure the lights stay on?
said Jeremy Nicholson of the Energy Intensive Users group, which represents major
manufacturers. The National Grid has a scheme to ask heavy users to cut demand when the
system is strained. The scheme pays companies not to use electricity at peak time, but
could result in less industrial output. We cannot do that sustainably over a whole
season. Industry is trying to do its bit as supplies become tighter, but we are entering a
very tricky phase, said Nicholson." |
"Since June the cost of a barrel of Brent crude, the benchmark for
world oil prices, has fallen by almost a quarter, from around $110 a barrel (where it was
stuck for the past four years) to just above $80 a barrel. Last month, for the first time
in decades, Nigeria exported no oil at all to the United States. Even at a big discount,
Americans just dont need it. And the main reason for all that is fracking. American production has almost doubled in the past five years
thanks to the new drilling technologies, and the United States overtook Russia last year
to become the worlds largest producer of oil and gas combined. (Saudi Arabia comes a
distant third.) With production soaring and world
demand for oil stalling due to slow economic growth, a collapse in prices was inevitable.
The question is how far they will collapse, and for how long. The answer is probably not
much further, for the moment but they could easily stay down in the $75-$85 range
for a couple of years. The reason for that is that the 'swing' producers (mostly Arab),
who could theoretically push prices back up by cutting their own production, have clearly
decided not to do so. Their concern is for the long-term power of the Organization of the
Petroleum Exporting Countries (OPEC) cartel, which used to be strong enough to set the
price of oil. That never will be true again unless they can drive the (mainly American)
frackers who are causing the over-supply of oil out of business. Saudi Arabia and its
allies are hoping that a prolonged period when the price of a barrel of oil is lower than
the cost of getting that barrel out of the ground by fracking will ruin this new industry
and bring back the good old days. Dream on. The Saudi strategy wont work because some 98 per cent of U.S. crude oil and condensates has a
break-even price of below $80 per barrel. Indeed, 82 per cent of American production would
still be turning a profit at $60 per barrel. Even
with its massive foreign currency reserves, Saudi Arabia probably cannot afford to keep
the oil price low enough for long enough to break the American frackers. (Its own
break-even price for conventional oil is $93 per barrel.) And the Iranians, Nigerians,
Venezuelans and Russians, who depend on oil revenues for at least half of their national
budgets, will be screaming for higher prices before they face riots in the streets. So
this is not a transient event; its a revolution. OPEC came into its own when the
United States ceased to be the dominant global producer in the early 1970s. With the
re-emergence of the United States as the biggest producer, OPECs clout is bound to
shrink so oil prices will probably stay well below $100 a barrel for the
foreseeable future." |
"Lower oil prices could put a stop to the nations future LNG
projects, even ones that still stack up on paper, and cut up to $11 billion a year from
increasingly LNG-reliant export revenue, industry leaders and analysts say. Brent crude
prices that held above $US100 a barrel for most of the past three years have slumped
dramatically since June, falling 25 per cent to a four-year low of about $US85 a barrel
and, if sustained, hitting the economics of six under-construction LNG plants, whose
contract prices are linked to moves in oil. If prices dont bounce, industry experts
and analysts say returns will be poor on most existing projects and any Australian future
LNG projects will be questionable. Adding to the hurdle of getting a new LNG project into
construction at a time when shareholders are demanding greater discipline would be a big
overall cashflow hit to the oil majors, which are the most likely proponents of new LNG
projects. Former senior BHP Billiton executive
Alberto Calderon, who was a contender to replace chief executive Marius Kloppers last
year, says a sustained period of $US80 oil would accelerate an inevitable move to lower
LNG prices that would make most Australian LNG projects not return their cost of capital." |
"Three factors make it unlikely
that the decline in oil prices will bring the shale revolution to an end. First, shale
production is profitable at todays lower prices. We know this because the boom began
during the Great Recession years of 2008-09, when prices fell below $50 a barrel. The
price U.S. shale producers got for their oil during the boom averaged around $85 to $90,
even though the world price stayed well over $100. That spreadthe difference between
the West Texas Intermediate (WTI) and world (Brent) pricewas a direct consequence of
too much domestic oil chasing too little capacity to move, store and use it. Yet in the past five years alone more than $500 billion of private
investment went into hydrocarbon infrastructure. U.S. shale output was obviously
profitable enough to spur the stunning growth in production and infrastructure when
domestic prices were in the same range as world prices today. Second,
shale production is getting more efficient, which means that profits are possible at
prices even lower than today. Smart drilling techniqueshorizontal drilling,
hydraulic fracturing and information technologies that accurately locate where to place
rigs and enable precise steering of the drill through meandering horizontal
hydrocarbon-rich shalesare far more productive than when the boom started. According
to the Energy Information Administration, the quantity of shale or natural gas produced
per rig has increased by more than 300% over the past four years. This rise in productivity matches (in equivalent terms of capital cost per
unit energy out) the improvements in solar power, but it took 15 years for solars
gains. Solar is now experiencing a slow-down in efficiency improvements; there is no sign
of a slow-down in shale technology. The third factor is the profound economic leverage
afforded by the enormous scale and diversity of Americas hydrocarbon infrastructure.
Many oil-producing nations have only a few big oil fields and a handful of companies,
sometimes just one. The U.S. has dozens of world-class fields, thousands of production
companies, tens of thousands of related businesses, and millions of miles of pipe and
rail. Among the thousands of shale producers, you can guarantee there are pioneers just
like those who started the shale revolution. As profit margins erode due to low or even
lower future prices, the pioneers will try out the revolutionary new shale techniques that
have yet to be deployed.You might think that the latest drilling technologies are already
in use, an easy sell when cash is gushing. Not so. Businesses rationally resist spending
to disrupt existing machinery and operations simply to learn new tools and techniques. But
they will chase profits through efficiency-boosting innovation in leaner times. The
pipeline of next-generation shale tech has been piling up with unfielded advances. These
include automated drilling, micro drilling that allows for far faster deployment with a
smaller rig footprint and new types of drills (some may use lasers soon), and big-data
analytics to maximize yields by tapping into the surprising volume of data from complex
shale operations. There is also nanotechnology to radically improve chemical formulations
and safety, on-site water recycling and even water-free fracturing, and new classes of
high-resolution subsurface imaging to radically improve exploration and production using
real-time and microseismic imaging. In a few years,
as new technologies are adopted, journalists will be writing again about the 'surprise'
that U.S. production expanded by another three million barrels per day on top of that much
growth over the past few years. The bounty will in due course spread to other nations
where the geophysical shale resources easily match the thousands of billions of barrels in
the U.S." |
"Consumers will be forced to pay
higher energy bills to fund policies that simultaneously tax coal plants to the brink of
closure and then pay them to stay open, the head of Britains biggest energy supplier
has warned. Sam Laidlaw, chief executive of British Gas owner Centrica, warned there was
an 'inherent paradox' in Government policies, which risked ending up being neither green
nor affordable. As part of plans to switch to
greener energy, ministers last year introduced a rising carbon tax, the so-called 'carbon
price floor', which charges power plants for burning fossil fuels. The tax was intended
initially to phase out the use of coal the dirtiest fuel in favour of more
environmentally-friendly gas plants, and eventually restrict all fossil fuel plants in
favour of green technologies such as wind farms and nuclear power. The levy has the effect
of pushing up wholesale power prices, costing every household about £5 last year,
increasing to an estimated £32 a year by 2020. Yet at the same time another policy, the
'capacity market', is being introduced to ensure there are enough reliable fossil fuel
power plants to keep the lights on and act as back-up for intermittent renewables. The
policy was initially regarded as a way of encouraging a new 'dash for gas' by aiding
construction of new gas plants. But in practice it is primarily expected to result in
subsidies being paid to existing coal, gas and nuclear plants including coal plants
that were otherwise at risk of closure from the carbon tax. In a speech on Thursday, Mr
Laidlaw said it was 'clear that old, dirty coal stations will be paid extra to stay online
for longer' as a result of the policy." |
"The UK's wind farms generated
more power than its nuclear power stations on Tuesday, the National Grid says. The energy
network operator said it was caused by a combination of high winds and faults in nuclear
plants. Wind farms are causing controversy in rural
areas and the government is choking off planning permission for new sites. But for a
24-hour period yesterday, spinning blades produced more energy than splitting atoms. Wind
made up 14.2% of all generation and nuclear offered 13.2%. It follows another milestone on
Saturday, when wind generated a record amount of power - 6,372 MW, according to National
Grid. This formed nearly 20% of the the UK's electricity, albeit at a time at the weekend
when demand is relatively low. But wind power's ascendancy over nuclear is expected to be
temporary. The situation is caused by windy conditions boosting the output from turbines
at a time when eight out of the UK's 15 nuclear reactors are offline." |
"The U.S. shale oil and gas
renaissance has effectively stripped Russia from its status as biggest non-OPEC oil
producing state. And Russia wont recover for the next 25 years. Or more, according
to the U.S. Energy Information Agency. U.S. oil and gas production is seen going from 9.8
million barrels a day in 2011 to 14.2 million per day in 2020. By then, Russia will
produce an average of 10.7 million barrels daily. And
while Russias oil production will rise by an average of 0.6% year over year between
now and 2040, U.S. oil production will be a little bit better, at around 1% growth per
year. The EIA has American oil and gas
production peaking in 2020, but its inevitable decline will
still outpace Russian production. For
instance, by 2030, the U.S. is expected to average 13.2 million barrels daily while Russia
will be pumping out 11.2 million. New horizontal drilling technologies have helped make
the United States the Saudi Arabia of the Americas. But,
the U.S. oil boom will only marginally take away OPECs market share. OPEC will still
command 40% of the global oil supply in 2020, down from around 41% today. That market
share will rise as U.S. production declines. Of
course, EIA doesnt have a crystal clear crystal ball. No one can truly predict what
supply will be like in 2040, let alone six years from now in 2020. In fact, the U.S. shale
oil and gas revolution began just seven short years ago. A decade ago, many oil experts
were heralded by conspiracy theorists in their belief that peak oil had hit the U.S., and
was even the main reason behind the second Iraq War. Moreover, anyone who thinks the
frontier markets in the Middle East will eventually tap out should reconsider, EIA
analysts said in a study released in September. According
to the EIA, Middle East oil production will go from 25.9 million barrels daily currently
to 27.1 million in the next six years. Year over year production increases for the Middle
East are pegged at around 1.6%." |
"U.S. shale producers are
cramming more wells into the juiciest spots of their oilfields in a move that may help
keep the drilling boom going as prices plunge. The technique known as downspacing aims to
pull more oil at less cost from each field, allowing companies to boost profit, attract
more investment and arrange needed loans to continue drilling. Energy companies see
closely-packed wells as their best chance to add billions more barrels of oil to U.S. production thats already the highest in a quarter century. 'We would be dealing with more than a decade of inventory,' said Manuj
Nikhanj, co-head of energy research for ITG Investment Research in Calgary. 'If you can go
twice as tight, the multiplication effect is massive.' To make downspacing work, the
industry must first solve a problem that for decades has required producers to carefully
distance their wells. Crowded wells may steal crude from each other without raising total
production enough to make the extra drilling worthwhile. Too much of that cannibalization
could propel the U.S. production revolution into a faster downturn. In the past,
most wells were drilled vertically into conventional reservoirs, which act more like pools
of oil or gas. Companies learned quickly that packing wells too closely together just
drains the reservoirs faster without appreciably increasing production, like two straws in
the same milkshake. Shale rock is different, acting more like an oil-soaked sponge.
Drilling sideways through the layers of shale taps more of the resource, while fracking is
needed to crack the rock to allow oil and gas to flow more freely into the well.
Thats why packing more wells together can work, said Lance Robertson, Marathon Oil Corp. (MRO)s vice president over
Eagle Ford operations. Because shale is so dense, the oil and gas cant travel
as far in the rock. As long as the fracking cracks dont interlace, the more wells
drilled, the more oil each field will produce, he said. Working against producers are
crude prices that last week dipped below $80 for the first time since 2012, escalating
borrowing costs for drilling wells that have a tendency to peter out quickly. Harvesting
oil and natural gas from dense rock layers is expensive, making operations even more
vulnerable to sinking prices than in past boom-and-bust cycles. West Texas Intermediate
oil fell $1.16 to $81.33 a barrel on the New York Mercantile Exchange at 1:37 p.m. So far, early results from
downspacing experiments by a handful of companies have been mixed. Its 'the
billion-dollar question,' said Jonathan Garrett, a Houston-based upstream analyst for
energy consultant Wood Mackenzie Ltd. 'Is downspacing allowing access to new resources, or
is it drawing down the existing resources faster?' An analysis of a group of wells on the
same lease in La Salle County, in the heart of Texass booming Eagle Ford formation,
showed that closer spacing reduced the rate of return for drilling to 23 percent from a
high of 62 percent for wells spaced further apart, according to a paper published in April
by Society of Petroleum Engineers. In Louisianas Haynesville field, which mostly produces gas, data from producers and
regulators shows that efforts to drill wells closer together has led to what industry
insiders call 'interference.' Thats when a second or third well drilled close to an
existing location produces less than the first, according to an analysis of the practice
by Drillinginfo, which collects and analyzes data on thousands of wells
across the U.S. Closer spacing may mean that wells deplete faster, and ultimately produce
less, leading to diminishing returns over the life of the field. EOG Resources Inc. (EOG), one of the most
experienced drillers in the Eagle Ford and North Dakotas Bakken formation, saw last
year that some wells with tighter spacing were less productive over a longer period of
time, according to an Oct. 8 investor presentation. Marathon has seen similar results.
Thats fine with producers if downspacing still leads to higher total profits from a
field. Heres the basic math. Three years ago, in an earlier phase of development,
five wells might have been drilled on a 640-acre parcel of land at a cost of $6 million
each. At an ultimate per-well yield of the equivalent of 450,000 barrels of oil, the total
production would be about 2.3 million barrels at a cost of $30 million. At an oil price of
$80 a barrel, that would produce profits of about $150 million from that 640 acres. Based
on tighter spacing being tested now in Texas, 16 wells could be drilled on the same parcel at a cost of $5.5
million each. Even if each well yields less, about 400,000 barrels, thats still a
recovery rate of 6.4 million barrels from the same land at a cost of $88 million. Profits
in this scenario at todays oil price would amount to $424 million, or almost triple.
To counter production declines in individual wells, companies are using a combination of
methods, including drilling wells that extend farther underground horizontally and using
more sand to prop open cracks during fracking. Data from EOGs tight well spacing
tests in Texass Eagle Ford are showing the tactics are helping producers keep
per-well recovery the same, or even higher. Tighter spacing was the primary reason EOG
boosted its estimate for how much oil and gas it may be able to get out of the Eagle Ford
by 1 billion barrels in the past year. The companys use of spacing and other
techniques has helped top operators such as EOG reduce their costs to $46 a barrel in the
formation, according to Wells Fargo & Co. Thats about 32 percent below the
average across the area estimated by ITG. Companies experimenting with downspacing,
including ConocoPhillips (COP), Continental Resources Inc. (CLR) and Anadarko Petroleum Corp. (APC), are still trying to
figure out how quickly wells will become depleted when theyre so crowded together,
said Leo Mariani,
an analyst with RBC Capital Markets in Austin. If that happens too fast, those initial
extra profits might eventually become losses. It may take as long as five years before the
industry has a solid understanding of how much oil theyre leaving in the ground by
crowding wells so closely together, Mariani said." |
"Daniel Yergin, an oil and gas expert whose 1990 book 'The Prize' is
still considered required reading for anyone who wants to understand the industry, on
Wednesday won government recognition for helping to illuminate the mysteries of energy
policies, politics and production. The Department of Energy presented Yergin with its
first-ever James R. Schlesinger Medal for Energy Security during a ceremony in the
nations capital. The prize is named for the nations first energy secretary who
is widely credited not just with standing up the department but also making international
concerns and security a big part of the conversation around energy. Schlesinger died in
March. 'He brought a strategic vision and security framework to bear on these issues,'
Yergin noted in accepting the medal Wednesday. 'Hed been a defense strategist and a
student of international affairs, and he saw how those things were linked with energy.'
Yergin won the Pulitzer Prize for 'The Prize: The Epic Quest for Oil, Money & Power,'
and has since followed that tome up with another: 'The Quest: Energy, Security, and the
Remaking of the Modern World.' Now vice chairman of the research firm IHS, Yergin also
presides over the annual CERAWeek conferences he launched more than three decades ago.
Energy Secretary Ernest Moniz credited Yergin with making 'unique contributions to the
energy security debate.' 'His writings, from The Prize to The
Quest, have provided the historical perspective for understanding todays
energy security challenges,' Moniz said. 'His emphasis on energy market structures as a
critical energy security consideration is an important part of Americas energy and
security policy conversation.' Yergin on Wednesday
insisted that energy security now means much more than just supply. While the United
States energy picture has radically changed in recent years with technological
advancements driving oil and gas production to near-record levels Yergin worries
about turmoil around the globe undermining the domestic improvements. And he wants the
United States to do a better job preparing for the energy disruptions on the horizon
be they cyberattacks or natural disasters that cut off oil and gasoline flows." |
"Christophe de Margerie, CEO of
French oil giant Total
was killed Monday night when the business jet he was flying in crashed upon takeoff at
Vnukovo Airport in Moscow. In addition to de
Margerie, 63, three crew members on the Falcon 50 jet perished. According to reports,
the plane hit a snow plow while attempting to take off. As the pilot attempted to turn
back and land, the plane crashed in a fireball. The driver of the snow plow is alleged to
have been drunk at the time, though he reportedly
denies it. Its a sad end to the life of one of Big Oils most colorful
leaders. De Margerie had worked at Total since 1974. He became head of Middle East
operations in 1995, then boss of exploration and production in 2002. He served as CEO
since 2007. He leaves behind a wife and children. Immediately recognizable for his
bristle-brush moustache, De Margerie was gregarious and outspoken. I interviewed him in
2010 for this feature story and found him to be a refreshing departure
from the typically close-guarded Big Oil boss. Chatty
and blunt, De Margerie didnt hide his conviction that Peak Oil was a fast
approaching reality, insisting at the time that the worlds producers would be hard
pressed to ever grow past 95 million barrels per day. He may have revised that number
upwards a bit in recent years, considering the booming development of tight oil in the
United States, but his dogma remained the same as then: 'There will be a lack of
sufficient energy available,' he said. Because of this belief, De Margerie was tireless in
grabbing new oil and gas opportunities for Total while they were still available. De Margerie ventured out from Totals headquarters in La Défense,
the west Paris business district, to woo a whos who of presidents, prime ministers,
strongmen and dictators in places like Iraq, Iran, Uganda, Equatorial Guinea, Yemen,
Angola and Burma. But none of De Margeries relationships have been more important
than with Russian Prime Minister Vladimir Putin. This year De
Margerie negotiated a venture with Lukoil to drill for tight oil in Siberia. And with
Russias Novatek
and Chinas CNPC, Total is developing a $27 billion natural gas megaproject on the
Yamal Peninsula. As De Margerie told Reuters this year, 'Can we live without Russian
gas in Europe?
The answer is no. Are there any reasons to live without it? I think and Im
not defending the interests of Total in Russia it is a no.' I asked him in 2010
whether it was simply the case that international oil companies have no choice but to make
deals with despots. 'Bloody right!' he exclaimed." |
"The reasons oil prices started sliding in June were hiding in plain
sight: growth in U.S. production, sputtering demand from Europe and China, Mideast violence that
threatened to disrupt supplies and never did. After
three-and-a-half months of slow decline, the tipping point for a steeper drop came on Oct.
1, said Ray Carbone, president of broker Paramount Options Inc. Thats when Saudi Arabia cut
prices for its biggest customers. The move signaled
that the worlds largest exporter would rather defend its market share than prop up
prices.... OPEC Secretary-General Abdalla el-Badri denied the existence of a price war....
As Saudi Arabia tolerates lower prices to protect its market share, the kingdom is also
testing the level at which higher-cost U.S. production remains profitable, according to
the IEA. As much as 50 percent of shale oil is
uneconomic at current prices, El-Badri said. New York-based Sanford C. Bernstein & Co.
estimates about a third of U.S. production from shale loses money at $80 a barrel. 'We
think theres a lot of economic oil at $75, economic meaning we earn 15 percent, 16
percent, 17 percent returns,' Stephen Chazen, chief executive officer of Houston-based Occidental Petroleum Corp. (OXY), said during a
conference call with analysts Oct. 23. Other U.S. drillers have already altered plans due
to lower prices." |
"After declining gradually for three months, oil prices suddenly
tumbled almost $4 on October 14th alone. It was the largest single-day fall in more than a
year and brought the price of Brent crude, an international benchmark, to $85 a barrel. At
its peak in June, a barrel had cost $115. Normally, falling oil prices would boost global
growth. A $10-a-barrel fall in the oil price transfers around 0.5% of world GDP from oil
exporters to oil importers. Consumers in importing countries are more likely to spend the
money quickly than cash-rich oil exporters. By boosting spending cheaper oil therefore
tends to boost global output. This time, though, matters are less clear cut. The big economic question is whether lower prices reflect weak
demand or have been caused by a surge in the supply of crude. If weak demand is the culprit, that is worrying: it suggests the oil price
is a symptom of weakening growth. If the source of weakness is financial (debt overhangs
and so on), then cheaper oil may not boost growth all that much: consumers may simply use
the gains to pay down their debts. Indeed, in some countries, cheaper oil may even make
matters worse by increasing the risk of deflation. On the other hand, if plentiful supply
is driving prices down, that is potentially better news: cheaper oil should eventually
boost spending in the worlds biggest economies. The global economy is certainly
weak. Japans GDP fell in the second quarter. Germanys did too, and may be
heading towards recession (recent figures for industrial production and exports were
dreadful). Americas growth has accelerated recently, but its recovery is weak by
historical standards. Just before this weeks oil-price slump, the International
Monetary Fund cut its projection for global growth in 2014 for the third time this year to
3.3%. It is still expecting growth to pick up again in 2015, but only slightly. Weaker
growth translates into lower energy demand. This week, the International Energy Agency, an
oil importers club, said it expects global demand to rise by just 700,000 barrels a
day (b/d) this year. That is 200,000 b/d below its forecast only last month. Demand has
been weak for a while but the recent slowdownnotably in Germanytook markets by
surprise, hence the sharp fall in the price. But feeble demand is not the only
explanation. There has also been a big supply shock. Since April last year the
worlds total output of oil has been rising strongly. Most months output has
been 1m-2m b/d a day higher than the year before. In September, this expansion jumped
dramatically (see chart); global output was 2.8m b/d above the level of September 2013.
Most of the growth in supply has come from countries that are not members of OPEC, the oil
exporters clubfrom America in particular. Thanks
partly to increases in shale-oil output, the United States pumped 8.8m b/d in
September13% more than in the year before, 56% above the level of 2011 and not far
short of Saudi Arabia. Russian oil production is also inching up, suggesting sanctions
have not yet begun to be felt in its oilfields. In September, its output rose to 10.6m
b/d, within a whisker of the highest monthly figure since the collapse of the Soviet
Union. Non-OPEC production, though, has been rising for a while. The biggest recent change
has come from within the cartel. In April, Libyas productionhit by civil
warcrashed to just 200,000 b/d; by the end of September output was back up to
900,000 b/d and heading towards its pre-war level of 1.5m b/d. No less surprisingly,
Iraqs output is rising, too. The upshot is that OPEC production started to grow
again in September after almost two years of decline, compounding the impact of growing
non-OPEC supplies." |
"Experts have warned that a rush
to start fracking for oil across Britain may already be over before it has even begun as
the slump in global crude oil prices makes the controversial method of drilling look
increasingly uneconomic. Bids from oil companies for
licences to search and potentially drill for oil onshore in the UK are due on October 28.
The auction of mineral exploration rights across vast swathes of the country will, it is
hoped, spur a shale oil and gas 'revolution' similar to that which has helped transform
the US economy. Hydraulic fracturing or fracking has made America increasingly energy
independent and has broken its reliance on the volatile Middle East. The US, which pumps
about 8.5m barrels per day of crude, is forecast to soon overtake Saudi Arabia as the top
global producer of liquid petroleum. However, the recent sharp declines in the price of
oil traded on global markets Brent is down around 25pc since hitting $115 per
barrel in June have cast a cloud of uncertainty over the process of opening up the
UK to fracking due to the high costs associated with the process. Fracking for so called
'tight oil' involves the expensive process of cracking open shale rock formations deep
underground and then pumping fluid and sand into the fractures under high pressure to
force out the thick low quality crude. The fear is that with the Organisation of the
Petroleum Exporting Countries (Opec) a group of 12 mainly Middle Eastern producers
who pump a third of the worlds oil apparently locked in a price war as each
seeks to pump more crude than the market requires, it is the high cost of 'tight oil' such
as the projects being proposed in the UK that will suffer. Recent
research from Deutsche Bank speculated that if prices of Brent crude slump below $80 per
barrel then almost 40pc of shale oil wells in North America could become uneconomic
overnight. Although prices fluctuate, the German
investment bank argues that relative to the US dollar a current 'fair value' for Brent oil
could be around $80 per barrels for a prolonged period. 'Investment decisions on future
oil and gas developments in the UK have to be viewed in the context of the price over the
next five years,' said a spokesperson for the trade body UK Onshore Oil & Gas.
Effectively, the embryonic shale oil industry in the UK finds itself caught in the middle
of a global price war for control of energy markets. Although Opec countries need prices
to hold at around $100 per barrel long term, analysts increasingly suspect that they are
prepared to tolerate lower levels in the short term to counteract rising production in the
US and even force some North American wells to shut down. 'We believe US shale oil
activity could be increasingly sensitive to a falling oil price, particularly compared to
Russian or Canadian supply because of the shorter drilling contracts in the US,' said
Deutsche Banks strategist Michael Lewis. However, in the context of the UK the
breakeven cost of fracking is expected to be far higher, which might put off the major oil
and gas companies that the Government wants to get involved and dissuade them from bidding
in the current exploration licensing round. 'Fracking
here is still in its infancy, but in North America a price range of $70 to $80 (per
barrel) is seen as a challenging point for drillers,' Graham Sadler, the managing director
of Deloittes Petroleum Services Group, told The Sunday Telegraph. 'Its hard to tell what the impact will be in the UK, but the cost of
drilling would certainly be more expensive.' Britain lacks any significant onshore
infrastructure such as pipelines and processing facilities to handle a shale oil boom in
the Home Counties. A study by the British Geological Survey of the 'Weald' basin published
this summer revealed that there were likely to be 4.4bn barrels of shale oil in the area,
primarily beneath Surrey, Sussex and Kent. However, extracting this oil would be expensive
when compared with the US due to the environmental considerations that will be imposed on
drillers, experts say. 'It has to be more expensive,' Michael Tholen, the economics
director for Oil & Gas UK told the Telegraph. 'You cant just plough up bits of
Surrey and Blackpool like they can do in parts of the US.' Despite these concerns, the
Department of Energy & Climate Change (Decc) says that the licensing round
arguably the most important for the UKs upstream sector since the opening up of the
North Sea in the 1970s is progressing regardless of the fall in oil prices and that
it expects to award exploration permits early next year. 'Were optimistic that there
will be a strong response,' said a spokesperson for Decc. However, most international oil
companies approached by the Telegraph say they have no intention of bidding for onshore
rights to explore in the UK anyway, given the more lucrative opportunities that are
opening up elsewhere. The British exploration auction coincides with Mexico one of
the hottest emerging fossil fuel producers opening up its acreage to international
oil companies for the first time. Failure to secure significant interest from the
industrys blue-chip operators such as Royal Dutch Shell, BP and Chevron would be a
blow for the Government, which hopes that fracking will compensate for declining
production in the North Sea, provide long term energy security and boost the economy in
the same way that can be seen in North America. According to IHS Global Insight, shale gas
production in the US will support nearly 870,000 by 2015 and contribute more than $118bn
(£73bn) to the American economy. Its not just Britains nascent fracking
industry that would suffer from a prolonged weakness in global oil prices. The North Sea
which has traditionally produced the vast majority of the countrys oil and
gas is vulnerable due to the high cost of production offshore and current taxation.
North Sea production is already under severe pressure from the rising cost of operating
and the need to drill even deeper on the outer regions of the so called UK Continental
Shelf. Output from the North Sea has slumped to around 800,000 barrels per day, a figure
last seen in 1977. Part of the problem has been George Osbornes decision in 2011 to
increase tax on drillers. The falling price of crude could now add to the crippling
increases in cost that companies have had to endure offshore. 'A lot of projects that are
currently being looked at are expensive. At $80 per barrel the more challenging projects
dont look as attractive as they once did,' said Mr Sadler. According to Oil &
Gas UK, there are about 150 projects offshore in British waters that are seeking
investment and final sanction. These could be threatened if falling oil prices further
erode the profits of drillers in the area, in addition to the higher tax burden they
already face. Oil companies working in the North Sea face handing over 81 pence in every
pound of profits they make from the oil they produce, a figure that ranks UK production
among the most heavily taxed in the world..... Oil
& Gas UK estimates that the North Sea will need a staggering £1 trillion of
investment in order to recover all of the estimated 20bn barrels of reserves that remain
untapped. Should oil fail to recover its recent levels of $100 per barrel and instead
settle into a prolonged period of decline, then the Government will have to fund
significant tax cuts and incentives to keep drillers working offshore. To tap these reserves will increasingly mean oil companies must explore in
frontier areas in deeper water. One such project that is being closely watched by the
industry is the Rosebank field. Located 80 miles north west of the Shetland Islands, the
field lies in water depths of 3,600 feet and will require a floating production, storage
and offloading vessel. It is thought 240m barrels of oil could be recovered from the
field, but the US oil giant Chevron which is investigating its viability has still to make
a decision on whether to progress. 'A lot of companies think that North Sea investment
opportunities look unattractive at around $80 (per barrel),' said Mr Tholen." |
"Russia tonight welcomed NDA
government's decision to increase the number of nuclear power plants saying it is the only
way to solve India's energy crisis. 'The Indian govt
is talking about 22-24 nuclear power units, that is the roadmap, because India has no way
out of its energy crisis. It has been calculated that if India by 2030 has all the oil
produced in the world, it will not be enough for sustainable developement. Therefore, to
solve the energy problem of India, nuclear energy is the only option, just as we
did," Russian Ambassador to India Alexander M. Kadakin told reporters here." |
"Energy prices are now costing
the average consumer £410 more a year than they would have a decade ago, according to a
leading watchdog. Which? found that yearly spending
on energy had rocketed by 52% over and above inflation according to figures from the
Office for National Statistics. An average consumer would have paid £790 for their yearly
energy use in 2003/04, Which? said, but in 2012 the same amount of power would have cost
them £1,200. The hike comes despite domestic energy consumption dropping by 17% over the
same time frame, according to figures from the Department of Energy and Climate Change.
The price of gas and electricity had outstripped inflation since 2003/04, with an average
increase of 137% compared to 27%, Which? said. In contrast, other housing costs such as
rent or mortgage had risen by £210 over the same time period." |
"Since 2000, the industry has
seen investment almost triple while crude supply has gained only 11 percent, according to Mark Lewis, an analyst with Kepler Chevreux SA in Paris. In the
Canadian oil sands, among the most expensive oil deposits in the world to exploit, a
slowdown is already evident, and the International Energy Agency estimates about a quarter
of the projects are at risk as prices fall. Norways
Statoil ASA last month postponed work on its Corner field project in Alberta for at least
three years, in an effort to 'prioritize capital to the most competitive projects,' said
Staale Tungesvik, the companys president for Canada operations. And in May, Total
said it would delay a final investment decision at its Joslyn field because of escalating
costs. As far back as 2010, CEO Christophe de Margerie said that crude prices need to be at least
$80 a barrel to justify investments in projects in Alberta. In Norway, falling crude
prices will cause more delays to offshore projects already threatened by investment cuts
and rising costs, Bente Nyland, director of the Norwegian Petroleum Directorate, said
today in an interview..... If major oil companies decide crude prices will remain around
$90 for an extended period 'the rate at which new projects will get to market will slow
down,' Richard Griffith, an analyst at Canaccord Genuity Ltd. in London,
said in an interview. 'Big oil companies will go
back to the drawing board and re-assess projects and possibly ask projects to be
re-tendered.' Major oil companies 'have to go offshore, into deep waters or
unconventionals so the incremental barrels they are finding are more expensive and are
only just enough to offset the natural decline rates of fields.' Jeffrey Woodruff, senior director for natural resources &
commodities at Fitch Ratings, said in an interview. .... Despite cuts from the largest oil
companies, total global spending will continue to rise this year and next because of
national and independent oil companies, although at less than half the rate as in previous
years, IFP said. The move to lower spending comes amid a drop in oil prices. New York
futures fell below $80 a barrel today for the first time since June 2012. Brent crude oil
traded at $82.93 in London, a decline of 25 percent this year. The International Energy
Agency this week reduced its projections for demand this year, saying growth would be
the weakest since 2009. 'What is fundamental is that we cant keep up spending
if costs dont come down because some projects are no longer profitable and in the
longer term this could lead to a shortage in supply and capacity,' said Totals
Darricarrere." |
"Smart meters widely used in
Spain can be hacked to under-report energy use,
security researchers have found. Poorly protected credentials inside the devices could let
attackers take control over the gadgets, warn the researchers. The utility that deployed
the meters is now improving the devices' security to help protect its network. The
discovery comes as one security expert warns some terror groups may attack critical
infrastructure systems. Many utility companies are installing smart meters to help
customers monitor and manage their power use and help them be more energy efficient." |
"The green crusade of successive
governments is set to double electricity bills for households and cost homes £26billion a
year by 2030, it was claimed yesterday. The cost of renewable energy and carbon taxes will
put an extra £983 a year on household bills by then, compared to relying on a mix of nuclear and new gas-fired power
stations, three experts told a Lords committee. They
also said the 'foolhardy' green policy will do little to cut emissions of the greenhouse
gases blamed for global warming. The Scientific Alliance report highlights warnings by the
regulator Ofgem that the margin for electricityproduction for the 2015-16 winter will be
at an all-time low of 2 per cent compared to the pre-privatisation requirement of at least
20 per cent. It means that in times of high demand, such as during very cold weather,
Britain would be at risk of power cuts. The alliance argues that wind power which
is the main renewable energy source depended on by Government
is unreliable. One of the experts, Sir Donald Miller, former chairman of Scottish Power,
said: 'The blind reliance by successive governments on unreliable, intermittent renewable
energy has reduced the margin of safety to a critical level." |
"The price plunge which began in mid-June when New York oil futures
trading around $105 a barrel continued this week with oil touching $80 on Wednesday before
recovering to close at $81.78. Londons Brent crude underwent a similar collapse to
close yesterday at $83.46. Weak demand: increasing US
shale oil production: a stronger dollar; and the refusal of the Saudis and its Gulf Arab
allies to cut production combined to trigger the decline. US retail gasoline fell to an average of $3.17 a gallon, the lowest since
February 2011. The weekly stocks report will be delayed until Thursday, but analysts are
expecting a 2 million barrel increase in US crude inventories. The IEA confirmed the
weakness in the world oil markets this week by cutting their forecast for the increase in
global oil demand by this year by 250,000 b/d from last months estimate. The Agency
now believes that growth in consumption this year will be only 700,000 b/d, but will
increase to 1.1 million b/d in 2015 as the global economy improves....There is much concern about what will happen to US shale oil production
now that prices are circa $25 a barrel lower than they were last spring. This has led to
much speculation and discussion about just what it costs to produce a barrel of shale oil
these days. The optimists maintain that there have been so many technological advances in
drilling for shale oil in the last couple of years that current costs of production are
much lower than many analysts believe and that US shale oil production can keep on growing
for another year or two unhindered by lower selling prices. The IEA in Paris, which has
been optimistic about the prospects for US shale oil production, says that only 2.6
million b/d of global oil production comes from projects with a breakeven point above $80
per barrel and that 'close analysis of the US light, tight oil supply suggests that most
of it remains profitable above $80 a barrel'. It should be noted that the 1.1 million b/d
of Bakken, North Dakota production is currently selling for
only $66 a barrel, down from $86 last July. Some analysts point to the 600 drilled, but not-yet-fracked, wells in
North Dakota which could allow production increases even with a slower pace of drilling.
Others believe that shale oil companies are so heavily invested in their drilling programs
that they will continue drilling for a while even if US oil falls below $75 a barrel. Some
oil plays are said to be profitable even with oil at $50 a barrel." |
"It is the need to protect the oil of northern Iraq that drew the US
into war with Isis. And so the more rational jihadist commanders will now be realising
this particular part of the battlefront cannot be won. The
US has a fundamental strategic interest in the flow of cheap oil." |
"Lockheed Martin Corp said on
Wednesday it had made a technological breakthrough in developing a power source based on
nuclear fusion, and the first reactors, small enough to fit on the back of a truck, could
be ready in a decade. Tom McGuire, who heads the
project, said he and a small team had been working on fusion energy at Lockheed's
secretive Skunk Works for about four years, but were now going public to find potential
partners in industry and government for their work. Initial work demonstrated the
feasibility of building a 100-megawatt reactor measuring seven feet by 10 feet, which
could fit on the back of a large truck, and is about 10 times smaller than current
reactors, McGuire said. In recent years, Lockheed, the Pentagon's top supplier, has been
increasingly involved in a variety of alternate energy projects, including several ocean
energy projects, as it looks to offset a decline in U.S. and European military spending.
Lockheed's fusion energy project could help in developing new power sources amid
increasing global conflicts over energy, and as projections show there will be a 40
percent to 50 percent increase in energy use over the next generation, McGuire told
reporters. If it proves feasible, Lockheed's work would mark a key breakthrough in a field
that scientists have long eyed as promising, but which has not yet yielded viable power
systems. The effort seeks to harness the energy released during nuclear fusion, when atoms
combine into more stable forms. "We can make a big difference on the energy
front," McGuire said, noting Lockheed's 60 years of research on nuclear fusion as a
potential energy source that is safer and more efficient than current reactors based on
nuclear fission. Lockheed sees the project as part of a comprehensive approach to solving
global energy and climate change problems. Compact nuclear fusion would also produce far
less waste than coal-powered plants, and future reactors could eliminate radioactive waste
completely, the company said. McGuire said the company had several patents pending for the
work and was looking for partners in academia, industry and among government laboratories
to advance the work. Lockheed said it had shown it could complete a design, build and test
it in as little as a year, which should produce an operational reactor in 10 years,
McGuire said. A small reactor could power a U.S. Navy warship, and eliminate the need for
other fuel sources that pose logistical challenges. U.S. submarines and aircraft carriers
run on nuclear power, but they have large fusion reactors on board that have to be
replaced on a regular cycle." |
"The world's top energy watchdog has slashed its forecast for oil
demand this year as prices for crude continued to slide Tuesday. The Paris-based International Energy Agency said in its closely
watched monthly oil market report that the world will need to 200,000 barrels per day
(bpd) less oil this year than it had originally thought because of weaker global growth. Brent crude was down 0.5pc in London trading at around $88.5 per barrel
following the release of the report, which comes on top of a 23pc decline in the global
benchmark over the last year.... Speaking to the Telegraph yesterday, Fatih Birol, the
IEA's chief economist said: 'Production is for Opec to decide and I know they are very
actively looking at the issues affecting the market', adding that "almost every drop
of oil produced in the world is still going to be profitable at around $80."" |
"Experts from Greenpeace and the
'big six' energy providers are united on one thing: the UK should be able to keep the
power flowing for now. 'I think it is implausible that the lights are going to go
out anytime soon,' says Dr Doug Parr, chief scientist at Greenpeace UK. 'What happens over the next decade is that the supply margin
gets tighter as coal plants are retired, [though] many nuclear plants will limp on.' The
supply margin is the countrys energy safety gap: how much energy we can generate or
access (including from other countries energy grids) versus our peak usage. If the
gap is large, theres no problem if we experience a surge in demand. But if its
narrow, then predicting and preventing spikes in demand becomes very important if we want
to keep the lights on. The UKs supply margin looks good on paper because the country
has several gas plants which can be turned on or off relatively quickly. However, because
coal is so cheap, the gas plants on which the UKs energy future relies are not
economical to run. The biggest challenge to the UKs energy supply margin isnt
years ahead, the data suggests, but very soon indeed by the winter of 2015-16. The
trouble for those managing our power is a combination of factors hit all at once: old
generators are being switched off for the last time, gas plants those best able to
plug shortfalls are being mothballed for the medium to long-term due to the
abundance of cheap coal, and the plans for next-generation power production havent
yet kicked in. The net result is that the UKs supply margin, according to forecasts by Ofgem, is predicted to
fall from a tight 6% at the peak of winter demand in 2014-15 to a possible low of less
than 2% just a year later. The situation would be much worse if energy use hadnt
fallen so sharply; despite a growing population, peak demand has fallen from about 60GW in
2005-06 to 54GW in 2013-14, and a large portion of that drop happened in the past 12
months. That lower energy requirement is what makes all the difference between the
forecast showing the UK just barely keeping the lights on and the prospect of midwinter
blackouts. The main risk (though experts agree its a small one) is that a
combination of stronger-than-expected economic growth coupled with a particularly cold
winter could push the country just over the edge. 'The biggest problem for gas in the UK
right now isnt the changing energy mix, its dirt-cheap coal,' explains Parr.
'Cheap coal is coming into Europe from Russia, Columbia and the US. We probably already
have enough gas plants to take up the slack. We definitely have enough if two or three of
those in planning are built. But, bizarrely, markets are such that gas plants are closing
down or being mothballed.' Parrs assessment is echoed by others who are watching the
UKs transition from coal, and one who warns that the risk of blackouts in the near
future is higher than it has been for quite some time. Dr Robert Gross, director of the
centre for energy policy and technology at Imperial College London, says: 'It is very
unlikely that the UK will experience power cuts due to inadequate generating capacity.
However in the period of 2015-16 the risk of power cuts will be considerably higher than
historically, because the UK is closing old coal-fired power stations but has been slow to
build new gas-fired power stations.' Gross says efforts by the National Grid to ensure
mothballed gas plants are brought back into service, as well as persuading customers to
cut back on their demand for energy, has minimised what could otherwise have been larger
risks." |
"Moscow bound itself tightly to
Beijing yesterday, signing energy, trade and finance deals that could soften the impact of
Western sanctions but which also risk easing the ascent of one of Russia's biggest
regional rivals.... In May, two months after the
first western sanctions on Russia were introduced, President Putin brought more than a
decade of haggling to an end and sealed a £250 billion, 30-year gas-supply deal during a
summit in China.... Fyodor Lukyanov, head of the Moscow-based Council on Foreign and
Defence Policy, which advises the government, said that Mr Putin could find himself
becoming overly dependent on China's wealth and diplomatic clout." |
"Shale-oil producers would have
to scale back drilling if prices fell below their $80 breakeven rate, which in theory would result in prices rising eventually as US output
falls without the Saudis losing market share." |
"President Vladimir Putin has
approved the creation of a state-owned oil exploration drilling corporation that will
replace Western oil service companies forced to reduce operations in Russia by sanctions
over Ukraine, a news report said Monday. In a time
of 'sharply escalating international tensions,' a national oil service company uniting all
necessary drilling and servicing expertise is crucial to ensure Russia can keep its
hydrocarbon output stable in the long term, Deputy Prime Minister Alexander Khloponin
wrote in a letter sent to Putin in September. News agency RBC on Monday cited a copy of
the letter already stamped with Putin's approval. The president's spokesman, Dmitry
Peskov, refused to comment on the letter to news agency Interfax. The new state company
will be based on the assets of Rosgeologia, a fully government-owned agency that currently
unites three dozen state-controlled exploration service companies, most of which date from
the Soviet era. Government stakes in 15 other companies involved in shelf exploration
would be handed over to the new corporation under the plan, Khloponin said in the
letter." |
"Onshore wind is cheaper than
coal, gas or nuclear energy when the costs of external factors like air
quality, human toxicity and climate change are taken into account, according to an EU
analysis. The
report says that for every megawatt hour (MW/h) of electricity generated, onshore wind
costs roughly 105 (£83) per MW/h, compared to gas and coal which can cost up to
around 164 and 233 per MW/h, respectively. Nuclear power, offshore wind and
solar energy are all comparably inexpensive generators, at roughly 125 per MW/h.
'This report highlights the true cost of Europes dependence on fossil fuels,' said
Justin Wilkes, the deputy CEO of the European Wind Energy Association (EWEA). 'Renewables
are regularly denigrated for being too expensive and a drain on the taxpayer. Not only
does the commissions report show the alarming cost of coal but it also presents
onshore wind as both cheaper and more environmentally-friendly.' The paper, which was
written for the European commission by the Ecofys consultancy, suggests that the Conservative
party plan of restricting new onshore windfarms will mean blocking out the cheapest
source of energy when environmental and health facts are taken into consideration. It has
been suggested the Tory plan could be done through a cap on onshore wind turbines
output, lower subsidies or tighter planning restrictions.... The documents contents
may also be unwelcome in some quarters of the commission, which early today published selective results
from it that did not include external health and pollution costs. These showed that
renewable energy took 38.3bn of public subsidies in 2012, compared to 22.3bn
for gas, coal and nuclear. The EU did however note that if free carbon allowances to
polluters were included in the data, it 'would reduce the gap between support for
renewables and other power generation technologies.' The Ecofys papers nuanced
evaluation of historical subsidies for coal and nuclear was also not mentioned in the EU
press release, which renewable energy associations linked to a fossil fuel lobbying effort
ahead of the reports publication. 'Despite decades of heavy subsidies, mature coal
and nuclear energy technologies are still dependent on similar levels of public support as
innovative solar energy is receiving today,' Frauke Thies, the policy director for the
European Photovoltaic Industry Association told the Guardian. 'The
difference is that costs of solar continue to decrease rapidly. If the unaccounted
external costs to society are included, the report demonstrates that support to fossil
fuels and nuclear even by far exceeds that to solar.'" |
"Remember the fall of 2008? As the world spun out of control and the
price of everything crashed, a barrel of oil lost 70 percent of its value over about five
months. Of course, prices never shouldve been as high as $146 that summer, but they
shouldnt have crashed to $40 by the end of that year either. As the oil market has
recovered, there have since been three major corrections, when prices have fallen at least
15 percent over a few months. Were now in the midst of a fourth, with oil prices
down more than 20 percent since peaking in late June at around $115 a barrel. Theyre
now hovering in the mid-$80 range and could certainly go lower. Thats good
news for U.S. consumers, who are finally starting to reap the rewards of the shale
boom through low gasoline prices. But it could spell
serious trouble for a lot of oil producers, many of whom are laden with debt and exaggerating
their oil reserves. In a way, oil companies in the U.S. are perpetuating the crash by
continuing to drill and push up U.S. oil production to its fastest pace ever. Rather than
pulling back in hopes of slowing the amount of supply on the market to try and boost
prices, drillers are instead operating at full tilt and pumping oil as fast as they can.
Just look at the number of horizontal rigs in the field... So will U.S. oil producers
frack their way into bankruptcy? Thats a real possibility now. Theyve
certainly gotten more efficient at drilling, and dont need the same price they did
to remain profitable. But were getting pretty close. Back in July, Goldman Sachs
estimated that U.S. shale producers needed $85
a barrel to break even. Thats about where we are right now. The futures market points to even lower prices next year, with contracts
for oil next April trading at about $82 a barrel. Certainly, some producers need higher
prices than others. Those at the bottom of the cost curve could benefit from a potential
wave of bankruptcy that spreads across the oil patch; they could then scoop up some assets
on the cheap." |
"Kuwait's oil minister Ali al-Omair was quoted as saying by state
news agency KUNA on Sunday that OPEC is unlikely to cut oil production in an effort to
prop up prices because such a move would not necessarily be effective. Omair said $76-$77 a barrel might be the level that would end the
oil price slide, since that was the cost of oil production in the United States and
Russia." |
"Saudi Arabia is quietly telling oil market participants that Riyadh
is comfortable with markedly lower oil prices for an extended period, a sharp shift in
policy that may be aimed at slowing the expansion of rival producers including those in
the U.S. shale patch. Some OPEC members including Venezuela are clamoring for urgent
production cuts to push global oil prices back up above $100 a barrel. But Saudi officials
have telegraphed a different message in private meetings with oil market investors and
analysts recently: the kingdom, OPEC's largest producer, is ready to accept oil prices
below $90 per barrel, and perhaps down to $80, for as long as a year or two, according to
people who have been briefed on the recent conversations. The discussions, some of which
took place in New York over the past week, offer the clearest sign yet that the kingdom is
setting aside its longstanding de facto strategy of holding prices at around $100 a barrel
for Brent crude in favor of retaining market share in years to come. The Saudis now appear to be betting that a period of lower prices
- which could strain the finances of some members of the Organization of the Petroleum
Exporting Countries - will be necessary to pave the way for higher revenue in the medium
term, by curbing new investment and further increases in supply from places like the U.S.
shale patch or ultra-deepwater, according to the sources, who declined to be identified
due to the private nature of the discussions. The
conversations with Saudi officials did not offer any specific guidance on whether - or by
how much - the kingdom might agree to cut output, a move many analysts are expecting in
order to shore up a global market that is producing substantially more crude than it can
consume. Saudi pumps around a third of OPEC's oil, or some 9.7 million barrels a day.
Asked about coming Saudi output curbs, one Saudi official responded 'What cuts?',
according to one of the sources. Also uncertain is whether the Saudi briefings to oil
market observers represent a new tack it is committed to, or a talking point meant to
cajole other OPEC members to join Riyadh in eventually tightening the taps on supply. One
source not directly involved in the discussions said the kingdom does not necessarily want
prices to slide further, but is unwilling to shoulder production cuts unilaterally and is
prepared to tolerate lower prices until others in OPEC commit to action." |
"Former Environment Secretary
Owen Paterson will this week deliver a stark warning that Britain will 'run out of
electricity' unless it abandons its main green energy target. Mr Paterson, who was sacked
from the Cabinet in this summer's reshuffle, will argue in a lecture that the target
enshrined in the Climate Change Act which binds the UK to reducing emissions by 80
per cent by 2050 is unaffordable. He will go on to say that the current energy
policy is a 'slave to flawed climate action', and warn that 'in the short and medium term
costs to consumers will rise dramatically'. In
Wednesday's lecture, organised by the 'sceptic' think-tank Global Warming Policy
Foundation, which is chaired by former Tory chancellor Lord Lawson, he will say: 'There
can only be one ultimate consequence: the lights will go out.' Because the Act forces
Britain to invest in renewable electricity sources, mainly wind, he claims it 'blocks
other feasible policies that would cut both emissions and costs'. Previous energy
secretaries Labour's Ed Miliband and the Liberal Democrats' Chris Huhne
claimed to want to help the poor, he will say. But Mr Paterson believes their actions led
to 'the most regressive policy since the Sheriff of Nottingham' with vast subsidies
on consumers' bills going straight to the pockets of landowners and green investors. He
will go on to stress that although he has been accused of being a 'climate denier', he
accepts the main points of greenhouse theory. But he will point out that temperatures have
risen much more slowly than scientists predicted, while by some measures, the current
'pause' in global warming has already lasted for 18 years. To stand a chance of meeting
its obligations, Britain should be building a new giant nuclear power station every three
years, as well as thousands more of the turbines which have 'devastated landscapes,
blighted views, killed eagles and carpeted the very wilderness that [greens] claim to
love'. Instead, Mr Paterson will argue, policy should
focus on supplying cheap energy and cutting emissions. This, he says, can best be done by
fracking for shale gas and building small gas and nuclear-powered electricity stations. Mr Paterson told The Mail on Sunday that adding green energy costs to
people's household bills and building onshore wind farms are policies that are sending
Tory voters into the arms of Ukip the only party committed to scrapping them.
'Ukip's opposition to green energy targets and wind is tapping a tremendous tide of anger
felt across the country,' Mr Paterson said, adding: 'Everywhere I go, this issue comes up
all the time. You could live with that if the policy was actually working, but it's not.
If we change direction on this it will make a huge difference. 'It's an opportunity for
the Tories to steal one of Ukip's most popular campaigns.' Changing course would require
the Climate Change Act's suspension, and possibly its eventual repeal, while the separate
targets imposed by the EU would have to be part of the treaty renegotiation Mr Cameron has
promised if the Tories win next year's election." |
"Polands ambition to
achieve energy independence from Russia is being undermined by drillers giving up on the
nations shale wells after disappointing results. The highest test flows during the
countrys five-year search for unconventional gas were just 30 percent of whats
needed for commercial production, said Pawel Poprawa, a geologist at the AGH University of
Science and Technology in Krakow. The number of
active shale permits has fallen 43 percent from a high in January 2013 and explorers
probably wont extend all those expiring this year, according to Slawomir Brodzinski, the nations deputy environment
minister. 3Legs Resources Plc, the Isle of Man-based company that was the first foreign
explorer to buy a license in the East European nation, said last month its leaving
after poor results at Polands biggest fracking operation in the northeastern Baltic
Basin. The 'poorly understood' formation may hold more gas than Texass Barnett
Shale, where commercial output from 2000 helped turn the U.S. into the worlds
largest gas producer, according to the U.S. Energy Department." |
"Saudi Arabia plans to sell
oil cheap for political reasons, one analyst says. To pressure Iran to limit its
nuclear program, and to change Russia's position on Syria, Riyadh will sell oil below the
average spot price at $50 to $60 per barrel in the Asian markets and North
America, says Rashid Abanmy, President of the Riyadh-based Saudi Arabia Oil
Policies and Strategic Expectations Center. The marked decrease in the price of
oil in the last three months, to $92 from $115 per barrel, was caused by Saudi
Arabia, according to Abanmy. With oil demand
declining, the ostensible reason for the price drop is to attract new clients, Abanmy
said, but the real reason is political. Saudi Arabia wants to get Iran to limit its
nuclear energy expansion, and to make Russia change its position of support for the Assad
Regime in Syria. Both countries depend heavily on petroleum exports for revenue, and a
lower oil price means less money coming in, Abanmy pointed out. The Gulf states will be
less affected by the price drop, he added. The Organization of the Petroleum Exporting
Countries, which is the technical arbiter of the price of oil for Saudi Arabia and the 11
other countries that make up the group, won't be able to affect Saudi Arabia's decision,
Abanmy maintained. The organization's decisions are only recomendations and are not
binding for the member oil producing countries, he explained. Another analyst took issue
with Abanmy's views, however. Caspian Strategy Institute analyst Mubariz Hasanov
told Anadolu Agency (AA), that a single country cannot have much effect on oil prices.
'The U.S. and Saudi Arabia alone do not have the power to seriously affect oil
prices', Hasanov insisted. 'No country has this kind of power, unless
it starts a war or executes a strong embargo, as was done in 1973.' All other
efforts could only have a limited and temporary effect on oil prices, Hasanov said,
"If the price of oil is going to fall by 5 percent for economic reasons,
political efforts to decrease it can only make it 5.5 percent, not 10 percent.' |
"A further slump in oil prices
may dampen shale drilling's profitable run, according to a report from Goldman Sachs. In the past four
weeks, global oil prices plunged eight percent. And a barrel in the U.S. is below $90, the first time in two years. On Thursday, shares of companies centered in North Dakota's Bakken Shale
dropped more than 5 percent. If prices drop any further, the Wall Street Journal reports, drilling activity would slow down
drastically. The key issue lies in the overabundance of oil, with sluggish global demand
to match it. Texas, Colorado and North Dakota shale-drilling has increased U.S. production
by nearly three million barrels a day since 2011. And companies are playing a game of
chickenwho will be the first to cut back? The least productive fringes of the Bakken
would be the first drillers to react to price drops, said Paul Sankey, an energy analyst
with Wolfe Research, to Wall Street Journal. Other analysts said it's still too
earlya sustained, long term drop in prices is required to convince companies to cut
back on supply." |
"Why are shale plays getting hit so hard? The short answer is,
because oil is dropping. West
Texas Intermediate has gone from $105 to $85 in three months. But a large part of the
problem has to do with the way shale drilling is financed.... The line of credit you will
be able to get will drop because as the price of oil drops banks don't want to lend as
much... there's no doubt that things get a bit
difficult for some producers when oil is in the low $80's, which is where it is heading
now.....Here's another point: the depletion rate is very high in these wells. You are
literally squeezing oil from a rock. It can be on the order of 80 to 90 percent depletion
over a couple years. So you have to constantly keep drilling new wells to meet the
production quota. And there really isn't a lot of options. They have to drill, or they
don't have cash flow." |
"The second independent report on the performance of Andrea
Rossis low energy nuclear reactor was just released. Even though the first round of
tests were conducted by a group of respected European physicists, they received
considerable criticism from those who believe cold fusion to be impossible and
that the scientists reporting positive test results had simply been duped. Thus a second
test of Rossis latest device took place in the spring of this year. For those who
have not been following this saga, it should be noted that Rossi moved his research to
North Carolina last year and is now working for a new well-financed company called
Industrial Heat which is currently developing commercial versions of his
devices.....The report concludes: In summary, the performance of the E-Cat reactor
is remarkable. We have a device giving heat energy compatible with nuclear
transformations, but it operates at low energy and gives neither nuclear radioactive waste
nor emits radiation. From basic general knowledge in nuclear physics this should not be
possible. Nevertheless we have to relate to the fact that the experimental results from
our test show heat production beyond chemical burning, and that the E-Cat fuel undergoes
nuclear transformations. It is certainly most unsatisfying that these results so far have
no convincing theoretical explanation, but the experimental results cannot be dismissed or
ignored just because of lack of theoretical understanding. How fast this technology will be adopted is still an open
question. Obviously it has the potential to replace most uses of fossil fuel, giving a
massive boost to the global economy, and stopping nearly all carbon emissions if
universally deployed. So far the U.S. and other governments seem to be holding to a
position that this cannot be possible despite credible test results. Rapid deployment of
this or a similar technology would, of course, be one of the most disruptive events in
industrial history and would obviously meet resistance. Whether the mainstream media, the scientific community, and the government
come to realize that this or similar phenomena are real and need to be widely deployed as
quickly as possible if we are to avoid the consequences of global warming remains to be
seen. The one bright spot on the horizon is that
Rossi tells us that his firm, Industrial Heat, is currently installing a one megawatt
device in an undisclosed U.S. factory which will provide heat for a production line. If
this device becomes operational in the near future, it will be difficult to ignore in face
of the growing climate, energy, and economic problems the world is facing. Policymakers
should note that the Chinese are well aware of this technology and are already in a
contractual relationship with Industrial Heat to exploit it. If Washington is not ready to
lead the world into the next age, then Beijing almost certainly is." |
"Today, the Venezuelan economy
is struggling and so is its government-run oil monopoly, Petróleos de Venezuela, or
Pdvsa. The company is mired in a cash-flow crisis and has had to tap the Central Bank for
millions of dollars in loans. It has considered
selling its United States gas station subsidiary, Citgo, and is contemplating
raising gasoline prices at home, which are the cheapest in the world. But in a quiet
change that might surprise many Venezuelans, who have grown accustomed to seeing Pdvsa as
a symbol of national sovereignty, the company has been discreetly moving to give more
control to foreign oil companies that participate with it in joint ventures, according to
five people familiar with recent agreements it negotiated. Those changes have been done
without fanfare, raising the question of whether President Nicolás Maduro, in office less
than a year and a half, worries that supporters would see them as a betrayal of the
expropriation of foreign oil interests by the countrys former president, Hugo
Chávez, who turned the state oil company into a banner of his populist
policies. In the hopes of jump-starting stagnant
production through increased investment, the company has signed or is negotiating
financing agreements with numerous foreign oil companies operating here. These agreements
give the companies greater say over how drilling operations are run and how they buy
supplies and equipment, as well as greater control over spending and profits, according to
those familiar with them, some of whom asked not to be identified to preserve relations
with Pdvsa.... One of the first agreements was
signed with the American company Chevron in May 2013. The deal included a $2
billion loan by Chevron to Pdvsa to cover the state oil companys portion of
investment in an oil field across Lake Maracaibo from Mene Grande. But it also included
provisions sought by Chevron to guarantee that the new loan, as well as millions of
dollars in unpaid dividends from past operations, would be paid promptly from oil
revenues, according to an oil industry consultant in Venezuela briefed on the agreement
and Mr. Monaldi, who was shown a summary of the contract." |
"Tumbling oil prices are
starting to frighten energy companies around the globe, especially drillers in North
America, where crude is expensive to pump. Global oil prices have fallen about 8% in the past
four weeks. The European oil benchmark closed Thursday at $90.05 a barrel, its lowest point in 29 months. The price of a barrel in the U.S. closed at $85.77, its lowest since
December 2012. Weakening oil prices could put a crimp in the U.S. energy boom. At $90 a
barrel and below, many hydraulic-fracturing projects start to become uneconomic, according
to a recent report by Goldman Sachs Group Inc. While
fracking costs run the gamut, producers often break even around $80 to $85. 'There could be an immense amount of pain,' said energy economist Phil
Verleger.' As prices fall, you will see companies slow down dramatically.' Paul Sankey, an
energy analyst with Wolfe Research LLC, said the first drillers to react to declining
crude prices would be some in the least productive fringes of North Dakotas Bakken
Shale. 'Were not quite there yet,' he said, but a further drop of $4 or $5 a barrel
will force companies to begin trimming their capital budgets.' Shares of Continental Resources Inc. CLR -2.20% and Whiting Petroleum Corp. WLL
-3.25% , which are focused in the Bakken, fell by more than 5% each on Thursday.
Shares of major shale-oil and gas developer Chesapeake Energy Corp. CHK
-0.64% fell 7%. Jim Noe, executive vice president at Hercules Offshore Inc., HERO -1.11% a Houston-based drilling-services
company with rigs in the Gulf of Mexico, the Mideast, India and West Africa, said
companies such as his are monitoring weak oil prices closely. Hercules said its business
was affected by a slowdown in drilling activity in the second quarter. Herculess
stock fell 6.3%. The fundamental problem is that the world is awash with oil, but demand
for energy is growing more slowly amid tepid economic growth around the globe, especially
in China. Companies are always reluctant to be the first to cut their energy output,
hoping that others flinch first. And hedging can help companies weather temporary drops.
The overall U.S. economy, and especially industries such as refining and air travel, would
benefit from lower oil prices. Some U.S. oil fields,
including the Eagle Ford Shale and Permian Basin in Texas, would remain attractive for
drillers even at much lower oil prices. An analysis by Robert W. Baird & Co. said
prices could drop to $53 a barrel in certain parts of the Eagle Ford and still be
profitable to drill.... Long-term price declines are
just what some forecasters expect. Barclays BARC.LN -0.91%
PLC cut its outlook on Thursday, citing unexpectedly high crude production in Libya after
years of disruptions. The bank now expects Brent
crude, the European benchmark, to average $93 a barrel for the rest of the year, down 12%
from the banks previous forecast of $106. Barclays also cut its 2015 forecast, to
$96 from $107 a barrel. For
the past couple of years, the global oil markets have been buoyed by a glut of crude oil
coming out of the U.S. Shale-drilling in North Dakota, Texas and Colorado has increased
U.S. production by nearly three million barrels a day since 2011, accounting for all of
the global increase. U.S. output more than made up for losses from war or weather
disruptions." |
"A nuclear power plant will be
built in Britain for the first time in a generation after the EU finally signed off the
project today but will cost £8 billion more than expected. The new plant at
Hinkley Point in Somerset will be funded by a levy on household electricity bills,
amounting to around £8 a year, for 35 years.
Brussels had launched a probe into the project amid fears the £17.6billion government
subsidy for French firm EDF to build the plant broke EU rules banning unfair state
aid for companies. But the EU today revealed it had struck a deal with the
Government to cut the subsidy by £1billion, giving the project the go ahead. However,
European commissioners revealed the costs of building the nuclear power station had
rocketed by 50 per cent before construction had even started. The Government
claimed the new power station would cost £16 billion to build. But the EU Commission,
which has been examining the project since December, said the real cost would be
£24.5billion. The two reactors planned for Hinkley, which will provide power for about 60
years, are a key part of the coalition's drive to shift the UK away from fossil fuels
towards low-carbon power. The nuclear power station
is expected to begin operating in 2023. The approval
comes a year after headline terms of the subsidy contract were agreed by the UK
government, guaranteeing EDF and its partners a price of £92.50 twice the current
market price of electricity - for each megawatt-hour of power that the reactors generate
over a 35-year period.... EDF will get a guaranteed price for the electricity it generates
for decades, which will be added to household bills when the plant is up and running in
ten years time. Ministers argue that the plant will save consumers money compared
with building offshore wind farms or importing gas from abroad. The new power station,
known as Hinkley C, will have two reactors. It is the first nuclear plant to be built in
the UK since Sizewell B in Suffolk was completed in 1995. The Government said building a
new fleet of nuclear power stations could reduce bills by more than £75 a year in 2030.
At full capacity the two reactors could provide up to seven per cent of the country's
energy needs. Almost two-thirds of the nation's existing electricity generation is due to
be turned off in the next 15 years, adding to the urgent need for new power plans,
minister say." |
"The worlds longest
sub-sea electricity cable is due to be laid between Northumberland and Norway to cope with
the UKs depleting energy supplies. The 730km cable interconnector buried
deep beneath the North Sea would bring Norwegian hydro-power to the National Grid, while
it is hoped over time renewable energy created from UK wind-farms could be sent back to
the Scandinavian nation. Northumberland
Councils planning committee approved plans for a sub-station and cables to be laid
off the coast at Cambois and at land north east of East Sleekburn at a meeting on Tuesday
night. The multi-million pound project, which will be financed by the UK and Norwegian
company Statnett, is a world first and would help the National Grid top-up its
supplies of electricity by buying hydro-electricity to meet demand at peak times. The
cable, called the NSN Link, will start off at land near the former Blyth Power Station
site and will be buried underground until it meets a converter station on the coast." |
"As oil production swells, demand falters and prices slide, the
global oil market appears on the verge of a pivotal shift from an era of scarcity to
one of abundance. Oil prices have fallen as much as 20 percent since June, despite a host
of rising supply risks, leading more investors and traders to consider whether 2015 is the
year in which the U.S. shale oil boom finally tips the world into surplus. While the
plunge has rekindled speculation that the Organization of the Petroleum Exporting
Countries (OPEC) may need to cut output for the first time in six years when it meets next
month, some analysts are looking much further ahead. They
say a long-anticipated fundamental shift in the market may now be under way, ending a
four-year stretch when $100-plus prices were the norm, and opening a new era in which OPEC
restraint once again becomes paramount. The signs are everywhere: U.S. oil imports are
shrinking much faster than expected while oil production climbs to a thirty-year high.
Chinese economic growth, and therefore oil demand growth, is slowing. Even output in
trouble spots like Libya and
Iraq is rising after years of insurrection-led losses. What is happening in oil markets 'finally represent the rebalancing and the impact of this
tremendous surge in U.S. oil production,' says Daniel Yergin, Vice Chairman of IHS and one
of the world's foremost oil historians. The fact
that oil prices are falling despite continued turmoil in much of the Middle East and
sanctions on Russia 'is
a milestone, a marker of change.' Some analysts say it is too early to tell if the latest
fall in prices is any different from previous declines, such as in 2012 and
2013, when events such as civil war in Libya and
sanctions on Iran spurred
sharp rebounds. A spurt in economic growth in Europe or another supply disruption could
again push prices higher in the short term, but risks appear increasingly skewed lower.
Last week analysts at Credit Suisse cut their 2016 Brent oil price forecast to $93 a
barrel, the second-lowest among analysts polled by Reuters. The
consensus OILPOLL for that year was over $101 a barrel. The bank pegged 2017 at $88 a
barrel as North American output growth 'overwhelms' global demand. Some oil traders agree. Long-dated futures
for 2017 and beyond, which had for months held firm despite the slump in immediate prices,
finally fell last week. Global benchmark Brent crude for November LCOc1 fell 5 percent last week, hitting its
lowest in over two years. The implications of such a shift extend well beyond OPEC. It
would likely accelerate shifts in the global balance of power, with consumer nations such
as the United States becoming less dependent on producers like Russia or Iran. For most of the past decade, the oil market has been defined by
shortage. Prior to 2008, years of underinvestment, roaring demand from Asia and fears of a
looming "Peak Oil" fueled the price rally, and OPEC members have struggled to
keep up with demand. Oil soared to nearly $150 a barrel by mid-2008. Then, the financial
crisis sent prices into a tailspin, forcing OPEC to make two sharp cuts - as it turns out,
its last formal measures for at least six years. With demand stunted and U.S. shale
breakthrough, the 'Peak Oil' theme faded giving way to hope for abundance. Yet oil prices
held resolutely above $100 a barrel, with each potential downturn eventually thwarted.... While some in OPEC are starting to call for cuts, core Gulf members
are betting winter demand will revive the market. That may change if oil prices
slide another $10 or so. Not only will that squeeze budgets from Caracas to Moscow, but U.S. drillers would probably curb activity in the event of a
'sustained pullback' below $80 a barrel, analysts at Baird Energy wrote in a report on
Monday. 'US shale oil after all is not just the newest and biggest source of supply, but
also high cost and most responsive to oil prices,' said McNally. 'North Dakota and Texas
have effectively joined OPEC, though they may not have realized it yet.'" |
"The North Sea oil industry has
been thrown into turmoil after a major US firm revealed it may pull out of the UK, selling
off its significant reserves. Apache Corporation, the North Sea's third-biggest producer
behind BP and Royal Dutch Shell, said it was considering the move in a bid to focus its
attention on American shale gas projects.The firm,
once seen as the saviour of the North Sea, confirmed a sell-off is one of two options -
the other being the creation of a separate international firm that would take in all of
Apache's ventures outside the US. A spokesman for the firm confirmed this could lead to
more investment in the UK site, however, industry trade union RMT said it would be a
'severe blow' if the company decided to press ahead with withdrawal." |
"Iran is not ready to replace
Russia as a key gas supplier if sanctions against Tehran are removed, Itar-Tass news
agency quoted Iranian President Hassan Rouhani as telling Russian TV channel Rossiya 1.
The European Union is quietly increasing the urgency of a plan to import natural gas from
Iran, as relations with Tehran thaw while those with top gas supplier Russia grow
chillier, a European Commission source told Reuters in September. 'We are lagging in production and think about domestic consumption first,'
Rouhani told the channel in an interview. Iran has the world's second-largest gas reserves
after Russia. 'From time to time, we have problems during winter and then, you know, we
have many buyers, clients around us... All our neighbours to the east, west and south want
to buy gas which we are yet to produce,' he said. Russia is currently Europe's biggest
supplier of natural gas, meeting a third of its demand worth $80 billion a year. The EU
has imposed sanctions on Moscow over the conflict in Ukraine, increasing the need for gas
from elsewhere. 'Conditions today are not such when everybody would think that if Russia
stops gas supplies tomorrow then this gas would be supplied by Iran,' Rouhani added. 'Our
production is far from this stage yet.' Iran, which
needs to add large pipeline infrastructure, has long lobbied to build a designated
pipeline that would connect its huge South Pars gas field with European customers - the
so-called Persian Pipeline." |
"The ongoing U.S. energy boom
may be driving gasoline prices lower, but homeowners who heat with natural gas may be in
for another winter of sticker shock. 'It is now looking almost certain that stocks of
natural gas in the U.S. will be significantly lower than the five-year average' when
temperatures begin falling in November,' said Tom Pugh, commodities economist for Capital
Economics. 'Another cold winter, combined with lower
stocks than last year, could lead to even higher price spikes than last year.' Thanks to
big surges in seasonal demand, natural gas producers are busy this time of year building
up supplies. But despite record production, natural gas storage levels are still below
their five-year range heading into the winter heating season. The latest data from the
Energy Department shows that producers are playing catch-up, with storage levels more than
10 percent lower than last year's levels. That means homeowners who heat with gas could
see the same price spikes they saw last winter during cold snaps. .... Thanks to the
ongoing booming in new drilling techniques like hydraulic fracturingor 'fracking'
U.S.natural gas production is expected to continue growing. The EIA forecasts a 5.3
percent increase in 2014 and another 2.1 percent in 2015. .... One of the biggest new gas fieldsthe Marcellus shale in
Pennsylvaniaproduces about 13 billion cubic feet of natural gas per dayor
about 18 percent of total U.S. supply. Just four years ago, it was producing just the 2
billion cubic feet a day. New pipelines are being built, but it's not clear whether
they'll be able to keep up with the rapid growth in demand much of it coming from power
companies switching from coal burning plants to cleaning burning natural gas." |
"Gas and electricity will be
significantly cheaper this decade than previously thought, according to new official
estimates that undermine the Governments case for backing expensive green energy.
Burning gas for power is currently far cheaper than electricity from wind farms, which
receive billions of pounds in subsidies from consumers. But ministers have repeatedly
argued that gas prices will keep on rising, eventually making green energy good value for
money. On Thursday however the Department of Energy and Climate Change released new
forecasts slashing its power and gas price forecasts for later this decade by as much as
20 per cent. The forecasts suggest that instead of rising dramatically, wholesale prices
will instead remain nearer to current levels out to 2020. .... John Feddersen, chief executive of Aurora Energy Research, said that
- if the new forecasts were accurate 'people will have lower power bills as a
consequence'. A typical household dual fuel bill could be 7pc lower in 2020 than had been
feared, he estimated. ... A spokesman for the Department of Energy and Climate Change said
that the price forecasts had been cut due to 'a softening in market expectations of future
gas prices since the previous projections published in 2013'. He
said there was forecast to be 'downward pressure on global gas markets in the second half
of this decade as large sources of liquefied natural gas supply are due to come online
during this period'." |
"At least eight proposed big
gas-fired power plants are vying to win subsidies that would see them built and generating
electricity by 2018, ministers have announced. How many of them - if any - are built will
depend on the outcome of a reverse auction to be held later this year, as part of a new
Government scheme designed to keep the lights on. The proposed plants will compete against
existing power plants to win subsidy contracts, which would pay them to guarantee their
availability from 2018. Until recently, most fossil fuel power stations could expect to be
commercially viable simply by selling electricity into the market. But the expansion of
intermittment and subsidised renewable power such as wind and solar farms is distorting
the market so that many gas plants will only be needed intermittently as back-up, leaving
them unprofitable. As a result, ministers have been forced to offer subsidies to ensure
that old plants remain operational and new ones are built to avert the risk of blackouts
when the wind doesn't blow and the sun doesn't shine.
The so-called 'capacity market' is expected to add £14 to a typical annual household
energy bill. Ministers plan to award contracts to 50.8GW of capacity in the auction. The
subsidies will go to whichever plants can offer to guarantee their power for the lowest
annual cost." |
"A sharp fall in energy prices
around the world signals worse to come for the slowing global economy
as China's decade-long boom peters out, in addition to Europe's long struggle with
recession. The price of oil, the world's most important fuel source, has dropped 20
percent since the summer to below $92 per barrel on Thursday, a level last seen in June
2012. Energy analysts initially said the price declines were largely the result of greater
supply, citing the North American shale boom, the tapping of new offshore reserves
worldwide and greater output of coal. But analysts have also begun pointing to a slowdown in demand.
They cite China's ebbing thirst for oil and what could its first drop in demand for coal
in over a decade as indicators of a sharper slowdown in the world's second-biggest
economy. 'China's initial (economic) acceleration
has faded. With the U.S. acceleration reaching its limits, we have seen our GLI (Global
Leading Indicator) slip into 'slowdown',' Goldman Sachs said on Thursday in a research
note. 'Without re-acceleration outside the U.S., this may not change quickly,' the bank
said. Goldman said China could
still get close to its economic growth target of 7.5 percent for this year, but 'there is
a good chance of more slowing early next year'. That
would have profound implications worldwide, since the economies of China and the United States have been growing, while Europe and Japan continue to struggle in the wake of
the financial crisis. 'Overall, the global economy
is weaker than we had envisaged even six months ago,' International Monetary Fund chief
Christine Lagarde said in Washington on Thursday. 'Only a modest pickup is foreseen for
2015 as the outlook for potential growth has been pared down.' The IMF holds its annual
meeting next week and will release its latest World Economic Outlook beforehand.... Further affecting demand for fossil fuels, households and
industries in developed economies are becoming more efficient in using energy and are
moving more to renewables and other alternative fuel sources. 'Ironically, as the global demand pie is getting smaller, supplies (of
fossil fuels) are increasing,' said Michal Meidan, a director at consultancy China
Matters. Coal, the world's most important source for
electricity generation, has almost halved in value since spring 2011 to levels at which
most producers are losing money. Gas prices in Europe have fallen over 6 percent this year
despite the crisis between Russia,
its main supplier, and Ukraine, a vital transit route for EU imports. China's gas demand
growth is expected to ease to its slowest in three years in 2014 and dip again in 2015,
due in part to its slowing economy. In the oil market, moves by Saudi Arabia, the world's biggest exporter, are crucial to determine
volumes and pricing." |
"The EU spends more than 1
billion ($1.26 billion) a day on fossil-fuel imports and most of that goes to
Russiaby far the largest supplier of the blocs gas and oil....Output from Norways gas fields is expected to decline in the early
2020s, so large gas discoveries would be needed to maintain
the countrys current output into the 2030s. Qatar and other countries that provide
Europe with liquefied natural gas, which is transported in liquid form to coastal
terminals, are also unlikely to ramp up deliveries for one simple reason: price.
Energy-hungry Asia is driving global demand for LNG, with China needing it to fuel its
economy and Japan to fill the gap left by the closure of its nuclear plants after the
Fukushima disaster. 'You could go and purchase more
LNG, but you would need to compete with Japan and other Asian countries on price,' said
James Henderson of the Oxford Institute for Energy Studies. Even though other parts of the
world, notably the U.S., will in coming years start exporting LNG, the problem will remain the same.
'U.S. LNG will go where the price is highest. Europe has chosen the low-cost option with
Gazprom. It has a lot of spare gas and its price can be pretty low,' Mr. Henderson said.
Countries such as Canada, Mozambique and Tanzania are hoping to produce LNG but face cost,
infrastructure or regulatory obstacles, and it may be years before they can deliver large
volumes. Fracking, which has transformed the energy
landscape of the U.S., has raised hopes of a European gas boom. But few experts believe
fracking can boost the Continents gas output in the near future, partly because of
political opposition to it in some countries. In seeking to reduce energy ties with
Moscow, Europe also runs into contractual problems. Analysts say the bulk of contracts
Gazprom has with its European partners extend into the next decade at least, some beyond
2030. 'My understanding is that if European energy
firms had to default on those contracts, they would have to pay a massive penalty, which
they cant afford to do,' said Pierre Noel of the International Institute for
Strategic Studies." |
"Foreign-led projects lifted
Russian oil output last month to within reach of a post-Soviet record, showing the
potential in the country's existing fields, which are largely unaffected by Western
sanctions over Ukraine. Output of oil and gas condensate in the world's largest producer
rose 0.9 percent to 10.61 million barrels per day (bpd) last month from August, a touch
under the post-Soviet record-high of 10.63 million bpd reached in December, Energy
Ministry data showed on Thursday. Oil production
rose in January-September by 0.7 percent year-on-year, showing that Moscow has not curbed
its output to prop up the oil price, which reached a 27-month low under $93 per barrel on
Thursday, due to weak demand in China in Europe. A price below $100 marks the pain threshold for Russia's faltering
economy. Russia's central bank said on Wednesday it is working on
measures to support the sanctions-hit economy should oil prices fall by as much as a third
or more. The United States and European Union have
imposed wide-ranging sanctions on Moscow for its role in the Ukraine crisis, including
freezing access to foreign technology and banning Western firms from cooperating in Arctic, shale and deep-water drilling. This targets mostly future oil
output. However, Russia
provides around a third of the European Union's oil and gas, and many governments in the
bloc are wary of antagonising Russia further. 'It is unlikely that we'll see any impact on
Russian oil production from the sanctions by the year-end,' Alexander Kornilov from Alfa
bank said, although that could change if new sanctions are applied next year.... Oil
output under production sharing agreements (PSA), designed in the 1990s to encourage
investment by foreign oil companies, jumped by 24 percent in September to almost 1.23
million tonnes (298,844 bpd). The ministry does not provide a breakdown of the data for
the projects, which include Sakhalin-1 of Rosneft, ExxonMobil , ONGC and Sodeco;
Sakhalin-2 involving Gazprom , Shell, Mitsui, and Mitsubishi ; and Kharyaga with Total,
Statoil and Zarubezhneft. Sanctions do not affect these projects." |
"Russian oil output rose to near
a post-Soviet record last month, a sign the biggest source of revenue for President Vladimir Putins
government has yet to be eroded by U.S. and European sanctions. The nation increased
output 0.7 percent to 10.61 million barrels a day, according to preliminary data from
CDU-TEK, which is part of the Energy Ministry. The
figure is within 0.3 percent of the record in January and is for crude and condensates, a
type of oil that yields a greater proportion of high-value fuels. The U.S. and the
European Union have targeted Russias
oil industry by banning exports of some equipment and technology, blaming Putins
government for stoking a separatist insurgency in eastern Ukraine. Russia denies
involvement. Production in the oil and gas sector
hasnt been affected by tighter sanctions yet, according to Ildar Davletshin, an oil
and gas analyst at Renaissance Capital in Moscow. 'The impact on production will probably
not be seen until next year,' he said by phone, adding that the rising costs associated
with the sanctions could limit output by about 0.5 percent in 2015. 'The sector is still trying to understand the consequences of the
sanctions.' " |
"Global oil prices have fallen to their lowest level in more than two
years after Saudi Arabia cut its official selling price. Concerns of oversupply after
higher output in the US, together with forecasts of lower global demand by the
International Energy Agency (IEA), are driving prices down. Brent
crude fell by more than 1% to $93 a barrel, its lowest since June 2012. US light crude dipped below $90 for the first time in 17 months. In late
London trading it was barely changed on the day at $90.63 a barrel. On Wednesday, Saudi
Arabia announced it was reducing its selling price for oil in a move to protect its market
share, analysts said. 'This is a structural change in the oil market, with Saudi Arabia
explicitly stating that they are willing to compete on price,' said Bjarne Schieldrop, a
commodities analyst at SEB. The drop in price comes at a time when the Organization of
Petroleum Exporting Countries (Opec) and the US are increasing output. The extraction of shale oil in the US has increased the country's
production of oil significantly - the IEA has forecast that the US will soon overtake
Saudi Arabia and Russia to become the world's biggest oil producer." |
"Iran and Russia have built
unanimous consensus among the Caspian states, which also feature Azerbaijan, Kazakhstan
and Turkmenistan, over the inadmissibility of a foreign military presence in the Caspian
Sea, ruling out any future possible deployment of NATO forces in the basin. A political declaration signed by the presidents of the five Caspian
states at the IV Caspian Summit held in Astrakhan, Russia, on September 29, 'sets out a
fundamental principle for guaranteeing stability and security, namely, that only the
Caspian littoral states have the right to have their armed forces present on the Caspian,'
according to a statement
by Russian President Vladimir Putin in the wake of the summit. His Iranian counterpart,
Hassan Rouhani, added that 'there is consensus among all the Caspian Sea littoral states
that they are capable of maintaining the security of the Caspian Sea and military forces
of no foreign country must enter the sea,' Irans state news agency PressTV quoted
Rouhani as saying. The move comes as both Russia and Iran are experiencing tense
diplomatic relations with Western countries and feel increasingly threatened by a foreign
military presence in the Caspian Sea. 'Both Iran and Russia have interests in keeping
under control a military presence of Western countries in the basin,' Bahman Diba, foreign
policy expert and author of The Law and
Politics of the Caspian Sea, told The Diplomat..... The decision to seal off the Caspian Sea from a foreign military presence
now makes any plan for a NATO military base in the basin very unlikely. It may also have
repercussions in the sphere of energy security. 'Russia is strongly against the project
for a trans-Caspian pipeline carrying gas from Turkmenistan
to Azerbaijan and may threaten to use military force should
the two former Soviet republics decide to go ahead regardless,' Dmitry Shlapentokh,
professor of Soviet and post-Soviet history at Indiana University, U.S, told The Diplomat. 'However, if there was a NATO base in the Caspian, Russia might
eventually give in and accept the project.'... With the basins delimitation
principles still hanging in the balance, it is at least clear that there will not be no
NATO flag flying over the Caspian Sea waters as the littoral states look for some common
ground and finally find a way to split the basin." |
"India will be a 'renewables
superpower' according to its new energy minister, but its coal-fired electricity
generation will also undergo 'very rapid' expansion. However,
Piyush Goyal dismissed criticism of the impact of
Indias coal rush on climate change , as western governments giving 'homilies and
pontificating, having enjoyed themselves the fruits of ruining the environment over many
years.' The aggressive statements are significant in setting out both how prime minister
Narendra Modi will fulfil his governments ambitious goal to
bring electricity to the 300m power-less Indians and also how India will approach the
crucial 15 months of negotiations
ahead before a UN deal to tackle global warming must be agreed. Huge increases in
energy supply in developing nations are needed to lift the worlds poor out of
poverty, but achieving this largely through polluting fossil fuels will lead to dangerous
climate change." |
"A UK water company has begun supplying domestic gas produced from
human waste to homes. Severn Trent Water said it is
the first company to provide gas for heating and cooking to the National Grid using
"poo power". The biomethane is produced by breaking down sludge from a sewage
treatment plant. Severn Trent said Northumbrian Water and Wessex Water were also preparing
to supply homes using the same method. It expects to produce 750 cubic metres per hour,
supplying 4,200 homes annually, from its largest treatment plant in Minworth." |
"Over £1 trillion of investment
will be required to recover all of the remaining oil and gas that is thought to exist
offshore in British waters, according to the latest industry report from Oil & Gas UK.
Unless more incentives are provided for drillers to work in the UK Continental Shelf
(UKCS) and offset the increase in costs of operating there then the UK will struggle to
recover the 20bn barrels of oil equivalent (boe), or above, that are thought to remain
offshore, warned Malcolm Webb, chief executive of Oil & Gas UK. 'Maximising recovery from the UKCS is the collective responsibility of
all those who fund, regulate, tax and operate the offshore oil and gas industry and
achieving our full potential will require a tremendous effort on the part of everyone
involved,' said Mr Webb. 'Our industry makes far too important a contribution to the
economic and energy security of the nation to be allowed to falter at this critical
point.' The report shows that production in the first half has bounced back after
suffering several years of double digit declines. The latest figures cited in the report
from the Department of Energy & Climate Change show that output mainly from the North
Sea grew by 1pc in the first six months, compared with a year earlier, after almost £28bn
was pumped into boosting production since the beginning of last year. Some estimates have
placed the volume of oil equivalent, a measure which includes gas and condensate, that
could still be recovered in the area known as UKCS as high as 30bn barrels." |
"When the oil industry overcomes
an obstacle and boosts oil production, costs typically increase. That opens the door for a
better and cheaper energy source that will eventually displace crude oil. So at some
point, the cost of getting more and more oil likely will get so high that buyers
can'tor won'tpay. This is an issue the
late petroleum economist Morris Adelman wrestled with. 'No mineral, including oil, will
ever be exhausted. If and when the cost of finding and extraction goes above the price
consumers are willing to pay, the industry will begin to disappear,' he wrote in "The
Genie out of the Bottle: World Oil Since 1970," a book published in 1995." |
"Russias state-run
oil company said a well drilled in the Arctic Ocean with Exxon Mobil Corp. (XOM) struck oil, showing the
region has the potential to become one of the worlds most important crude-producing
areas. OAO Rosneft (ROSN) Chief Executive Officer Igor Sechin said the
exploration well had found about 1 billion barrels.
The number of similar geological structures nearby means the immediate area probably
contains more than the U.S. part of the Gulf of Mexico, he
said at the rig that drilled the well. 'It exceeded our expectations,' Sechin
said. The discovery, which needs to be confirmed with further tests, sharpens the
dispute between Russia and the U.S. over President Vladimir Putins
actions in Ukraine. The well was drilled before the Oct. 10 deadline Exxon was granted by
the U.S. government under sanctions barring American companies from working in
Russias Arctic. Rosneft and Exxon wont be able to do more drilling, putting
the exploration and development of the area on hold despite the find announced
today. The development of Arctic oil reserves, an undertaking that will cost
hundreds of billions of dollars and take decades, is one of Putins grandest
ambitions. As Russias existing fields in Siberia run dry, the country needs to
develop new reserves as it vies with the U.S. to be the worlds largest oil and gas
producer." |
"Russia, viewed by the Obama
administration as hostile to U.S. interests, has discovered what may prove to be a vast
pool of oil in one of the worlds most remote places with the help of Americas
largest energy company. Russias state-run OAO
Rosneft said a well drilled in the Kara Sea region of the Arctic Ocean with Exxon
Mobil Corp. struck oil, showing the region has the potential to become one of the
worlds most important crude-producing areas.
The announcement was made by Igor Sechin, Rosnefts chief executive officer, who spent two
days sailing on a Russian research ship to the drilling rig where the find was unveiled
today. The well found about 1 billion barrels of oil and similar geology nearby means the
surrounding area may hold more than the U.S. part of the Gulf or Mexico, he said. 'It
exceeded our expectations,' Sechin said in an interview. This discovery is of 'exceptional
significance in showing the presence of hydrocarbons in the Arctic.' The discovery
sharpens the dispute between Russia and the U.S. over President Vladimir Putins actions in Ukraine. The well was drilled
before the Oct. 10 deadline Exxon was granted by the U.S. government under sanctions
barring American companies from working in Russias Arctic offshore. Rosneft and
Exxon wont be able to do more drilling, putting the exploration and development of
the area on hold despite the find announced today....The development of Arctic oil
reserves, an undertaking that will cost hundreds of billions of dollars and take decades,
is one of Putins grandest ambitions. As Russias existing fields in Siberia run
dry, the country needs to develop new reserves as it vies with the U.S. to be the
worlds largest oil and gas producer. Output from the Kara Sea field could begin
within five to seven years, Sechin said, adding the field discovered today would be named
'Victory.' The Kara Sea well -- the most expensive in
Russian history -- targeted a subsea structure named Universitetskaya and its success has
been seen as pivotal to that strategy. The start of
drilling, which reached a depth of more than 2,000 meters (6,500 feet), was marked with a
ceremony involving Putin and Sechin. The importance of Arctic drilling was one reason that
offshore oil exploration was included in the most recent round of U.S. sanctions. Exxon
and Rosneft have a venture to explore millions of acres of the Arctic Ocean.... Exxon Chairman and Chief Executive Officer Rex Tillerson is counting on Russian discoveries to reverse a
trend of stalled exploration and escalating costs to pump
crude and natural gas from the ground. Production from the
companys wells fell in 2012 and 2013 and is expected to be flat this year. " |
"Russia is ready to resume gas
deliveries to Ukraine if Kiev pays its energy giant Gazprom back debts worth $3.1 billion
(2.4 billion euros) by late December, European Energy Commissioner Guenther Oettinger said
Friday. According to the interim agreement, which
has to be approved by the governments in Moscow and Kiev, Gazprom is ready to deliver at
least five billion cubic metres of gas in the coming months, Oettinger said after he met
with both energy ministers in Berlin. Gazprom will also want advance payments for the new
gas at $385 per 1,000 cubic metres -- less than the 485 dollars that Gazprom had earlier
demanded but more than the price of around $268 it had charged before the change of
government in Ukraine....Ukraine's Prodan said that 'unfortunately we have not been able
to arrive at a complete solution'. Under the deal, Kiev would pay Gazprom $2.0 billion in
debts by the end of October and another $1.1 billion between early November and late
December. The $3.1 billion are what Ukraine considers its debt to Gazprom. The Russian
energy giant has however demanded 5.3 billion. An arbitration court in Stockholm is due to
decide on the case in coming months, and on whether Ukraine will have to pay the
difference." |
"Norwegian energy firm Statoil said on Thursday it will postpone
development of its 40,000 barrel per day Corner oil sands project in Alberta, Canada, for
at least three years and cut about 70 jobs at its Canadian unit because of rising costs
and limited pipeline space. Corner would have been the second major development at
Statoil's Kai Kos Dehseh property in northern Alberta. The company said its existing thermal oil sands operation, the 20,000 bpd
Leismer project, is not affected by the postponement. Statoil said it decided to delay construction of the project because inflation was pushing up the cost
of labor and materials, while tightness in pipeline space to the U.S. market was pushing
down the price of its oil. 'Costs for labour and materials have continued to rise in
recent years and are working against the economics of new projects,' Staale Tungesvik,
Statoil's country manager for Canada, said in a statement. 'Market access issues also play
a role, including limited pipeline access which weighs on prices for Alberta oil,
squeezing margins and making it difficult for sustainable financial returns.' Statoil is
the first company in recent years to delay a thermal project in Alberta's oil sands, the
world's third largest crude reserve, because of uncertainty over costs and oil prices.
Thermal developments, which pump steam into the ground to liquefy thick bitumen deposits,
are much cheaper to build than the large-scale mining projects also used in the region.
However, earlier this year Total SA suspended work at its C$11 billion ($9.9 billion)
Joslyn oil sand mine as it looks for ways to cut costs at the troubled project. While
benchmark oil prices have dropped 15 percent over the past three months, Canadian crude
prices have been relatively healthy throughout the summer, tightening to around $13 per
barrel below U.S. benchmark crude in September, the narrowest differential in 14 months.
But with the West Texas Intermediate benchmark sliding to just above $90 per barrel
earlier this month, the outright price of Canadian crude is nearing the breakeven cost for
some oil sands projects." |
"Citigroup lowered its 2015
forecast for US oil prices by $10 per barrel to $89.50 and cut the forecast for Brent by
$7 to $97.50. The Iranians are even more pessimistic
saying that Brent will be trading around $90 a barrel next year." |
"Households faced rising energy
bills between mid-2013 and mid-2014 despite the cost of gas and electricity to the Big Six
suppliers falling by up to 20 per cent. Average domestic gas bills rose 3.5 per cent in
April to June 2014 compared to the same period in 2013 - while the wholesale cost of gas
paid by suppliers fell by 21 per cent. Meanwhile,
electricity bills rose 4.4 per cent while the cost of coal for power stations fell 12 per
cent, the statistics from the Department of Energy and Climate Change revealed. Coal and
gas produce nearly three fifths of the UK's electricity, the latest figures show, almost
equally split. All of the Big Six energy companies announced price increases which took
effect in late 2013 or early 2014, with four of the major suppliers announcing smaller
decreases after the Government brought in changes to energy efficiency measures paid for
on bills. Consumer organisation Which? executive director, Richard Lloyd, said: 'Energy prices consistently rank as the number one financial
concern for consumers and with figures like these
from the Government it's no surprise that so many people don't think they're getting a
fair deal." |
"Russia's Energy Minister
Alexander Novak has told a German newspaper that European countries cannot re-export
Russian gas to Ukraine due to contract reasons, and hinted those that do could face gas
cuts. In the text of an interview to be published on
Friday in Germany's Handelsblatt newspaper, Novak said re-exports were unacceptable -
reversing a position he took in an Austrian newspaper interview last week. 'The contracts
signed do not have any provisions for re-exports,' Novak told Handelsblatt. 'We hope that
our European partners respect the past agreements. That is the only way to guarantee
un-interrupted supplies." In an interview on Sept. 18 in Austrian newspaper Die
Presse, Novak said Russia would not curb gas exports to Europe this winter to prevent
countries from re-exporting supplies to Ukraine. 'That is ruled out,' he said when asked
by Handelsblatt whether Moscow would limit gas exports to curb supplies to strife-torn
Ukraine, whose deliveries from key supplier Russia have been cut off since mid-June in a
row over prices. Russia opposes the pro-Western course of leadership in its fellow
ex-Soviet republic and denies its troops have taken part in the war in Ukraine or provided
arms to rebel fighters despite what Western governments and Kiev say is incontrovertible
proof." |
"Wealthy gas producer Qatar has
no plans to pitch in as an alternative supplier as Europe seeks to reduce its reliance on
Russian gas, Doha's energy minister told a German newspaper Tuesday. 'Qatar doesn't see
itself as an alternative to other producers and exporters. We producers complement each
other,' Energy Minister Mohammed al-Sada told the Frankfurter Allgemeine Zeitung daily. Qatar is the world's largest producer of liquefied
natural gas (LNG). "We know that energy is not just a commercial product but a very
strategic one and we know what responsibility a producer therefore has," he added.
The European Union is due to hold a fresh round of talks with Russia and Ukraine in Berlin
on Friday in a bid to settle an ongoing dispute over gas deliveries. Europe gets more than
30 percent of its gas from Russia, with half of that transiting through Ukraine, but in June Moscow cut off supplies intended for Kiev amid a bitter price
dispute. For now, gas is continuing to flow as normal through Ukraine into the EU, but
Russia has warned there was a high risk of disruption of deliveries to Europe this winter as
international tensions remain high over the Ukraine crisis. Europe does not have the
infrastructure to accept LNG in major quantities." |
"The European Union is quietly
increasing the urgency of a plan to import natural gas from Iran, as relations with Tehran thaw while
those with top gas supplier Russia grow
chillier. Two "ifs" - the removal of sanctions on Iran and the
addition of some pipeline infrastructure - are not preventing EU planners preparing, a
European Commission source involved in developing EU energy strategy told Reuters. 'Iran is far towards the top of our priorities for mid-term measures
that will help reduce our reliance on Russian gas supplies,' the source said. 'Iran's gas could come to Europe quite easily and politically there is a
clear rapprochement between Tehran and the West.' Russia is
currently Europe's biggest supplier of natural gas, meeting a third of its demand worth $80 billion (£48.7
billion) a year. The EU has imposed sanctions on Moscow over the conflict in Ukraine,
increasing the need for gas from elsewhere." |
"There continues to be great potential for surprises to the upside in
production of US tight oil, according to Wood
Mackenzie's latest integrated analysis. 'Growth in US tight oil continues to impress
as development technology and techniques have yet to mature beyond adolescence,' said
Phani Gadde, senior North America upstream analyst for Wood Mackenzie. Gadde said that additional volumes from enhanced oil recovery (EOR) will
come on stream after 2020, and
could add 1.5 to 3 million barrels per day (mb/d) by 2030, up
to 25% more oil than is being forecasted today. These
technologies are in early test phase and are not commercial yet, but indicators suggest up
to a 100% increase in recovery rates. Gadde added that pilot tests are underway with
operators, such as EOG, testing it out in the Eagle Ford shale play.
'This is going to happen, like horizontal drilling
and fracking, leading to another step change in production technology,' said Skip York,
principal analyst, Americas Downstream, Midstream & Chemicals, for Wood Mackenzie....
Ann-Louise Hittle, head of Macro Oils for Wood Mackenzie, added a global perspective on
the impact of additional tight oil output: 'The fact
that these additional volumes are poised to have an impact after
2020 means that the increased US tight oil production above
our current forecast is likely to be absorbed without a strong effect on Brent oil prices.
This is particularly the case because of potential long-term political risk in key future
sources of supply such as Iraq's.'" |
"New gas and water technologies
could add decades to the lifespan of oil reserves in the North Sea, according to Edinburgh
researchers. A Heriot-Watt University team said they had made a breakthrough in developing
clean and cheap methods to maximise extraction from existing fields. The university has
been working on a technique known as low-salinity water injection. The team has been researching which fields would benefit most from it.
Researchers have also been developing gas injection technologies for use in reservoirs
that are already flooded with water. Professor Mehran Sohrabi, director of the
university's centre for enhanced oil recovery, believes new technologies could be a game
changer for the industry and has called for more investment to reverse the decline in
North Sea production." |
"Brent
crude oil inched lower on Tuesday as ample global supplies outweighed tensions in the
Middle East, while U.S. oil bounced higher after four sessions of losses. For Brent,
higher output from Libya and Iraq overshadowed the start of U.S.-led air strikes against
Islamist groups in Syria. U.S. crude rallied after earlier falling close to 17-month lows.
Global oil prices have fallen steeply since June as geopolitical fears waned and strong
supply, including from the United States, swamped markets. Libyan oil output has risen to
800,000 barrels per day, with the key El Sharara oilfield restarting, a National Oil Corp
(NOC) spokesman said on Tuesday, from 700,000 bpd at the weekend. Iraq's southern oil
exports have increased this month to 2.6 million bpd, approaching a record high hit in
May. Brent for November delivery fell 12 cents to
settle at $96.85 a barrel after climbing as high as $97.59 a barrel in early trading. It
hit a two-year low of $96.21 last week. Brent is down nearly 6 percent this month, with
the oil benchmark on track for a third straight monthly fall." |
"Top US energy companies
Chevron and ExxonMobil have dropped out of the race to become a consortium leader
in financing the Turkmenistan, Afghanistan, Pakistan and
India (TAPI) gas pipeline following dismissal of their demand
for an equity stake in the project. The two companies were seeking shareholding in the
field from where Turkmenistan would supply gas to energy-starved Pakistan, Afghanistan and
India in response to their commitment to providing funds for laying the gas pipeline,
officials say. However, Turkmenistan turned down the request, forcing the companies out of
the competition to become the team leader. Turkmenistan
desires to award offshore gas extraction contracts to Chevron and ExxonMobil, but for that
it needs to change the rules. According to the officials, seeing an empty field, now Total
of France and Malaysias Petronas have entered the fray and are expressing interest
in gas exploration in Turkmenistan without seeking any stake. 'The government of
Turkmenistan is negotiating with Total and Petronas a services agreement which is expected
to be finalised in two months. The two firms could work as the consortium leaders,' an
official said. 'After receiving reports from Turkmenistan, Pakistan will again engage into
talks with the central Asian state.' The Afghan government says it does not require the
entire committed volume of gas and only needs a part of it. The remaining quantity will be
shared by Pakistan and India. 'For the pipeline, a route survey will be undertaken. Its
engineering design is also yet to be prepared,' the official said. Under the TAPI project,
which is expected to cost over $10 billion, Pakistan will get 1.365 billion cubic feet of
gas per day (bcfd) from Turkmenistan, India will also receive the same 1.365 bcfd and
Afghanistan will get 0.5 bcfd. Turkmenistan will export natural gas through a 1,800km
pipeline that will reach India after passing through Afghanistan and Pakistan. Pakistan
and India have already signed gas sale and purchase agreements and efforts are under way
to attract potential investors for financing the project. Earlier, energy giant Chevron
had emerged as the potential leader in a consortium that will finance and run the
transnational TAPI pipeline. The four countries linked with the project are currently in
the process of setting up a consortium and selecting a technically capable and financially
sound company as the consortium leader, which will design, finance, construct, own and
operate the gas pipeline." |
"Brent crude fell below $98 per barrel on Monday, down for the third
session in four, as sluggish demand and abundant supplies outweighed a possible cut in oil
output from the Organization of the Petroleum Exporting Countries (OPEC). Comments from OPEC's secretary general last week that the group could cut
output next year buoyed Brent on Friday, but investors' attention turned back to the gloomy economic outlook in Europe and China
which has curbed oil demand. November Brent was
trading 44 cents lower at $97.95 per barrel by Monday morning after posting its first
weekly rise in three last week. US crude for October delivery fell $0.28 cents to $92.13
per barrel, ahead of the expiry of the contract at the end of Monday. 'When you look at
the increase in supplies in the past year, you see very strong growth in the United States
in particular from non-conventional sources and also in other non-OPEC producing areas ...
supply growth is not being driven by OPEC,' National Australia Bank (NAB) economist Phin
Ziebell told Reuters. OPEC members, some of whom require oil prices at above $100 to meet
budgetary needs, will review the organization's oil output policy at its next meeting on
27 November. Investors will focus on China's flash manufacturing PMI reading due out on
Tuesday for more cues on where the world's second-largest economy is heading. The world's
top energy consumer reported earlier this month the slowest factory output growth in
nearly six years, partly causing Brent to slump under $97, the lowest in more than two
years. Concerns over an extended stagnation in Europe that could pull the other economies
down was highlighted at the G20 meeting in Australia on Sunday. "The overall story is
of abundant supply and very slack demand being coupled with an increasing lack of
nervousness about geopolitical tensions in the Middle East and the Ukraine," Ziebell
said. In signs that western sanctions could impact
Russian oil and gas production in the long run, Exxon Mobil said on Friday it will wind
down drilling in Russia's Arctic in the face of US sanctions targeting Western cooperation
with Moscow's oil sector." Oil drops on demand Upstream Online, 22 September 2014 |
"Natural gas is often touted as
a 'bridge' fuel to reduce greenhouse-gas emissions during a transition from coal-fired
power plants to renewable sources of energy. But natural gas offers few short-term
benefits over coal, according to a study released last week by Energy Innovation, as long
as the natural-gas infrastructure continues to leak methane. 'For short time frames and if
natural gas leakage rates are high, natural gas may offer little benefit compared to coal
or could even exacerbate warming,' according to economist Chris Busch and physicist
Eric Gimon, publishing in the most recent issue of The
Electricity Journal. 'Over a longer period, such as 100 years or more, natural
gas from electricity provides greenhouse gas reductions compared to coal even if leakage
rates are relatively high.' The advantage of natural gas can best be seen over the
long-term, in which gas offers about a 50 percent reduction in emissions over
coal. Unfortunately, a 50 percent improvement over 100 years is too little, too
late....Although natural gas produces about half the
carbon emissions of coal, methane leaks at every stage of the natural-gas lifecycle, and
methane traps heat in the atmosphere about 120 times more effectively than carbon dioxide.
Other studies have estimated that up to 4 percent of natural gas leaks into the atmosphere
before it reaches power plants, and this study concludes that leakage negates much of
gass advantage. 'Under the best of
circumstances, natural gas-fired electric power plants can only make a modest dent on
abating climate changeand, if developed poorly, with serious methane leaks, or if
used to displace energy efficiency or renewable energy, natural gas could instead
seriously contribute to the problem.' The Environmental Protection Agency counts on the
advantages of natural gas in its draft Clean Power Plan, released earlier this year.
Another article in the current issue of The Electricity Journal anticipates
that 'EPAs Proposed Rule Could Prompt a Larger-than-Expected Shift from Coal to Gas
by 2020.' The new study supports concerns by environmentalists about the Obama
Administrations confidence in a natural gas bridge." |
"Some 100 million tons
of annual oil production or about 20 percent Russia's total oil
output is at risk because of sanctions related to the supply
of Western technology and expertise to Russia, Vagit Alekperov,
the head of Russia's No. 2 oil company, said Friday. Executives at an
international business forum in Sochi said in the long run, Russian oil
companies can do without the Western technology banned by the latest sanctions
imposed on Moscow over the conflict in Ukraine. But at what cost? they
asked. Earlier this month, the United States
and European Union imposed sanctions on leading Russian energy companies,
including Rosneft and LUKoil, preventing U.S. and EU firms from supporting
their exploration or production activities in deep water, Arctic offshore or shale
projects. About a quarter of Russia's oil production currently comes
from hard-to-recover reserves with the help of the fracking
technology where powerful, mostly U.S.-made pumps are employed to force
oil out of the earth, Alekperov, chief of privately owned LUKoil, said
at the International Investment Forum Sochi-2014. As
conventional oil wells begin drying up, the importance of hard-to-reach deposits
in Russia a country that relies for 40 percent of its
state budget on oil industry taxes will only increase. Most of the
automated control systems and communications equipment in the oil industry today
come from the U.S. and Japan, Alekperov said, adding that these supplies are now
at risk because of Western sanctions. A firm U.S. ally, Japan has so far
imposed limited sanctions on Moscow, and the measures do not touch the oil
industry. Tokyo said last week that it was preparing new measures to target
the energy sector but has not yet implemented them. LUKoil is looking to domestic producers and suppliers
in Asia to substitute the banned technology, but 'not all of it can be
fully replaced,' Alekperov said. In the long run, oil producers will be able
to make up for the loss of Western technology, but it is not clear how
costly this shift will be, he said. Meanwhile, new sanctions could make the situation
even worse....Sanctions could stall the $500
billion of direct capital investment the Russian government thought would be
channeled into the development of the Arctic shelf by 2020. Multiplier
effects can add another $300 billion in potential losses and cripple prospects
for the development of offshore and hard-to-reach oil fields
in Russia, according to an earlier report by U.S. investment bank Merrill
Lynch. ... Having poured billions of dollars
into these new horizons, Western energy companies are not happy with the bans
imposed by their governments, and are in no rush to leave. Executives
of both Total and Shell in Sochi on Friday said they would continue
working in Russia despite sanctions, although some of their projects may be
affected. Exxon, which despite early waves
of Western sanctions against Moscow began exploratory drilling this summer with
state-owned oil giant Rosneft on Russia's Arctic shelf, is now winding down its
operations. These companies may yet outlast
the sanctions and free Russia from the need to develop its own
technology. 'This is a long-term investment we
are making and it will require 10-20 years to bear fruit. It is inappropriate
to impose sanctions and then say, invest somewhere else,' said Jacques de
Boisseson, the head of Total Russia, adding: 'I call on politicians: Do not
play with the energy industry, it is too fragile.'" |
"Russia has announced two new
milestones in its Proryv, or Breakthrough, project to enable a closed nuclear
fuel cycle. The ultimate aim is to eliminate production of radioactive waste from nuclear
power generation. Siberian Chemical Combine (SCC),
based in Tomsk, said yesterday it has completed testing of the first full-scale TVS-4 fuel
assembly containing nitride fuel. The assembly is intended for the BN-600 fast neutron
reactor, which is the third unit of the Beloyarsk nuclear power plant." |
"Russian gas producer Gazprom is likely
to record its lowest output this year since its creation a quarter of a century ago after
cutting supplies to Ukraine and losing market share to domestic rivals. Gazprom reduced its 2014 production forecast this week, and analysts
regard even this figure as overoptimistic due to Moscow's battle with Kiev over gas prices
and its role in the conflict in eastern Ukraine. Falling output could put further pressure
on the economy,
which relies heavily on oil and gas sales and is already slowing to a crawl partly as
Western sanctions start to bite. Gazprom chief Alexei Miller told President Vladimir Putin
on Wednesday that he expected production this year to be 463 billion cubic metres (bcm), a
6.7 percent decrease from the 496.4 bcm announced by Gazprom at a May presentation and
down from 487.4 bcm produced last year. Putin looked sanguine but analysts said the crisis
in Ukraine and the Kremlin-controlled company's decision in June to cut gas supplies to
its second-largest market after Germany were taking their toll. Miller's
forecast is slightly above Gazprom's record low hit in 2009 during the global financial
crisis, but the analysts expect actual 2014 production to be significantly lower than
this.....Gazprom's share of the lucrative domestic
market is also shrinking as other producers, such as Novatek,
Rosneft and Lukoil are more flexible in setting prices and
other contractual terms with customers. According to Sberbank CIB figures, Gazprom's
rivals have almost doubled their share of the Russian gas
market to 35 percent this year from 18 percent in 2009, when
Gazprom's production fell sharply to a low of 461.5 bcm. Created out of the Soviet gas
ministry in 1989, Gazprom has been slower than its rivals to respond to a changing market." |
"U.S. unconventional oil
production soared by some 3.3 million barrels a day (b/d) in the last four years, and, if
the US Energy Information Administration is correct, is due to climb by another million
b/d or so in 2015. While this jump in production was unexpected by most, it was just
another phenomenon resulting from unprecedentedly high oil prices, which in turn resulted
from the lack of adequate 'conventional' oil production. As is well known, economic development can have major reactions and
feedbacks. What is so interesting about all this is that a temporary surge in what was
heretofore a little known source of oil in the U.S. is masking the larger story of what is
taking place in the global oil situation. The simple
answer is that except for the U.S. shale oil surge almost no increase in oil production is
taking place around the world. No other country as yet has gotten significant amounts of
shale oil or gas into production. Russias conventional oil production seems to be
peaking at present, and its Arctic oil production is still many years, or perhaps even
decades, away. Brazilian production is going nowhere at the minute, deepwater production
in the Gulf of Mexico is stagnating and the Middle East is busy killing itself. On top of
all this, global demand for oil continues to increase by some million b/d each year
most of which is going to Asia. If we step back and acknowledge that the shale oil
phenomenon will be over in a couple of years and that oil production is dropping in the
rest of the world, then we have to expect that the remainder of the peak oil story will
play out shortly. The impact of shrinking global oil
production, which is been on hold for nearly a decade, will appear. Prices will go much
higher, this time with lowered expectations that more oil will be produced as prices go
higher. The great recession, which has never really gone away for most, will return with
renewed vigor and all that it implies." |
"Vermonts largest city has
a new success to add to its list of socially conscious achievements: 100 percent of its
electricity now comes from renewable sources such as wind, water, and biomass. With little fanfare, the Burlington Electric Department crossed the
threshold this month with the purchase of the 7.4-megawatt Winooski 1 hydroelectric
project on the Winooski River at the citys edge. When it did, Burlington joined the
Washington Electric Co-operative, which has about 11,000 customers across central and
northern Vermont and which reached 100 percent earlier this year. It shows
that were able to do it, and were able to do it cost effectively in a way that
makes Vermonters really positioned well for the future, said Christopher
Recchia, the commissioner of the Vermont Department of Public Service. Its part of a
broader movement that includes a statewide goal of getting 90 percent of Vermonts
energy from renewable resources by 2050, including electricity, heating, and
transportation." |
"Germanys relentless
push into renewable energy has implications far beyond its shores. By creating huge
demand for wind turbines and especially for solar panels, it has helped lure big Chinese
manufacturers into the market, and that combination is driving down costs faster than
almost anyone thought possible just a few years ago.Electric utility executives all over
the world are watching nervously as technologies they once dismissed as irrelevant begin
to threaten their long-established business plans. Fights are erupting across the United
States over the future rules for renewable power. Many poor countries, once intent on
building coal-fired power plants to bring electricity to their people, are discussing
whether they might leapfrog the fossil age and build clean grids from the outset. A reckoning is at hand, and nowhere is that clearer than in Germany. Even
as the country sets records nearly every month for renewable power production, the changes
have devastated its utility companies, whose profits from power generation have collapsed.
A similar pattern may well play out in other countries that are pursuing ambitious plans
for renewable energy. Some American states, impatient with legislative gridlock in
Washington, have set aggressive goals of their
own, aiming for 20 or 30 percent renewable energy as soon as 2020. The word the
Germans use for their plan is starting to make its way into conversations elsewhere: energiewende,
the energy transition. Worldwide, Germany is being held up as a model, cited by
environmental activists as proof that a transformation of the global energy system is
possible. But it is becoming clear that the transformation, if plausible, will
be wrenching. Some experts say the electricity business is entering a period of
turmoil beyond anything in its 130-year history, a disruption potentially as great as
those that have remade the airlines, the music industry and the telephone business. Taking full advantage of the possibilities may require scrapping
the old rules of electricity markets and starting over, industry observers say
perhaps with techniques like paying utilities extra to keep conventional power plants on
standby for times when the wind is not blowing and the sun is not shining. The German
government has acknowledged the need for new rules, though it has yet to figure out what
they should be. A handful of American states are beginning a similar reconsideration of
how their electric systems operate." |
"Oil prices dropped once again last week with Londons Brent
hitting the lowest in more than two years, closing on Friday at $97.11 a barrel.
New York oil futures were more volatile, but closed at $97.27, leaving the WTI-Brent
spread at $4.84. As has been the case for the last
three months, generally weak demand and ample production has been overwhelming fears of
supply disruptions stemming from the Middle East or Russia. Last week all the major report
agencies the EIA, IEA, and OPEC reported that they had cut forecasts of
global consumption for the remainder of the year and on into 2015. The EIA reported that the US produced 8.59 million b/d the week before
last, which was down a bit from the preceding week, but was 845,000 b/d more that during
the same week last year. It is this continuing growth
in US shale oil production that is keeping the markets well supplied and has cut US oil
imports by about 6.8 percent from last year. Imports of Canadian oil into the US are up 27
percent from last year." |
"Russias largest banks,
oil producers and defence companies will be cut off from international finance and
technology under sweeping new economic sanctions announced by the US and Europe that
substantially escalate western political pressure over Ukraine. In coordinated moves that
may unnerve already jittery financial markets, the US Treasury and European Union
announced on Friday that Russias largest bank, Sberbank, would be barred from
accessing their capital markets for any long-term funding, including all borrowing over 30
days. Existing 90-day lending bans affecting six
other large Russian banks will also be tightened to 30-days, something US officials claim
will sharply increasing their borrowing costs and deny access to important
dollar-denominated funding sources. Even more draconian measures were imposed on the
Russian energy industry, where the US and Europe are attempting to shut down important new
exploration projects in Siberia and the Arctic by barring foreign oil companies from
providing any equipment, technology or assistance to deepwater, offshore, or shale
projects. The bans will prevent previously active
companies such as Exxon and Shell from dealing with five of the largest Russian oil
producers and pipeline operators: Gazprom, Gazprom Neft, LukOil, Surgutneftegas, and
Rosneft." |
"Flaws in the design of a key
Government policy to keep the lights on could add £359m a year to consumer bills, MPs on
the energy select committee have warned. Tim Yeo,
the committees chairman has written to Matt Hancock, the energy minister, urging a
rethink of rules for the so-called capacity market, a system designed to ensure Britain
has enough power supplies to meet demand. The market is primarily designed to bolster
supplies, by offering retainer-style subsidy payments to power plants in order to
guarantee they will be available when needed from 2018. Both existing and proposed new
power plants can compete for subisides in the market, through reverse auctions.
However, the capacity market is also open to ways dampening demand, for example by signing
up businesses who will receive the subsidies in return for agreeing to use less power at
peak times. The energy committee backs such 'demand-side response' measures, arguing they
offer a 'cheaper and greener alternative to building new generating capacity'. But it says
a series of problems with current eligibility rules for the capacity market 'severely
limit' the potential for demand-side response to compete. For example, demand-side schemes
that take part in the capacity market for 2018 can not also take part in schemes to
provide similar measures over the next two winters. As a result, the system 'could encourage the construction of expensive new
power stations which are not actually required', Mr Yeo warns." |
"The International Energy Agency
Thursday trimmed its forecast for the rise in oil demand this year for the third month in a row, calling the recent slowdown in
demand 'nothing short of remarkable.' In its closely watched monthly oil market report,
the Paris-based energy watchdog said it expects global oil demand to grow by 0.9 million
barrels a day in 2014, a decrease of 65,000 barrels a day compared with last month's
forecast and down by 300,000 barrels a day since July. According to the IEA, oil demand
growth in the second quarter was at its lowest in 2½ years, dented by economic weakness in Europe and China, a trend the agency expects will continue to
weigh on demand. 'While demand growth is still expected to gain momentum, the expected
pace of recovery is now looking somewhat more subdued,' the IEA said. The agency expects oil demand to increase by 1.2 million barrels a day
next year, though that is still 100,000 barrels a day less than it forecast last month.
Meanwhile, Saudi Arabia, the biggest oil producer in the Organization of the Petroleum
Exporting Countries finally appears to be responding to the lower demand outlook. According to
the IEA, Saudi Arabia cut its oil output by 330,000 barrels a day last month, apparently
in response to lower demand from its customers and a shift in the oil producer's focus
toward Asian markets. The Kingdom's oil exports are likely to have run below 7 million
barrels a day for the last four months, their lowest level since September 2011, as
domestic consumption ratcheted up over the summer and supply to the U.S. fell, the IEA
said. The sharp cut in Saudi Arabia's output, also reflected in data reported by the Organization of the Petroleum Exporting
Countries on Wednesday, comes as demand for the group's oil as a whole is falling and
oil prices have experienced a steep drop, prompting speculation over whether OPEC might
cut production further." |
"Poland's PGNiG gas utility on
Thursday said its gas deliveries from Russia's Gazprom had now been cut by half, against a
background of tension over the Ukraine crisis. 'The decline in deliveries was at 45
percent' on Wednesday, PGNiG said in a statement a day after announcing gas had been cut
by 24 percent, a claim Gazprom rejected as 'incorrect.' Tensions are running high between
the countries over the escalating Ukraine conflict, where Poland has backed the government
forces battling separatists in the country's east. The head of Ukraine's main gas utility
Ukrtransgaz, Igor Prokopiv, said the reduction was made with 'the goal of cutting the
reverse flow we are receiving' from EU states.
Several eastern EU states are supplying Kiev with gas after Russia stopped deliveries in
mid-June after a pro-Western government took power, accusing Ukraine of not paying its
bills. One of Ukraine's suppliers, Slovakia, on Wednesday reported a 10 percent cut in gas
deliveries from Russia. German group RWE has also been supplying Ukraine with gas using
reverse flow since April. PGNiG said Wednesday that it had observed a first cut in
deliveries on Monday. A spokesman told AFP it was plugging the gap in supplies with
deliveries 'from the south and the west,' without elaborating. Poland is highly dependent on Russian gas. Of the 16 billion cubic
metres of the fuel it uses annually, over 60 percent is imported, mainly from Russia. Baltic states Estonia and Lithuania said Wednesday there was no dip in
their deliveries. Poland has been one of the staunchest supporters of Kiev's pro-West
government and has repeatedly called for tougher sanctions against Moscow." |
"Sir Ian Wood, the North
Seas most eminent businessman, has warned there are only 15 years of reserves left
before the industrys decline starts wreaking major damage on the Scottish economy. Sir Ian spoke out against the pro-Scottish
independence campaign's reports of an additional 21 billion barrels of oil in the
North Sea from unconventional shale resources. Whilst
agreeing that there is undoubtedly oil under the sea, Sir Ian said claims that it was
economically exploitable were 'fantasy' and misleading to Scottish people trying to make
up their minds over the issue of Scottish independence." |
"Families could end up forking
out more for smart energy meters than they will save, MPs have suggested. The Public
Accounts Committee said the average cost of installing 53million of the devices over five
years could amount to £215 per household, or £43 a year, with the expense added to
bills. But over the same period, households can expect to shave only around £26 a year
off their bills, the MPs said. The Government claims
families will reduce how much they spend on gas and electricity they use because they will
be able to monitor their usage. But MPs on the House of Commons Public Accounts Committee
have questioned whether the high specification devices, which will include displays to
demonstrate gas and electricity usage and costs, will be good value of money. The
Government and energy industry have decided that all homes and small businesses should
have meters installed by 2020. Ministers have backed the plan as part of a wider strategy
to cut household energy use and so reduce greenhouse gas emissions in order to meet EU
targets. The devices will deliver massive savings to energy companies because the meters
allow them to get accurate energy use readings automatically, which means they can rid of
thousands of meter readers, billing and customer service staff. It will also allow the
energy firms to introduce new variable tariffs that impose much higher charges during the
peak evening period in order to encourage families to switch energy use to other times of
the day." |
"Government plans to install
£215 'smart' energy meters in every home will cut energy bills by just 2pc and
only if customers opt to use less, the Public Accounts Committee has warned. Ministers
want smart meters, which take automatic gas and electricity usage readings and send them
back to energy companies, installed in every household in Britain by 2020. A national roll-out is scheduled to begin late next year. But the Public
Accounts Committee warns on Wednesday that the £10.6bn programme may be too costly and
may result in customers footing the bill for technology that may already be out of date by
the time it is installed." |
"Brent
crude fell below $100 a barrel on Monday, the first time in 16 months, before
returning to close in three-digit territory but down on the day as fear of OPEC output
cuts helped the market recover from weak Chinese and U.S. data. Slower-than-expected
growth in the world's top oil consumers, and ample supply, has pushed prices down from a
high for the year above $115 in June, complicating central banks' efforts to ward off
deflation. Still, analysts do not think it will be easy to keep Brent, the world's
benchmark for oil, at below $100 as the oil-exporting countries within OPEC were likely to
retaliate with production cuts to push the market up.
'Obviously, a breach below $100 raises a host of issues if you're an OPEC cartel member,
and I think that's one of the things the trade took cognizance of as the market went down
today,' said Phil Flynn, analyst at Price Futures
Group in Chicago. 'A lot of these OPEC countries basically plan their entire universe with
the fact that Brent crude will never fall below $100.'..... Monday's declines followed
data showing that China's
import growth fell unexpectedly for the second consecutive month in August, posting its
worst performance in over a year as domestic demand faltered. It raised concerns that
tepid domestic demand exacerbated by a cooling housing market is increasingly weighing on China. The European Central Bank last week cut interest rates to a
record low as euro zone inflation edged towards zero, while the Bank of Japan is maintaining a massive monetary
stimulus as it tries to break free from years of deflation. Lower oil prices add to the
downward pressure on inflation from anaemic growth. Investors kept a close eye on
geopolitical concerns in Europe and the Middle East, especially on the impact tensions
could have on European demand. So far, fighting in Iraq has had
little impact on oil production, and output from Libya has increased over the last three
months despite violence there." |
"Forget the North Sea and the Middle East, it is the frozen oceans of
the Arctic which are the next great frontier that big oil companies plan to exploit over
the coming 15 years. The Arctic region, which crosses
several national boundaries including Russia, Alaska, Norway and Greenland, is thought by
energy consultants Wood Mackenzie to hold an estimated 166bn barrels of oil equivalent in
terms of reserves. Thats more petroleum and gas than Iran holds and enough to meet
the worlds entire annual consumption of crude oil for five years at current rates. 'There arent that many places
left on the planet that are on the kind of scale as the Arctic in terms of possible
resources for the oil companies to go at,' Andrew
Latham, vice-president of exploration services at Wood Mackenzie told The Daily Telegraph.
'The reason they are interested is that it has the potential to work on a very
large scale.' ... One of the worlds last
remaining great frontiers, the Arctic is expected to
play a major role in supplying the worlds future energy needs by 2030 and if the
West fails to tap these riches quickly, then Russia will have no such reservations. As the
race for Arctic oil heats up, President Vladimir Putin dispatched warships last week to
reopen frozen bases that could be used as a springboard for Russian drillers, while also
allowing the Kremlin to control the new Northern Sea Route that has opened up because of
the melting ice. The state-owned Russian energy giant, Rosneft, is already working in the
Barents Sea." |
"As the Australian winter draws to a close, the uranium sector is
starting to believe that its deep freeze is also beginning to thaw. The industry has been
dying a slow death since the Fukushima nuclear disaster destroyed confidence in March
2011. The incident prompted Japan to turn off its entire fleet of nuclear power
reactors, and other nations also paused for thought over whether nuclear power was an
industry they wanted to be part of. The lack of demand led to a steep fall in uranium
prices, which kept dropping long after most pundits thought the bottom had been
reached. But the events of the past month have some investors wondering if the
bottom, and perhaps the start of the revival, have been found. After falling below $US29 per pound in May, the spot price for
uranium has since enjoyed a series of incremental rises, and reached $US33 per pound
earlier this week. Shares in Paladin Energy, Australia's biggest-producing uranium
pure-play and the stock most attached to movements in the uranium price, have risen by 50
per cent since late June. There appears to be a collection of factors behind the recent
price rise; numerous mines have been forced to close under the low prices, including the
Honeymoon mine in South Australia. Strikes have also temporarily closed some other mines,
including the world's biggest in Canada, which is owned by Cameco. There are also
suspicions that a program to convert military-grade uranium in Russia into civilian power
may have been interrupted by the recent conflict in Ukraine, further denting the supply
picture and improving prices. But UBS commodities analyst Daniel Morgan warned optimists
that interruptions to supply should not be confused with increases in demand. 'There's
been a few supply-side issues which has been enough for a very modest price rise. What the
market really needs is a demand-side driver to get the price going and in my view we don't
have one at the moment,' he said. But Paladin
managing director John Borshoff believes there could be more to the story. 'The small spot
price increase experienced in August, moving from $28 a pound to now above $32, has been
explained away by political issues and the possible strike. While this may be the case, I
believe there could be other underlying influences at play suggesting some supply
fragility even at this stage,' he said last week. Mr
Borshoff believes the reduction in uranium production will hit hard if Japan decides to
restart its entire nuclear fleet, and even harder if China delivers on its promise to
build scores of new nuclear power plants over the next two decades. He argues the
curtailed uranium mines will take time to be recommissioned when demand returns, and the
construction of new uranium mines will take much longer, given that the recent years of
low prices have not incentivised explorers and developers to find future mine sites. The
result will be several years of uranium shortage, and strong support for prices. Most
investment banks agree, but there are disagreements over how soon it will arrive. UBS expects the spot price for uranium will average $US43 per pound in
the 2015 calendar year, and higher again to $US53 in 2016." Uranium showing signs of post-Fukushima revival Sydney Morning Herald, 3 September 2014 |
"China is quickly overtaking the
United States as the world's biggest importer of oil. Not only that, but China now buys
more crude oil from the Middle East than the US does a shift that some experts
think could have big geopolitical implications in the years ahead. Roughly half of China's
imported oil now comes from the Persian Gulf, whereas America's reliance on Middle Eastern
crude has been steadily shrinking in recent years.
.... China currently imports around
5.6 million barrels of oil per day on net, with about half of
those imports coming from the Persian Gulf region. As
the map shows, Saudi Arabia, Iran, Oman, and Iraq dominate the list (as do Russia and
Angola) and most of the oil flows through the Strait of Malacca, a vulnerable
chokepoint.The United States, meanwhile, now
imports around
5 million barrels per day, and its list is quite different. Only 41 percent of US oil
imports now come from the Persian Gulf (mostly from Saudi Arabia). By contrast, more than half of US oil
imports come from Canada and Mexico... On one very basic level, where people get their oil
isn't overly important. Oil prices tend to rise and fall together all over the world, no
matter the source, and an oil spike that crushed China's economy would hurt America's
economy too. .... But as the Brookings paper notes, China is becoming much
more directly dependent on Middle Eastern oil than the United States is, and that fact
alone could have big implications for geopolitics for the region. 'The United States has
long been exposed to the geopolitical risks associated with energy production and transit,
but now, increasingly, so too are the Asian powers,' the authors write. 'Chinese and
Indian policymakers are scrambling to understand these risks and to work out how to manage
them.' They also note that the impact on the psychology of American policymakers could be
profound: 'American strategists, meanwhile, may be tempted to fulfill Chinese fears and
use energy as a source of pressure on its most significant rival. Others will see an
opportunity to disengage from the Middle East during a period of fiscal austerity, leaving
Beijing and Delhi to take responsibility for the troubled region.' .... It's worth noting
that China's position as the world's top oil importer is relatively new. For many decades,
the United States was the undisputed champion of oil importing. This was basically the one
fact that most people knew about US energy policy that the country was way more
dependent on foreign oil than anyone else. But that's
now changing. The Energy Information Administration estimates that China
surpassed the US in net oil imports sometime around the fall of 2013... Part of this is
due to China's rapid growth, as more and more people are driving. Part of it is due to the
fact that China has been slow to develop its own domestic
oil resources. So the country has to seek out petroleum abroad.But another big factor has
been changes in the United States. Thanks to the fracking boom in places like Texas and
North Dakota, the US is
producing more and more of its own crude oil. At the same time, improvements in fuel
efficiency and a slowdown in rates of driving means that the United States is reducing its
oil consumption. Add those two together, and imports are dropping." |
"The 1972 book Limits to Growth, which predicted our civilisation would probably collapse some time this
century, has been criticised as doomsday fantasy since it was published. Back in 2002,
self-styled environmental expert Bjorn Lomborg consigned it to the 'dustbin
of history'. It doesnt belong there. Research
from the University of Melbourne has found the books forecasts are accurate, 40
years on. If we continue to track in line with the books scenario, expect the early
stages of global collapse to start appearing soon. Limits to Growth was commissioned by a
think tank called the Club of Rome. Researchers
working out of the Massachusetts Institute of Technology, including husband-and-wife team
Donella and Dennis Meadows, built a computer model to track the worlds economy and
environment. Called World3, this computer model was cutting edge. The task was very
ambitious. The team tracked industrialisation,
population, food, use of resources, and pollution. They modelled data up to 1970, then
developed a range of scenarios out to 2100, depending on whether humanity took serious
action on environmental and resource issues. If that didnt happen, the model
predicted 'overshoot and collapse' in the economy, environment and population
before 2070. This was called the 'business-as-usual' scenario. The books
central point, much criticised since, is that 'the earth is finite' and the quest for
unlimited growth in population, material goods etc would eventually lead to a crash. So
were they right? We decided to check in with those scenarios after 40 years. Dr Graham Turner gathered data from the UN (its department of economic and
social affairs, Unesco, the food and agriculture organisation, and the UN statistics
yearbook). He also checked in with the US national oceanic and atmospheric administration,
the BP
statistical review, and elsewhere. That data was plotted alongside the Limits to
Growth scenarios. The results show that the world is
tracking pretty closely to the Limits to Growth 'business-as-usual' scenario. The data
doesnt match up with other scenarios. These graphs show real-world data (first from
the MIT work, then from our research), plotted in a solid line. The dotted line shows the
Limits to Growth 'business-as-usual' scenario out to 2100. Up to 2010, the data is
strikingly similar to the books forecasts." |
"Chinese Vice Premier Zhang
Gaoli on Monday announced that his country would begin the construction of its part of the
Power of Siberia gas pipeline in the first half of 2015. 'The Chinese side has already planned to begin the construction of the
Chinese part of the pipeline in the first half of next year. And we must use effort so
that we complete construction and the beginning of the pipelines use in 2018,' Zhang
said during the opening ceremony of the construction of the Chinese part of the pipeline,
at which Russian President Vladimir Putin was also present. After
10 years of negotiations, in May 2014, Russia and China signed a 30-year deal on the
supply of 38 billion cubic meters of natural gas to China annually." China to Begin Building Power of Siberia Gas Pipeline in First Half of 2015 RIA Novosti, 1 September 2014 |
"Global consumption of meat needs to fall - to ensure future demand
for food can be met and to help protect the environment - a study says. Research from Cambridge and Aberdeen universities estimates
greenhouse gases from food production will go up 80% if meat and dairy consumption
continues to rise at its current rate. That will make it harder to meet global targets on
limiting emissions. The study urges eating two
portions of red meat and seven of poultry per week. However that call comes as the world's
cities are seeing a boom in burger restaurants. The research highlights that more and more
people from around the world are adopting American-style diets, leading to a sizeable
increase in meat and dairy consumption. It says if this continues, more and more forest
land or fields currently used for arable crops will be converted for use by livestock as
the world's farmers battle to keep up with demand. Deforestation will increase carbon
emissions, and increased livestock production will raise methane levels and wider
fertiliser use will further accelerate climate change. The lead researcher, Bojana Bajzelj
from the University of Cambridge, said: "There are basic laws of biophysics that we
cannot evade." "The average efficiency of livestock converting plant feed to
meat is less than 3%, and as we eat more meat, more arable cultivation is turned over to
producing feedstock for animals that provide meat for humans. "The losses at each
stage are large, and as humans globally eat more and more meat, conversion from plants to
food becomes less and less efficient, driving agricultural expansion and releasing more
greenhouse gases. Agricultural practices are not necessarily at fault here - but our
choice of food is." The report says the situation can be radically improved if
farmers in developing countries are helped to achieve the best possible yields from their
land. Another big improvement will come if the world's population learns to stop wasting
food. The researchers say if people could also be persuaded to eat healthier diets, those
three measures alone could halve agricultural greenhouse gas levels from their 2009 level.
The study is the latest to warn of the planetary risks of eating intensively-produced meat
and dairy produce. Scientists worried about climate change are increasingly making common
cause with health experts concerned about the obesity pandemic." |
"Russia says there is a risk
that gas shortages this winter could force Ukraine to siphon off supplies of Russian gas
meant for EU customers. Ukraine's gas reserves have reached a "critical" state,
Russian Energy Minister Alexander Novak said. He was speaking after talks in Moscow with
EU Energy Commissioner Guenther Oettinger. The EU is
anxious to ensure secure gas supplies for the winter. Ukraine needs to store much more gas
underground, Mr Novak said. He estimated at 10bn cubic metres (353bn cu ft) the amount of
extra gas that Ukraine would need to pump into underground storage tanks to avoid having
to siphon off gas from the transit pipelines. In winter, he warned, "there will be
big risks, above all the possibility of Ukraine taking gas to meet its own needs, instead
of those supplies going to European customers"." |
"Some of the summer's biggest
news stories took place in the bombed schools of Gaza, the abandoned hospitals of the
Democratic Republic of Congo, the wheat fields of eastern Ukraine and the bloody mountains
of northern Iraq. But one of the most important made virtually no headlines at all, and
seemed to only appear on the website of the U.S. Energy
Information Administration. Last July the government agency, which has collected mundane
statistics on energy matters for decades, quietly revealed that 127 of the world's largest
oil and gas companies are running out of cash. They are now spending more than they are
earning. Profits have lagged as expenditures have risen. Overburdened by debt, these firms
are selling assets. The math is simple. The 127
firms generated $568 billion in cash from their operations during 2013-2014 while their
expenses totalled $677 billion. To cover the difference of $110 billion, the energy giants
increased their debt load or sold off assets. Given that the gap between earned cash and
spending stood at a modest $10 billion in 2010, that's a significant change for the
industry as well as the global economy it fuels. The Energy Information Administration
doesn't explain why the world's major hydrocarbon producers are now spending more and
making less. But an August report by Carbon
Tracker, a non-profit financial think-tank, provides some possible answers. Most companies are now investing in high-cost and high-risk
projects to mine difficult hydrocarbons such as bitumen or shale oil, according to Carbon
Tracker. Hydraulic fracturing, the land equivalent of ocean bottom trawling, adds to the
cost of oil, too. It's not only the firms deploying fracking that are racking up high debt
loads. Chinese state-owned corporations, for example, plopped down $30 billion to develop
junk crude in the oilsands over the last decade. But with a few exceptions, none of the
investments are making a good dollar return due to the difficult and costly nature of
mining messy bitumen as well as problematic quality of the reserves, combined with huge
cost overruns.... The Chinese aren't the only ones
facing diminishing returns from high-cost projects in the oilsands. Most of the world's oil and gas firms are now pursuing extreme
hydrocarbons because the cheap and easy stuff is gone. The high-carbon remainders include
shale oil, oilsands, ultra deepwater oil and Arctic petroleum.... But given that oil demand in places like Europe, the United States
and Japan is flattening or declining, many analysts don't think that high-carbon,
high-risk projects (which all need a $75 to $95 market price for oil to break even) make
much economic sense in a carbon-constrained world. "Our analysis demonstrates that a
blind pursuit of reserve replacement at all costs or a focus on high expenditure
regardless of returns could go against improving shareholder returns," recently
warned Carbon Tracker. The capital costs for
liquefied natural gas (LNG) terminals supplied by heavily fracked coal or shale fields is
also rising. Highly complex LNG projects in Norway, Australia and Papua New Guinea have
all experienced
major cost overruns. Goldman Sachs now reckons
more than half of the oil companies listed on the stock market -- are spending five times
more than what they did in 2000 chasing extreme hydrocarbons. As a consequence they need
an oil price of $120 a barrel to remain cash neutral in the future. Spending more cash to
get less energy has major implications for the global economy, a creature of oil." |
"HENRIK LUND of Aalborg
University, Denmark, has told the 21st International Congress of Chemical and Process
Engineering (CHISA) that Denmark will be able to switch to 100% renewable energy by 2050. Lund was presenting a plenary lecture at CHISA, in Prague, and said that
the switch will require a holistic approach looking at so-called smart energy
systems, not just considering electricity
generation but heating and transport as well. The
Danish governments ambitious target was set in 2006 and includes these three key
uses of non-renewable energy. The government has set several interim targets, including
that 50% of energy will come from wind by 2020 and that no power plants will burn coal and
no households will use oil for heating by 2030." |
"Europe will remain heavily
reliant on Russian gas for at least another decade, according to a leading rating agency.
Fitch said a lack of alternative sources meant policymakers would have no choice but to
continue buying gas from Russia until at least the mid-2020s and "potentially much
longer". Europe already buys a quarter of its gas from Russia, and analysts expect
consumption to increase by a third by 2030 as economies recover from the debt crisis and
gas-fired electricity generation replaces old coal and nuclear power. Analysts said it
would be difficult for countries to secure alternative sources of supply in the medium
term, leaving them at risk of being "held hostage by dominant suppliers",
including Russia. "Any attempt to improve energy security by reducing European
reliance on Russia would require either a significant reduction in overall gas demand or a
big increase in alternative sources of supply, but neither of these appears likely,"
Fitch said in a report on Tuesday. Growing tensions
between Ukraine and Russia over the latter's annexation of Crimea have led to a raft of
tit-for-tat sanctions between Russia and the West. The European Commission (EC) has laid
out plans to reduce Europe's reliance on energy imports, including promoting indigenous
sources of renewable and nuclear energy, and a single energy market. Finland, the Czech
Republic and much of eastern Europe rely heavily on Russia for gas, while Germany imports
a substantial amount from Russia. Fitch said overhauling Europe's current infrastructure
and making the network more resilient to shocks would cost around 200bn (£160bn).
Although around half of this can be funded by capital markets, there is a risk that
consumers may also be forced to pay for the upgrade through higher energy bills. Analysts
also highlighted Russia's dominant role across the energy market. "Even if coal-fired
and nuclear energy were favoured over gas, the impact on energy security would be limited
because Russia also supplies 26pc of the EU's hard coal and is the sole supplier of fuel
rods to nuclear power plants in several countries," it said. Fitch said Azerbaijan's
Trans Anatolian gas pipeline could provide an alternative source of energy for Europe once
construction is completed in 2018, providing 31 billion cubic metres (bcm) of Europe's
expected overall demand of around 565 bcm of gas a year by 2026. But analysts added:
"That is not enough to cover the incremental increase in gas demand we expect over
the period, let alone replace any supplies from Russia."... The rating agency also
cast doubt over an American-style shale gas revolution in Europe. "We do not expect
meaningful shale production for at least a decade by which time it could at best offset
the decline of conventional gas production," it said." |
"In the midst of the strongest
market for commercial trucks in eight years, North American sales of natural-gas-powered
haulers are just crawling along. Higher purchase prices compared with diesel trucks,
improved diesel fuel economy and continued scarcity of fueling stations are damping
natural-gas-powered truck demand. About 10,480 of
the heavy-duty trucks are expected to be sold this year, up 20% from the 8,730 sold last
year, according to Power Systems Research. However, some forecasters had expected sales to
about double to 16,000 vehicles this year amid the trucking industry's enthusiasm for
natural gas a year ago. What happened? A big roadblock remains the premium for a
heavy-duty gas truck$50,000 more than the about $150,000 for a new diesel-powered
truck. In theory, the payback for that higher price is recovered from fuel savings of
between $1.60 and $1.70 for the gas equivalent of a gallon of diesel. Paybacks can average
four years considering the average truck travels 125,000 miles a year. But truckers say
the fuel savings isn't all it seems. Mileage from a natural-gas-powered truck is about 20%
less per energy equivalent than a diesel truck, meaning a gas truck consumes the same
amount of fuel for 200 miles as a diesel truck uses for 240 miles. Moreover, fuel
costsas well as any natural-gas fuel savingsare typically passed on to a
trucking company's customers.... Two years ago, forecasters expected as much as 20% of the
heavy-duty trucks sold annually in North America by the end of the decade would be
natural-gas powered. "We're still growing
[natural-gas-powered trucks], but all the hype is gone," said Robert Carrick, sales manager for natural gas for Freightliner, a
unit of Germany's Daimler AG DAI.XE
-0.93% . "Long-haul, over-the-road trucking is not going to adopt natural gas for
a long time."" |
"Researchers say they have found
more than 500 bubbling methane vents on the seafloor off the US east coast. The unexpected discovery indicates there are large volumes of the gas
contained in a type of sludgy ice called methane hydrate. There are concerns that these
new seeps could be making a hitherto unnoticed contribution to global warming. The scientists say there could be about 30,000 of these hidden
methane vents worldwide. Previous surveys along the
Atlantic seaboard have
shown only three seep areas beyond the edge of the US continental shelf." |
"The two major forecasting
agencies, Washingtons EIA and Paris IEA, are both more pessimistic than is
generally known for they both foresee US shale oil production leveling off as soon as
2016. The reason for this is that drillers will
simply run out of new places to drill and frack new wells. While new techniques of
extracting more oil from a well are possible, there is need to look closely at the costs
of these techniques vs. the potential payoff. The shale oil situation in Texas is somewhat
different than in North Dakota for there you have much better weather and two separate
shale oil deposits. The recent growth in Texass shale oil production has been much
smoother than in storm-prone North Dakota and has been increasing at about 44,000 b/d each
month. So far as can be seen from the outside of the industry, production in both states
will continue to grow for at least another year or two but then we will be at 2016.
The government has never gotten around to publishing the assumptions that go into the
forecast that U.S. shale oil production will stop growing circa 2016. The biggest
difference between EIA/IEA and independent analysts is the government forecasters do not
see a precipitous drop in shale oil production following the peak. Instead they see a
period of flat production followed by a gentle decline stretching well into the next
decade. Such a gentle end to the shale oil bubble can only assuage fears of a
calamity. This projection on a gentle end to U.S.
shale oil is at variance with outside forecasters who note that shale oil wells are pretty
well gone in three years and simply do not see where the oil to maintain production levels
will be coming from for another 10 or 15 years after the peak. Independent analyses of
U.S. shale oil generally come to the same conclusion that production will peak in the
2016-2017 timeframe, but as noted above see a much faster decline than does the government.... A more recent development having serious long-term implications for
the oil industry is the growing disparity between the cost of producing a new barrel of
oil from the Canadian oil sands or deep below the ocean and the selling price of that oil.
A recent study points out that many planned oil production projects are simply not
economical at todays oil prices which have been relatively stable for the past five
years as costs continued to soar. Oil companies are
already cutting back on new drilling projects which will have little impact on current
production, but will be very significant five years or so from now." The Peak Oil Crisis: When?: Falls Church News Press, 22 August 2014 |
"The construction of the
worlds largest tidal energy project is set to begin later this year. The
installation, which is expected to power 175,000 homes, will be built in the Inner Sound
of the Pentland Firth near Orkney. Developers MeyGen
have secured more than £51m in funding, including £17.2m from the Scottish Government.
Energy minister Fergus Ewing said: The funding announced today will help bring to
life innovative and exciting plans to develop the worlds largest tidal power project
in Scotland. "Our ambition for Scotlands emerging wave and tidal sectors
remains great. The Pentland Firth development takes our ambition to the next level and
further cements Scotlands reputation as a world leader in deploying renewables
technology. We know that the successful harnessing of ocean power takes hard work
and persistence which is why we are determined to support those in the industry. By
developing clean, green energy we are creating opportunities for communities in the north
of Scotland and delivering jobs and investment. The 269-turbine development has also
benefited from a £3.3m grant from Highlands and Islands Enterprise (HIE).... Work on first phase of the development, which includes 61 turbines
and is expected to provide enough electricity for 42,000 homes, will begin later this
year. The first electricity is expected to be delivered to the grid by 2016." |
"Canadian oil companies are ruthlessly enforcing capital discipline
as project costs creep up and shareholders pressure management to focus only on the most
profitable ventures. Suncor Energy Inc. announced a billion-dollar cut for the rest of the
year even though the company raised its oil price forecast. Others such as Athabasca Oil
Corp., PennWest Exploration Ltd., Talisman Energy Inc. and Sunshine Oil Sands Ltd. are
also cutting back due to a mix of internal corporate issues and project uncertainty.
Cenovus Energy Inc. is also facing cost pressures at its Foster Creek oil sands facility. Given that the low-bearing fruit have already been
developed, the next wave of oil sands project are coming from areas where geology might
not be as uniform, said Dinara Millington,
senior vice president at the Canadian Energy Research Institute. The global oil industry
is gripped with the cost-cutting fever amid shareholder pressure, but the oil sands are
particularly vulnerable given their baked-in higher development costs, high wages, remote
location and infrastructure challenges. In May, Frances Total SA shelved an
$11-billion oil sands mine project planned with joint venture partners Suncor, Occidental
Petroleum and Inpex Canada. Oil sands are economically challenging in terms of
returns, said Jeff Lyons, a partner at Deloitte Canada. Cost escalation is
causing oil sands participants to rethink the economics of projects. Thats why
youre not seeing a lot of new capital flowing into oil sands. Existing in-situ oil sands projects in
Alberta are produced at a break-even cost of US$63.50 per barrel on average, while
integrated oil sands mining projects have a breakeven cost of US$60 to US$65, including a
9% after-tax return, compared to the Saskatchewan Bakkens US$44.30 a barrel cost..... Deal activity has cooled in Canadas vast oil sands
reserves as producers have struggled with rising costs, in part because of stricter
environmental regulations, Deloitte said in a recent report. Even with oil at
more than $100 per barrel, some large producers have been cancelling projects because
higher costs have crimped returns. Richard
Grafton, chief executive officer of Grafton Asset Management, says oil prices may have to
go higher for new investors to
favour oil sands. Right now, the [price] band that we are in for a number of years
is around $100, and frankly, may be we need at a higher price with access to global
market, before we get excited about that [the oil sands], Mr. Grafton told the
Financial Post in an interview last week. A recent report by London-based Carbon Tracker
Initiative estimated that a number of oil sands projects would be economically impractical
at oil prices below $130 per barrel. RBC Capital, which is confident that the existing oil
sands players will meet their production targets profitably, estimates the industry will
require between $26-billion to $33-billion each year to maintain existing production and
raise output by an additional 250,000-bpd annually till the end of the decade.
Challenges and constraints exist such as pipeline capacity and technology
development, however, financing is perhaps the biggest challenge facing development stage
oil sands companies at this time, RBC noted. Stricter
government regulations around control of oil sands assets by state-owned enterprises and
Chinese investors disappointment with their Canadian investments may see a further
slowdown in new activity." |
"The "oil intensity" of global GDP has already halved since
1980s. We are becoming more frugal. Gasoline demand in the OECD rich states has been
sliding in absolute terms since 2007, punctuated by ups and downs, but dropping overall
from 15.5m barrels a day (b/d) of crude to 14m b/d. Citigroup's report - "Energy
2020: The Revolution Will Not Be Televised" - says the average efficiency of new cars
in the US has risen by 4.6 miles per gallon (mpg) since 2008 under fuel economy mandates.
It is still rising at a steeper rate. Gasoline demand will slide by 900,000 b/d in the US
alone by 2020. China has even more draconian curbs coming into force, with a 50mpg fuel
economy mandate by 2020. Its output of electric cars is up 177pc in a year, and hybrids
are up 567pc. India will reach 50mpg by 2021, Mexico by 2025. Crude prices have decoupled
from the global commodity nexus for the past three years, held up by the Arab Spring and
disruptions in Africa. This split-level energy market is becoming untenable. The US shale
revolution has caused natural gas prices in North America to collapse. With a long delay,
and by convoluted means, this effect is spreading to Asia, where liquefied natural gas
(LNG) prices have halved this year. In the end, oil
must converge towards gas prices since vehicles can be designed to use either source, or
both. The new Cummins Westport ISX 12G gas engine released last year competes directly
with diesel. Natural gas lorries are expected to take around 4pc of the US market this
year as new taxes and pollution laws come to bear. "We think a large portion of the
freight market could utilise LNG and penetration rates could ultimately top 40pc,"
said Citigroup. Navigant Research says the global gas fleet will reach 1.9m lorries and
1.8m buses by 2022. The switch to gas is spreading to pick-up trucks and passenger
vehicles as the technology gets cheaper. The gas option for the new bi-fuel Chevrolet
Silverado has fallen to $9,500. Even railroads are dipping their toes in the water. CSX is
testing a hybrid that can run on natural gas or diesel. It is possible that gas and LNG
prices will converge upwards, rather than oil coming down. That seems unlikely. America's
gas ouptut has risen from 440 to 720bn cubic metres (bcm) in six years - 20pc of global
production - and is still rising. The US Energy Department expects it to reach 960bcm by
the end of the decade. These are huge volumes. The Marcellus Region in Pennsylvania has
multiplied output seven-fold in four years, with an accelerating surge over the past year
as drilling technology gets better. There is now speculation that the US will surpass
Qatar to become the world's top exporter of LNG by 2020. Australia is catching up - albeit
at high cost - and it too is expected to triple LNG exports and overtake Qatar by
2020. Even if global gas fails to deliver as expected, this will merely accelerate
the powerful shift towards solar power already under way, eroding the demand for oil more
slowly by a different means.... Big Oil is trapped,
gradually running down legacy reserves. The longer that geopolitical eruptions disguise
this erosion of competitiveness by propping up prices, the more emphatic the shift to
renewables. Yet if prices do drift down to $80 - as
many expect - they will lose money on their exotic ventures. The energy group
Douglas-Westwood says half the oil industry needs prices of
$120 or more to generate free cash flow under current
drilling plans and shareholder dividends. Leverage
may catch up with them, a risk flagged recently by Standard & Poor's. The
oil-exporting states are also trapped. Russia needs
crude prices near $110 to balance the budget. Natixis says the fiscal break-even cost for
Iraq is $108, for Saudi Arabia $97 and the Emirates $89. Bahrain and Algeria are over
$120." |
"At 2 pm on August 18th the
combined output of renewables in Germany amounted to 41 GW, enough to provide 75% of all
the domestic power needed at that time. While such
high shares of renewables are a positive testament of the energy transition, they are also
evidence of the upcoming challenges. Yesterday was neither an extremely windy nor a very
sunny Sunday in Germany. However, at 2 pm wind power peaked at 18.6 GW, coinciding with
13.5 GW of solar power. Adding about 4 GW of hydro power and approx. 4.9 GW from biomass,
to those 32 GW of variable renewable power (VRE), the total renewable output amounted to
41 GW at that hour. At the same time domestic power demand was 53.5 GW, thus renewables
did in theory meet 75% of the German demand and only 13.4 GW of additional conventional
power was needed. However, in reality conventional power was only throttled back to 21.4
GW." |
"Wind power has generated a new
record high of 22% of the UKs electricity over a 24-hour period, industry body
RenewableUK said. Electricity from wind outstripped coal yesterday, with the fossil fuel
supplying just 13% of the UKs power on the same day. Solar and biomass each provided
3% of the countrys electricity, and hydropower accounted for 1%, while nuclear
generated 24% and gas 26%. Onshore and offshore wind
turbines generated enough electricity to power some 15 million homes at this time of year,
according to the statistics from National Grid. The share of electricity generated by wind
turbines is a new record, beating the previous 24-hour record of 21% set earlier this
month. Before that, the record stood at 20%, generated on December 20 last year,
RenewableUK said. RenewableUKs director of external affairs Jennifer Webber said
Were seeing very high levels of generation from wind throughout August so far,
proving yet again that onshore and offshore wind has become an absolutely fundamental
component in this countrys energy mix." |
"A wind farm requires 700 times
more land to produce the same amount of energy as a fracking site, according to analysis
by the energy departments recently-departed chief scientific advisor. Prof David
MacKay, who stood down from the Government role at the end of July, published analysis putting shale gas extraction in perspective,
showing it was far less intrusive on the landscape than wind or solar energy. His intervention was welcomed by fracking groups, who are battling to win
public support amid claims from green groups and other critics that shale gas extraction
will require the industrialisation of the countryside. Hundreds of
anti-fracking protesters on Thursday occupied a field near Blackpool neighbouring a
proposed fracking site for energy firm Cuadrilla. Prof MacKay said that a shale gas site
uses less land and creates the least visual intrusion, compared with a wind
farm or solar farm capable of producing the equivalent amount of energy over 25 years. He
rated each technologys footprint against six criteria covering aspects
of land use, height, visual impact and truck movements to and from the site. The shale gas
site or pad was the winning technology on three measures, solar
farms won on two, while wind farms did not win any. None was deemed to have
won on truck movements as all types generated lots of traffic.
Prof MacKay, who is Regius Professor of Engineering at the University of Cambridge, said
that a shale gas pad of 10 wells would require just 2 hectares of land and would be
visible - due to an 85-foot-high drilling rig - from 77 hectares of surrounding area.
However, the drilling rig would be in place for "only the first few years of
operations". By contrast, a wind farm capable of producing the same energy
would span an area of 1,450 hectares, requiring 87 turbines each 328-foot tall. Prof
MacKay noted that the actual turbines, access roads and other installations for the wind
farm would have a smaller footprint, of 36 hectares, as the wind farm has lots of
empty land between the turbines, which can be used for other purposes. But the large
area covered by the farm as a whole would mean it would be visible from a surrounding area
of between 5,200 and 17,000 hectares. A solar farm generating equivalent energy would span
a 924 hectare area, directly building on 208 hectares of it. An
estimated 7,800 lorry movements would be required for the wind farm and between 3,800 and
7,600 for the solar farm. The fracking site could require the fewest lorry movements, at
2,900, if water is piped to and from the site. However, it could require significantly
more than the other technologies - 20,000 trips - if water was transported by truck. Prof MacKay said the analysis showed that perhaps unsurprisingly,
there is no silver bullet no energy source with all-round small environmental
impact. He said that all sources have their costs and risks and said the
public should look at all the options." |
"Petroleos
Mexicanos, facing a 10th straight year of production declines, is including water in its oil output and may revise
previously reported data, according to a company official briefed on the matter. A record gap this year between reported output and what the state-owned
company processes is partly explained by measuring systems at older fields that are unable
to differentiate water-heavy oil from actual crude, the official said, asking not to be
named as Pemex debates reducing figures for the past three years or more. Last month, the
company cut its 2014 output forecast to 2.44 million barrels a day. Pemex, which is
preparing to form partnerships with private producers for the first time in seven decades,
produced 2.48 million barrels a day through June, while its distribution system processed
2.32 million barrels a day, according to the National Hydrocarbons Commission.
The commission didnt give a reason for the 6.5 percent gap. In an e-mail,
Pemexs press department attributed the difference to evaporation, statistical
variations and storage, without commenting on the inclusion of water. Pemex was probably
setting goals they werent achieving and postponing the moment to correct the
information, Adrian Lajous, the oil companys chief executive from 1994 through
1999, said in a phone interview from Mexico City." |
"Support for fracking in the UK
has fallen, with less than a quarter of the public now in favour of extracting shale gas
to meet the country's energy needs, according to official government polling. The latest Department of Energy and Climate Change public opinion
tracker, published
on Tuesday, shows that public support and opposition is now evenly matched at 24 per
cent, while almost half of respondents said they were neutral on the issue. The findings
stand in contrast to those of a poll published
on Monday by the UK Onshore Operators Group, which represents fracking firms, which
found that 57 per cent were in favour and just 16 per cent against. Respondents to the
DECC survey, which has polled opinion on shale gas since December 2013, were given a brief
explanation of fracking, asked whether they had heard of it previously, and then asked if
they supported or opposed its use." |
"Ukraine has begun test imports
of gas from Slovakia via an upgraded pipeline, the head of Ukrainian state-owned gas
company Naftogaz said on Saturday, as the country tries to secure greater energy
independence from Russia. Last year, Russia
supplied about half of the gas Ukraine used, but Gazprom cut supplies on June 16 in a row
over pricing and in the wake of Moscow's annexation of Crimea. Russia has come under heavy Western sanctions over its move on Crimea
and accusations it is supporting separatists in east Ukraine with troops and funds, claims
it denies. Ukraine, which is trying to source more gas from the European Union and cut
consumption levels from last year's 50 billion cubic metres (bcm), hopes to increase its
own annual gas production from current levels of 20 billion cubic metres (bcm). The Slovak
pipeline - an upgraded older link leading from the Vojany power station near the Ukrainian
border to the western Ukrainian town of Uzhorod - can supply up to 10 bcm of gas a year.
"Test pumping of gas has started from Slovakia to Ukraine via Vojany-Uzhorod. This
pipeline could supply up to 40 percent of the country's gas import needs," Naftogaz
chief executive Andriy Kobolev said in a post on Facebook.
The test imports from Slovakia amount to 2 million cubic metres a day, a spokesman for the
state pipeline operator Ukrtransgaz said. The pipeline is expected to function on an
interruptible basis from September and on a firm basis from March 2015." |
"ConocoPhillips and Royal Dutch
Shell Plc are among global oil companies needing crude prices as high as $150 US a barrel
to turn a profit from Canadas oil sands, the costliest petroleum projects in the
world, according to a study. The next most-expensive crude projects are in the deep waters
off the coasts of Africa and Brazil, with each venture needing prices between $115 and
$127 a barrel, said Carbon Tracker Initiative, a London-based think tank and environmental
advocacy group, in a report today. As the U.S. shale drilling boom floods the worlds
biggest crude market with supply, explorers are at greater risk of a price collapse that
would turn some investments into money losers.
Energy explorers are willing to invest in high-cost oil- sands developments because once
they are up and running, they produce crude for decades longer than other ventures such as
deepwater wells, said David McColl, an analyst at Morningstar Inc. in Chicago. Where
else can you get 10 to 30 years of predictable cash flow? said McColl, who estimated new oil sands projects require $60 to $100
crude to make sense. The returns may not be
stellar compared to some other projects but they are steady. After four straight
years of gains, Brent crude, the benchmark price for most of the worlds oil,
declined 0.3 percent last year to an annual average of $108.70. Brent for September
delivery slumped as low as $102.10, a 13-month low, on the London-based ICE Futures Europe
exchange yesterday. In order to sustain shareholder returns, companies should focus
on low-cost projects, deferring or cancelling projects with high break-even costs,
the reports authors wrote. Capital should be redeployed to share buybacks or
increased dividends. Carbon Tracker said it derived its projects list and cost
estimates from a database compiled by Rystad Energy AS, an Oslo- based oil-industry
consulting firm. ... In May, Carbon Tracker released a report that said the oil industry
was at risk of wasting $1.1 trillion of investors cash on expensive developments in
the Arctic, oil sands and deep oceans. That figure
represents the amount explorers may spend on oilfields that need crude prices of $95 a
barrel or more, the group said three months ago. Oil companies face growing pressure from
shareholders to rein in costs after two decades of bigger spending have failed to boost
production or profitability, said Steven Rees, who helps oversee $992 billion as global
head of equity strategy at JPMorgan Chase Bank. ... The projects most at-risk from lower prices are
ConocoPhillipss Foster Creek development and Shells Carmon Creek, oil-sands
developments in Alberta that respectively need $159 and $157 a barrel oil to be
profitable, Carbon Tracker said. A joint ConocoPhillips and Total oil-sands project called
Surmont requires $156 a barrel, while Exxon Mobil Corp.s Aspen and Kearl
developments in the same part of Canada need $147 and $134 crude, respectively, to make
economic sense, the study found. ConocoPhillips
plans to spend $800 million a year on oil- sands projects over the next three years that
will generate more than $1 billion in annual cash flow starting in 2017, Beaudo said.
Those cash flows will increase over time and last for decades, providing funds for other
types of oil developments, he said. Shell,
Europes biggest company by market value, relies on a per-barrel price range of $70
to $110 for the purposes of longer-term project planning, Sarah Bradley, a
spokeswoman for The Hague-based corporation, said in a telephone interview. She
didnt directly address the studys findings with regard to the oil sands." |
"Chinese companies have shelled
out more than $30-billion in Canadas energy industry, but many of those investments
have been hit with operational problems, delays and weak returns, leading to growing
impatience in some quarters in China. PetroChina Co. Ltd., Sinopec, CNOOC Ltd., China
Investment Corp. and other state-owned enterprises made a raft of big bets on oil sands
projects, shale developments and domestic companies since 2005 and many have yet to pay
off. There is absolutely some buyers remorse stemming from many of
Chinas big-ticket acquisitions, said Samir Kayande, vice-president of energy
research at ITG Investment Research, who has done intensive studies of some of the deals. Some problems were the result of purchases made during a rush on assets
across the industry, when competition from both domestic and foreign buyers was brisk, Mr.
Kayande said. Eventually, assets in the best geological regions are likely to pay off, and
those further from the earliest developments will lag in performance, he said. Officials
with the Chinese companies, and Canadians familiar with their thinking, say it is far too
early to deem the buying spree, in a notoriously difficult industry, a bust. Not all
Chinas problems are directly related to the land its companies acquired. Some could
not have been predicted." |
"Britain's household energy bills are rising faster than in most
countries in the developed world, according to new research carried out by the House of
Commons Library. Based on figures from the Department of Energy and Climate Change, and
using energy data from the EU and members states of the International Energy Agency based
in Paris, UK consumers have faced three years of energy price rises experienced by only a
handful of other countries. Only Ireland, with an electricity price rise of 24.7 per cent,
is above the UK's 23.5 per cent hike. With electricity prices actually falling in Norway
and Hungary, down by 16.5 and 17.7 per cent respectively, only South Korea and Germany
have had rises close to the UK figure. Comparing rises in domestic gas prices between 2010
and 2013, the UK hike of 33.8 per cent is similarly among the highest recorded. The new
research examining the economic burden for UK consumers puts the Energy Department's
reassurance last year that the UK's domestic electricity bill was "fairly
average" compared with that of the rest of Europe in a new light. Measured in prices per kilowatt hour, electricity costs less in
the UK than in Denmark, Germany, Italy, Portugal, Belgium, the Netherlands, Slovakia and
Austria. But the new research shows that, in the past four years, UK prices have risen
more sharply. Europe's cheapest electricity is estimated to be supplied by Greece, France,
Poland, Hungary and Finland. The contrast with the United States and Japan's very low
energy bills is still stark. However, in a re-run of
Ed Miliband's assault last year on energy prices and his promise that a Labour
government would freeze prices till 2017 the shadow Energy Secretary, Caroline
Flint, will this week revisit energy prices. She will claim that household energy bills in
the UK have risen four times as fast as wages since 2010." |
"EDF Energy is taking three of
its nuclear reactors in Britain offline for inspection this week after finding a defect in
a reactor of a similar design, the company said on Monday. The firm, which operates 15 nuclear reactors in Britain, said it came
across the defect on a boiler spine at its Heysham 1-1 reactor, which had been shut down
in June for refuelling. As a precautionary measure, EDF Energy is taking Heysham 1-2,
Hartlepool 1 and Hartlepool 2 reactors offline from Monday to Wednesday for an estimated
eight-week period. This will mean that Britain will have a total of almost 3 gigawatts
(GW) of nuclear capacity offline this week, about a third of Britain's total nuclear
capacity. However, because demand for power is quite low due to the summer and renewable
energy output is quite strong, the impact on Britain's power supply should be muted,
analysts said." |
"The worlds leading oil
and gas companies are taking on debt and selling assets on an unprecedented scale to cover
a shortfall in cash, calling into question the long-term viability of large parts of the
industry. The US Energy Information Administration (EIA) said a review of 127 companies
across the globe found that they had increased net debt by $106bn in the year to March, in
order to cover the surging costs of machinery and exploration, while still paying generous
dividends at the same time. They also sold off a net $73bn of assets. This is a major
departure from historical trends. Such a shortfall typically happens only in or just after
recessions. For it to occur five years into an economic expansion points to a deep
structural malaise. The EIA said revenues from oil and gas sales have reached a plateau
since 2011, stagnating at $568bn over the last year as oil hovers near $100 a barrel. Yet
costs have continued to rise relentlessly. Companies have exhausted the low-hanging fruit
and are being forced to explore fields in ever more difficult regions. The EIA said the
shortfall between cash earnings from operations and expenditure -- mostly CAPEX and
dividends -- has widened from $18bn in 2010 to $110bn during the past three years. Companies appear to have been borrowing heavily both to keep dividends
steady and to buy back their own shares, spending an average of $39bn on repurchases since
2011. The agency, a branch of the US Energy Department, said the increase in debt is
not necessarily a negative indicator and may make sense for some if interest
rates are low. Cheap capital has been a key reason why US companies have been able to
boost output of shale gas and oil at an explosive rate, helping to lift the US economy out
of the Great Recession. The latest data shows that
tight oil production has jumped to 3.7m barrels a day (b/d) from half a
million in 2009. The Bakken field in North Dakota alone pumped 1m b/d in May, equivalent
to Libyas historic levels of supply. Shale gas output has risen from three billion
cubic feet to 35 billion in just seven years. The EIA said America will increase its lead
as the worlds largest producer of oil and gas combined this year, far ahead of
Russia or Saudi Arabia. However, the administration warned in May that continued
declines in cash flow, particularly in the face of rising debt levels, could challenge
future exploration and development. It said that upstream
costs of exploring and drilling have been surging, causing
companies to raise long-term debt by 9pc in 2012, and 11pc last year. Upstream costs rose
by 12pc a year from 2000 to 2012 due to rising rig rates, deeper water depths, and the
costs of seismic technology. This was disguised as
China burst onto the world scene and powered crude prices to record highs. Major
disruptions in Libya, Iraq, and parts of Africa have since prevented oil from falling much
below $100, even though other commodities have been in the doldrums. But even flat prices
for three years have exposed how vulnerable the whole oil and gas edifice is becoming. The
major companies are struggling to find viable reserves, forcing them take on ever more
leverage to explore in marginal basins, often gambling that much higher prices in the
future will come to the rescue. Global output of
conventional oil peaked in 2005 despite huge investment. Steven Kopits from
Douglas-Westwood said the productivity of new capital spending has fallen by a factor of
five since 2000. The vast majority of public oil and gas companies require oil
prices of over $100 to achieve positive free cash flow under current capex and dividend
programmes. Nearly half of the industry needs more than $120, he said.... The global oil and gas nexus is
clearly over-extended and could face a severe crunch if oil prices slip towards $80. A growing number of experts say it would be wiser to shrink the industry
to a profitable core, returning revenues from existing ventures to shareholders and
putting some companies into partial run-off rather than risking fresh money on
projects that may prove to be ruinous white elephants. The International Energy Agency in
Paris says global investment in fossil fuel supply rose from $400bn to $900bn during the
boom from 2000 and 2008, doubling in real terms. It has since levelled off, reaching
$950bn last year. The returns have been meagre. Not a
single large oil project has come on stream at a break-even cost below $80 a barrel for
almost three years. A study by Carbon Tracker said companies are committing $1.1 trillion
over the next decade to projects requiring prices above $95 to make money. Some of the
Arctic and deepwater projects have a break-even cost near $120. The oil majors like
Shell are having to replace cheap legacy reserves with new barrels from much more
difficult places, said Mark Lewis from Kepler Cheuvreux." |
"President Vladimir Putin said
on Thursday Russia
should aim to sell its oil and gas for roubles globally because the dollar monopoly in
energy trade was damaging Russia's economy. "We should act carefully. At the moment we are trying to agree with
some countries to trade in national currencies," Putin said during a
visit to the Crimea region, which Moscow annexed from Ukraine earlier this year." |
"Natural gas production in the lower 48 United States increased by
0.5 billion cubic feet per day (Bcf/d) during the month of July versus June, according to
Bentek Energy®, an analytics and forecasting unit of Platts. Production averaged 68.5 billion Bcf/d last month, marking the highest
monthly average on record and surpassing the previous record set in June. On July
30, production set a one-day record high of 69.3 Bcf/d. On a year-over-year basis,
average July 2014 gas production was up 5.1% from July 2013 or 3.3 Bcf/d higher." |
"The world's oil prices have stayed high since 2010 bouncing around
$100 per barrel for two basic reasons. Oil demand keeps
rising, and production is struggling to keep up. But why is production struggling to keep
up? One big factor has been geopolitical conflict. Wars, unrest, and sabotage have
increasingly plagued oil producers like Iraq, Libya,
and Syria since 2011. The US and EU sanctions on
Iran's oil industry have also removed a lot of oil from global markets. All told, some 3.3
million barrels of oil per day equivalent to nearly 4 percent of global supply
are currently offline due to "unplanned outages":... James Hamilton, [is] an economist who studies oil at the
University of California, San Diego. He argues that the oil markets have changed
dramatically in recent years and $100 per barrel oil is likely here to stay...A
smaller fraction of the "oil" being produced today is actually crude oil
which is arguably the most useful of all liquid fuels..... There's some evidence that
Saudi Arabia is having trouble increasing oil production, Hamilton notes. And private
companies are investing more and more money but getting less and less oil. A lot of the
easy-to-drill oil is already online what's left is the hard stuff.... Hamilton, for
his part, is skeptical that these factors will go away anytime soon. Yes, peace might
break out in Libya or Iraq or a financial crisis might break out in China
and that would cause a dip in prices. But the dip would only be temporary, buying the
world a few years' of extra supply. "My conclusion," he writes, "is that
hundred-dollar oil is here to stay.'" |
"U.S. oil giant Exxon Mobil
began drilling for oil in Russia's Arctic on Saturday,
its partner Rosneft said, despite sanctions imposed on the Russian company by Washington
over the crisis in Ukraine."Today, commercial success is driven by efficient
international cooperation," Russian President Vladimir Putin told Rosneft CEO Igor
Sechin and ExxonMobil President Glen Waller on a videoconference call from his Black Sea
residence." |
"US producers are looking at
ways to coax more natural gas from existing wells, potentially slowing declines or even
lifting output from large, beleaguered fields. Southwestern Energy last week said it may
delve back into its early wells in Arkansas' Fayetteville shale, where it is the largest
producer by volume, using improved hydraulic fracturing techniques and technology to
release additional gas. Exco Resources, a large producer in the Haynesville shale of east
Texas and northern Louisiana, has already re-fractured one of its mature wells, lifting
the output by 1.2mn cf/d ..... The push to re-enter existing wells underscores the strides
producers are making in shale fields. US independents are drilling more prolific wells
than they did just a few years back and can now apply what they have learned to older
wells, where production is declining. The re-fracturing is also less expensive than
drilling new wells. Exco's initial re-fracturing test cost $1.7mn, compared with $7.2mn
for a new Haynesville well. The company projected that it could bring those costs down to
near $1mn once it is ready to execute a re-fracturing program in 2015. Fields like the Fayetteville and the Haynesville were home to some of the
heaviest drilling activity before gas prices tumbled in 2012 to 10-year lows below
$2/mmBtu. The downturn in prices prompted producers to fan out in search of higher-priced
oil and NGLs in other fields. Output from the Haynesville shale in June was 3.9
Bcf/d, down by 23pc from a year earlier. Production from the Barnett has dropped by about
5pc year over year to 4.4 Bcf/d, while Fayetteville production has held steady at about
2.8 Bcf/d, according to the US Energy Information Administration. The increased oil and
NGL drilling still led to soaring natural gas production, since those wells typically
produce gas as well. US gross gas production has already increased by about 6pc this year,
reaching an all-time high of more than 78 Bcf/d in May. Producers are now showing some
renewed interest in fields like the Haynesville and Fayetteville because efficiency gains
are reducing well costs." |
"Gas for Winter delivery in the UK saw intraday gains of more than 4%
Friday as the market reacted to news that Ukraine may block flows of Russian gas through
its territory. The Winter 14 contract traded as low as 59.50 pence/therm on ICE during the
morning but following the news jumped to 62.00 p/th. The rise followed news that Ukrainian
Prime Minster Arseniy Yansenyuk said Kiev may stop transit of Russian gas deliveries to
Europe via Ukraine as part of sanctions against Russia. At
the end of July the UK's National Grid said an interruption to Russian gas flows through
Ukraine could cut 207 million cubic meters/day of supply to the EU during the winter. The
potential for Russia to re-route gas via the Yamal and Nord Stream pipelines, however,
could reduce the impact to EU-bound deliveries to 117 million cu m/d, National Grid said.
To put the figures into context, total seasonal normal gas demand in the UK at the moment
is about 170 million cu m/day. It's higher during the winter as gas-fired heating usage
increases." |
"When Brazil's state-run oil
company Petroleo
Brasileiro SA PETR4.BR
-4.17% disclosed its biggest-ever oil find, in 2007, then-president Luiz Inácio Lula
da Silva quipped that the discovery proved that God is Brazilian. New production figures
are making believers out of many in the industry. Output from the "pre-salt"
fields has passed 500,000 barrels of oil a day, nearly triple that of 2012, and now
accounts for nearly a quarter of the company's total production of two million barrels a
day. It is a quick ramp-up for Petrobras, and is taking place in one of the most
challenging oil patches in the world. The deposits lie nearly 200 miles off Brazil's
southeastern coast, buried deep below the sea floor under a thick layer of salt, which
gives the fields their name. "In terms of productivity and the speed with which
Petrobras has moved from zero barrels a day to 500,000 barrels a day, it's kind of
unprecedented," says Ruaraidh Montgomery, an analyst at researcher Wood Mackenzie.
Production gains in pre-salt fields are sorely needed to offset declines in production at
Petrobras' mature fields. Last year, Petrobras's total output fell to 1.93 million barrels
of oil and equivalents a day, from 1.98 million in 2012. This year, as the pre-salt fields
deliver more oil, overall output has inched up. In June production was 2.008 million
barrels a day. The Rio de Janeiro-based oil company
is due to report its second-quarter results on Friday. Riding the pre-salt boom, Brazil
aims to be among the world's top five global oil producers by 2020, when it expects to be
producing four million barrels of oil a day. But to hit that ambitious target, Petrobras
will have to overcome financial as well as technical challenges. The company's profit has
been squeezed by Brazil's government, which forces it to sell imported gasoline at below
cost to battle inflation. It also has borrowed heavily to finance exploration and
development. Now the world's most indebted oil major, Petrobras projects it will have
spent $102 billion in the pre-salt area by 2018; tens of billions more will be needed to
fully develop those reserves. Adding to the challenge is that Petrobras is pretty much on
its own. The Brazilian government's tough production-sharing rules require Petrobras to be
the sole operator at all pre-salt projects and hold a minimum 30% stake. Those terms have
turned off most major oil companies, which have opted to invest elsewhere. At the first
and so far only auction for pre-salt fields, there was only one bid, a consortium led by
Petrobras. Brazil's pre-salt oil windfall is in some ways the opposite of the American
shale oil boom. In the U.S., the door is open to all comers. Landowners settle for low
royalties, but the result has been a massive increase in production and U.S. energy
security in the process....The two main basins are roughly the size of the state of
Georgia and are estimated to hold 50 billion barrels of recoverable oil. The biggest field
currently in production, named Lula after the former president's nickname, has an
estimated eight billion barrels of oil aloneroughly eight times more than the
biggest offshore field in the Gulf of Mexico. To get at the oil there, Petrobras has
invested billions of dollars on research, new 3-D imaging technology, a souped-up shipping
fleet and bigger helicopters to get workers and equipment to the fields. New drilling
techniques also were needed to get to the fields, which can be as deep as 20,000 feet
below the surface of the ocean. The salt layer alonewhich is constantly
shiftingcan be as much as 6,500 feet thick. Holes drilled in the salt can
reseal themselves, so a special kind of mud must be used to keep them open. At those
depths, the temperature swings from extreme heat to cold. The gas in the pre-salt fields
is especially corrosive so special steel pipes are needed. "To produce in these
conditions, no one in the world had done this," said Edmundo Marques, chief
exploration officer at Rio de Janeiro-based independent oil company Ouro Preto Óleo e
Gás, and a former Petrobras executive.... Petrobras'
next challenge lies in its existing, mature oil fields where production is falling fast.
At the Roncador field, the country's biggest producer, output has dropped to 256,200
barrels a day, down from 395,000 barrels in 2010. That is putting pressure on Petrobras to
keep up its winning streak in the pre-salt fields to meet production goals. "It is a
race, as the old giants are on the decline," says Bob Fryklund, an IHS strategist. A
company spokeswoman said the rate of decline at Petrobras' mature fields is below
international benchmarks for such fields." |
"Vladimir Putin has agreed a
$20bn (£11.8bn) trade deal with Iran that will see Russia sidestep Western sanctions on
its energy sector. Under the terms of a
five-year accord, Russia will help Iran organise oil sales as well as cooperate in
the oil-gas industry, construction of power plants, grids, supply of machinery, consumer
goods and agriculture products, according to a statement by the Energy Ministry in
Moscow. The Russian government issued a new statement on Wednesday after mysteriously
withdrawing a similar release on Tuesday. Russian Energy Minister Alexander Novak said on
Wednesday that his government will help Iran bring its oil to market. In return, Iran
wants to imort power and pump equipment, steel products such as pipes, machinery for its
leather and textile industries, wood, wheat, pulses, oilseeds and meat. Iran "is also
interested in the joint construction of power generation and development of coal
deposits", Mr Novak added. ... Further talks between the two countries will take
place next month, he said. A deal could see Russia buying 500,000 barrels of Iranian
oil a day, the Moscow-based Kommersant newspaper has previously reported. That would be
about a fifth of Irans output in June and half its exports. .... The move is a
win-win for both nations after they were hit with Western sanctions aimed at limiting
their energy sectors. The European Union recently unveiled a raft of measures to restrict
certain oil exploration and oil drilling related products in Russia after what President
Barack Obama called the country's "illegal actions" in Ukraine. .... Meanwhile,
Iran has faced sanctions due to its reluctance to end a controversial nuclear programme.
The country has been locked in talks with six world powers - Britain, China, France,
Russia, the US and Germany - to reach an understanding, with an interim deal to lift a ban
on sales to the EU and limiting them to Asia agreed in November. However, since then talks
have stalled, causing Iran's petroleum exports to halve in the past two years, according
to OPEC. Despite the sanctions, Iran has been looking to boost
oil production in recent months, setting a new output target of 5.7m barrels per day
(bpd) of crude by 2018 - OPEC believes Iran is currently pumping about 3m bpd of crude.
However, it needs the help of international oil companies, and Russian energy firms have
repeatedly expressed an interest in teaming up with Iran." |
"The dash for gas in the Nineties accelerated depletion
of our gas reserves. Labours dithering over nuclear power put replacement of our
ageing reactors at least a decade behind schedule, and a premature abandonment of coal has
taken place alongside an inconsistent, scattergun approach to renewables. Those who claim
that Britain faces an energy squeeze are right, then. But those
who claim that the answer is using fracking to extract gas from shale formations are
guilty of putting hope ahead of reality. The example held up by the pro-fracking lobby is,
of course, the United States, where fracking has produced so much gas that the market has
been oversupplied, forcing gas prices sharply downwards. The trouble with this parallel is
that it is based on a fundamental misunderstanding of the US shale story. We now have more
than enough data to know what has really happened in America. Shale has been hyped
("Saudi America") and investors have poured hundreds of billions of dollars into
the shale sector. If you invest this much, you get a lot of wells, even though shale wells
cost about twice as much as ordinary ones. If a huge number of wells come on stream in a
short time, you get a lot of initial production. This is exactly what has happened in the
US. The key word here, though, is "initial". The big snag with shale wells is
that output falls away very quickly indeed after production begins. Compared with
normal oil and gas wells, where output typically decreases by 7pc-10pc
annually, rates of decline for shale wells are dramatically worse. It is by no means
unusual for production from each well to fall by 60pc or more in the first 12 months of
operations alone. Faced with such rates of decline, the only way to keep production rates
up (and to keep investors on side) is to drill yet more wells. This puts operators on a
"drilling treadmill", which should worry local residents just as much as
investors. Net cash flow from US shale has been negative year after year, and some of the
industrys biggest names have already walked away. The seemingly inevitable outcome
for the US shale industry is that, once investors wise up, and once the drilling sweet
spots have been used, production will slump, probably peaking in 2017-18 and falling
precipitously after that. The US is already littered
with wells that have been abandoned, often without the site being cleaned up. Meanwhile,
recoverable reserves estimates for the Monterey shale supposedly the biggest shale
liquids play in the US have been revised downwards by 96pc. In Poland, drilling
30-40 wells has so far produced virtually no worthwhile production. In the future, shale
will be recognised as this decade's version of the dotcom bubble. In the shorter term,
it's a counsel of despair as an energy supply squeeze draws ever nearer. While
policymakers and investors should favour solar, waste conversion and conservation over the
chimera of shale riches, opponents would be well advised to promote the economic case
against the shale fad." |
"Homeowners in Europe are more
worried about energy bills than paying the rent or mortgage, a survey suggests. The finding comes as part of research by Europe's largest DIY retail
group, Kingfisher. Kingfisher, which operates as B&Q in the UK, surveyed 17,000
households in nine European countries. "There is a staggering increase in the
number of people who intend to prioritise energy efficiency," said Kingfisher boss
Sir Ian Cheshire. "It is soaring bills that is driving this agenda." The survey
of attitudes to home improvement is a snapshot of how Europeans view their home. And it
seems we're not that different from our continental neighbours. ... the biggest priority
in the home is improving energy efficiency. Almost a third (31%) said they intended to
introduce measures to cut their energy bills. That compares with just 4%, in their last
survey in 2012." |
"Saudi Arabias decade-long
Gas Initiative is unravelling with considerable impact on global energy
balance as galloping domestic consumption seems eating into the exportable crude
surplus of the Opec kingpin Saudi Arabia. Launched by the then crown prince, and
now King Abdullah ibn Abdul Aziz, way back in September 1998, when during an hour long
private meeting with senior executives of seven US oil majors he invited them to help
develop the kingdoms energy resources. But things have turned sour
since. Initially, the three mooted gas projects focused on a $15 billion scheme to develop
gas reserves in South Ghawar field and two minor $5bn ventures that involved gas
production for petrochemical, power and water desalination projects. However, internal
opposition and drawn out negotiations, as well as questions about the Aramco reserve
estimates, stifled the early euphoria. The initiative ended up with only a handful of
projects, led mainly by Russian, Chinese and European firms. US oil majors, who had
originally negotiated for participation, interestingly abstained. The revised gas projects entailed exploration and processing of the
non-associated gas found in designated blocks in the Rub Al Khali (Empty Quarter). In
October 2003 Royal Dutch/Shell and Frances were awarded the Shaybah gas project,
covering a 200,000 square kilometre. In May 2004, Russias Lukoil was awarded stake
in 29,900 sq km Block A and Chinas Sinopec was awarded stake in 38,800 sq km Block
B. Italys ENI and Spains Repsol-YPF, were awarded the 52,000 km, Block C. The
entire scheme is now in doldrums. Early last month, Shell announced ending investments in
the project. ENI, Repsol and Total have also abandoned gas search. Chinas
Sinopec too had reportedly suspended operations in the Empty Quarter. The relatively high
cost of developing challenging deposits while gas sales prices fixed at a fraction of
probable production costs were discouraging Shell and others, industry sources were quoted
by Reuters as saying. Low domestic gas pricing has been an issue here. Saudi Aramco
corridors in Dhahran have been abuzz with voices calling for changes in the price regimen.
The country will not be able to develop the known gas
resources in the Empty Quarter desert until the government raises the domestic gas price,
Saudi Aramco CEO and President Khalid Al Falih was quoted in press as saying. One
challenge we have is the pricing of gas is very low in Saudi Arabia and does not make
unconventional gas or tight gas in the Rub Al Khali economic, he argued. Al Falih says he hopes the gas price issue will be addressed by the
government in due course. However, he refrained out from providing any timeline. The
focus is now shifting to unconventional resources. Saudi Oil Minister Ali al-Naimi had
estimated the countrys unconventional gas reserves at over 600 trillion cubic feet,
more than double the proven conventional reserves of 288 trillion cubic feet. Saudi deserts may hold as much as 645 trillion cubic feet of
technically recoverable shale gas, the worlds fifth-largest deposits, estimated
Baker Hughes Inc. Russias Lukoil was reportedly interested in tapping unconventional
gas deposits in the Empty Quarter. This is tight gas. The negotiations are under
way, a spokesman for Lukoil Overseas said. And in order to make unconventional gas
economically viable, Saudi Aramco is endeavouring to reduce the cost of producing natural
gas from so-called tight rock formations, targeting Saudi Aramco, is now targeting a cost
of $2 to $3 per thousand cubic feet of tight gas, Adnan Kanaan, of Aramcos Gas
Reservoir Managing department said. With domestic gas demand to almost double by 2030 from
2011 levels of 3.5 trillion cubic feet per year, finding new resource is a key challenge
to the energy managers of the kingdom, today." |
"On one side are Tony Blair, a powerful consortium of energy interests, including BP, and the
autocratic ruler of a former Soviet bloc country. On the other are the olive growers of
Puglia and a comedian turned political maverick. News
that Britain's former prime minister is to advise the consortium behind the Trans Adriatic Pipeline (TAP), the final
leg of a 2,000-mile gas pipeline that will run from Azerbaijan across much of central eastern
Europe, has sparked uproar among people
living close to its ultimate destination in the heel of southern Italy.
Anger towards the pipeline the pet project of Azerbaijan's controversial president,
Ilham Aliyev has been building up in Puglia for several years, with thousands
attending public meetings and demonstrations opposing the project, which is due to start
in 2016. Plans for the pipeline to come onshore in Brindisi were ditched following local
opposition. The new route will strike land in the less populated municipality of
Melendugno..... The decision to bring in Blair as an adviser on the "reputational,
political and societal challenges" associated with the pipeline along with the
former German foreign minister Hans-Dietrich Genscher and Peter Sutherland, a former BP
chairman puts the ex-Labour leader on a collision course with the Italian comedian
Beppe Grillo, whose Five Star Movement (M5S) has been largely responsible for mobilising
opposition to the project. TAP's supporters claim that Grillo's movement ignores the views
of the silent majority of people in Puglia. They
point to a recent opinion poll commissioned by TAP that found the vast majority of people
in the region do not believe the pipeline will have a harmful impact on their landscape.
Many also believe it will help to drive down gas prices in Italy, where there is little
competition in the energy market.... Blair's decision
to take up the position has also proved controversial with human rights groups, who claim
the pipeline will help to entrench the position of the Aliyev family, who treat Azerbaijan
as their personal fiefdom. The US State Department's human rights report for Azerbaijan
last year noted that there have been "increased restrictions on freedoms of
expression, assembly and association, including intimidation, arrest and use of force
against journalists and human rights and democracy activists online and offline". Requests for comment from Blair's office went unanswered." |
"As the chart shows, just
as many analysts have contended, the oil supply hit an inflection point in 2005.
That year signals the high water mark of conventional crude and condensate production,
which is 2.1 mbpd less than it was then. Even if we include refinery processing gain,
biofuels and NGLs (these latter two adjusted for energy content equaling about 70% of that
of a barrel of crude), we find the oil supply is up only 0.4%, 300,000 b/d, compared to
2005. Virtually all of the growth92%, on an energy-adjusted basishas come from
unconventionals, specifically, Canadian oil sands and US shale (tight) oil. Indeed,
70% of the net growth of the global oil supply from 2005 through 2013 came from US shales
alone. Shales are not the icing on the cake; they are the cake itself. This matters,
because shale production in turn depends overwhelmingly on only two plays, the Eagle Ford
and the Bakken, where production is expected to peak in 2016 or 2017 or see much slower
growth in production as the sweet spots there are exhausted. The Permian Basin may pick up the slack, but to date has not done so in
needle-moving quantities. Meanwhile, lagging oil prices are calling into question a number
of oil sands projects, particularly those slated to begin production after 2020. Unconventional growth may well be approaching its high water mark.
If 1 million b/d growth has led to higher oil prices, what will happen when unconventional
growth slows to 300,000 b/d in two or three years?...productivity of capital has
deteriorated by a factor of four, from $5,300 capex b/d of oil production in 2004 to
$21,400 in 2013. This deterioration is net of technology improvements. Geology is not only winning, it is crushing technology." |
"Russia and
the world's top energy user China may
jointly develop six floating nuclear
power plants (NPPs), Russia's nuclear export body said on Tuesday, a further joint
energy project since the signing of a $400 billion gas supply deal. Rusatom Overseas, the export branch of state nuclear reactor monopoly
Rosatom, said it signed a memorandum of understanding with China on
the development of floating NPPs from 2019. "Floating NPPs can provide a reliable
power supply not only to remote settlements but also to large industrial facilities such
as oil platforms," Rusatom Overseas Chief Executive Dzhomart Aliev said in a
statement. Hit by European and U.S. sanctions in response to the crisis in Ukraine, Russia is
eager to diversify its economy
away from the West. Following this new strategy, Russian state monopoly Gazprom signed a
$400 billion deal with China in May after 10 years of negotiation. Rosatom plans to launch
the world's first floating NPP in 2018. This mobile, small capacity nuclear thermal power
plant, best suited to remote regions, will be based in Chukhotka in Russia's far
east." |
"Its estimated that 9
million barrels of crude oil are moving over the rail lines of North America at any given
moment. Oil trains charging through Virginia, North
Dakota, Alabama, and Canadas Quebec, New Brunswick, and Alberta provinces have
derailed and exploded, resulting in severe environmental damage and, in the case of
Quebec, considerable human casualties. A continental oil boom and lack of pipeline
infrastructure have forced unprecedented amounts of oil onto US and Canadian railroads. With 43 times more oil being hauled along US rail lines in 2013
than in 2005, communities across North America are
bracing for another catastrophe." |
"For seventy years, one of the
critical foundations of American power has been the dollars standing as the
worlds most important currency. For the last forty years, a pillar of dollar primacy
has been the greenbacks dominant role in international energy markets. Today, China
is leveraging its rise as an economic power, and as the most important incremental market
for hydrocarbon exporters in the Persian Gulf and the former Soviet Union to circumscribe
dollar dominance in global energywith potentially profound ramifications for
Americas strategic position. Since World War II, Americas
geopolitical supremacy has rested not only on military might, but also on the
dollars standing as the worlds leading transactional and reserve currency. Economically, dollar primacy extracts seignoragethe
difference between the cost of printing money and its valuefrom other countries, and
minimises U.S. firms exchange rate risk. Its real importance, though, is strategic:
dollar primacy lets America cover its chronic current account and fiscal deficits by
issuing more of its own currency precisely how Washington has funded its hard power
projection for over half a century. Since the 1970s, a pillar of dollar primacy has been
the greenbacks role as the dominant currency in which oil and gas are priced, and in
which international hydrocarbon sales are invoiced and settled. This helps keep worldwide
dollar demand high. It also feeds energy producers accumulation of dollar surpluses
that reinforce the dollars standing as the worlds premier reserve asset, and
that can be recycled into the U.S. economy to cover American
deficits. Many assume that the dollars prominence in energy markets
derives from its wider status as the worlds foremost transactional and reserve
currency. But the dollars role in these markets is neither natural nor a function of
its broader dominance. Rather, it was engineered by U.S. policymakers after the Bretton
Woods monetary order collapsed in the early 1970s, ending the initial version of dollar
primacy (dollar hegemony 1.0). Linking
the dollar to international oil trading was key to creating a new version of dollar
primacy (dollar hegemony 2.0)and, by extension, in financing another
forty years of American hegemony. ... China has watched Americas increasing
propensity to cut off countries from the U.S. financial system as a foreign policy tool,
and worries about Washington trying to leverage it this way; renminbi internationalisation
can mitigate such vulnerability. More broadly, Beijing understands the importance of
dollar dominance to American power; by chipping away at it, China can contain excessive
U.S. unilateralism. China has long incorporated financial instruments into its efforts to
access foreign hydrocarbons. Now Beijing wants major energy
producers to accept renminbi as a transactional currencyincluding to settle Chinese
hydrocarbon purchasesand incorporate renminbi in their central bank reserves. Producers have reason to be receptive. China is, for the vastly
foreseeable future, the main incremental market for hydrocarbon producers in the Persian
Gulf and former Soviet Union. Widespread expectations of long-term yuan appreciation make
accumulating renminbi reserves a no brainer in terms of portfolio
diversification. And, as America is increasingly viewed as a hegemon in relative decline,
China is seen as the preeminent rising power. Even for Gulf Arab states long reliant on
Washington as their ultimate security guarantor, this makes closer ties to Beijing an
imperative strategic hedge. For Russia, deteriorating relations with the United States impel deeper cooperation
with China, against what both Moscow and Beijing consider a declining, yet still
dangerously flailing and over-reactive, America." |
"China
should boost imports of food so it can dedicate more of its scarce water supplies to
energy production, especially in arid but coal-rich regions like Xinjiang and Ningxia, a
senior environmental official said on Monday. Mu Guangfeng, the head of the environment
impact assessment office at the Ministry of Environmental Protection, told a conference China should open up further to overseas food supplies and put
stricter limits on the consumption of water for agriculture in areas like Xinjiang. He said China, the world's top manufacturing nation, sends thousands of
ships to overseas ports and many of them return empty. Filling them with grain would be an
ideal solution. "We cannot skip over energy, and if we open up our minds a little,
can we not further restrict agricultural water use in places like northern Shaanxi and
then break a taboo by using the space on our ships to buy grain from overseas?" he
said. Mu's comments reflect a wider debate among policymakers about the best use of
China's increasingly scarce water resources as industrial and agricultural demand soars.
Severe drought and scorching heat has damaged more than a million hectares of farmland in
China's Henan and Inner Mongolia provinces, with no immediate relief in sight, state news
agency Xinhua reported. China's per capita water supplies are only a quarter of the global
average, and in the northwest, shortages threaten to hold back ambitious plans to develop
the coal reserves, either by producing synthetic natural gas or delivering power to eastern coastal markets through long-distance cross-country grids. China is already
the world's top importer of soybeans, and has slowly introduced foreign corn into the
domestic market. But it remains reluctant to allow large-scale imports of staples such as wheat or rice, and has vowed to keep its total food
self-sufficiency rate at around 95 percent, despite proposals from researchers that the
figure could be relaxed. "I believe that increasing imported food will help protect
China's freshwater, and give ecologically fragile coal-producing regions the ability to
recover more quickly," said Mu. "Some people say we can't import food, but what
about energy? More than 60 percent of our oil is imported, and nearly 50 percent of our natural gas," he added." |
"The world will face
insurmountable water crises in less than three decades, researchers said
Tuesday, if it does not move away from water-intensive power production. A clash of
competing necessities drinking water and energy demand will cause widespread
drought unless action is taken soon, researchers from Denmarks Aarhus University,
Vermont Law School and the CNA Corporation, a nonprofit research and analysis
organization, said in the reports. Its a very important issue, said lead
study author Paul Faeth, Director of Energy, Water, & Climate at CNA Corporation. "Water used to cool power plants is the largest source of water
withdrawals in the United States, said Faeth in a press release on two new reports released Tuesday. The
recommendations in these reports can serve as a starting point for leaders in these
countries, and for leaders around the world, to take the steps needed to ensure the
reliability of current generating plants and begin planning for how to meet future demands
for electric power. Globally, there has been a three-fold population increase
in the past century and a six-fold increase in water consumption, the report said. If
trends in population and energy use continue, it could leave a 40 percent gap between
water supply and demand by the year 2030. In most countries, including the United States,
energy production is the biggest source of water consumption even larger than
agriculture, researchers said. In 2005, 41 percent of all freshwater consumed in the U.S.
was for thermoelectric cooling, according to the study. Power plants produce excess heat,
requiring cooling cycles that use water. Only wind and solar voltaic energy production
require minimal water. If we keep doing business as usual, we are facing an
insurmountable water shortage even if water was free, because its not a
matter of the price, Sovacool said. Researchers said nuclear
power and coal
the most "thirsty" power sources should be eventually replaced with more
efficient methods, especially
renewable sources like wind
and solar, the report said. Electricity generation from thermoelectric power
plants is inextricably linked to water resources at nearly all stages in the power
production cycle, yet this critical constraint has been largely overlooked in policy and
planning, the report said. Researchers said they chose Texas as an important case
study because its population is predicted to grow from 25 million to 55 million by 2050,
which will increase the competition for water and electricity. The state, which is also
prone to drought, gets 33 percent of its power from coal, 10 percent from nuclear and 48
percent from natural gas, according to the study. During the summer of 2011, Texas
experienced the worst drought in state history." |
"Two new reports that focus on
the global electricity water nexus have just been published. Three years of research show that by the year 2040 there will not be
enough water in the world to quench the thirst of the world population and keep the
current energy and power solutions going if we continue doing what we are doing today. It
is a clash of competing necessities, between drinking water and energy demand. Behind the
research is a group of researchers from Aarhus University in Denmark, Vermont Law School
and CNA Corporation in the US. In most countries, electricity is the
biggest source of water consumption because the power plants need cooling cycles in
order to function. The only energy systems that do not require cooling cycles are wind and
solar systems, and therefore one of the primary recommendations issued by these
researchers is to replace old power systems with more sustainable wind and solar systems.
The research has also yielded the surprising finding that most power systems do not even
register how much water is being used to keep the systems going....Combining the new
research results with projections about water shortage and the world population,
it shows that by 2020 many areas of the world will no longer have access to clean drinking water.
In fact, the results predict that by 2020 about 30-40% of the world will have water
scarcity, and according to the researchers, climate change can make this even worse." |
"The Government has been urged
to make sure subsidies are only paid to "genuinely" low-carbon biomass energy
after an assessment showed it could be more polluting than fossil fuels. Biomass energy
comes from burning biological products such as woody pellets made from saw-mill residues,
pulpwood or trees, and is expected to contribute to targets to boost renewable energy and
cut carbon emissions from the power sector. But new calculations from the Department of
Energy and Climate Change assessing woody biomass from North America for use in UK power
stations shows that carbon emissions can vary significantly depending on how it is
produced. Some biomass could produce more emissions
than gas or even coal, the calculations showed, sparking calls from environmentalists for
the Government to rethink its policy of subsidies for the energy source. Energy and
Climate Change Secretary Ed Davey said: "In the short term, biomass can help us
decarbonise our electricity supplies, and we are committed to supporting cost-effective,
sustainably produced biomass. "This calculator shows that, done well, biomass can
offer real carbon savings - which is why we are tightening our rules for sustainable
biomass. Any producer who doesn't meet those standards will lose financial support from
next year." Harry Huyton, the RSPB's head of climate change, said: "Government's
own report today confirms that some forms of bioenergy are worse for the climate than
fossil fuels. "It is clear from the results of this research that certain sources of
bioenergy shouldn't receive public money under the guise of being clean green energy
sources. "We're calling on government to act on these findings as soon as possible to
ensure their policy only supports genuinely low-carbon bioenergy." Friends of the
Earth's bioenergy campaigner Kenneth Richter said: "This important new research
confirms that burning trees from overseas forests in our power stations can have a bigger
impact on our climate than burning fossil fuels. "The Government must urgently
rethink its bioenergy strategy. Rather than writing blank cheques for firms like Drax the
Government must introduce full carbon accounting for bioenergy in the UK, and ensure that
cutting emissions is at the heart of all our energy policies."" |
"Renewables are seen by the
public as a better way to boost energy security than any other energy source, new polling
has revealed. A ComRes poll for RenewableUK found 48
per cent of the 2,065 respondents chose investing in green energy as their number one
priority when it comes to addressing energy securioty concerns. Support for renewables was
more than three times higher than the next most popular option, nuclear, which was backed
by 15 per cent of respondents, with reducing energy consumption by homes and businesses
supported by 14 per cent. Just 13 per cent of respondents identified fracking as a top
priority, which would suggest the public does not share the government's confidence that
domestic shale gas can play a major role in boosting energy security. The poll also
revealed support for renewables rises to 50 per cent in marginal seats, while support for
fracking drops to eight per cent. Significantly, renewables were deemed the top priority
among voters for the Conservatives, Labour, Lib Dems and UKIP, both nationally and in
marginal seats. The poll follows similar research,
published earlier this month and also commissioned by RenewableUK, which found voters prefer politicians in
favour of wind energy developments. However, the new poll also showed that developing
a secure supply of energy for the UK came just fifth in a list of the highest public
priorities, with only 53 per cent of respondents putting it among their top five most
important issues. In contrast, 80 per cent selected maintaining and improving the NHS in
their top five priorities and 67 per cent highlighted tackling unemployment as a priority.
However, despite Conservative Party opposition to onshore wind developments, just five per
cent of people selected reducing the number of future onshore wind farms in their top five
priorities, a number that falls to four per cent in marginal seats." |
"EU member states will have to
boost their energy efficiency by 30% by 2030, according to the European Commission. After
months of difficult negotiations, commissioners agreed to a goal they termed ambitious but
realistic. Some member states have been pushing for an even higher target amid concern
over the security of gas supplies from Russia. European leaders, meeting in October will
decide whether the new goal should be legally binding. The 30% target will be based on projections for 2030 that were made in
2007. In a statement, the Commission said the new goal would build on existing
achievements, pointing out that new buildings across the EU now use half the energy they
did in the 1980s. Industry is about 19% less energy intensive than it was in 2001, they
argued." |
"Germany is the world's most
energy efficient country with strong codes on buildings while China is quickly stepping up
its own efforts, an environmental group said Thursday. The study of 16 major economies by
the Washington-based American Council for an
Energy-Efficient Economy ranked Mexico last and voiced concern about the pace of
efforts by the United States and Australia. The council gave Germany the top score as it
credited Europe's largest economy for its mandatory codes on residential and commercial
buildings as it works to meet a goal of reducing energy consumption by 20% by 2020 from
2008 levels...The study ranked Italy second,
pointing to its efficiency in transportation, and ranked the European Union as a whole
third. China and France were tied for fourth place, followed by Britain and Japan. The
report found that China used less energy per square foot than any other country, even if
enforcement of building codes is not always rigorous.... Australia was ranked 10th, with
the council praising the country's efforts on building construction and manufacturing but
placing it last on energy efficiency in transportation. The study ranked the United States
in 13th place, saying that the world's largest economy has made progress but on a national
level still wastes a "tremendous" amount of energy." |
"Tony Blair, the former British prime
minister, has been hired to advise a BP-led consortium on
the export of natural gas from Azerbaijan to Europe,
in a sign of the efforts now being made by western companies to reduce reliance on Russian
supplies...." |
"SCOTLAND is on the brink of an
energy crisis, a leading expert has warned, after it emerged the country has begun to rely
on electricity produced in England to keep the lights on. In a departure from historical trends, Scotland imported power from down
south on 162 days over the past three years. On 10 occasions, Scotland imported English
power constantly throughout the day to meet its needs." |
"Two years ago Total's chief
Christophe de Margerie launched a "high risk, high reward" oil exploration
strategy, betting he could hit a bonanza, even though his rivals had failed to make big
discoveries. But Total risks joining the industry trend of making only smaller and fewer
finds, despite global investments in oil exploration heading to a record $1 trillion
(£583.90 billion) by 2017. This week, Margerie told Reuters he gives himself until the
year-end to find a major deposit or cut the exploration budget next year following several
disappointing drilling campaigns. Top players are struggling to find enough conventional
oil. Majors are caught between growing pressure from investors to cut spending and boost
profits and the increasingly costly need to replace declining onshore and offshore
reserves. 'Over the last 10 years the rate of return
from exploration has diminished with time,' said Andrew Lodge, exploration director at
London-listed explorer Premier Oil. 'In the heyday of 2001-2002 the average rate of return
for the industry was 20 percent ... that dropped last year to around 10 percent," he
said. Disappointing exploration campaigns no longer make such big headlines as they were
10 years ago amid the "peak oil" debate. That theory of oil as a diminishing
resource has been transformed by the U.S. shale oil revolution. Speedy growth from North
American unconventional oil reserves has helped stabilize oil prices, despite major supply
outages.... The shale oil industry is more complicated and is still in its infancy, which
makes it incredibly difficult to anticipate new oil coming onto the market. New
conventional discoveries in recent years have disappointed in size and only a handful,
such as Statoil's Johan Sverdrop oilfield in the North Sea, have emulated the mega fields
discovered more than 50 years. "Today we consume
33 billion barrels of oil per year and are discovering 10-20 billion barrels at most. It
appears that the biggest single oil discovery in 2013 was less than 1 billion barrels in
size," asset management firm Investec said in a report. Despite a tight capital diet, oil companies are set to spend a record $1
trillion to explore for new reserves by 2017, according to Barclays. Exploration and
production spending has risen four-fold since 2000 to around $700 billion because of a
rise in material and services prices, which in turn were driven to a large extent by a
steep increase in global oil prices and inflation rates. In 2014, ExxonMobil will spend
the most on E&P among the oil majors at $35.3 billion dollars, followed by Chevron at
$34.6 billion. PetroChina has the largest E&P budget for 2014 at $39.6 billion,
according to Barclays data. "Majors have increased exploration budget by 3 to 5 times
in recent years but they have been very ineffective," said Investec's Charles Whall.
"The oil companies are a little complacent". Oil
discoveries peaked in the 1960s when around 400,000 billion barrels were discovered. In a
measure of the success of drilling project, the number of new oilfield developments is set
to drop below 50 per year in 2014 and 2015, compared with an average of 75 per year over
the past decade, according to Nicholas Green,
analyst at London-based Bernstein Research. 'This represents the lowest level of activity
since 1999, lower even than the oil price crash of 2008-09,' he said. The declining rate
of finds is now discouraging investment in certain areas, with drilling in the North Sea
set to decline the most over the next two years. Southeast Asia is likely to be the only
region to see increased activity, according to Green. The complexity of 'frontier
exploration' such as the Arctic and the pre-salt deep waters of Brazil and West Africa has
cut returns on investments." |
"Britains ageing nuclear
reactors are close to reaching key safety thresholds, which will have to be raised to
allow them to keep generating power, it emerged yesterday. EDF Energy, the French state-
controlled company which owns eight nuclear power stations in Britain, will ask the Office
for Nuclear Regulation to approve increases in the amount of weight that the
reactors graphite cores are allowed to lose. The
cores are made up of thousands of graphite bricks which play a key role in the safe
operation of the reactor, but degrade because of radiation." |
"North Sea oil revenues will
make almost no contribution to UK growth by 2040 while total receipts will fall much
faster than initially expected, according to the Office for Budget Responsibility. In a blow to the Scottish independence campaign, the Government's
independent fiscal watchdog said expected revenues from North Sea oil and gas would total
£39.3bn between 2019-20 and 2040-41, down by almost a quarter compared with its
projection of £51.9bn last year. The OBR said this was largely due to persistently
disappointing revenues in recent years, which had a knock-on effect on the future tax
take. By the end of the forecast period, the OBR expects offshore oil and gas revenues to
account for just 0.05pc of gross domestic product (GDP) - or £2.6bn in cash terms. While
this is a slightly higher proportion than its forecast last year, the OBR said revenues
from North Sea oil and gas were "on a declining trend" even under the most
optimistic production scenario....In May, the Scottish government lowered its estimates of
the country's oil and gas tax revenues over the next five years, but its projections
remain far more optimistic than the OBR's. " |
"Data from Bank of America show that oil and gas investment in the US
has soared to $200bn a year. It has reached 20pc of total US private fixed investment, the
same share as home building. This has never happened before in US history, even during the
Second World War when oil production was a strategic imperative. The International Energy
Agency (IEA) says global investment in fossil fuel supply doubled in real terms to $900bn
from 2000 to 2008 as the boom gathered pace. It has since stabilised at a very high
plateau, near $950bn last year. The cumulative blitz on exploration and production over
the past six years has been $5.4 trillion, yet little has come of it. Output from
conventional fields peaked in 2005. Not a single large project has come on stream at a
break-even cost below $80 a barrel for almost three years. "What
is shocking is that upstream costs in the oil industry have risen threefold since 2000 but
output is up just 14pc," said Mark Lewis, from Kepler Cheuvreux. The damage has been
masked so far as big oil companies draw down on their cheap legacy reserves.
"They are having too look for oil in the deepwater fields off Africa and Brazil, or
in the Arctic, where it is much more difficult. The marginal cost for many shale plays is
now $85 to $90 a barrel." A report by Carbon Tracker says companies are committing
$1.1 trillion over the next decade to projects that require prices above $95 to break
even. The Canadian tar sands mostly break even at $80-$100. Some of the Arctic and
deepwater projects need $120. Several need $150. Petrobras,
Statoil, Total, BP, BG, Exxon, Shell, Chevron and Repsol are together gambling $340bn in
these hostile seas....Yet the sheer scale of "stranded assets" and potential
write-offs in the fossil industry raises eyebrows. IHS Global Insight said the average
return on oil and gas exploration in North America has fallen to 8.6pc, lower than in 2001
when oil was trading at $27 a barrel. What happens if oil falls back towards $80 as Libya
ends force majeure at its oil hubs and Iran rejoins the world economy?... Even if
the fossil companies navigate the next global downturn more or less intact, they are in
the untenable position of booking vast assets that can never be burned without violating
global accords on climate change. The IEA says that two-thirds of their reserves become
fictional if there is a binding deal limit to CO2 levels to 450 particles per million
(ppm), the maximum deemed necessary to stop the planet rising more than two degrees
centigrade above pre-industrial levels. It crossed 400 ppm threshold this spring, the
highest in more than 800,000 years. "Under a global climate deal consistent with a
two degrees centigrade world, we estimate that the fossil fuel industry would stand to
lose $28 trillion of gross revenues over the next two decades, compared with business as
usual," said Mr Lewis. The oil industry alone would face stranded assets of $19
trillion, concentrated on deepwater fields, tar sands and shale." |
"Thanks to favorable weather and
record production from solar and wind power, renewable energy accounted for approximately
31 percent of Germanys electricity generation in the first half of 2014. Non-hydro renewables made up 27 percent of the countrys power, up
from 24 percent last year, according to new
data released by the Fraunhofer Institute. And
for the first time ever, renewable energy sources accounted for a larger portion of
electricity production than brown coal. Production of wind and solar in particular saw
substantial gains over the same time last year. Solar
grew by 28 percent in the first half of 2014 compared to 2013 and wind power grew by 19
percent over the same period last year. Solar and wind alone made up a whopping 17
percent of power generation, up from around 12-13 percent in the past few years, reported
Renewables International. Helped along by low demand
on a holiday, Germany nevertheless set another solar
power record in June, generating 50 percent of its overall electricity demand from
solar for part of the day. And in May, renewable energy sources combined to account for 75
percent of power demand for part of the day. As
a point of comparison, approximately 13 percent
of the U.S. electricity supply was powered by renewables as of the end of 2013, roughly
half of Germanys rate.Dr. Bruno Burger with the Fraunhofer Institute explained that
the gains made by renewables thus far in 2014 can be attributed to the combination of good
weather and growing production of clean energy. In the first half year 2013 we had
really bad weather and the solar and wind production was below the long term
average, Burger said via email. In 2014 we started with more [sun] and wind
and the production is higher than in average years." |
"Shale gas produced in the UK could provide more than a third of the
nation's gas supplies within 20 years, a report has found. While drilling for the natural
gas is yet to progress beyond exploration and testing, one possibility would see shale gas
meeting 41pc of the UK's total gas needs by 2035. But a failure to invest in UK gas
production could see our dependency on imports rise to 91pc in the same time frame. These
potential scenarios are from a wide-ranging report on the trends that shape the UK's
energy landscape, examining the political, economic, technological and social factors that
will determine where we get our energy from over the next 20 years and beyond, and how we
will use it. There could be more than 5m electric vehicles on the nation's roads by 2035,
and almost all cars on the roads are expected to be electric or hybrid by 2050. Around 6m
homes could also be generating their own heat from domestic heat pumps by 2030, if
technology continues to improve and is supported by strong government policy and
incentives. But these snapshots of the future are
based on widely differing visions on what energy generation, use and consumption in the UK
could look like over the coming decades.... Richard Smith, head of energy strategy and
policy at the National Grid, said the report was an exploration of a spectrum of
"credible and plausible" scenarios, rather than specific predictions or
forecasts, to help inform government and businesses when deciding on future energy
policies..... The power supply landscape is expected
to change drastically in the next 20 years. All four scenarios suggest that the majority
of coal power stations will close by 2023 as they choose not to comply with emissions
requirements, with a move towards renewable sources in each scenario. But the extent of
future renewable energy usage varies widely. Under the most environmentally optimistic
scenario, renewable generation could represent 53.8pc of installed capacity, contributing
more than 50pc of the electricity output by 2035/6. This would largely be made up of wind
and solar photovoltaic sources, making up 46pc of the supply mix and 43.5pc of electricity
output. Under the model of "no progression", renewable sources would provide
38.2pc of energy generation, providing 30pc of electricity output. The slow economic
recovery and political volatility of the "no progression" model also shows a
future in which shale gas production would remain at zero by 2030, but under the "low
carbon life" scenario this could be as high as 41pc of the UK's total gas supply by
2035. Under the same model, the UK's dependency on imported gas could fall to 40pc by 2035
- lower than it is today - but could soar to 91pc under the "no progression"
scenario. All the scenarios also see a decline in North Sea gas production. Transport is
also likely to be affected by the changing energy landscape. The majority of vehicles on
UK roads are currently powered by petrol or diesel, and transport is responsible for 23pc
of UK consumer's greenhouse gas emissions in 2012, almost entirely through carbon dioxide
emissions. While there are just 9,000 electric cars on the road today, government
promotion of electrification of transport could see this number soar to 5.4m by 2035.
Demand for lighting in UK homes could more than halve with increases in energy efficiency,
falling from 14 terawatt-hours (TWh) in 2012 to as low as 6TWh by the late 2020s or early
2030s." |
"The chief executive of French
oil major Total (TOTF.PA)
is giving himself until the end of the year to strike oil at a big new field somewhere in
the world before considering whether to change direction and cut the exploration budget.
The Paris-based oil major, which launched a drilling strategy that it termed
"high-risk, high-reward" two years ago, has had disappointing explorations
results so far. "It's not a success in terms of results for the moment,"
Christophe de Margerie told Reuters in an interview. "But exploration takes more than
two years to yield results." De Margerie was
asked whether the group could drop the expensive strategy, which had been a shift from
Total's previous, more cautious approach. "Not before the end of the year; at the end
of the year we'll see if we didn't get enough," he said.... De Margerie also played
down the importance of reaching the production capacity target he set for 2017: 3 million
barrels of oil equivalent per day. "It's clear that if we continue to have problems
like today in Nigeria, Venezuela,
Libya and elsewhere, countries with problems beyond our control, then
we can't reach the 3 million," he said. Total has cut its staff in Libya to the bare minimum due to increasing violence in the North
African country, for example, while security issues and oil theft have hurt its output in
Nigeria." |
"An anticipated drop in oil
production by 2016 is expected to hurt the Russian economy, the Russian Finance
Ministry said Monday. The ministry said Monday it expects a $4.5 billion decline in oil
export revenue because of an anticipated 6.3 percent drop in oil production from 2014
figures. The ministry said the federal budget next year will receive about $2.2 billion
less than expected because of a contraction in exports. A report on the Russian economy from the World Bank in March said real
gross domestic product growth in 2013 was 1.3 percent, compared with 3.4 percent in 2012.
There's a "confidence crisis" emerging within the Russian economy, the bank
warned. "In the past, the lack of comprehensive structural reforms was masked by a
growth model based on large investment projects, continued increases in public wages, and
transfers -- all fueled by sizable oil revenues," it said. Russian energy exports last year accounted for more than 10 percent of GDP." |
"Royal Dutch Shell is ending
investments in a gas development project in Saudi
Arabia, complicating the top oil exporter's efforts to exploit its huge gas reserves.
The search for gas has been a priority for Saudi
Arabia as it struggles to keep pace with rapidly rising domestic demand. But the
emergence of the shale gas industry has opened up more lucrative opportunities for energy
companies elsewhere. 'Shell has decided to end
further investment in the Kidan development,' it said in an emailed statement. 'This was a
difficult decision but Shell remains committed to the Kingdom and we are keen to grow our
investments, both in upstream and downstream.' Shell did not give a reason for the
decision to shelve the joint venture in the Kidan area of the Empty Quarter, the sea of
sand dunes that cover south-east Saudi Arabia. Last year, industry sources said the
company was set to end investments in the venture due to disagreements with the government
over terms. At least three foreign firms - Italy's ENI, Spain's Repsol and France's
Total - have already abandoned the search for commercially viable gas deposits in that
part of Saudi Arabia. Shell has stuck it out longer in its South Rub al-Khali Co (SRAK)
project with state-run Saudi Aramco after finding small quantities of gas. Kidan is rich
in sour gas and is near the 750,000 barrels per day (bpd) Shaybah oilfield, one of the
biggest in the country. Sour gas has high levels of potentially deadly hydrogen sulphide
and therefore is tougher to produce than conventional gas reserves. The relatively high
cost of developing challenging deposits in a country where gas sales prices are fixed at a
fraction of probable production costs were possible reasons to discourage Shell too,
industry sources familiar with the matter told Reuters last year. Saudi Arabia, which
holds the world's fifth largest proven reserves of gas, expects domestic demand for natural gas - which it uses mainly for power generation - to almost
double by 2030 from 2011 levels of 3.5 trillion cubic feet per year. Saudi Oil Minister Ali al-Naimi had estimated the country's
unconventional gas reserves - those held in reservoirs that have not been traditionally
exploited - as at over 600 trillion cubic feet, more than double its proven conventional
reserves. Saudi wants natural gas to help it cover demand for subsidised domestic power so
it can save its oil for more lucrative exports." Saudi gas development plans hit hurdle as Shell shelves project Reuters, 7 July 2014 |
"During a June 19 White House press conference, U.S. President Barack
Obama gave all the expected reasons for acting against the Islamic State of Iraq and
Greater Syria (ISIS): worrying instability in the Middle East, the risk of jihadist
blowback in the West, simple human suffering. But the
President noted one more reason for intervention in Iraq that U.S. policymakers have
usually downplayed in the past. 'In addition to having strong allies there that we are
committed to protecting, obviously issues like energy and global energy markets continues
to be important,' said Obama. In other words: We need Iraq's oil.... Because Iraq's oil
industry was artificially depressed by years of mismanagement under Saddam Hussein,
international sanctions in the 1990s and the ravages of war over the past decade, the
country has a lot of room to improve. And that's exactly what it was doing - production
briefly hit 3.6 million bpd in February, the highest level since Saddam seized power in
1979, as the Iraqi government worked with major oil companies to build its drilling
capacity... The oil market is a remorseless treadmill - if new supplies can't keep up with
rising demand, prices will rise, crippling economic growth. No country was poised to play
a bigger role in that race than Iraq. In 2012 the IEA projected that Iraq's production
could almost double to nearly 6 million bpd by 2020, a bigger increase than in any other
country, and the Iraqi government was aiming for as much as 9 million bpd by that year.
Yet that growth is dependent on heavy investment in production - something the war with
ISIS is disrupting. The IEA has already cut its
forecast for Iraqi production in 2019 by nearly half a million bpd." |
"The
U.S. will remain the worlds biggest oil producer this year after overtaking Saudi Arabia and Russia as extraction of
energy from shale rock spurs the nations economic recovery, Bank of America Corp.
said. U.S. production of crude oil, along with liquids separated from natural gas,
surpassed all other countries this year with daily output exceeding 11 million barrels in
the first quarter, the bank said in a report today. The country became the worlds
largest natural gas producer in 2010. The International
Energy Agency said in June that the U.S. was the biggest producer of oil and natural
gas liquids. 'The U.S. increase in supply is a very
meaningful chunk of oil,' Francisco Blanch, the banks head of commodities research, said
by phone from New York.
'The shale boom is playing a key role in the U.S. recovery. If the U.S. didnt have
this energy supply,
prices at the pump would be completely unaffordable.' Oil extraction is soaring at shale
formations in Texas and North Dakota as
companies split rocks using high-pressure liquid, a process known as hydraulic fracturing,
or fracking. The surge in supply combined with restrictions on exporting crude is curbing
the price of West Texas Intermediate, Americas oil benchmark. The U.S., the
worlds largest oil consumer, still imported an average of 7.5 million barrels a day of crude in April,
according to the Department of Energys statistical arm. U.S. oil output will surge
to 13.1 million barrels a day in 2019 and plateau thereafter, according to the IEA, a
Paris-based adviser to 29 nations. The country will lose its top-producer ranking at the
start of the 2030s, the agency said in its World Energy Outlook in November. 'Its
very likely the U.S. stays as No. 1 producer for the rest of the year' as output is set to
increase in the second half, Blanch said. Production growth outside the U.S. has been
lower than the bank anticipated, keeping global oil prices high, he
said. Partly as a result of the shale boom, WTI futures on the New York
Mercantile Exchange remain at a discount of about $7 a barrel to their European
counterpart, the Brent contract on ICE Futures Europes London-based
exchange. WTI was at $103.74 a barrel as of 4:13 p.m. London time.' 'The shale production
story is bigger than Iraqi production, but it hasnt made the impact on prices you
would expect,' said Blanch. 'Typically such a large energy supply growth should bring
prices lower, but in fact were not seeing that because the whole geopolitical
situation outside the U.S. is dreadful.' Territorial gains in northern Iraq by a group calling
itself the Islamic State has spurred concerns that oil flows could be disrupted in the
second-largest producer in the Organization of Petroleum Exporting Countries after Saudi
Arabia. Exports from Libya
have been reduced by protests, while Nigerias production is crimped by oil theft and sabotage. Libya
will resume exports as soon as possible from two oil ports in the countrys east
after taking back control from rebels who blocked crude shipments for the past year,
Mohamed Elharari, spokesman for the state-run National Oil Corp., said by phone yesterday
from Tripoli. The U.S. will consolidate its position as the worlds biggest producer
in the coming months if returning Libyan supply limits the need for Saudi barrels, said
Julian Lee, an oil strategist who writes for Bloomberg News First Word. 'Theres a
very strong linkage between oil production growth, economic growth and wage growth across
a range of U.S. states,' Blanch said. Annual investment in oil and gas in the country is
at a record $200 billion, reaching 20 percent of the countrys total private
fixed-structure spending for the first time, he said." |
"Germany plans to halt shale-gas
drilling for the next seven years over concerns that exploration techniques could pollute
groundwater. "There won't be [shale-gas]
fracking in Germany for the foreseeable future," Environment Minister Barbara
Hendricks said Friday. The planned regulations come amid a political standoff with Russia,
Germany's main natural gas supplier, and following intensive lobbying from
environmentalists and brewers concerned about possible drinking-water contamination....The
government will reassess the ban in 2021." |
"The U.S. will remain the
worlds biggest oil producer this year after overtaking Saudi Arabia and Russia as extraction of
energy from shale rock spurs the nations economic recovery, Bank of America Corp.
said. U.S. production of crude oil, along with liquids separated from natural gas,
surpassed all other countries this year with daily output exceeding 11 million barrels in
the first quarter, the bank said in a report today. The
country became the worlds largest natural gas producer in 2010. The International
Energy Agency said in June that the U.S. was the biggest producer of oil and natural
gas liquids. The U.S. increase in supply is a very meaningful chunk of oil, Francisco Blanch,
the banks head of commodities research, said by phone from New York. The shale
boom is playing a key role in the U.S. recovery. If the U.S. didnt have this energy supply, prices
at the pump would be completely unaffordable. Oil extraction is soaring at shale
formations in Texas and North Dakota as
companies split rocks using high-pressure liquid, a process known as hydraulic fracturing,
or fracking. The surge in supply combined with restrictions on exporting crude is curbing
the price of West Texas Intermediate, Americas oil benchmark. The U.S., the worlds largest oil consumer, still imported an average of 7.5 million barrels a day of crude in April,
according to the Department of Energys statistical arm. ... The shale production story is bigger than Iraqi production, but
it hasnt made the impact on prices you would expect, said Blanch.
Typically such a large energy supply growth should bring prices lower, but in fact
were not seeing that because the whole geopolitical situation outside the U.S. is
dreadful. " |
"Energy regulator Ofgem last
year said that Britain's store of spare electricity capacity could slump as low as two per
cent in 2015. A year on the watchdog said in a report published today that the
margins have barely improved in spite of safeguards being introduced. Niall Trimble,
of the Energy Contact Company, reportedly said: "With a cold winter, there is a very
good chance we would have blackouts." Delays in building new nuclear power plants to
replace Britain's crumbling, aged and polluting stock are behind the potential
shortfalls. "In an average winter we'd probably sneak through," Mr Trimble
added. "But if a big nuclear station went offline there may not be sufficient
capacity and some people will be cut off."
However, the Government claimed today to have "defused the ticking time bomb" of
an energy crunch with plans to buy vast amounts of power back-up. The scheme will procure
53.3 gigawatts of electricity generating capacity, ensuring that energy generation
equivalent to 17 new nuclear power stations, or more than 80 per cent of UK peak demand,
will be available if needed. The scheme, known as the capacity market, aims to ensure UK
energy supplies are secure, but it will not kick in until towards the end of the decade.
Energy providers, such as new gas plants and existing power stations that might otherwise
be shut down, will be able to bid in an auction for payments that will require them to
provide electricity capacity when the system needs it. The cost of the scheme, which will
be passed on to consumers in their bills, will not exceed £4billion, although officials
indicated the cost was expected to be closer to £2billion. It will lead to an estimated
increase of £2 on the average annual household electricity bill between now and 2030.
Energy Secretary Ed Davey said: "There was a real risk back in 2010 that an energy
crunch would hit Britain in the middle of this decade and lead to damaging power cuts. "But the excellent news is that with today's announcement we
have the final piece of the jigsaw of our detailed energy security plans and can now say
with confidence that we have defused the ticking time bomb of electricity supply risks we
inherited." He said the UK was a top player in
global energy security, adding: "Today's announcement - coupled with our record
amounts of investment in renewables and electricity infrastructure, our revival plans for
the North Sea and the most healthy pipeline of investment projects in new generating
capacity and interconnectors ever - means we will remain a world leader." This month,
National Grid confirmed new measures to tackle the energy crunch the UK faces over the
next two winters, when the UK's total generating capacity will barely exceed the expected
peak demand. Payments will be made to large
energy users which can reduce their power use - for example by switching to back-up
generation - during peak evening hours in winter, on weekdays between 4pm and 8pm. Ofgem
insists households should be protected from any potential blackouts caused by winter
shortages, as large industrial users would find their energy supplies limited in the first
instance. ... Peter Atherton, of Liberum
Capital, warned that spikes in demand for limited electricity during a cold winter could
also force up bills drastically." |
"Scotland has only a "modest amount" of shale gas and
oil, according to a new study. The British
Geological Survey report was commissioned to assess the potential reserves of fuel in
Scotland. It estimates there are 80 trillion cubic feet of shale gas in central Scotland
and six billion barrels of shale oil. That compares to 1,300 trillion cubic feet in the
north of England and 4.4 billion barrels in the south. The amount of oil and gas which
could be commercially recovered is expected to be "substantially" lower. The
report says: "The complex geology of the area and historic mine workings mean that
exploratory drilling and testing is even more important to determine how much can be
recovered." UK energy minister Michael Fallon said shale gas and oil reserves in
central Scotland would not provide "an energy bonanza"." |
"[North Sea] Production has
plunged in the past decade to 1.4 million barrels a day from 3.5 million. Per-barrel
operating costs have soared more than fourfold, to £18 ($32) from £4 a decade ago. And
while companies are spending heavily on development, exploration drilling has declined to
the lowest rate of activity over the past three years since production began on the U.K.
continental shelf (UKCS) in the early 1970s. Just 15
exploration wells were completed last year. Theres also political risk. The Scottish
independence referendum scheduled for September has thrown uncertainty into the equation
as opposing politicians in London and Edinburgh trade warnings about impacts on the sector
if the vote does not go their way. Without dramatic efforts to reverse course, production
from the UKCS will continue to fall. That would gut a sector that employs 450,000 people
in Britain, supports a homegrown, globally active service industry, and paid the
equivalent of $11.7-billion in direct taxes last year. It would also deprive the world of
an important source of non-OPEC oil at a time when growing Asian demand and ongoing
conflict in the Middle East will keep pressure on prices for the foreseeable future.
Norways aging North Sea fields have also seen a steep drop in production to
1.4 million barrels a day in 2013 from 3.4 million in 2001.... There is plenty of oil left
in the UKCS the industry estimates as much as 24 billion barrels of recoverable
reserves, compared with 42 billion barrels that have been produced since 1970, when Royal
Dutch Shell PLC and BP PLC pioneered the offshore industry. The big message is the
death of the North Sea is completely exaggerated. Were only two-thirds through the
story, Energy Minister Michael Fallon said in an interview at his Whitehall office.
But much of that oil and gas is situated in harder-to-develop fields sometimes
smaller ones, sometimes at greater depths, or further from shore, often under high
pressure and high temperature conditions or needing enhanced oil recovery techniques. That
all means higher costs.... One of the fundamental
problems in the U.K. North Sea is that companies are now operating some 300 fields, and
many of the new ones are fairly small in scale. As a result, companies need to share
infrastructure such as the pipelines to bring the oil and gas to shore and subsea
processing units. That cumbersome system as well as a lack of investment in aging
equipment until recently has resulted in a 25-per-cent decline over the decade in
production efficiency, or the amount of time crews and equipment are actually working.... the current investment boom will quickly fade unless companies are
encouraged to explore in the deeper waters west of the Shetland Island and in the more
complex, high-pressure, high-temperature fields. In fact, the sheer scale of the
investment is an indication of the challenges the industry faces. The record spending is
occurring because companies are progressing development projects in an era of higher
oil prices, but also because they are pursuing much more technically challenging projects
as well, Lindsay Wexelstein, Edinburgh-based analyst for the global consultancy Wood
Mackenzie Group. With a new focus on capital discipline, international oil companies are
shifting investment away from plays that offer substandard returns. California-based Chevron Corp. and Norways Statoil ASA have
both recently shelved major projects in Britains offshore. Some of the
projects that are being progressed at the moment are very marginal, Ms. Wexelstein
said. The cost escalation weve seen in U.K. North Sea really is putting
pressure on these project economics. Fast-rising operating costs are
unsustainable and will result in yet more fields being shut-in and prematurely
decommissioned if it is not addressed, Oil & Gas UK says. Indeed, while companies such as BP and Nexen are doubling-down in the
offshore region, Calgary-based Talisman is beating a retreat." Twilight in the North Sea: The push to revive a fading oil source Globe and Mail, 28 June 2014 |
"Savers are being offered
returns of up to 9% a year or four times the best available rates on cash Isas
by lending their money to build wind and solar energy projects across the UK. Promoters
claim the schemes offer a steady and predictable income, although they are not without
risk. A primary school in Leominster, Herefordshire, is raising money to place solar
panels on its roof with the lure of extraordinary tax breaks. A renewable energy co-operative
building wind turbines in Derbyshire and Yorkshire has a scheme expected to give its
investors 7.3% a year. In Teesside, local farms and businesses will be powered by turbines
promising returns of up to 7.5% a year, while near Liskeard in Cornwall a single wind
turbine is claiming that returns should be around 9% a year. Most of the schemes allow savers to invest small sums from £50
upwards and some give tax breaks worth 50% off your income tax liability, plus no
capital gains or inheritance tax. "You can get great returns and do something good
with your money," says Bruce Davis of Abundance Generation, which helps to promote a
variety of schemes. "After raising more than £6.3m for UK renewable energy
companies, providing jobs and clean energy for the UK economy, we have shown that people
want investments that achieve a real
'win-win': doing something good with money while making a good return." |
"Volkswagen has revealed the wallet-crushing price for its
record-breaking XL1 model - the worlds most energy efficient production vehicle. The
car will be available to UK customers at £98,515. A total production run of around
200 XL1s are being built at VWs Osnabrück factory in Germany, a proportion of which
will be made available for the UK. The first delivery was made to a German customer at the end of May, with a number of UK
customers already in line to buy a car. The design
brief for the XL1 was to produce a one litre car a car that uses one
litre of fuel per 100 km, equivalent to 282 miles per gallon. The resulting vehicle uses
just 0.9 litres per 100 km, or 313 mpg on the official combined cycle. Carbon dioxide emissions are just 21 g/km. Thi
is achieved using a two-cylinder 48PS 800cc diesel engine with a 27PS electric motor,
driving through a modified seven-speed DSG transmission." |
"Shale energy in Scotland will
be no game-changer, industry sources have warned, ahead of the publication of
a report mapping potential fracking targets north of the border. The British Geological
Survey has conducted a survey of shale resources across the central belt of Scotland,
between Glasgow and Edinburgh, the findings of which are expected to be published as soon
as next week. Sources suggested the report would show relatively modest quantities of
shale oil and gas far less than are believed to lie beneath the Bowland basin of
northern England. "It's not going to be a game-changer," said one. A BGS survey of the Bowland last year said it could hold 1,300 trillion
cubic feet (tcf) of gas enough that if just 10pc could be extracted it could meet
the UKs gas needs for more than four decades. By contrast, one industry source said
their own estimates suggested there could be just 15 tcf of shale gas in Scotland,
implying that less than one years worth of gas usage could be extracted. Another
said they believed that Scotland was more likely to be prospective for shale oil than gas.
They suggested there could be large amounts of oil in the ground likely billions of
barrels - but that it was not clear how much could be extracted. A BGS report last month found there could be 4.4bn barrels of
shale oil in the Weald basin of southern England but warned that just a few per
cent of that might be viable to extract." |
"As test wells continue to come
back dry and firms begin to reassess their prirorities, an Arctic oil strike is looking as
far off as ever. In the most recent setback, Statoil announced today that no hydrocarbons were found during exploratory drilling
operations at a well located in Faroese waters. It is the second time in a week that
Statoil has had to plug after failing to identify traces of gas or oil. Last week, Statoil gave up drilling a well in the northern Barents after it too proved
not to contain evidence of hydrocarbons. Just weeks earlier the drilling site had been the
scene of a
standoff between the oil company and activists from Greenpeace, an environment group
that opposes Artic drilling. The announcement of the second dry well coincided with a
decision by Eykon
Energy, an Icelandic firm, that it was dropping its application for an oil exploration
license for the Norwegian continental shelf." |
"Tensions between Russia and
Ukraine provide a strong motivation for European
Union leaders to have a fresh stab at overhauling Europe's energy strategy at their
summit Friday, in an effort to improve security, cut costs and reduce vast differentials
between countries. Russia's suspension last week of natural-gas deliveries to Ukraine,
through which much of the EU's supply also travels, emphasizes the bloc's vulnerability. Moreover, a new policy could spur economic growth: Business leaders
regularly complain of the EU's fractured energy market and high prices compared with the
U.S. The European Commission has made numerous attempts to change the situation, without
much success. Five years ago, it launched a bundle of measures at unifying national
natural-gas and electricity markets, but prices and approaches to energy still differ
widely from one EU country to the next. ... the signs are that leaders will agree Friday
only on short-term measures to mitigate against possible shortages this winter, kicking
tougher decisions down the road. "Countries are extremely reluctant to move to a
common approach on energy because they've got very different attitudes," says Fabian
Zuleeg from the European Policy Centre, a think tank in Brussels. "There are
competing priorities, such as the question of how much do we need low energy prices for
competitiveness and for growth, how much climate-change mitigation can we finance, and how
much energy dependency do we need and what that should cost." The commission says the
bloc spends 1 billion a day on fossil-fuel imports, accounting for 53% of energy
use, against 40% in 1990. Russia's OAO Gazprom OGZPY -0.34% monopoly supplied 39%
of EU natural gas in 2013and six EU countries, including Lithuania and Bulgaria, are
entirely dependent on Gazprom for supplies." |
"Russia's Gazprom has held talks
about a Hong Kong listing and may use the yuan currency in a recently agreed gas deal with
China as it looks to strengthen its foothold in energy-hungry
Asia. Moscow has looked east for new business and energy deals as relations with the West deteriorate. China and Russia signed a $400 billion gas supply
deal in May, linking Russia's huge gas fields to Asia's booming market for the first time.
Gazprom listed its American Depositary Receipts (ADRs) on the Singapore stock exchange
last week, giving it greater access to Asian investors. Its American Depositary Receipts
(ADRs) are already listed in London. "We are in talks to add a listing on the Hong
Kong stock exchange. The next step is upgrading the level of our listing in
Singapore," Gazprom Chief Financial Officer Andrei Kruglov said at a briefing for
reporters on Thursday. He said Gazprom was preparing
to receive payments in Chinese yuan for supplying gas to China. The
Kremlin-controlled company plans to sell 38 billion cubic metres of gas a year to the
world's most populous country from 2018." |
"The US has given permission to
two firms to export oil, after it has been lightly processed - a move that could see oil
exports from the US increase. Exports of unrefined crude oil produced in the US have been
mostly banned for nearly four decades. But there
have been calls to ease that ban, not least due to rising oil production and a shale oil
boom. However, the White House said the move by the Commerce Department did not indicate a
change in policy. "As the Commerce Department has said, oil that goes through a
process to become a petroleum product is no longer considered crude oil," spokesman
Josh Earnest said. The US Commerce Department, which controls oil exports, has given
permission to Pioneer Natural Resources Co and Enterprise Products Partners to ship a type
of ultra-light oil to foreign buyers. The US has
restricted most crude exports since mid-1970s, in response to the Arab oil embargo. While
there have been calls for the restrictions to be eased, some have cited concerns that any
such move may see fuel prices in the US rise and hurt domestic businesses and consumers." |
"Some observers are already
saying that large increases in Iraqi oil production in the immediate future are unlikely,
but as yet few are writing off the current 3.3 million barrels of daily oil production.
Lets assume, however, that before this year or next is out, Iraqi oil exports drop
substantially as it has in several other oil exporting states undergoing similar political
trauma. Just what does this mean for the worlds oil supply? With 2.5 million
additional barrels of oil disappearing from the market added to the 3.5 million that have
already been lost due to lower production in Libya, Iran, Sudan, and Nigeria, the world
markets would clearly be stressed. The Saudis could
probably come up with an extra million b/d for a while, but that is about it. Iran could
sign a nuclear treaty this summer and be out from under sanctions, but it will take a
while to develop significant increases in production. Libya, Sudan, Syria, Nigeria and
Yemen show no signs of settling their internal political problems and start exporting
significantly larger amounts of crude in the foreseeable future. Keep in mind that global
demand for oil has recently been increasing at a rate of about 1.2 million b/d or so every
year, while depletion of existing oilfields requires that another 3-4 million b/d be
brought into production each year just to keep even. Many people including government
forecasters are looking to increasing U.S. shale oil production and more deepwater oil
from the Gulf of Mexico to keep the worlds supply and demand in balance without
sharp price increases. Somewhere down the line there may be more oil produced from the
Arctic; from Kazakhstan; from off the coast of Brazil; from East Africa, and even
significant shale oil production from other than in the U.S., but it will be many years
before these new sources can start producing significant amounts of crude and none of
these are likely to make up for any shortages that develop in the next few years.
Deepwater oil production from the Gulf of Mexico has been flat recently, and we are
starting to get indications that the rapid increases in US shale oil production, which
have kept prices under control for several years, may be drawing to a close. The geology
of shale oil production dictates that once it stops growing, a rapid decline in production
is likely. In sum, it looks as if there will be higher and possibly much higher oil and
gas prices coming soon. If ISIS decides that the way to finish off the Shiite
infidels is by cutting their oil revenues, then a bombing and terror campaign
against southern Iraqi oil installations and oil workers would be a likely result. It
would not take much to send the foreigners running. The Chinese are already moving out
some of the 10,000 oil workers they have in southern Iraq and others are likely to follow
as we have seen in so many other places. Where do oil and gas prices go? The official
forecasters are only talking about another couple of dollars a barrel this year, but this
is clearly too low if significant shortages develop." |
"Millions of barrels of crude oil flowing from shale formations
around the countrynot just North Dakotaare full of volatile gases that make it
tricky to transport and to process into fuel. Oil from North Dakota's Bakken Shale field
has already been identified as combustible by investigators looking into
explosions that followed train derailments in the past year. But high gas
levels also are affecting oil pumped from the Niobrara Shale in Colorado and the Eagle
Ford Shale and Permian Basin in Texas, energy executives and experts say. Even the
refineries reaping big profits from the new oil, which is known as ultralight, are
starting to complain about how hard it is to handle with existing equipment. Some of what
is being pumped isn't even crude, but condensate: gas trapped underground that becomes a
liquid on the surface.... Until a few years ago, the
oil available to U.S. refiners was dirty and heavy. Refiners spent billions of dollars on
equipment to turn that gunk from Venezuela and Canada into gasoline and diesel. That has
changed as oil companies began using some of the same techniques, including hydraulic
fracturing, that produced the natural-gas boom. U.S. oil production rose by 3 million new
barrels a day between 2009 and 2013, bringing the country's total output to 8.4 million
barrels a daythe highest level since 1988. There are geologic reasons that the new
oil is particularly gassy and volatile. Over millions of years, organic material turns
into a brew of hydrocarbons: crude oil, natural gas and other gas-infused liquids. The
longer that fossil-fuel mixture cooks undergroundin intense heat and under
tremendous pressurethe more molecules escape from their source rocks and migrate to
reservoirs where there is room to move around, says Scott Tinker, the state geologist for
Texas. In those reservoirs, the oil and gas separate into less-dense gas on top and
heavier crude oil below, much like a shaken vinaigrette settles into distinct layers. But
shale rock is so dense that much less oil and gas escapes from it. The energy industry
must frack shale to create tiny fissures so that oil and gas can flow out. Those minuscule
pathways let only the smallest molecules rise, which is why large volumes of gas and the
lightest liquids are coming out of the ground. In most cases, ultralight oil doesn't look
like black gold. In fact, it can be as clear as water and some oil from the Eagle Ford
Shale in Texas brims with so much dissolved gas that it bubbles, giving the appearance of boiling at room temperature. That
gas makes ultralight shale oil highly combustible in a way conventional crude is not. In
the past year, derailments of trains carrying light crude have resulted in spectacular
blowups, including an explosion that killed 47 people in Quebec last July." |
"Austrian energy company OMV and
Russia's Gazprom signed a contract on Tuesday for the construction of the South Stream
pipeline's Austrian section. It came just hours before Russian President Vladimir Putin
arrived in Vienna for a one-day visit. While OMV general director Gerhard Roiss said the
South Stream pipeline would "ensure energy security for Europe, particularly for
Austria," the US embassy in Vienna launched a thinly veiled attack on the move. In a
statement, it said that trans-Atlantic unity had been essential in "discouraging
further Russian aggression" and that the Austrians "should consider carefully
whether today's events contribute to that effort." In a meeting with Austrian
president Heinz Fischer, Putin slammed the criticism by saying that "our American
friends... want to supply Europe with gas themselves. They do everything to derail this
contract..." Fischer also defended the project, stating that "no one can tell me
why... a gas pipeline that crosses NATO and EU states can't touch 50 kilometers (31 miles)
of Austrian territory." Putin and Fischer also
emphasized Russia's and Austria's close business ties, with Putin calling Austria an
"important and reliable" partner. Austria was the first western European country
to sign, in 1968, long-term gas supply deals with Moscow. Russia is Austria's
third-biggest non-EU trading partner after the United States and Switzerland. While
Austria is a member of the EU and should, therefore, endorse the bloc's visa bans and
asset freezes against Russia, Fischer said on Tuesday that he opposed sanctions against
Moscow. But he also told Putin Moscow's annexation of Crimea violated international law.
South Stream, which will cost an estimated $40 billion (29.4 billion euros), is designed
to carry Russian gas to the center of Europe. Russia currently supplies a third of
Europe's gas. The pipeline bypasses the current transit route through Ukraine and would make Europe even more
dependent on Russian gas, critics say. The EU Commission says South Stream as it
stands does not comply with EU competition law because it offers no access to third
parties. The EU also objects to the fact that Gazprom will control both the pipeline
itself and the gas supply. The pipeline will stretch across Russia, under the Black Sea
and then through Bulgaria, Serbia, Hungary and Slovenia to Austria. Gazprom's partners for
the offshore part of the project are Italy's ENI, Germany's Wintershall Holding and
France's EDF." |
"Escalating violence in Iraq is threatening the development of some of
the world's largest oil reserves at a time when OPEC's number-two producer was expected to
be a key future supplier. Western majors including BP, ExxonMobil and Shell, along with
state-backed Chinese giants CNOOC and CNPC, have ploughed billions of dollars into the
country's oil fields since 2008. But now a lightning offensive led by jihadists from the
Islamic State of Iraq and the Levant (ISIL) means the anticipated modernisation of Iraq's
major southern oil fields is looking slimmer by the day. "There's no question that
outside of North America, Iraq is the country that matters the most for future
production," Antoine Halff, the head of the IEA's oil markets and industry division,
told AFP. So far, insurgents have forced the shutdown of Iraq's main oil refinery but has
not reached the main oil fields of the south, which account for 90 percent of exports.
Global oil prices have risen from around $109 a barrel to nine-month highs of over $114 a
barrel on the back of the crisis, but are nowhere near what analysts predict they could
reach if Iraq stops exporting. "In an 'ugly' scenario, where the bulk of Iraqi supply
is lost, the price of Brent could easily surge to new record highs above $140," said
Capital Economics. But in the long-term, the bloodshed could hinder access to Iraq's low
cost-oil supplies, which account for 11 percent of proven world reserves, just as the
depletion of mature fields elsewhere is starting to bite. Iraq
has ramped up production in recent years and currently produces 3.3 million barrels a day
(bpd). The International Energy Agency expects that to grow to 6 million by 2020,
accounting for around 60 percent of the cartel's production growth. That's key as the
agency predicts world oil demand will breach 100 million bpd in 2019, with developing
countries overtaking the developing world for the first time. "For upstream, there
are a lot of investments that are going to happen from 2016," said Hans Nijkamp, vice
president of Shell Iraq.... While it is unlikely ISIL could take direct control of fields
in the Shiite south, they could target authorities and oil company headquarters in the
capital. They could also spread chaos using sabotage and terrorism as they did in the
northern province of Anbar, where a key pipeline has been disabled since March. The IEA
has cut its growth outlook for Iraq by around half a million barrels to 4.29 million bpd
by 2018, citing concerns about security, infrastructure and corruption that existed before
the latest violence. "It's quite clear to all of us what the potential of Iraq is but
we all know that the capacity to realise that potential has been seriously
compromised," said Jeremy Greenstock, chairman of Lambert Energy Advisory. "It's
not just a question of security on the ground... the investment sector has to be reassured
that Iraq can manage its business in order to provide return on that investment." Iraq's ability to boost exports is particularly important given that
violence is disrupting exports from other producers such as Libya and Syria. The IEA
estimates OPEC's 2014 spare capacity at 3.52 million barrels a day -- 80 percent from
Saudi Arabia -- so in theory the cartel could replace almost all of Iraq's supplies. But
that would leave very little margin for error, especially if a rebound in global growth
drives a faster-than-expected rise in demand. Disruption in Iraq would be a particular
issue for resource-hungry China, which is now the largest foreign investor in the
country's oil sector. Last year China overtook the US to become the world's top oil
importer and it is expected to be a key driver in pushing up world demand by 2020. China
National Offshore Oil Corp. and China National Petroleum Corp. both have huge investments
in the south and China has a total of 10,000 workers on the ground. Halff said Beijing was
likely to turn to Saudi Arabia, which produces crude of similar quality to Iraq's, and to
Iran and Russia for supplies. The Iraq crisis has also turned the spotlight onto exports
from the autonomous region of Kurdistan, which Baghdad says are illegal as it claims the
sole right to develop and export Iraqi oil. Kurdistan wants to increase them to 400,000
bpd by the end of 2014, from 125,000 bpd currently, and said it has already started
pumping oil through Turkey." |
"A tanker delivered a cargo of
disputed crude oil from Iraqi Kurdistan's new pipeline for the first time on
Friday in Israel,
despite threats by Baghdad to take legal action against any buyer. The SCF Altai tanker
arrived at Israel's Ashkelon port early on Friday morning, ship tracking and industry
sources said. By the evening, the tanker began unloading the Kurdish oil, a source at the
port said. The port authority at Ashkelon declined
to comment. Securing the first sale of oil from its independent pipeline is crucial for
the Kurdish Regional Government (KRG) as it seeks greater financial independence from
war-torn Iraq. But the new export route to the Turkish port of Ceyhan, designed to bypass
Baghdad's federal pipeline system, has created a bitter dispute over oil sale rights
between the central government and the Kurds. Reuters was not able to confirm whether the
KRG sold the oil directly to a buyer in Israel or
to another party. Oil cargoes often change hands multiple times before reaching their
final destination.The United States, Israel's closest ally, does not support independent
oil sales by the Kurdish region and has warned possible buyers against accepting the
cargoes. Israeli leaders have been alarmed in recent months, however, by signs of a
possible rapprochement between Washington and Iran." |
"Non-EU nation Norway will only
help the European Union with any supply crisis caused by the Russia-Ukraine gas price
dispute if it makes commercial sense, officials told a meeting called in Brussels on
Friday to address energy security. Ukraine, which also attended the meeting of the EU gas
coordination group, promised it would ensure "continued and undisturbed transport of
gas". So far, none of the 28 EU member states has reported any disruption, the
European Commission, which chaired the meeting, said in a statement. The meeting of EU industry and national experts, plus officials from
Norway and Ukraine, was one of a series this year as conflict has raged between Russia and
Ukraine - a transit route for about half of the gas Russia supplies to the EU. Concerns
over possible disruption of shipments to the EU intensified this week after Gazprom cut
off Ukraine's gas because of unpaid bills and disagreements over pricing. For now, the gas
situation is comfortable, with all gas fields in the EU running at maximum capacity and
storage levels ample at 53 billion cubic metres (bcm), more than a year ago following a
mild winter, the Commission statement said. In total, EU gas demand is around 485 bcm, of
which Russia supplies around 30 percent. EU Energy Commissioner Guenther Oettinger, who
has been brokering talks between Russia and Ukraine, has said he will use the summer
months to try to resolve the gas price row. He holds a meeting with Ukraine's energy
minister on Tuesday. On Thursday and Friday EU heads of state and government will debate
energy security at summit talks. In the event Oettinger does not get a solution in time
for peak winter demand, EU gas industry sources say they have more options than in
previous gas crises in 2006 and 2009 because of improved storage and better
infrastructure, including facilities for handling liquefied natural gas (LNG). Norway,
which neighbours the European Union and is the No. 2 supplier to Europe after Russia,
would be the obvious place to turn to for extra EU supplies. However, non-EU supplier
Norway told the meeting the availability of extra gas in periods of high demand depended
on "the attractiveness of European prices and commercial decisions", the
Commission said in a statement. Norway said excess pipeline capacity was available, but
there could be technical constraints. The U.S. Energy
Information Administration said that in 2013, 13 percent of Norwegian gas exports went to
buyers beyond Europe." |
"The IEAs Medium-Term Oil
Market Report 2014 has predicted that global growth in oil demand may start to slow down
as soon as the end of this decade, due to environmental concerns and cheaper alternatives,
and despite boosting its 2014 forecast of global demand by 960,000 barrels per day. While
supply is forecast to remain strong thanks largely to the unconventional, or
tight oil revolution currently underway in north America the IEA says
it expects the global market to hit an inflexion point, by the end of 2019,
after which demand growth may start to decelerate due to high oil prices, environmental concerns and
cheaper fuel alternatives. These factors, says
the report, will lead to fuel-switching away from oil, as well as overall fuel savings. In
short, it says, while peak demand for oil other than in mature
economies may still be years away, and while there are regional differences, peak
oil demand growth for the market as a whole is already in sight. Its worrying news for the over-invested and under-prepared; not least of
all oil importing nations, to which, as Samuel Alexander noted in this article last September, the economic costs of peak oil
are especially significant. When oil gets
expensive, everything dependent on oil gets more expensive: transport, mechanised labour,
industrial food production, plastics, etc, he wrote. This pricing dynamic
sucks discretionary expenditure and investment away from the rest of the economy, causing
debt defaults, economic stagnation, recessions, or even longer-term depressions. That
seems to be what we are seeing around the world today, with the risk of worse things to
come. This then adds to the peak oil cycle,
increasing governments motivation to decarbonise their economies better late
than never not only because oil has become painfully expensive, but also
because the oil we are burning is environmentally unaffordable. This view has been
echoed in numerous recent reports. US investment banks Sanford Bernstein raised the
prospect of energy price deflation, caused by the plunging cost of solar and
the taking up of market share by that technology as it displaced diesel, gas and oil in
various economies. It predicted that could trigger a massive shift in capital. Analyst Mark
Fulton last month also questioned the wisdom of the private-sector investing over
$1 trillion to develop new sources of high-cost oil production. While Mark Lewis, of
French broking firm, suggested that $US19
trillion in revenues could be lost from the oil industry if the world takes
action to address climate change, cleans up pollution and moves to decarbonise the global
energy system. The IEA report also includes an updated forecast of product supply, which
draws out the consequences of the shifts in demand, feedstock supply and refining
capacity." |
"The sectarian strife in Iraq has put growth of Opec crude oil production
capacity over the next five years at risk, according to the International Energy Agency,
highlighting the importance of the country to the global energy market. Roughly 60 per
cent of the growth in the oil-producing cartels production capacity up until 2019
was expected to come from Iraq. Given Iraqs precarious
political and security situation, the forecast [for Opec output capacity growth of 2.08m
barrels a day for 2013-19] is laden with downside risk, the watchdog backed by
wealthy nations said in its medium-term
oil market report released on Tuesday. Sunni insurgents from the Islamic State of Iraq
and the Levant (known as Isis) made further territorial gains over the Shia-led government
in northern Iraq, having already taken the city of Mosul. The escalating violence has threatened the disintegration of the country
and the oil supplies of Opecs second-largest crude producer after Saudi Arabia. The
military offensive brought home to markets.....how unstable and volatile the Iraqi
political situation remains, the IEA said of the nation that produces more than 3m
b/d. Iraq had re-emerged as a critical source of oil in recent years, reaching a
35-year high of 3.6m barrels in February. Although Abdul Kareem
Luaibi, the countrys oil minister, struck a defiant tone last week in Vienna,
analysts say it is unlikely Iraq will hit its 2014 4m b/d production target. This
offensive is not only raising concerns about future production from operating and new
projects, but casting a pall on the functioning of the countrys government
institutions and even on regional stability, the IEA added. While Baghdad is
targeting output of 8.5m-9m b/d by 2020, the IEA has cut its forecast by almost 500,000
b/d because of the recent strife and projects that the country will produce just 4.5m b/d
by 2019. Concerns over Iraqi supply come as fighting in Libya has stalled production while
international sanctions against Iran over its nuclear programme have cut exports. Nigerian
production has been plagued by theft." |
"The price of oil is at its most stable since 1970, as a huge
increase in US oil production offsets disruption to supply from places such as Libya,
according to BP. Christof Rühl, group chief
economist, said the world had seen a cumulative 3m barrels a day of supply disruption
since the start of the 2011 Arab uprising but that had been cancelled out by a
similar extra amount of US production. There has been an almost perfect match
between outages in north Africa and elsewhere and US production growth, he said. The
equilibrium had created an eerie quiet in global oil markets. Its
sheer coincidence they have nothing to do with each other so wont last
forever, he added. Mr Rühl was presenting BPs latest annual statistical
review, an oil industry bible which contains country-by-country data on oil and gas
production, consumption and reserves. This
years review highlights the huge impact Americas shale revolution has
had on global energy markets. The widespread use of
techniques such as hydraulic fracturing, or fracking, and horizontal drilling has
opened up vast reserves of oil and gas that were long thought uneconomic to extract. The
shale boom has transformed Americas energy outlook, ending a decades-long decline in
oil production and cutting natural gas prices by two-thirds from their 2008 peak. It has also encouraged hopes of an industrial renaissance based on cheap
energy. Mr Rühl said the US experienced the
worlds largest increase in oil production last year 1.1m b/d. Indeed, he said
it was one of the largest annual oil output increases the world has seen. US oil
production exceeded 10m b/d in 2013, reaching its highest level since 1986. But the boom in the US has been counterbalanced by disruptions elsewhere
in the world, particularly in the Middle East. Unrest in Syria and Libya has led to big
drop-offs in production and fears are growing that the violence in Iraq, where jihadi
militants last week gained control of the towns Mosul and Tikrit, could affect that
countrys output too. As a result, average oil prices remained unusually stable
albeit at levels exceeding $100 per barrel for
a third consecutive year, BP said. Dated Brent averaged $108.66 per barrel last year, a decline of
$3.01 from 2012 levels. Bob Dudley, BPs chief
executive, said this years review demonstrates the strength of the flexible
global energy system in adapting to a changing world. BP
also noted a big increase in oil consumption in the US. Demand grew by 400,000 b/d
the fastest growth of any country last year. That was led by the industrial sector, as the
US emerged from the 2008 financial crisis. US demand growth also outpaced the growth in
Chinese energy consumption for the first time since 1999. Chinese oil demand grew by only 390,000 b/d the lowest since the
recession of 2009. Mr Rühl noted there was a mismatch between Chinas energy demand
growth, which slowed to 4.7 per cent in 2013, down from a ten-year average of 8.6 per
cent, and Chinas GDP growth, which stood at 7.7 per cent last year." |
"As world leaders try to generate momentum for an international
agreement on and solution to climate change, large amounts of coal continue to be produced
and burned. In fact, coal consumption now accounts
for more than 30 percent of the world's energy market -- its
highest share in 44 years. According to a
recently released report, the "BP Statistical Review of World Energy 2014," coal consumption
grew three percent in 2013 -- more than any other energy source. That's a dip from coal's
ten year average; consumption of the fuel has grown nearly 4 percent per year over the
last decade. It's bad news for those who had hoped alternative and renewable energy
sources would cut into the dominance of dirtier, more traditional sources like coal.
Although renewables continue to grow, especially wind and solar, they can't keep up with
cheaper and more popular competitors like coal. Americans -- who sit on the largest coal
reserves in the world -- are using less coal, thanks to the abundance of cheaper shale
gas. But the U.S. is still producing and exporting the fuel to Europe and Asia in huge
amounts, chiefly China and India. Though China's energy consumption growth rate
declined slightly, BP report authors pointed out that "the country still accounted
for 67 percent of global growth." "India experienced its second largest
volumetric increase on record and accounted for 21% of global growth," economists at
BP wrote. Coal is now challenging oil for the tile of
world's most popular energy source. Though oil still accounts for the largest slice of the
world's energy pie, at 33 percent, its the least popular its been in years." |
"U.S. production of liquid
petroleum hit a 44-year high of 11.27 mil barrels per day in April, the Financial Times
reported, just shy of the 11.3 mil it averaged in 1970. But output likely surpassed that mark in recent weeks. Separately, the
Energy Information Administration said oil exports hit a 15-year high in April with
268,000 barrels of crude per day, up 8.9% from March." |
"US production of liquid petroleum is surpassing its previous peak,
reached in 1970, in the latest landmark for the countrys shale oil boom. Four
decades of decline in US oil output have been reversed in just five
years of growth. Petroleum production, including crude oil and related liquids, known
as condensate, and natural gas liquids (NGLs) such as ethane, was 11.27m barrels per day
in April, almost equalling the peak of 11.3m b/d reached as an average for 1970. Recent
growth rates suggest that it has now exceeded that figure. The composition of US production today
is not the same as in the early 1970s, in that it has a higher proportion of NGLs,
which have a lower energy content and value than crude oil. Crude production of 8.3m b/d
in April was still well short of its record high of 10m b/d in November 1970. Even so, the rebound in US output has refuted claims that it was in
irreversible long-term decline. Forecasts from the US Energy Information Administration
suggest that crude production will also come close to its 1970 peak in the next few years.
The US is already the worlds largest producer
of oil and gas, taken together, and is one of the top three in terms of oil alone,
alongside Russia and Saudi Arabia. The US boom is in
sharp contrast to oil production elsewhere in the world, which is constrained by decline
in mature areas such as the North Sea and political and security issues in countries such
as Iraq and Syria. UK oil production has continued a steep decline in recent years,
falling by more than two-thirds from its high point of just under 3m b/d in 1999.... However, the US governments EIA has predicted that production will
peak again around 2020 and then start to decline. Mark Lewis, an energy analyst at Kepler
Cheuvreux, said that because the most attractive reserves had been drilled first, and the output from old shale wells declined very quickly, future production growth would be more difficult to achieve. Predictions
that the US could surpass Saudi Arabias crude oil production of about 9.7m b/d and
sustain that for a long time were completely overblown, he added." |
"EU energy ministers agreed a
deal on Friday to limit production of biofuels made from food crops, responding to
criticism these stoke inflation and do more environmental harm than good. The ministers'
endorsement of a new compromise overcomes a stalemate hit late last year when European
Union governments failed to agree on a proposed 5 percent cap on the use of biofuels based
on crops such as maize or rapeseed. Friday's deal would set a 7 percent limit on the use
of food-based biofuels in transport fuel. The new deal must now be considered by the
newly-elected European Parliament. "We think
this proposal is much better than nothing," European Energy Commissioner Guenther
Oettinger told the Luxembourg meeting of ministers. "We need to support research and
development in advanced biofuels so we can move forward from generation one into
generation two and generation three," he added, referring to more sophisticated
biofuels which do not compete with growing crops for food. The proposed 7 percent limit is
part of a goal to get 10 percent of transport fuel from renewable sources by 2020, as part
of efforts to curb greenhouse gas emissions and EU dependence on imported oil and gas.
Initially, the European Union backed biofuels as a way to tackle climate change, but
research has since shown that making fuel out of crops such as maize displaces other
crops, forces the clearing of valuable habitats, and can inflate food prices.The next generation of advanced biofuels, made from waste or
algae for example, does not raise the same problems, but does require more investment. The
compromise supported by ministers on Friday includes a 0.5 percent non-binding target for
next-generation biofuels, which environment campaigners say is nowhere near enough to make
a difference. The agreement could mean that the
overall goal to get 10 percent of transport fuel from renewable sources by 2020 is missed,
analysts say. Currently around 5 percent of EU transport fuel comes from renewable
sources. Food-based bio-refiners, which have invested on the basis of the original 10
percent, say a lower target threatens jobs. And those trying to develop advanced biofuels
say the progress they are making is under threat." |
"Spectacular advances by Jihadi
forces across northern Iraq have raised the spectre of a Sunni-Shia conflagration in the
heart of the Middle East, triggering a surge in oil prices and throwing into doubt the
structure of global energy supply for the next decade. Brent crude jumped above $113 a barrel as the self-described Islamic State
of Iraq and the Levant (ISIL) raced down the Tigris Valley towards Baghdad with
sophisticated weaponry, seizing on its momentum after the historic capture of Mosul. Oil
prices are approaching levels last seen during the Arab Spring. Iraq is turning into
a nightmare. There are real risks that this movement will spread to other countries. Our
economies are too weak to pay for oil at $120, and they cant stand $140 if it spikes
that high, said Chris Skrebowski, a veteran oil analyst and former editor of
Petroleum Review. Iraq is Opecs second-biggest producer, though output has slipped
8pc to 3.3m barrels a day (b/d) since February due to sabotage of the Kirkuk-Ceyhan
pipeline to Turkey. Ole Hansen, from Saxo Bank, said a fall in Iraqi output to levels seen
in the last Gulf war would cause a $20 price spike. The entire economic recovery
could stall, and we could even slip back into recession in some regions, he
said." The International Energy Agency is
counting on Iraq to provide 45pc of the entire increase in global oil supply by the end of
the decade, badly needed to meet growing demand in China and India. This requires vast
investment rising to $540bn by 2035 as output tops 8m b/d but such outlays
are implausible as the state slides towards sectarian civil war....Michael Lewis, from Deutsche Bank, said the pitched battles have
created a new event risk for global oil markets, leaving it far from clear
whether developments such as the West Qurna 2 field will be completed as planned. The
unfolding drama comes at a time of near paralysis in Libya, where militia conflicts have
cut output to less than 200,000 b/d, barely a fifth of the potential. There is a tentative
deal in the works but it will take months to crank up output. Libyan crude is very
waxy. If you leave the taps off for 12 months it precipitates out. You cant just
turn it back on again, said Mr Skrebowski. China
has been boosting its strategic petroleum reserve at a record pace, tightening the global
market just as disruptions in Azerbaijan, Colombia, Mexico, South Sudan and other non-Opec
suppliers cut output by 500,000 b/d, enough to tip the balance in a global market of 92m
b/d. The IEA called on Opec to raise output by 900,000 b/d even before the drama in Iraq.
The cartel has ignored the pleas, deciding on Wednesday to keep its quotas unchanged at
30m b/d. Most Opec members need prices near $100 just to cover their budgets. Elizabeth Stephens, from Jardine Lloyd Thompson, said the ISIL Jihadis
fund themselves by control over Syrias oil fields, selling $18m of crude each month
to the Assad regime. Perhaps we should be encouraging Assad to buy from the West,
but that would be an embarrassing change of policy, she said. The world is ever more
dependent on bringing Iran back into the fold. An end to sanctions would allow Tehran to
sell an extra 1m b/d, with potential for much more as investment revives." |
"The energy watchdog today
ordered power firms to explain why they have not passed on dramatic falls in the price
they pay for gas. Wholesale gas prices have
almost halved since the start of the year, after one of the mildest winters in recent
times. Ofgem said that 'as far as we know' the large suppliers had not explained the
price drops to customers, and must act to restore trust. Families have seen bills continue
to rise this year, but falling wholesale gas mean the energy companies are making bigger
profits. Wholesale gas was being traded at 37.55p per therm yesterday, down from around
70p in December. Experts said the mild winter mean gas stores which would normally be
running low at this time of year are almost full.... Last year, after freezing
temperatures in March and April, the price surged to more than £1 per therm. The spike
was blamed by energy companies for their round of price hikes announced in December." |
"In clinching a $400 billion
deal last month to buy Russian gas, China may end up helping out its old political and
economic rival in a way that matters hugely for Japan - energy security. The China-Russia agreement, the biggest gas deal
ever, unlocks new gas supplies and could bring down gas prices across Asia, a development
that would pay the biggest dividends
for Japan, the world's top buyer of liquefied natural gas. Other big Asian gas buyers such as South Korea and Taiwan could also benefit. The deal, signed on May
21, cemented a dramatic shift in energy flows from the West to the East. Gas will be
transported to China via a new pipeline linking Siberian gas fields from 2018, building up
gradually to 38 billion cubic metres a year. China has massive gas needs, but access to
more of the fuel is also vital for Japan since its utilities
pay the world's highest prices. Japan buys about a third of global LNG shipments and spent
a record 7.06 trillion yen ($70 billion) last year, mostly for electricity generation to
replace idled nuclear reactors following the Fukushima disaster in 2011. There are hopes
that piping Russian gas to China will create a new price benchmark that could cut prices
for Asian LNG buyers as well as providing new gas sources. "This will surely put downward pressure on gas prices and some say it
is the beginning of the end of the Asia premium," Masumi Kimura, a researcher at
Japan Oil, Gas and Metals
National Corp (JOGMEC), said in a note, referring to the higher price paid for gas in Asia
compared to other parts of the world. Russia's Gazprom declined to confirm what price the
deal with China was struck, but industry sources say it translates to about $10-$10.50 per
million British thermal units, an international pricing standard, well below the current
level of around $13 for spot Asian cargoes. A source at one of the biggest Japanese buyers
of gas shipped in liquid form said that the new Russian gas should absorb some Chinese
pressure on LNG demand in Asia. Others were cautious,
however, over the potential impact. "The Russian gas will be coming into the
northeast of China, into a market that was never going to be served by LNG in the first
place," said Gavin Thompson, head of Asia-Pacific gas and power at consultancy Wood
Mackenzie. .... The Chinese deal has also revived
talk of a pipeline from Russia to Japan. A group of 33 ruling party lawmakers plans to
lobby Abe to sign a deal on a gas link with Putin at an estimated cost to build of about
$6 billion compared with more than $40 billion for the Chinese pipeline. But Daiske
Harada, an economist with JOGMEC focusing on Russia, said Rosneft and Gazprom were more
interested in pushing exports by LNG to the Pacific market, not by pipeline. Gazpom plans
to build a second plant in Vladivostok by 2018, with a capacity of 10 and 15 million
tonnes of LNG per year, and also a spur to the Chinese pipeline to bring gas to
Vladivostok. Rosneft and ExxonMobil also plan an LNG plant on Sakhalin to produce 5
million tonnes a year from 2018. Along with Russian
supplies, Japan could also benefit with the United States due to start shipping shale gas from as early as 2015. Other
potential sources include West Africa and Canada." |
"Gazprom Neft had signed
additional agreements with consumers on a possible switch from dollars to euros for
payments under contracts, the oil company's head Alexander Dyukov told a press conference.
'Additional agreements of Gazprom Neft on the
possibility to switch contracts from dollars to euros are signed. With Belarus, payments
in roubles are agreed on,' he said. Dyukov said nine of ten consumers had agreed to switch
to euros. ITAR-TASS reported earlier that Gazprom Neft considered the possibility to make
payments in roubles under contracts. Some contracting
parties agree to switch from dollars to euros and Yuans. 'The so-called Plan B is already partially worked out. The switch of
dollar contracts to euros and Yuans is agreed on with some of our contracting parties.
Under consideration is the possibility to switch contracts to roubles,' Dyukov said at the
St. Petersburg International Economic Forum." |
"[Mexican President] Peña
Nieto, 47, had signed into law a constitutional amendment that Pemex, its powerful union
and its political backers had fought for decades. The amendment will open Mexican oil and
gas fields to foreign and private investment for the first time in 76 years. After signing the law Dec. 20, Peña Nieto told his countrymen that
it would be a boon... Pemex has always functioned as an arm of the state. Its the
biggest Mexican company and the countrys biggest taxpayer. In the final quarter of
2013, Pemex paid 50 percent of its revenue $16 billion in taxes to
the federal government, which uses the state-owned company to fund a third of its budget.
Pemex posted a loss of $5.8 billion for the quarter, bringing its total loss for 2013
to $13 billion. It lost $2.74 billion in the first quarter of 2014.... For Pemex, the constitutional change will mean it gets much-needed
help in increasing its oil production, which has declined for nine years and in March hit
its lowest monthly level since 1995. For foreign oil giants such as Chevron, Exxon
Mobil and Royal Dutch Shell, it means gaining access to untapped oil reserves that
Pemex says could total 113 billion barrels, including 26.6 billion in the deep
waters of the Gulf of Mexico. The reserves are worth
$11 trillion. Pemex chief Emilio Lozoya says
Mexico also boasts 460 trillion cubic feet of unexploited
shale gas in the rock formations beneath its soil, worth an estimated
$2.2 trillion. Energy -policy scholar and consultant Kent Moors says the five major
fields identified could produce a 'shale frenzy' among private companies. The foreign incursion into the oil and gas fields will begin this year
after the Mexican Congress passes secondary legislation. .... Mexicos near-term goal is to raise production
20 percent, to more than 3 million barrels a day, by 2018. Delays in passage of
the implementing legislation and the awarding of contracts makes that unlikely, says Maria
Jose Hernandez of the Eurasia Group, a global risk consulting firm. Peña Nietos plan is for Pemex to, in effect, cease to be a
government department and function like a for-profit company. To further that goal, the
government plans to allocate $28 billion to Pemex for oil exploration and production
in 2014. As part of the overhaul, the National Union of Mexican Oil Workers will
relinquish its five seats on the Pemex board. The board will be trimmed to 10 members from
15 and will comprise five government officials selected by the president and five
independent members, according to Pemex board member Fluvio Ruiz. The models for a new Pemex, Lozoya says, are Petróleo Brasileiro,
the Brazilian oil major that opened to foreign competition in 1997; Norways Statoil;
and Colombias Ecopetrol, which has seen production almost double since state control
was limited in 2003....Mexico became a major oil exporter after the 1971 discovery of one
of the worlds biggest oil fields in the shallow waters of the Bay of Campeche. The
field was named Cantarell after the fisherman who alerted Pemex when he saw oil in the
water. Cantarells output has fallen almost 90 percent since 1979. That would
have been a catastrophe for the government had the price of oil not increased to more than
$100 a barrel during the past decade. The failure of
Pemex and its government overseers to invest in the latest drilling and exploration
technology is partly to blame for the decline. A critical issue for the future of Pemex is
manpower. The company is overstaffed with unskilled workers whose jobs are guaranteed for
life and understaffed with engineers and skilled laborers, says Marcelo Mereles, a former
Pemex director and now a partner at EnergeA, a consultancy.... Whoever does the drilling,
one area of great potential for Mexico is its shale deposits. Victor Herrera, managing
director for Latin America at Standard & Poors, says the petroleum embedded in
shale is the 'low-hanging fruit' of Mexicos energy overhaul. 'We could see a lot of
investment coming very quickly from Texas.' Thats because one so-far underexplored shale formation lies in northern Mexico
across the border from Texass prolific Eagle Ford field. Oil output at Eagle Ford rose to 1.2 million barrels a day last year
from about 50,000 in 2007." |
"A cargo believed to be Europe's
first major shipment of tar sands oil arrived in Spain this week, as European policymakers
proposed scrapping the requirement that such oil be labeled as more polluting than other
forms of crude.570,000 barrels of Western Canada Select heavy blend crude, originally from
Canada, arrived in Spain's port of Bilbao in the middle of this week, said a spokesman for
Repsol. The shipment, which he said was a first for
the Spanish oil and gas company, is part of a pilot project to test the capacity of its
refineries to process the heavy grade crude.... Producing oil from tar sands generates
higher greenhouse gas emissions than conventional oil. It has also been criticised for the
amount of water needed to extract it. In anticipation of the shipment, Spanish
environmentalists held a protest at the port of Bilbao last week.... The fuel quality directive, approved by EU member states in 2009,
mandates a 6% reduction in greenhouse gas emission from fuel by 2020. One proposal to
achieve this goal was to
designate oil from tar sands as 25% more polluting as compared to other forms of crude.
The Canadian
government has spent years lobbying against the proposal, arguing that it unfairly
singles out Canadian crude. EU member states failed to reach an agreement over the
proposal. According to a draft document seen by
Reuters, EU policymakers have proposed changes to the directive that would require
companies to report an EU-wide average of the emissions for raw materials, rather than
having fuel suppliers divulge the carbon footprint for the original crude oil used to make
their product. The changes could eliminate potential
hurdles for Canada in selling tar sands oil to Europe." |
"The world could provide energy
at a lower cost by doubling the share that comes from renewable sources such as
wind and solar power, according
to the international agency for supporting those technologies. The Abu Dhabi-based
International Renewable Energy Agency, which is backed by 170 governments, will present an
analysis to the UN in New York on Thursday showing the share provided by renewable energy
could double by 2030 if governments put in place policies to promote it. That implies a
greater potential for rapid growth in renewables than most other estimates have suggested. Irena said its assessment was the most detailed such study ever
conducted, and showed that the share of global energy derived from renewables could rise
from about 18 per cent today to 36 per cent in 2030. It added that the increase could be
achieved using todays technology, and globally would have a lower cost than using
fossil fuels, because of benefits to health and the environment from cutting pollution.
The calculated savings depend on assigning a value to cuts in carbon dioxide emissions,
because of their contribution to global warming, but Irena calculates that the shift would
save money even at a price of $20 per tonne of those emissions, a lower figure than is
used in many long-term projections. The cost of the transition to a greater share for
renewables would also be held down by expected declines in the prices of technologies such
as solar panels and advanced biofuels." |
"European governments must stop
handing generous subsidies to green energy technologies, the head of energy giant E.On has
warned. Johannes Teyssen said that renewable power sources, such as wind and solar, were
no longer in their infancy, so to continue to hand them special treatment had a distortive
effect. Speaking in London at the annual conference of Eurelectric, the European
electricity industry body of which he is president, Mr Teyssen said: '10 years ago
renewables were in an immature state and needed to be nurtured. 'Today they are the
biggest animal in the zoo and if you continue to treat them as imbeciles and feed them
baby nutrition you will just get a sick big cat.' He claimed the only people
blocking debate about ending financial aid for renewables were those who 'just want to
harvest subsidies without accountability'. Mr Teyssen has argued that Europe must scrap
all 'green levies' that are used to subsidise renewables. He has said he supports such
technologies but that the funding model is wrong and Europe should instead install a
proper carbon price to drive the market to find the most cost-effective ways of going
green. E.On, like most European utilities, is losing
money from its gas-fired power plants as expansion of renewable energy and cheap coal
prices mean they are only called upon to run for short periods of time. It has already
mothballed some plants and experts warn more closures could leave Europe at risk of power
cuts at times of peak demand when the sun doesnt shine or the wind doesnt
blow. In the UK, the Conserative party has pledged to end subsidies for onshore wind power
if it wins the next election. However, it appears committed to offshore wind, which is a
newer technology but still significantly more expensive. The Government has already
announced it is closing a subsidy scheme for large-scale solar farms two years early and
take-up exceeded expectations." |
"The turmoil in Ukraine should be a wake-up call for Europe's looming fuel and food crisis,
campaigners warned on Tuesday. Ahead of the G7 summit, organised by leaders after they
decided to boycott a G8 summit originally scheduled this week in Russia, Oxfam said
tension with Moscow because of the situation in Ukraine highlighted the need for Europe to
reassess its energy mix. Europe imports half its energy,
predominantly fossil fuels and Russia is the
EU's top supplier for both oil and gas, with European
countries paying more than £200 a person to Russian oil and gas giants last year, Oxfam
said. A report by the charity claimed that even if
EU governments met their climate and energy commitments for 2020, Europe's annual energy
imports bill would soar from £325bn to more than £400bn by 2030 because of rising
prices.... Oxfam urged Europe to end its reliance on imported fossil fuels and dirty
home-grown energy sources including coal and fracking. Instead the EU should shift its
focus to increasing energy efficiency and boosting renewable energy. Improving energy efficiency by 40% by 2030 could save each
household almost £250 a year, the charity said." |
"In a lecture to the Columbia
University Center on Global Energy Policy in February of 2014 Steven Kopits, who is the
Managing Director of the consultancy, Douglas Westwood explains how conventional 'legacy'
oil production peaked in 2005 and has not increased since. All the increase in oil
production since that date has been from unconventional sources like the Alberta Tar
sands, from shale oil or natural gas liquids that are a by-product of shale gas
production. This is despite a massive increase in investment by the oil industry that has
not yielded any increase in conventional oil production but has merely served
to slow what would otherwise have been a faster decline. More specifically the total spend
on upstream oil and gas exploration and production from 2005 to 2013 was $4 trillion. Of
that $3.5 trillion was spent on the legacy oil and gas system. This is a sum
of money equal to the GDP of Germany. Despite all that investment in conventional oil
production it fell by 1 million barrels a day. By way of comparison investment of $1.5
trillion between 1998 and 2005 yielded an increase in oil production of 8.6 million
barrels a day. Further to this, unfortunately for
the oil industry, it has not been possible for oil prices to rise high enough to cover the
increasing capital expenditure and operating costs. This is because high oil prices lead
to recessionary conditions and slow or no growth in the economy. Because prices are not
rising fast enough, and costs are increasing, the costs of the independent oil majors are
rising at 2 to 3% a year more than their revenues. Overall profitability is falling and
some oil majors have had to borrow and sell assets to pay dividends. The next stage in
this crisis has then been that investment projects are being cancelled which
suggests that oil production will soon begin to fall more rapidly.... According to Kopits the vast majority of the publically quoted oil
majors require oil prices of over $100 a barrel to achieve positive cash flow and nearly a
half need more than $120 a barrel. But it is these oil prices that drags down the
economies of the OECD economies. For several years however there have been some countries
that have been able to afford the higher prices. The countries that have coped with the
high energy prices best are the so called 'emerging non OECD countries' and above all
China. China has been bidding away an increasing part of the oil production and continuing
to grow while higher energy prices have led to stagnation in the OECD economies. .... As a society runs up against energy depletion and other problems
more and more production must go into energy acquisition, infrastructure and maintenance
less and less is available for consumption, and particularly for discretionary
consumption.... Over the last few years central banks
have had a policy of quantitative easing to try to keep interest rates low the
economy cannot pay high energy prices AND high interest rates so, in effect, the policy
has been to try to bring down interest rates as low as possible to counter the stagnation.
However, this has not really created production growth it has instead created a
succession of asset price bubbles. The underlying
trend continues to be one of stagnation, decline and crisis. The severity of the
recessions may be variable in different countries because competitive strength in this
model goes to those countries where energy is used most efficiently and which can afford
to pay somewhat higher prices for energy. Such countries are likely to do better but will
not escape the general decline if they stay wedded to the conventional growth model." |
"It will require $48 trillion in
investments through 2035 to meet the world's growing energy needs, the International
Energy Agency said Tuesday from Paris. IEA Executive Director Maria van der Hoeven said in
a statement the reliability and sustainability of future energy supplies depends on a high
level of investment.... The IEA's report says around
15 percent of annual investments target renewable energy resources, while the bulk of
spending, more than $1 trillion, is directed at fossil fuels. More
than half of the energy supply investments are needed to keep production of oil and gas
fields at current levels and to replace existing power plants before they reach the end of
their life cycle. IEA Chief Economist Fatih
Birol said getting the investments in the right place require a level playing field.
'Policy makers face increasingly complex choices as they try to achieve progress towards
energy security, competitiveness and environmental goals,' he said. 'These goals won't be
achieved without mobilizing private investors and capital, but if governments change the
rules of the game in unpredictable ways, it becomes very difficult for investors to
play.'" |
"NPR's Business News starts with the outlook for oil. This is a
change of course - the International Energy Agency has released a report on global energy
investment. And this group predicts the United States
will have to rely more heavily on Middle East oil in the coming years, as North American
sources start to dry up a little bit. U.S. energy production has boomed recently, much of
it coming from oil and gas extracted from shale. But the IEA says U.S. production will
start to lose steam around 2020, and that would put more bargaining power back in the
hands of OPEC countries, such as Saudi Arabia." |
"After spending the past decade and more than $200 billion acquiring
mines and oilfields from Australia
to Argentina, Chinas attention is
turning to food. The worlds most populous nation is confronting a harsh reality: For
every additional bushel of wheat or pound of beef the world produces, China will need
almost half of that to keep its citizens fed. And in a recognition that it cant
produce enough crops and meat domestically, mainland Chinese and Hong Kong-listed firms
spent $12.3 billion abroad on takeovers and investments in food, drink or agriculture last
year, the most in at least a decade, data compiled by Bloomberg show. ...China has 21
percent of the worlds population with just 9 percent of its arable land, and an even
lesser percentage of fresh water, according to Jefferies Group LLC. Rising incomes are
driving demand for more protein-rich food, while domestic output is close to its limits,
Abhijit Attavar, an analyst with Jefferies in Singapore, said in an
April 15 report." |
"In 2011, the main political parties in Angela Merkels Germany,
the fourth largest economy in the world, agreed on a new policy known as energiewende, meaning energy transition. Its
twin centerpieces are an 11-year phase-out of nuclear power plants, in the wake of
Japans Fukushima disaster earlier that year, and a target of cutting carbon
emissions by 80 to 95 percent by mid-century. Under the plan, renewables, predominantly
wind and solar, will supply 80 percent of Germanys electricity and 60 percent of its
total energy. Is achieving this goal possible, especially given that until recently
nuclear was Germanys main source of low-carbon energy?..... Germany has in the past
decade embraced renewables big-time. The country last year got 24 percent of its power
from solar and wind more than any other major industrialized nation. On some sunny
weekends, more than a million mini-solar power plants on roofs and land across the country
deliver half Germanys electricity needs. On stormy winter nights, thousands of wind
turbines can achieve the same.... Lignite was the
mainstay of power generation in communist East Germany, before Germany was reunified in
1990. Most of the old open-cast mines that once peppered the landscapes of states like
Brandenburg, east of Berlin, subsequently shut. But now companies such as Vattenfall are
opening new ones, along with new power stations to run on their output. Lignite burning is higher today than at any time since the 1990s. It generates 26 percent
of the nations electricity, more than solar and wind combined. No other nation burns
so much. Lignite emits far more CO2 than other fossil fuels 1,100 grams per
kilowatt-hour, compared to between 150 and 430 grams for natural gas. It is the main
reason why German CO2 emissions have started rising.
The expansion of lignite is, says Carel Carlowitz Mohn of the European Climate Foundation, 'the
blind spot of energiewende.' Why this blind spot? One reason is that lignite is cheap and
abundant. Existing mines in the Brandenburg area could deliver fuel for 50 or 60 years at
least. Another is that the lignite mining and power industry is a rare source of jobs in
eastern Germany, the poorest part of the country..... The obvious alternative back-up
option is natural gas. Burning natural gas emits much less CO2 than lignite. Just as
important, modern open-cycle gas turbines can be switched on or off in less than 10
minutes. Thus the CO2 emissions from running gas plants on standby to take over if
renewables falter is much lower than for lignite. The
trouble is that gas is much more expensive right now than lignite. Again this is not the
way it was supposed to be. The European Unions internal carbon
cap-and-trade system was supposed to push up the cost of burning lignite by requiring
big CO2 emitters to buy emissions permits, thus closing the price gap between gas and
lignite. But the European economic downturn has created a surplus of permits, and their market price has collapsed, says Flasbarth. German politicians are in
no hurry to halt the lurch to lignite. For one thing, high energy prices are increasingly
unpopular among Germans, who already pay three times as much
as Americans. For
another, a third of the countrys gas comes by pipeline from Vladimir Putins
Russia, making Germany dependent on a country whose leader is now openly hostile to his
western neighbors." |
"Europe will need to tap more diverse sources
of gas and develop more supplies of controversial
shale gas within the continent, amid concerns over the Ukraine
crisis, according to a new energy security strategy unveiled by the European commission on
Wednesday...Increasing the sources of supply for the EU's imports of gas was cited as the
priority by the bloc's energy chief, Guenther Oettinger. About
40% of the EU's imported gas supply comes from Russia,
with around a third from Norway and a fifth from north Africa. But in the wake of the Ukraine crisis, energy experts are worried that this over-dependence on Russia
could expose European business and citizens to threats from the Kremlin and higher prices.
Russia earlier this month signed a $400bn deal to supply gas to China. Jose Manuel Barroso, president of
the European commission, made it clear in launching the strategy that gas was at its heart: 'The EU
has done a lot in the aftermath of the gas crisis 2009 to increase its energy security.
Yet, it remains vulnerable. The tensions over Ukraine again drove home this message. In
the light of an overall energy import dependency of
more than 50% we have to make further steps.
Increasing energy security is in all our interest. On energy security, Europe must speak
and act as one.' Reducing the over-dependency on Russia and getting new gas supplies were
cited as part of a "long list of homework" for the EU by Oettinger....Europe
spent about 421bn (£342bn) in 2012 on energy imports, which make up just over half
of energy use. Gas is one of the biggest imports,
with two thirds of it coming from overseas, and used mainly for heating and industrial
purposes, with a smaller proportion going to power generation.... Franziska Achterberg, energy policy director at Greenpeace, said:
'The commission's plan will do very little to reduce the EU's dependence on energy
imports. Throwing money at new gas infrastructure to get Europe off Russian gas will not
cure the addiction to imported fossil fuels.'" |
"About 40% of the EU's imported
gas supply comes from Russia, with around a third from Norway and a
fifth from north Africa. But in the wake of the Ukraine crisis, energy experts
are worried that this over-dependence on Russia could expose European business and
citizens to threats from the Kremlin and higher prices. Russia earlier this month signed a $400bn deal to supply gas to China. Jose Manuel Barroso, president of
the European commission, made it clear in launching the strategy that gas was at its heart: 'The EU
has done a lot in the aftermath of the gas crisis 2009 to increase its energy security.
Yet, it remains vulnerable. The tensions over Ukraine again drove home this message. In
the light of an overall energy import dependency of more than 50% we have to make further
steps. Increasing energy security is in all our interest. On energy security, Europe must
speak and act as one.' Reducing the over-dependency on Russia and getting new gas supplies
were cited as part of a 'long list of homework' for the EU by Oettinger. 'We want strong
and stable partnerships with important suppliers, but must avoid falling victim to
political and commercial blackmail,' he said. 'We need to accelerate the diversification
of external energy suppliers, especially for gas.' Increasing indigenous energy production
was also listed as a priority by the commission. But as well as including renewable energy, which has been
the main focus in the past, this would now explicitly include 'sustainable production of
fossil fuels', which would be expected to include shale gas. Europe spent
about 421bn (£342bn) in 2012 on energy imports, which make up just over half of
energy use. Gas is one of the biggest imports, with two thirds of it coming from overseas,
and used mainly for heating and industrial purposes, with a smaller proportion going to
power generation. Oettinger also cited the need for new infrastructure, which could
include more methods of importing gas, such as new pipelines and ports equipped for ships
carrying liquefied natural gas, and interconnectors that allow grids in different
countries to be hooked together and suppliers to be connected to users. Other actions
included completing the EU's internal energy market, which is part of the liberalisation
of energy markets that has long been a target for Brussels regulators." |
"In an attempt to cut Japan's
energy costs after the Fukushima nuclear disaster, a group of 33 Japanese lawmakers will
soon submit a project for review to build a gas pipeline between Japan and Russias
Sakhalin Island, project leader Naokazu Takemoto told Bloomberg on Wednesday. The
construction of the 1350-kilometer pipeline from the most southern point of Sakhalin to
Hokkaido and Honshu Islands, ending 150 kilometers away from Tokyo, could take 5 years and
cost 600 million yen ($6 billion), according to the group's estimates. The plan was
discussed 10 years ago, but energy companies expressed little interest until the country
faced the need for alternative energy sources after most of its nuclear reactors were put
on stand-by following the disaster at the Fukushima plant. This time, the plan will be submitted to Prime Minister Shinzo Abe in
June, ahead of Russian President Vladimir Putin's visit in the fall, Takemoto said. The lawmakers expect that the pipeline would supply up to 20
billion cubic meters of gas per year, which would satisfy 20 percent of Japan's demand. The new gas supply would also allow a cut in liquefied natural gas
imports. 'The price of natural gas will be twice as low as the price of liquefied gas,'
Takemoto said in the interview. Earlier this month, during Russian President Vladimir
Putin's visit to Shanghai, Russian gas exporting monopoly Gazprom signed a $400-billion
deal with China's CNPC to supply 38 billion cubic
meters of gas per year." |
"Mexicos President Enrique
Peña Nieto has gone where no other Mexican president has dared to tread since the
nations wildly popular oil nationalization in 1938. Late last year, he pushed
through an historic measure to reprivatize much of Mexicos energy sector. The
constitutional reforms to grant private companies rights to oil and gas exploration and
exploitation passed last December. Peña Nieto delivered the package of secondary
legislation that establishes rules and procedures to the nations Congress April 30. His Institutional Revolutionary Party (PRI) says the measures could be
approved by June, removing the last legislative hurdle to implementation. Mexican
government officials reject the term 'privatization' for the proposed scheme. When oil and
gas is in the ground (and has no monetary value), they say, it belongs to the Mexican
people; when it is extracted and worth millions, then it belongs to transnational
corporations. They also note that Pemex, the state energy company, is not being sold
outright, although they admit that many of its assets could be sold in the future.
Meanwhile it will lose some concessions it is currently working, as well as rights to most
future sites. Although the laws are expected to pass through an alliance between the PRI
and the conservative National Action Party, the controversy will not end there. National
pride, concerns about lost sovereignty, anti-neoliberal sentiment, and an aversion to
foreign oil companies have combined to form massive opposition to the governments
privatization plans. Opponents are collecting signatures to put a referendum on the
reforms on the ballot in the July 2015 federal elections. If they do, some
polls show they have a good chance of winning. The privatization and break-up of Pemex
has long been a chief aspiration of neoliberal planners in North America. Promoters of the
'free-market' model and supporters of NAFTAincluding the World
Bank, the State Department-funded Wilson
Center, and the Mexican
business association Coparmexhave predictably celebrated the reforms. The
Mexican government argues that Pemex is ailing, production is falling, refining and
high-tech extraction capacity is low, and corruption is rampant. No one contradicts any of
these points. However, if Pemex is in dire need of help, the government has no one to
blame but itself. For years, critics have accused successive governments of milking Pemex.
The para-state company consistently provides nearly half of Mexicos national budget,
with 53.8 percent of its $123 billion in net sales going to the federal government in
2013. Experts
have noted that a thorough overhaul of Pemex could achieve the goals set forth by
privatization supporters. But critics claim that the
government has purposefully weakened Pemex by failing to invest its revenues in future
operations and expansion, setting the stage for privatization while running up a
$63-billion debt as of the end of last year. Opponents
have presented a counterproposal to reform Pemex that does not amend the
constitution." |
"Last week the LA Times ran a
story saying that the U.S. Energy Information Administration (EIA) is about to reduce
'its' estimate of the amount of shale oil that can be recovered from the Monterrey Shale
under California by 96 percent. This reduction cuts the estimate of producible shale oil
in the U.S. by 60 percent....The great Monterrey
Shale oil myth got its start back in July 2011 when the EIA stapled a cover on a
contractor-produced 'study' that it paid for entitled Review of Emerging Resources: U.S.
Shale Gas and Oil Plays. In the fine print of the cover pages, however, the EIA did note
that the 'views in this report should not be construed as representing those of the
Department of Energy.' The underlying study, which was prepared by a small consulting
company, INTEK, Inc., in Arlington, Virginia, purports to have been based on a wide range
of sources and methods. However when it came to California the reports author,
Hitesh Mohan, said the California portion was primarily based on technical reports and
presentations from oil companies. Presentations from oil companies are prepared to raise
money from investors and can be expected to lay out the most optimistic view possible. The
methodology that produced the mythical estimate seems to have been something like this:
take the 1,700 square miles of the Monterrey Shale, drill 28,000 wells in it at the rate
of 16 wells per square mile, wait until each well produces 550,000 barrels of oil and you have your
15.4 billion barrels. Later research showed that only
a handful of California oil wells ever produced 550,000 barrels of oil or anything close. The California story only gets worse. The California oil industry funded
a joint industry University of Southern California study concluding that exploiting
the supposed 15 billion barrels of shale oil would result in from 512,000 to 2.8 million
new jobs in the state; would increase per capita GDP by $11,000 and boost government
revenue by up to $24.6 billion per year. All the politicians had to do was get out of the
way, stop all this environmental nonsense over fracking and more regulations, and the
state would be rich. The writing on the wall came
last year when thorough and independent studies by the Post Carbon Institute pointed out
first that very little oil was coming out of California due to fracking of shale deposits
as compared to those in North Dakota and Texas. In December of last year, a second more
detailed well-by-well study of what was actually happening in California blew the
ridiculous INTEK/EIA conclusion out of the water. Although the Post Carbon Institute
studies got little nationwide attention, several California newspapers and TV stations,
which are much closer to the states well being, did in-depth stories concluding that
the 15 billion number and the ensuing riches were unlikely eventualities. It is obvious
that the new studies brought pressure on the Department on Energy to take a second look at
what they were saying about shale oil in California. When it became obvious that were
endorsing nothing but industry hype, they did an about face and lowered the estimate to
600 million barrels, which in itself may be high. The EIAs reaction to questions
about one of the biggest blunders in its history is interesting. EIA Director Adam
Sieminski told the Wall Street Journal that the oil bearing rocks are still under
California, but the technology to extract the oil has not yet been developed. Industry
spokesmen are more upbeat, saying that hundreds of smart engineers are working on the
problem of producing Californias shale oil and that someday, if not sooner, they
will be successful. The California shale story
raises once again questions about just where Americas shale oil and gas production
is going and along with it the future of industrial society. Naturally, none of us want to
hear that hard times, lower economic growth, and fewer jobs lie ahead. The Department of
Energy clearly is trying to draw a fine line between the gross over-optimism exhibited in
the Monterrey shale incident and an energy apocalypse. But, do we really have to wait
until the evidence of over-optimism is so overwhelming that it has to be admitted? There
are several other 'Monterrey Shales' out there well-understood in the peak oil community
where the Department of Energy continues to make overly optimistic estimates which will
one day rebound to the detriment of us all." |
"EU Energy Commissioner Guenther
Oettinger said Ukraine needs to begin repaying its $3.5 billion gas debt to Russia and
proposed a fair market price of between $200-$400 per 1,000 cubic meters to
resolve the dispute. 'The bills are on the table,
and they must be paid,' Oettinger said on German radio station SWR on Monday after holding
talks in Berlin with Russian Energy Minister Alexander Novak and Gazprom Deputy CEO
Aleksandr Medvedev. Oettinger suggests Ukraine use some of the $3.2 billion from its first
IMF aid tranche and other EU assistance programs to start paying off its debt to Gazprom.
Ukraine owes Russian state-owned Gazprom more than $3.5 billion, as it has not paid its
gas bills in full since July 2013. Russia has even given Ukraine 10 billion cubic meters
of gas free of charge, as much as Russia delivers to Poland in a year. President Vladimir
Putin said that Russia is only ready to discuss a new gas discount for Ukraine once it
starts paying off its debt. Oettinger said that a 'fair and suitable market price' to
resolve the dispute would be between $200-$400, which the commissioner considers 'common
for the European market.'" |
"The gas supply agreement between Russia and China is worth more than
$400 billion... The price at which gas will be
supplied was not disclosed but is understood to be between $350 and $380 per 1,000 cubic
metres. This is similar to the price that most
European utilities pay based on contracts signed during the past two years." |
"Government hopes that Britain can emulate the US by starting a
shale-gas revolution have been knocked back after a
long-awaited report unexpectedly concluded there was no potential in fracking for gas in
the Weald region of southern England. Michael Fallon, the energy minister, insisted he was neither
"disappointed nor happy" at the findings from the British Geological Survey and
denied the government had hyped the potential for extracting shale gas in Britain. He preferred to focus on more positive BGS findings that there could be
4.4bn barrels of oil in the shale rocks of the area, which
stretches from Salisbury to Tunbridge Wells although in practice recoverable
reserves are likely to be a fraction of this. 'Britain needs more homegrown energy,' he
said. 'Shale development will bring jobs and business opportunities. We are keen for shale
and geothermal exploration to go ahead while protecting residents through the robust
regulation that is in place.' The government has started a 12-week consultation on new
legislation that would bypass the law of trespass for underground work that is 300 metres
or more below the surface and for voluntary community payments of £20,000 for each
lateral well drilled. Environmental campaigners have been using landowners' rights to halt
fracking projects. Fracking for shale gas involves digging, often as deep as a kilometre
down, and pumping a mix of water, sand and chemicals into surrounding rock to fracture it
and release the gas." |
"The Governments dream of
kickstarting a fracking revolution has suffered a major setback after a survey of one of
the UKs great shale gas hopes found no evidence of gas in the area. And while the
same survey of the Weald basin, stretching from Wiltshire to Kent did find
an estimated 4.4 billion barrels of oil, the scientist who oversaw the project admitted it
would be so difficult to extract that the basin would be unlikely to yield even 0.5 per
cent of the oil so far extracted from the North Sea.
Robert Gatliff, director of energy and marine geoscience at the British Geological Survey,
which produced the report, said: 'Its not a huge bonanza. But we have to see what
happens.' He added: 'It is going to be a challenge
for the industry to get it out.' The North Sea has produced about 40bn barrels of oil since the 1970s and
is likely to yield between three billion and 24 billion more, according to industry
estimates. But Mr Gatliff expects the Weald basin to yield no more than 220m barrels of oil, based on a generous
extraction rate of about 5 per cent of the total estimated 'resource'. This is less oil than Britain consumes in six months.... industry experts
said the survey acted as a stark reminder that despite the publicity fracking has
received, it remains far from certain that shale oil and gas will be produced in the UK in
significant quantities, if at all. Dr Robert Gross, director of the Centre for Energy
Policy and Technology at Imperial College London, said: 'This survey underlines the need
to keep a sense of perspective about the prospects for land-based fossil fuel production
in the UK. It is highly unlikely that the UK will replicate the US experience in the
foreseeable future.' Bob Ward, director of policy at the London School of Economics
Grantham Research Institute, said the findings 'do not substantiate the continuing hype
surrounding the UKs shale gas and oil resources'. Ministers have repeatedly pointed
to the success of fracking in the US, where it has driven down gas prices." |
"Europe has lost the global
scramble for reliable energy supplies and faces a long-term queeze as Siberian gas is
diverted to the fast-growing markets of Asia, Russia's gas chief has warned in scathing
comments aimed at EU political leaders. Alexey Miller, chairman of the state giant
Gazprom, said Russia's $400bn deal this week to supply gas to China for 30 years is a
black moment for Europe and will change the geo-strategic balance in the world. 'The global competition for Russian gas resources started yesterday. Let
there be no mistake about that. We have untapped the Asian market and this is going to
have an impact on European gas prices,' he said. Mr Miller said the 38bn cubic metres
(BCM) contract from 2018 is larger than the entire volume of liquefied natural gas (LNG)
sold in the world. 'You don't find that sort of contract on the side of the road in
Europe,' he told the St Petersburg Economic Forum. Relishing his theme, he said China's
gas demand is growing exponentially and would surge past Europe's total consumption to
reach 400 BCM in 'the very near future' as the Politburo tries to wean its polluted
mega-cities off coal-powered plants. A large proportion of this will come from the vast
Siberian fields, crowding out supplies for buyers in Europe deemed 'less reliable'.
Describing Europe's energy shortage as 'scary', he ridiculed the EU's push for wind and
solar power as a shambles, and said its LNG venture had gone nowhere with capacity use
collapsing to 22pc. 'Europe has lost the competition global for LNG, and in a single day
it has just lost the competition for the world's pipeline gas as well,' he said. The comments reflect the fury in Russia over a string of hostile
measures by Brussels following the Ukraine crisis, including a de facto freeze on the
South Stream gas pipeline through the Black Sea and plans being developed by a team at the
European Commission to slash reliance on Russian gas as quickly as possible. The China prize has given Russia a dramatic means of fighting back, though
it is far from clear what the Memorandum of Understanding between the two sides actually
means. Most analysts say it is highly unlikely that China would wish to become too
dependent on Russian supplies after witnessing the skirmishes in Europe. The reason why
Europe's imports of LNG have fallen so low is because Japanese demand since the Fukushima
nuclear disaster has pushed up the price. Germany, Spain and the UK have been turning to
coal instead to produce electricity. Mr Miller's
words were echoed by the Russian energy minister, Alexander Novak, who predicted that
China would need to import a further 110 to 130 BCM from Siberia beyond the original deal,
a four-fold increase. Mr Novak was slightly more cautious, saying that China's total gas
use would double over the next decade to 300 BCM and then flatten at European levels. By
then India would be entering the fray as the next big market.
Michael Stoppard, chief gas strategist for IHS
Energy, said the volumes may be huge but the price is being held down by 'brutal
competition' from coal. Gas currently trades at a price equivalent to $30 a barrel in the
US and $60 in Europe, far below the spot price for oil. It is no longer a remote prospect
that the 'sleeping giant' of Iran could burst on the global scene with colossal levels of
supply as sanctions are lifted. Gas may rise from 21pc to 25pc of global energy use by
2030, he said, but that does not mean that Russian gas producers will automatically make
much money from it." |
"Billions of barrels of oil have been found in the ground beneath
the south of England, but far fewer than had been hoped, a report out today revealed. The
official analysis by the British Geological Survey (BGS) estimates that there are
4.4billion barrels-worth of oil - but no shale gas at all - in the ground under the Weald
Basin in the south east of England. With geologists estimating that as little as
220million barrels of it could be recoverable, it is equivalent to just 0.5 per cent of
what has been pumped out of the North Sea in recent years. Today, ministers insisted they were not disappointed by the report, which
dashed hopes there could be vast untapped oil reserves waiting to be fracked, and revealed
new proposals to allow energy firms to drill down without getting landowners' permission.
Green MP Caroline Lucas condemned the latest chapter in the fracking controversy as
'disastrous' while the Campaign for the Protection of Rural England news criticised the
government of 'rushing major decisions with too few facts'. Today's RGS report estimates
that the Weald Basin, a vast area covering around 3,500 square miles in the south, could
contain between 2.2-8.5billion barrels of oil, equivalent to 290-1,100million tonnes.
Currently, Britain consumes around 500million barrels of oil per year. The new
report says that a 'resonable estimate' of what may lie in the Weald Basin is 4.4billion
barrels, roughly a tenth of what has been recovered from the North Sea in recent years,
but it could be as little as 2.2billion barrels. Given that these figures are for
resources and not reserves, meaning that as little as ten per cent of it could be
recoverable, the Weald Basin could yield just 220million barrels - 0.5 per cent of what
has been pumped out of the North Sea....energy expert
Professor Stuart Haszeldine, of the University of Edinburgh, was among those warning that
oil from the Weald Basin wouldn't last long. He said: 'From the estimated 4.4billion
barrels, I would expect maybe 400million barrels could be extracted, which is the
equivalent of one North Sea oil field. 'The UK uses 500million barrels per year, so it's a
lot of bother for one year's supply.' Professor
Andrew Aplin, from Durham University, said: 'The interesting question is how much of the
oil might be recoverable, as much of the oil is likely to be tightly bound to the rock and
therefore difficult or impossible to produce. 'And if there is any free, it might fracture
easily and not flow easily.'... He also said the
amount of oil likely to be generated was smaller than the 16,000 barrels per day of oil
generated by Dorset's Wytch Farm, which is Europe's biggest onshore oilfield. The prospect of oil drilling across a swathe of southern England will
heighten tensions over whether fracking can go ahead in the face of local opposition....
It was also revealed last night that communities which agree to shale wells being sunk are
to get more cash an average of £800,000. A source at the Department for Energy and
Climate Change (DECC) said: 'At the exploration stage?
?communities will receive
£100,000. 'And then if a well site goes ahead, they will receive 1 per cent of gross
revenue every single year around £1million per well over ten years. 'And today we
can announce, in addition to this, communities will receive £20,000 for each unique
lateral well put in place underground. This is likely to mean an average of
£800,000.'" |
"Vast areas of southern England will on Friday be identified by the
Government as targets for fracking, with ministers also announcing that energy companies
will be allowed to frack under homes without owners' permission. A British Geological Survey study of the South, spanning from
Wiltshire to Kent and including the South Downs National Park, will be published, mapping
out the likely location of billions of barrels of shale oil. Ministers are also preparing to publish controversial plans to change the
laws of trespass to give energy companies an automatic right to frack beneath homes and
private land even if owners object. They hope that the introduction of fracking to
Britain will spark an energy revolution which will drive down household bills as has
happened in America....Both announcements come on the day results of the local elections
are revealed, leading to claims that the Government is attempting to bury controversial
news. Communities under which fracking takes place will be offered compensation, which
ministers will suggest could reach £800,000. But industry sources told The Telegraph they
only expected to pay in the region of £200,000 for a major drilling site at peak
production.... Senior Conservatives whose seats are covered by the BGS study have voiced
concerns at fracking in their areas, despite supporting the search for shale gas and oil
elsewhere. Andrew Tyrie, MP for Chichester, has indicated he would oppose plans to frack
in Fernhurst in the South Downs National Park as it was 'an environmentally sensitive
area' and 'very close to a village of 3,000 inhabitants'. Nick Herbert, MP for the
neighbouring Arundel and South Downs seat, has said the benefits of shale are 'potentially
substantial' but warned that 'for West Sussex, with our precious countryside, fragile
chalk downs and tranquil villages, the impacts on water and traffic are of particular
concern'. The BGS reports publication was delayed
until after the local elections and ministers were accused of burying controversial
news by releasing the report and the trespass law change as political attention focuses on
the results.... Fridays publications will be followed within weeks by the launching
of a new 'licensing round offering companies the rights to drill across the much of
the UK, including the newly-mapped areas. But ministers
fear that a British shale boom could be thwarted unless the issue of fracking beneath
homes is resolved. They will make clear that companies would still have to gain
planning permission for fracking, as well as numerous environmental permits and land
access rights for their rig at the actual drilling site. However, the issue of
below-ground access rights is seen as one of the biggest obstacles to a shale boom because
drilling would have to take place beneath thousands of homes in order for gas and oil to
be produced at scale. Under current trespass law, landowners above the horizontal drilling
path could prevent it taking place and could only be overruled by a court. Fracking
opponents Greenpeace have already signed up thousands of landowners in a 'legal blockade'
against the process. Ministers argue that only 'minimal' compensation should be paid to
those above drilling routes, because residents will not be affected by, or even aware of,
fracking beneath them. The government is thought to have rejected the idea of compensation
for individual homeowners who object and instead be considering industry plans to
compensate entire communities under which drilling may take place, to reduce bureaucracy
and disputes. Industry will pledge to pay £20,000 for each horizontal drilling route, the
Telegraph has learnt. There could be 40 horizontal wells per site, leading ministers to
suggest that communities could share in total payouts of £800,000. But industry
sources told The Telegraph that some of the horizontal wells would be above each other at
different heights on the same trajectory, and that they would only pay for land access
once in such cases, resulting in a total nearer £200,000. However, sites where fewer
wells are drilled, for example while companies are beginning exploring, could expect
significantly less in the region of tens of thousands of pounds. By contrast, the
fracking industry has pledged much more generous benefits including a 1pc share of
revenues worth up to £10m - to those communities in the immediate vicinity of the
drilling rig, or whose homes will be affected by lorry traffic to and from the site.
Proponents of a trespass law change argue it simply brings the access rights for fracking
in line with those that have been used for other industries, such as coal mining or
transport tunnels. They argue that fracking, entailing a six-inch pipe more than a mile
below ground, is significantly less disruptive. The only test case on the issue saw
£1,000 awarded to Mohammed Fayeds estate for oil drilling beneath it, but an appeal
court judge later said £82.50 would have been more appropriate." |
"Moscow may sign an
intergovernmental agreement with Teheran this year to build eight new reactors for nuclear
power plants in Iran, a source close to the negotiations told journalists Thursday. Two reactors could be built at the Bushehr Power Plant and six reactors
at other sites, the source said, adding that the talks were in their final stage. Russian
President Vladimir Putin said earlier this week that Russian-Iranian cooperation will
continue despite international turbulence around Tehran. Putin said that Russia and Iran
are not only neighbors, but also long-standing reliable partners. Irans only nuclear
power plant near Bushehr came online September 2011 and began operating at full capacity a
year after. Moscow handed over operational control of the Russian-made plant to Iran in
September last year. Construction of the power plant in the countrys south began in
the 1970s but was plagued by delays. Russia signed a billion-dollar deal with Tehran to
complete the plant in 1998." |
"Russia's President Vladimir
Putin has pulled off a major political coup by securing a landmark $400bn (£236bn) gas
agreement with China, a move that will come as a blow to US efforts to isolate the
Kremlin. Few details were available for the deal - one of the world's biggest energy pacts
- but state-owned China National Petroleum Corp said that it had signed a 30-year
agreement to buy up to 38bn cubic metres a year of gas from 2018. The deal is a coup for
Mr Putin as he seeks to open up new markets for Russian gas as the US prepares to begin
exporting to Europe, currently Russia's main market. It also sees Russia move closer to
Beijing at a time when the Kremlin is a loggerheads with the US over the political
situation in Eastern Ukraine following its annexation of Crimea. 'This is indeed a
historic event for the gas sector of Russia and of the Soviet Union,' Mr Putin was
reported by Reuters to have said after the deal was signed. 'This is the biggest contract
in the history of the gas sector of the former USSR.'
A new pipeline linking Siberia's gas fields to China's main coastal cities will be built
as part of the agreement and Russia plans to invest $55bn in exploration and pipeline
construction. 'We started the first page of a big book, a fascinating story of the
Russian-Chinese cooperation in the gas industry, and many more essential chapters are yet
to be written in it,' said Gazproms chairman Alexey Miller after the signing
ceremony with Chinese President Xi Jinping in Shanghai. China needs to find new sources of
natural gas to meet its future energy needs and to reduce its dependence on coal as its
main fuel for power generation. According to the International Energy Agency (IEA), Asia is the fastest growing region for natural gas consumption in
the world. By 2015 it will become the second-largest market overall with demand expected
to surpass 790 billion cubic metres of natural gas. In China, annual demand for gas is
expected to reach 420bn cubic metres by the end of the decade and sustain a rate of 14.3pc
growth through to 2030. Under Beijings natural gas policy unveiled in 2012 gas will
increasingly be used to run cars, trucks, trains and ships. According to RBC Capital, the deal could be based on a price of $10 per
million British thermal units (btu) of gas - significantly cheaper than the average for
imports of liquefied natural gas (LNG) of around $16 per btu. However, the broker points
out that the deal will need continuing support from both Beijing and Moscow over several
year before gas is delivered after 2018." |
"The Nord Stream gas pipeline is
one of the guarantees of reliable Russian gas delivery to Europe and if the South Stream
is launched, then deliveries will no longer depend on the situation in Ukraine, Russian
Prime Minister Dmitry Medvedev said Tuesday. 'I would like to draw your attention to the
fact that one of the guarantees for Europeans that everything remains normalized and that
everything is in order is the presence of the North Stream [gas pipeline], the so-called
Nord Stream. If we can in the next few years launch the South Stream, then, strictly
speaking, [gas] transit through Ukraine will simply not be needed, though we understand
that this is needed for Ukraine itself,' Medvedev said during an interview with Bloomberg. The Russian Prime Minister stressed that the launch of the South Stream
will guarantee regular gas supplies to Europe if the situation at the Ukrainian market
stabilizes and the country meets its commitments. In 2012 the construction of the South
Stream pipeline began near the Russian city of Anapa. The aim of the 15.5-billion-euro
project is to cut Russias dependence on the Ukrainian transit system and diversify
Russian gas deliveries to Europe. Commercial deliveries through this pipeline to Europe
are expected to begin in the first quarter of 2016, with the pipeline becoming fully
operational in 2018. Russia annually pumps about 100 billion cubic meters of gas to
European countries via Ukraine, which makes up 80 percent of its total gas supplies to
Europe." |
"The US shale gas and oil boom of recent years is 'very profound, but
sometimes taken out of proportion,' International Energy Agency chief economist Fatih
Birol said at the Flame conference in Amsterdam Tuesday. Birol said that of the projected
reduction in US oil imports from Tuesday to 2035, while 35% was expected to be the result
of changes in oil supply, with more oil produced at home, and 8% from oil switching to
gas, some 57% would be the result of demand-side policies. 'US oil imports are set to
plummet due to increasing oil supplies and recently adopted policies to improve efficiency
of cars and trucks,' he said....Birol added that even
as the US became a major oil producer, it was wrong to downplay the continued role of the
Middle East. US and Brazilian oil would step up until the mid-2020s, 'but the Middle East
is critical to the long-term oil outlook,' Birol said. Middle East oil would 'continue to
be indispensable' and 'the right signals to invest must be sent,' he said. Birol also questioned the importance of an often-cited increase in US
coal exports as a result of US shale gas freeing up coal formerly used in the country's
power generation sector. The US had made up only 7% of the increase in global steam coal
since 2007, he said, against massive increases from Indonesia. Moreover, the slowdown in
Chinese demand growth compared with previous expectations had been more significant.
'China's move away from coal will have a much greater impact on global coal markets than
the US shale gas revolution,' Birol said. Curbing of demand growth in China had 20 times
the impact of the increase in US coal exports in 2012, he said. Birol said the shale
revolution had a 'major impact,' but that in global gas pricing, 'large disparities
between regions will persist.' He added that Europe needed to think hard about the
competitiveness of its industry in such a climate. 'Europe's energy strategy needs to
focus on competitiveness and energy security in addition to climate concerns,' Birol
said." |
"The number of people in favour
of fracking for shale gas in the UK has fallen below 50%, a new poll suggests. Just 49.8% were in favour of shale gas extraction when researchers from
the University of Nottingham asked 3,657 people earlier this month. This is the lowest
number in support of fracking since the university started its poll on the issue in 2012.
The latest results found 31.4% were against fracking, while 18.4% were undecided. 'The May
2014 survey confirms that the turn against fracking for shale gas in the UK has deepened,'
says the report. And it cites the anti-fracking
protests which took place in the village of Balcombe in West Sussex in 2013 as a
tipping point when the tide of public opinion towards shale gas extraction began to shift.
Since those protests the number of people against fracking has been steadily rising, it
says." |
"Brazil
will export more crude oil in 2014 than it will import, Magda Chambriard, director
general of Brazil's oil regulator, the ANP, said on Tuesday. If her prediction comes true,
the oil-trade surplus will be Brazil's first since 2012, when the country exported $20.3
billion of crude oil and imported $13.4 billion, according to Brazil's commerce
and trade ministry. Brazil had
an oil trade deficit in 2013, importing $16.3 billion of crude oil and exporting $13
billion, the ministry said on its website. As most of Brazil's oil output is heavy crude
oil and its refineries operate best with light crude, Brazil exports domestic oil to buy lighter, imported
grades." |
"Federal energy authorities have
slashed by 96% the estimated amount of recoverable oil buried in California's vast
Monterey Shale deposits, deflating its potential as a national 'black gold mine' of
petroleum. Just 600 million barrels of oil can be extracted with existing technology, far
below the 13.7 billion barrels once thought recoverable from the jumbled layers of
subterranean rock spread across much of Central California, the U.S. Energy Information
Administration said. The new estimate, expected to
be released publicly next month, is a blow to the nation's oil future and to projections
that an oil boom would bring as many as 2.8 million new jobs to California and boost tax
revenue by $24.6 billion annually. The Monterey Shale
formation contains about two-thirds of the nation's shale oil reserves. It had been seen as an enormous bonanza, reducing the nation's need for
foreign oil imports through the use of the latest in extraction techniques, including acid
treatments, horizontal drilling and fracking. The energy agency said the earlier estimate
of recoverable oil, issued in 2011 by an independent firm under contract with the
government, broadly assumed that deposits in the Monterey Shale formation were as easily
recoverable as those found in shale formations elsewhere. The estimate touched off a
speculation boom among oil companies. The new findings seem certain to dampen that
enthusiasm.... The problem lies with the geology of
the Monterey Shale, a 1,750-mile formation running down the center of California roughly
from Sacramento to the Los Angeles basin and including some coastal regions. Unlike
heavily fracked shale deposits in North Dakota and Texas, which are relatively even and
layered like a cake, Monterey Shale has been folded and shattered by seismic activity,
with the oil found at deeper strata. Geologists have
long known that the rich deposits existed but they were not thought recoverable until the
price of oil rose and the industry developed acidization, which eats away rocks, and
fracking, the process of injecting millions of gallons of water laced with sand and
chemicals deep underground to crack shale formations. The new analysis from the Energy
Information Administration was based, in part, on a review of the output from wells where
the new techniques were used. 'From the information we've been able to gather, we've not
seen evidence that oil extraction in this area is very productive using techniques like
fracking,' said John Staub, a petroleum exploration and production analyst who led the
energy agency's research....'Our oil production estimates combined with a dearth of
knowledge about geological differences among the oil fields led to erroneous predictions
and estimates,' Staub said. Compared with oil production from the Bakken Shale in North
Dakota and the Eagle Ford Shale in Texas, 'the Monterey formation is stagnant,' Staub
said. He added that the potential for recovering the oil could rise if new technology is
developed." |
"The poorest households spend
40% of their income on housing, food and fuel, a huge increase on a decade ago, according
to research uncovered by an all-party parliamentary inquiry into hunger and food poverty.
The evidence suggests that while the cost of living crisis has hurt every socio-economic
group, it has been a disaster for the poorest households. The proportion of income that
the poorest households spend on necessities rose by nine percentage points between 2003
and 2012, in the biggest rise endured by any economic group. According to a cross-party inquiry led by Labour MP Frank Field, the disproportionately large
increase seen in the poorest households is due entirely to rising housing and fuel costs
the proportion of income spent on food is the same as a decade ago. UK households combined spent £34.3bn on energy in 2013, a real-terms
increase of 131.1% on the £14.8bn spent in 2003. Had energy prices risen in line with the
RPI over the same period, households would have spent £20.6bn on energy in 2013 an
increase of just 39.2% on 2003. It is claimed that cuts have duly had to be made by the
poorest households in the quantity or quality, or both, of food purchases. According to an
evidence paper due to be published by the inquiry this week, these trends may help explain
why so many households now rely on food assistance." |
"European Energy Commissioner
Guenther Oettinger said on Friday that Russia is Europe's main trading partner in natural
gas and that there should be therefore no sanctions against Moscow's energy sector over
the crisis in Ukraine. Sanctions against the Russian
energy sector are 'something that is inappropriate,' Oettinger told reporters through an
interpreter after a meeting of EU energy ministers in Athens." |
"In just over five years Britain
will have run out of oil, coal and gas, researchers have warned. A report by the Global
Sustainability Institute said shortages would increase dependency on Norway, Qatar and
Russia. There should be a 'Europe-wide drive' towards wind, tidal, solar and other sources
of renewable power, the institute's Prof Victor Anderson said. The government says
complete energy independence is unnecessary, says BBC environment analyst Roger Harrabin.
The report says Russia has more than 50 years of oil, more than 100 years of gas and more
than 500 years of coal left, on current consumption. By contrast, Britain has just 5.2
years of oil, 4.5 years of coal and three years of its own gas remaining. France fares even worse, according to the report, with less than year to
go before it runs out of all three fossil fuels. Dr Aled Jones, director of the institute,
which is based at Anglia Ruskin University, said 'heavily indebted' countries were
becoming increasingly vulnerable to rising energy prices. 'The EU is becoming ever more
reliant on our resource-rich neighbours such as Russia and Norway, and this trend will
only continue unless decisive action is taken,' he added. The report painted a varied
picture across Europe, with Bulgaria having 34 years of coal left. Germany, it was
claimed, has 250 years of coal remaining but less than a year of oil. Professor Anderson
said: 'Coal, oil and gas resources in Europe are running down and we need alternatives.
'The UK urgently needs to be part of a Europe-wide drive to expand renewable energy
sources such as wave, wind, tidal, and solar power.' However, Jim Skea, Research Councils
fellow in UK Energy Strategy. cast doubt on the findings of the report. He told BBC News:
'This sounds very unlikely. What's more, it's irrelevant - the UK has a stable supply of
imported energy, even if it is a good idea to increase our own supplies." |
"Last winter several of the
major international oil companies announced that they could no longer afford the
accelerated pace of capital expenditures that resulted in some $3.5 trillion being spent
to explore and drill for conventional oil in the last ten years. It is this massive
expenditure that has kept conventional oil production steady, but now is coming to an end. Within the next few years, we are likely to see drops in conventional
production as the pace for exploring and developing new oil fields contracts." |
"The unconventional technology that enables us to extract oil from
shale has triggered a boom in American
energy. While North American energy production has exploded, this doesn't necessarily
put the the region on a level playing field as the mega-exporters in the Middle East. One
reason why the Middle East continues to be in a relatively comfortable spot is because
cost of production is so low. Morgan Stanley analysts recently included this chart of
crude production costs. Onshore Middle East oil sites
are much cheaper to tap than North American shale, which costs about $65 per barrel to
extract. Horizontal drilling and hydraulic
fracturing isn't cheap. This is a huge advantage, especially as fluctuating prices often
make production unprofitable for higher cost sources." |
"...the whole [fraking] process in the USA has taken years to mature.
Fracking technologies in their new form were first applied in 1975 and it took about
thirty years before they took off commercially. This was because long and protracted
legislative wrangles slowed everything down. Final 'release' (and fracking take-off) only
came with the passing of the Act in 2005 which exempted licencees from the U.S. Clean
Water Act highly controversial and bitterly contested to the last. In 2000 shale
gas output had reached 1.5% of US needs. By 2005 it jumped to 4%. Now it is 35% and
rising. Second, the 2005 price per trillion cubic feet (tcf) of natural gas was $11 and by
2012 was $1.99. This has stopped much investment in its tracks and means that most
of the drilling enterprises in America are losing money. Once exports physically begin
(end of next year) both price and investment will pick up, say to around $4/5, but the
Americans estimate it will cost at least $6 to transport it across the Atlantic, so it
will reach European markets at just above our current price. It could easily be undercut
by the prolific supplies of LNG due to reach us from Algeria, Angola, lots more from
Qatar and further afield viz Indonesia and Australia. Exporting to Asia will
be much more profitable. So probably will Russian gas! Third, the Americans point out that
the shale boom could only happen when it did so fast because the country has a vast and
available infrastructure already in place to support and supply the demand for drilling
rigs and machinery, because America had a ready-built and massive gas grid to get the
stuff into the main trunk gas pipelines, and lots of open-road heavy transport facilities.
The UK lacks these so far .Of course America, almost uniquely, also has a
system of subterranean rights and royalties accruing to the property owner a huge
incentive in most states. Fourth, where these incentives do not operate the Americans
argue that it is a waste of time and money trying to engage with and bribe rural
communities that do not want it. They urge only going, to start with, to areas where local
people WANT fracking, well away from all communities and ideally in derelict or wasteland
areas with no nature or environmental significance . Fifth, and in general,
the expert consensus from these folk warns that in the UK, in their view, it could all
take longer to get going than some have implied, despite the promising gas
formations and geology. And it will be a struggle to keep costs down to commercial rates. Any drop in the OIL price below $80 (which incidentally quite a
few experts predict) could make new shale operations here, or elsewhere, uneconomic
and therefore fail to attract investors.... The view coming out from Ministers is MUCH too optimistic and
could prove extremely dangerously politically when the reality unfolds. The American
experience , which was anyway full of problems and delays before it finally took off,
cannot be repeated in the totally different conditions here. Huge extra infrastructure spending is needed in the UK to make it all
work on any significant scale and lots of highly controversial legislation to be
passed. Thousands of rigs will be needed and America
has those thousands. We have, as yet, only a handful." |
"As I write, fireworks are going off over the Caspian Sea. The
pyrotechnics are long and elaborate, sounding like an artillery barrage. They are a
reminder that Baku was perhaps the most important place in the Nazi-Soviet war. It
produced almost all of the Soviet Union's petroleum. The Germans were desperate for it and
wanted to deny it to Moscow. Germany's strategy after 1942, including the infamous battle
of Stalingrad, turned on Baku's oil. In the end, the Germans threw an army against the
high Caucasus guarding Baku. In response, an army raised in the Caucasus fought and
defeated them. The Soviets won the war. They wouldn't have if the Germans had reached
Baku.... Baku is strategic again today, partly
because of oil. I've started the journey here partly
by convenience and partly because Azerbaijan
is key to any counter-Russian strategy that might emerge.... To understand Azerbaijan
you must begin with two issues: oil and a unique approach to Islam. At the beginning of
the 20th century, over half the world's oil production originated near Baku, the capital
of Azerbaijan. Hence Hitler's strategy after 1942. Today, Azerbaijani energy production is
massive, but it cannot substitute for Russia's production. Russian energy production,
meanwhile, defines part of the strategic equation. Many European countries depend
substantially on Russian energy, particularly natural gas. They have few alternatives. There is talk of U.S. energy being shipped to Europe, but building
the infrastructure for that (even if there are supplies) will take many years before it
can reduce Europe's dependence on Russia. Withholding energy would be part of any Russian
counter to Western pressure, even if Russia were to suffer itself. Any strategy against
Russia must address the energy issue, begin with Azerbaijan, and be about more than
production. Azerbaijan is not a major producer of
gas compared to oil. On the other side of the Caspian Sea, however, Turkmenistan is. Its
resources, coupled with Azerbaijan's, would provide a significant alternative to Russian
energy. Turkmenistan has an interest in not selling through Russia and would be interested
in a Trans-Caspian
pipeline. That pipeline would have to pass through Azerbaijan, connecting onward to
infrastructure in Turkey. Assuming Moscow had no effective counters, this would begin to
provide a serious alternative to Russian energy and decrease Moscow's leverage. But this
would all depend on Baku's willingness and ability to resist pressure from every
direction... Georgia is absolutely essential as a
route for pipelines, given Armenia's alliance with Russia, Azerbaijan's support for
Georgian independence is essential. Azerbaijan is the cornerstone for any U.S.-sponsored
Caucasus strategy, should it develop.... Franklin
Roosevelt allied the United States with Stalin to defeat Hitler and didn't find it
necessary to regularly condemn Stalin while the Soviet Union was carrying the burden of
fighting the war, thereby protecting American interests." |
"Shale gas could be fuelling
British homes for the first time by late 2015, under plans from fracking firm Cuadrilla.
The company is preparing to submit planning applications by the end of this month to frack
at two sites in Lancashire next year. Francis Egan, Cuadrilla chief executive, said that,
if successful, it planned to connect the test fracking sites up to the gas grid, in what
would be a milestone first for the fledgling British shale gas industry. He also suggested homeowners hostile to fracking beneath their land
should be entitled to only minimal compensation, if any. Cuadrilla hopes to gain planning
permission for its two sites, near the villages of Roseacre and Little Plumpton, in time
to start drilling at the end of this year. They could then be fracked next summer 'in a
best case scenario'." |
"Electricity costs have doubled
for businesses over the last decade, says energy saving body the Carbon Trust, pushing
sustainability issues to the top of the agenda. But
these days 'going green' is as much about business survival as reducing impact on the
environment. Yet surveys show many businesses still struggle to understand the
technologies available and are wary about the upfront costs involved. Technology of
Business offers a guide to the most effective ways businesses can cut their energy bills
and begin operating more sustainably. Switching to LED - Light Emitting Diode - lighting
is the quickest and simplest action any business can take to reduce energy usage, argues
Myles McCarthy, director of implementation at the Carbon Trust. A traditional 60 watt
incandescent bulb would produce about 750 to 1,000 lumens - a measure of lighting power -
but 95% of the energy used to create that light would typically be wasted in heat. Modern LED lights are much more thermally efficient and can now
produce between 50 and 100 lumens per watt (lm/W) in normal working conditions. One US
manufacturer, Cree, reckons it has produced a white light LED bulb that can produce 300
lm/W. Mr McCarthy says payback on investment in LED is typically between one and three
years. For example, one retail outlet client invested £74,000 in new lighting, resulting
in a 74% lighting energy reduction and savings of around £33,000 per year, he says." |
"Norway's energy boom is tailing
off years ahead of expectations, exposing an economy unprepared for life after oil and threatening the long-term
viability of the world's most generous welfare model. High spending within the sector has
pushed up wages and other costs to unsustainable levels, not just for the oil and gas
industry but for all sectors, and that is now acting as a drag on further energy
investment. Norwegian firms outside oil have struggled to pick up the slack in what has
been, for at least a decade, almost a single-track economy.
How Norway handles this 'curse of oil' - huge wealth that bring unhealthy
dependency in its train - may hold lessons across the North Sea in Scotland, which votes
on independence from the United Kingdom later this year, relying at least in part on what
it sees as its oil revenues.... the glory days of
British hydrocarbon production are already in the past, with North Sea output down around
two thirds since its peak. A net oil and gas exporter until the turn of the century,
Britain will import almost half of its hydrocarbon needs this year, mostly from Norway,
rising to two-thirds by 2026, the government has said....
The fortunes of the oil industry, which accounts for
a fifth of Norway's economy, have shifted abruptly as the global oil sector slammed on the
brakes. Costs are spiking and capital spending has been so high that energy firms are
selling assets to pay dividends.
With oil prices seen falling this year and next, appetite for capital expenditure is low.
Investments, which tripled over the past decade, are now seen declining in the years
ahead, confounding earlier expectations for a steady increase, while oil production
remains flat, despite years of heavy spending. Energy companies are cutting some of their
most innovative projects, a big worry as the sector has relied on cutting edge innovation to offset its high costs.The
government puts the best face on this, but admits times are changing.... Norway is the world's seventh
biggest oil exporter, and it supplies a fifth of the European Union's gas, a critical
position as tensions with Moscow over Ukraine raise concerns about Russian supplies. It also boasts the world's highest GDP per hour worked, according to the
OECD, but labour productivity has declined since 2007, and since 2000 its unit labour cost
has risen around six times faster than in Germany." |
"Oil explorers like Exxon Mobil
Corp. and OAO Rosneft risk wasting $1.1 trillion of investors cash through 2025 on
expensive, uneconomic projects from the Arctic and deep seas to tar sands, according to a
study. Thats the sum the industry may spend on developments that need market prices
of at least $95 a barrel to break even, the Carbon Tracker Initiative said. The money risks being wasted as the
total amount of oil the world can afford to burn without warming the planet to unsafe
levels is available from less costly deposits that are economical at $75 a barrel,
according to its report. Petroleo Brasileiro SAs capital spending on projects
needing $95 a barrel or more may reach $83 billion through 2025, with Exxon at $73 billion
and Rosneft at $70 billion, Carbon Tracker said. The
figures arent the companies own figures but were estimated by the non-profit
group, whose backers include the Rockefeller Brothers Fund, Joseph Rowntree Charitable
Trust and European Climate Foundation. Rosneft said consumption of so-called
unconventional oil is forecast to rise as demand for energy increases and other sources
are depleted. While recovery is a challenge, the resources represent the foundation for a
'stable increase in company value for shareholders,' it said in an e-mailed reply to
questions." |
"British motorists and businesses are paying some of the highest fuel
tax rates in the world and sales to cash-strapped UK drivers have slumped to a record low,
two new surveys reveal today. UK pump prices overall are some of the world's highest
because 60p in every pound spent at forecourts is tax putting a fragile economic
recovery at risk, say industry accountancy experts. Meanwhile
cash-strapped motorists are slashing their petrol and diesel consumption to cope with
soaring domestic energy bills, says the AA. As a result, sales of petrol in March
plummeted to their lowest on record and are down a quarter on the first
three months of last year, the motoring organisation said. The news comes as the RAC
predicts a 2p rise in the 130.21p a litre cost of petrol, which is nevertheless down on
the 140p paid a year ago. It rose above 130p this
week for the first time since January. It also comes despite a series of fuel duty freezes
by Chancellor George Osborne. Meanwhile UK petrol sales to cash-strapped drivers
have slumped to their lowest level on record despite plunging prices at the pumps.
New figures for March mean petrol demand dipped by a quarter in the first three months of
2014 compared with the same period in 2008 just before the recession. The AA says:
The new record low in UK petrol sales may in part be explained by the reaction by
households to the budgetary squeeze from domestic energy price hikes. UK drivers
bought 1.367billion litres of petrol in March 2014, according to government figures
highlighted by the AA. This was the lowest recorded figure, with the previous low point
being March 2013 - the coldest March for 50 years - when sales only reached 1.376billion
litres. Motorists in March last year had to battle the elements and petrol prices of
around 140p a litre. By contrast March this year was much warmer, with prices around the
130p a litre mark. Diesel consumption rose from 2.109billion litres in March 2013 to
2.230billion litres in March 2014. But diesel sales for the first three months of this
year are only five per cent higher than for the same period in 2008 despite a 40 per cent
increase in diesel-powered vehicles. AA president Edmund King said: Petrol sales
have hit their lowest on record when pump prices were at a three-year low, the weather was
relatively warm and dry, and the economy was showing signs of recovery. This was not
the freezing, miserable, 140p-a-litre March of the year before. He added:
Either the fear or reality of gas and electricity price surges has triggered an
avoid-the-petrol-pump backlash to balance family spending or the trauma of
speculator-driven road fuel price spikes over more than three years has seared into the
psyche of the UK driving consumer. We may find out in the next couple of months as
the boilers and heaters are turned off - and drivers look forward to summer motoring and
trips out." |
"Britain has already approved
enough renewable energy projects to hit its EU targets, rendering all 1,000 projects still
in the planning system surplus to requirements, new analysis claims. Government figures
show that 35 gigawatts (GW) of renewable capacity - mainly wind and solar farms and
wood-burning biomass plants - is already built, under construction or has planning
consent. This will be more than enough to hit the legally-binding target of sourcing 15pc
of energy from renewable sources by 2020, according to a report by the Renewable Energy
Foundation (REF). REF - which, despite its name, is a stern critic of renewable energy
costs - said that 'if all capacity in the pipeline were refused immediately, the 2020
target would still be met', even allowing for the likelihood that some of the consented
projects would not ultimately be built. The UKs 15pc target for 2020 covers all
energy, including heating and fuels - and in practice is expected to require at least 30pc
of electricity to come from renewable sources. If all 18GW of such projects currently in
the planning system were consented and built, the UK would exceed that level by 50 per
cent, REF calculates. Dr John Constable, one of the
authors of the REF study, said there was 'vastly more speculative activity in the planning
system than is required by the targets or can be afforded by the consumer'. The report is
likely to strengthen Tory calls to curb the expansion of wind and solar farms, which are
subsidised by energy bill-payers. Britain has no binding renewable targets beyond
2020 and ministers have said they are happy to use other low-carbon technologies, such as
nuclear or 'clean gas, if they offer a cheaper route to decarbonising. REFs analysis comes as Tim Yeo MP, Tory chairman of the
energy select committee, said government plans for expensive offshore wind farms may have
to be cut, in light of new figures showing the rising cost of green subsidies. Documents
quietly released by the Treasury last week show that ministers expect to sign deals this
year committing consumers to paying £28.8bn in subsidies for a series of projects over
coming decades. The projects include at least five offshore wind farms, Hinkley Point
nuclear plant, and three biomass plants. Mr Yeo said
the figures showed the need for ministers to be 'very hard-headed about the
cost-effectiveness of different technologies'. 'We
may need to revise downwards how much offshore wind there will be,' he said. 'A couple of
years ago the government was suggesting offshore wind will have a really big part to play.
I dont think we can afford that.' He said that
solar and onshore wind farms were 'better value' and suggested that blocking onshore wind
farms would push up bills. 'We do need to be aware that the cost of respecting
peoples concern about the environmental impact of onshore wind is to add greatly to
the costs of producing low-carbon energy,' Mr Yeo said. 'The public need to understand
that there is a cost to saying no to onshore wind.' The comments appear to echo
those of Ed Davey, the energy secretary, who has claimed that Tory plans to curb onshore
wind in favour of costlier offshore turbines could push up bills. However, Mr Yeo said a formal curb on onshore wind deployment were
unlikely to many any difference because developers were already finding it 'almost
impossible to get planning consent'.... The
Renewable Energy Association, which represents the green energy industry, said last week:
'The UK is currently broadly on track to meet its legally binding 2020 target of 15%
renewable energy.' Overall growth in renewable energy deployment must continue at an
average 17% per annum to achieve the target one of the most demanding growth rates
across the whole EU.' It said that £30bn had been invested in renewable energy since 2010
and that twice that amount was needed by 2020. " |
"The government must urgently
establish a strategic authority to oversee the future growth of Britain's ageing energy infrastructure, a study argues on
Tuesday. Academics at Newcastle University challenge
the government's market-based approach, saying the £100bn needed to secure energy
security is not being delivered by a fragmented system that lacks central direction. The
academics, led by Prof Phil Taylor, argue that the country needs a 'systems architect' and
that energy, at least for the bulk of the population, is too cheap, which is leading to
waste." |
"Iran has indicated it would be
willing to supply natural gas to Europe amid concern that Russia could retaliate against
EU sanctions by restricting its own supplies of the fuel. The Islamic republics oil
minister, Bijan Namdar Zanganeh, said at the weekend: 'As a country capable of supplying
gas in very big volumes, Iran is always willing to be present in Europes market,
either through pipeline or in LNG [liquified natural gas] form.' Energy supplies from Iran holder of the worlds second-largest
natural gas reserves have been limited by sanctions aimed at curtailing its nuclear
programme. However, a recent deal brokered by the US could see Tehran eventually re-emerge
as a major global supplier at a time when markets are concerned about the reliability of
Russia in the wake of the Ukraine crisis. Stockpiles across Europe are thought to be high
enough to absorb any short-term disruption to supplies from Moscow and offset the need to
find new imports immediately. Figures from the US Energy Information Administration show
that Russia dominates Europes gas supply market, shipping 76pc of its exports of the
heating fuel to the region last year." |
"Slovakia and Ukraine have
reached a deal that will allow gas from Central Europe to reach Ukraine via Slovakia.
Under the deal Slovakia will reinstate a disused pipeline that will be capable of
supplying 3 billion cubic metres (bcm) of gas a year to Ukraine. Ukraine has been looking for alternatives to Russian gas, which last year
accounted for around a half of its 55bcm consumption. In April, German energy firm RWE
began deliveries of gas via Poland. Under that deal RWE can supply up to 10bcm of gas a
year. Russia has almost doubled the price of gas for Ukraine, following the toppling
of pro-Russian President Viktor Yanukovich in February. Also, Ukraine owes Russian gas
firm, Gazprom $2.2bn (£1.3bn) for supplies of gas. The two nations are in dispute over
that debt and Ukrainian officials are concerned that Gazprom could just cut off the
nation's supply of gas. Ukraine was hoping that Slovakia would be able to open more
capacity, by reversing the direction of gas in the main pipeline from Russia to the West.
But Slovakian authorities are concerned that would break the terms of its contract with
Gazprom." |
"In April, state-owned Gazprom
shipped the first 70,000 tons of oil from the Prirazlomnaya oil field in the Pechora Sea.
And within the next three years there are plans to start shipping liquefied natural gas
from the Yamal Peninsula under an international project called Yamal LNG. Ice is a major
threat to vessels shipping out hydrocarbons or those bringing in supplies. It is also a
barrier to commercial transit navigation from China to Europe. The Northern Sea Route
stretches from the Kara Sea to the South Siberian Sea, and links with the Bering Strait
between Asia and North America. When connected with the ice-free waters to the south, it
becomes the shortest seaway between European ports and China. Because of harsh conditions, navigation in these waters is possible for
only half of the year. And even then ships may not be safe without an icebreaker escort.
To make year-round navigation possible, more ice-class ships are needed as conditions do
not seem to be improving drastically. Despite talk of
global warming, the polar ice seems to be showing signs of coming back in strength.
European satellite Cryosat surveys of the Arctic Rim revealed that over last year the
ice-covered area grew by 50 percent from 2012. The
satellite, launched in 2010 to study the Arctic ice, had since then been reporting
receding ice coverage in the region. Just a few years
ago scientists predicted all of the Arctic ice would melt before the end of 2013. Now they are postponing their forecasts for another decade. Ice is a
hazard for shipping not only on the Northern Sea Route, but in the neighboring Baltic Sea
waters, which are considered milder in terms of ice coverage. Two years ago the
nuclear-powered icebreaker Vaigach set a record rescuing 250 ships from the ice in the
Baltic over a period of 1 1/2 months. Ships have to be specially designed and equipped to
sail through ice. A conventional icebreaker uses the energy from its engines to slide over
the ice and crush it with its own weight. An icebreaker has to combine three
characteristics to be successful and survive in inhospitable waters. First, a reinforced
body prevents the ship from being gripped and crushed by ice from the sides. Second, a
specially designed hull lets it roll over thick ice. And third, it needs a hugely powerful
engine to keep it going in even the worst of conditions. 'Today, the most powerful thrust
is achieved only with the use of nuclear energy,' said Vyacheslav Ruksha, the head of
Atomflot, a subsidiary of state-owned nuclear energy corporation Rosatom that manages
nuclear icebreakers. Russia, with the biggest
icebreaker fleet in the world, has an advantage no other country possesses. It has over 30
icebreakers of different classes, six of which run on nuclear power and are strong enough
to move through ice over 2 meters thick which they have to navigate when escorting
ships in the Kara Sea. Another advantage of nuclear
power is that these ships have a very high level of autonomy. In the Arctic, where there
may be no ports for hundreds of nautical miles around and no means to refuel, this is
crucial. 'Even the most advanced diesel-powered icebreakers consume 350 to 400 tons of
fuel a day,' Ruksha said. 'If you want such a ship to sail autonomously for two months,
for instance, you can calculate how much fuel would first have to be stored somewhere and
then blown as exhaust into the sea.' Russias newest nuclear icebreaker the 50
Let Pobedy, or 50 Years of Victory is currently the biggest and most powerful in
the world. Almost 160 meters long and 30 meters wide, its two nuclear-powered engines are
capable of jointly producing 55 megawatts of power enough to cover the electricity
needs of a small city. The only existing icebreaker of a similar class in the world is the
U.S. diesel-electric and gas-powered Polar Star, built in 1976. However, while
Russias fleet is impressive, it is aging. Most of its most powerful ships were built
during the Soviet era and they are now over 20 years old, and many of the oldest have had
their service lives extended. If not for new shipbuilding projects, the 50 Let Pobedy,
built in 2007, would be the only Russian nuclear icebreaker by 2021. Knowing this,
Atomflot has in recent years launched a multi-billion dollar program to build new
and even more powerful icebreakers. In November 2013, United Shipbuilding Company,
or USC, a state-owned ship building giant, began work on what is to become the biggest and
most powerful icebreaker in the world. Called Project 22220 and named Arctica, it will be
as tall as an 18-story apartment building and 173 meters long. With its nuclear engines giving out 60 megawatts of power, it will
be able to tackle ice up to three meters thick. The
ship is scheduled to sail in 2017. Atomflot plans to order two more ships of this class,
but has not yet agreed on a price with the USC. The estimated cost of building three
nuclear powered icebreakers is about $3 billion, Ruksha said.... Last summer, Russian icebreakers led the first Chinese commercial
ship through the Northern Sea Route on its way to the Dutch port of Rotterdam. It made its
destination even faster than planned, and almost two weeks earlier than it would have if
it had gone via the traditional route through the Suez Canal. According to the American
Bureau of Shipping, 71 ships sailed through the Northern Sea Route in 2013, 54 percent
more than in 2012. But even though the transit potential of the seaway is growing, it will
still be nowhere near the volumes that go through the Suez Canal, shipping experts said.
The Suez handled about 900 million tons of cargo in 2013, and only 5 million to 10 million
tons of transit shipping volumes are expected to come to the northern route in the coming
years. 'Cargo volumes do not originate close enough to the route,' said Henrik Falck,
chairman of the board of Norwegian Tschudi Shipping Company. Most trans-continental
container routes pass between the ports of China, Australia, North and South America, he
said, which is too far south of the Northern Sea Route....'Now our task is to help Yamal LNG vessels go safe through the
ice-covered waters,' [Ruksha] said, adding that when fully developed the project will
increase annual cargo volumes in the Northern Sea Route by over 17 million tons." |
"Thirty years after Arthur Scargill led the miners out on strike
to be followed by the wholesale closure of the British coal industry it is
not a union leader from Yorkshire but a billionaire from Russia who has his finger on
Britains light switch. Britain now imports four
times as much coal as it produces, and Russia, which is subject to international sanctions
over Ukraine, is our biggest supplier, providing close to half of all the coal we bring
in. And the company responsible for the bulk of that is the Siberian Coal Energy Co,
whose chairman and majority owner is Andrey Igorevich Melnichenko. Our dependence on
Russian coal has been thrown into sharp relief both by the rising tension between the West
and Russia over Ukraine and by last weeks vote by miners to agree to the closure of
two of Britains remaining three deep pit mines. If
the Prime Minister says he does not like what Russias doing in Ukraine, Putin can
always turn round and say hell be sending Russian coal east not west this
year, said Chris Kitchen, general secretary of
the National Union of Mineworkers. It is a far cry from the situation when Margaret
Thatcher came to power in 1979. Then, Britain produced 122million tons of coal from nearly
300 mines, with the vast majority underground mines and about 60 open-cast. Now, two of
Britains last three deep mine pits will close within 18 months after the admission
by UK Coal, Britains biggest coal producer, that it could no longer go on. On
Tuesday, UK Coals miners voted to back an orderly shutdown of the deep mines, with
the help of £10million of Government loans and £10million from the private sector. Though under European Union rules on pollution nearly half the
UKs 13 coal-fired power stations are due to close by 2015 and all could be
shut down by 2023 coal still supplies about 40 per cent of Britains
electricity generation needs." |
"The Danish states oil and
gas company, Nordsøfonden, has announced that the search for oil in the Danish areas of
the North Sea are too expensive, Berlingske newspaper reports. During a meeting yesterday
at which the energy authorities, Energistyrelsen, opened up the seventh bidding round for
offshore drilling permits in the North Sea, Peter Helmer Steen, the head of Nordsøfonden,
voiced his discontent. 'The costs associated with drilling
and building new platforms in Denmark are far too steep,'
Steen said according to Berlingske. 'They need to go
down if we want more resources extracted. We can see that some of our drilling costs are
twice as high in Denmark as they are in other countries.' The high costs in Denmark could
stem from the technical areas such as the number of days it takes to drill
and expenses associated with supply ships, but part of the cost comes from the necessary
requirements now needed to operate rig equipment. The steep costs have weakened
competition in Denmark, and stringent regulation is an area that the authorities will look
into when they develop a new strategy for oil excavation in the North Sea." |
"Oil producers in Canada and the
United States could see their plans for aggressive expansion of crude-by-rail
short-circuited if American regulators follow Ottawas lead and force the industry to
retire or retrofit tank cars built before 2011.
Industry officials warn that the railway supply industry will have a hard time meeting the
rising demand for new cars while retrofitting existing ones that are seen as vulnerable to
leakage and explosions during accidents involving crude-laden freight trains." |
"The oil and gas industry is worth
about £35bn to the UK economy, according to a new study. The research, commissioned
by industry body Oil and Gas UK, found more than 3,000 companies were directly involved in
the industry. The number of people employed by UK firms grew by more than 20,000 in the
four years to 2012. The report said a key challenge was the availability of skilled and
experienced workers. It also suggested the industry needs to increase exports to sustain
growth. The Ernst and Young report states: 'The era
of cheap, easy oil may be over but the global demand for oil and gas remains high. In a world of sustained high oil prices but declining production, the
outlook for the oilfield services industry is robust. Using technology to reduce costs and
extend the life of conventional production, for example through enhanced oil recovery
techniques, will be critical to future commercial success. The UK oilfield services sector
is already a global leader and there are significant opportunities, both at home and
overseas, for the sector to continue going from strength to strength." |
"Hydraulic fracturing has opened
a whole new world of oil and gas, but even Exxon Mobil Corp. says its not the
worlds best energy source for the future. Energy efficiency technology will save 500
quadrillion British thermal units over the next 30 years, said Ted Pirog, an
energy analyst with Exxon Mobil Corp. How much energy is that? 'Thats the amount of
energy that the world uses today,' said Pirog, as he spoke at the North Texas Commission
luncheon Wednesday. 'Our greatest source of energy in the future is our ability to use it
more efficiently.' Pirog gave a brief run-through of
Exxon's Outlook for Energy: A View to 2040 report at the Omni Mandalay Hotel in
Irving. By 2040, the worlds population
will grow by 2 billion people. The world will become increasingly urbanized and
industrialized, relying more and more on energy. Overall energy consumption will go up 35
percent during that time but it would be far higher without advances in energy
efficiencies, Pirog said. Thats everything from more fuel-efficient vehicles,
including hybrid cars, to more fuel-efficient power plants. Electricity generation will
grow by 90 percent by 2040 but the amount of fuel needed to generate that electricity will
only grow by 50 percent, Pirog said. 'Were
going to use the fuels more efficiently to generate more electricity,' Pirog said." |
"When it comes to setting overly optimistic targets for the
production of advanced biofuels, the United States Environmental Protection Agency makes Pollyanna sound like Eeyore. The official 2013 target official for cellulosic biofuelmade from
the non-edible parts of plants, wood waste and other non-food feedstockswas 1.75
billion gallons. That was the volume of biofuels Congress mandated that oil refiners blend
with gasoline in an effort to fight climate change. The EPA subsequently slashed
that target to 6 million gallons last year. And on Earth Day yesterday the agency
finally came down to earth and issued a retroactive
target to reflect the actual production of biofuels in 2013. The number: 810,185 gallons....making
advanced biofuels is a far more technologically challenging and complex process than
deploying solar panels or wind turbines. And attracting investors to put up the hundreds
of millions of dollars to build biofuel refineries has been no easy task.... In January,
one of the few commercial cellulosic biofuel producers, Kior, which is backed by Silicon
Valley venture capitalist Vinod Khosla, shut down its Mississippi refinery amid
'structural bottlenecks, reliability and mechanical issues,' the company stated in a March
regulatory filing. So how much progress is the industry making to hit that 17 million
gallon goal for 2014? Heres how much cellulosic
biofuel was produced in the first quarter of this year, according to the American Fuel and
Petrochemical Manufacturers: 75,000 gallons." |
"It's not surprising that a survey of energy professionals attending the 2014 North American Prospect Expo
overwhelmingly identified 'U.S. energy independence' as the trend most likely to gain
momentum this year. Like any number of politicians and pundits, these experts are riding high on the shale boom -- that
catch-all colloquialism for the rise of hydraulic fracturing and horizontal drilling that
have unleashed a torrent of hydrocarbons from previously inaccessible layers of rock. But this optimism belies an increasingly important question: How
long will it all last? Among drilling critics and the press, contentious talk of a 'shale
bubble' and the threat of a sudden collapse of America's oil and gas boom have been
percolating for some time. While the most dire of these warnings are probably overstated,
a host of geological and economic realities increasingly suggest
that the party might not last as long as most Americans think.... The problems arise when you look
at how quickly production from these new, unconventional wells dries up. David Hughes -- a
32-year veteran with the Geological Survey of Canada and a now research fellow with the Post Carbon Institute, a
sustainability think-tank in California -- notes that the average decline of the world's
conventional oil fields is about 5 percent per year. By comparison, the average decline of
oil wells in North Dakota's booming Bakken shale oil field is 44 percent per year.
Individual wells can see production declines of 70 percent or more in the first year.
Shale gas wells face similarly swift depletion rates, so drillers need to keep plumbing
new wells to make up for the shortfall at those that have gone anemic. This creates what
Hughes and other critics consider an unsustainable treadmill of ever-higher,
billion-dollar capital expenditures chasing a shifting equilibrium. 'The best locations are usually
drilled first,' Hughes said, 'so as time goes by, drilling must move into areas of lower
quality rock. The wells cost the same, but they produce less, so you need more of them
just to offset decline.' That's a tall order when
prices are low. Currently, natural gas is moving at about $4.50 per MMBtu -- a welcome
uptick, but by no means ideal for producers. Even if that climbed to $6, Hughes estimates that shale gas growth would last only another
four years or so, at which point even-higher prices
would be needed to maintain production, let alone keep it growing. Speaking last month to Oilprice.com, Art Berman, a Houston-based geological consultant
with a similarly sober (and often unpopular) view of the shale boom, called for more
realistic assessments of its longevity. 'I'm all for shale plays, but let's be honest
about things, after all,' Berman said. 'Production
from shale is not a revolution; its a retirement party.' Berman and Hughes both presented their concerns at the annual meeting of the Geological
Society of America last fall. Not everyone thinks this sort of pessimism is warranted.
With funding from the Alfred P. Sloan foundation, Scott Tinker, a professor of geosciences
at the University of Texas at Austin has been leading one of the most comprehensive,
well-by-well analyses of the four biggest shale gas reserves in the U.S., including
the contentious Marcellus formation in the Appalachians. Tinker doesn't quibble much with
Hughes' and Berman's observations about well depletion rates, though he interprets the
implications differently. 'Just like conventional drilling, the broad message here is that
these basins are going to continue to be drilled and there will be money made by some and
lost by others,' Tinker said. He prefers to call the shale boom an evolution rather than a
revolution, and he suggests that while new wells must consistently be plumbed to address
the shortfalls of old ones, this has always been the case. Newer drilling technology that
allows several well paths to proceed from a single surface installation will help minimize
local impacts, Tinker says -- adding that with higher prices, the shale gas boom could
remain healthy as far out as 2040. That's not an immediate threat, but it's also not
exactly the 100-years-of natural gas that President Barack Obama has touted.
Clearly, neither shale oil production, which even
Tinker concedes is likely to peak just five or six years from now, nor shale gas will escort the U.S. into the era of energy
independence." Is the U.S. Shale Boom Going Bust? Bloomberg, 22 April 2014 |
"Energy analyst, Moshe Ben-Reuven, recently published an extensive
analysis on Marcellus shale production rates in part based on available EIA data. He
concludes while the Marcellus has produced impressive amounts of shale gas, he believes, 'Marcellus proved reserves, along with production rate, allow
projection of life span, which is shown far less than the 100 years, closer to 10 years.' Ben-Reuven also stated he could not find any physics based formulas, only
pro formas, for what the oil and gas industry are claiming in regard to long
term per well production estimates." |
"Shinzo Abe, Japans
premier, announced last week that his country will reopen many of its 48 nuclear reactors
once cleared by safety regulators, despite the Fukushima disaster in 2011. 'This could
have a huge effect. Japan is the worlds largest importer of LNG,' said Prof Alan
Riley, from City University. Japan has relied heavily on LNG in thermal coal to power its
industries since Fukushima, importing 76bcm last year. This has been ruinously expensive.
It has also soaked up the worlds supply of LNG and driven up the price in Asia to at
least four times US levels. Two reactors in western Japan the safest area could be open
within six months or less. A further 29 may follow in stages. Reactor start-ups could free
up 34bcm in global supply, allowing it to be re-routed to Europe. Russias total gas
exports to the EU are 130bcm." |
"Biofuels made from the leftovers of harvested corn plants are
worse than gasoline for global warming in the short term, a study shows, challenging the
Obama administration's conclusions that they are a much cleaner oil alternative and will
help combat climate change. A $500,000 study paid for by the federal government and
released Sunday in the peer-reviewed journal Nature Climate Change concludes that biofuels
made with corn residue release 7 percent more greenhouse gases in the early years compared
with conventional gasoline. While biofuels are better in the long run, the study says they
won't meet a standard set in a 2007 energy law to qualify as renewable fuel. The
conclusions deal a blow to what are known as cellulosic biofuels, which have received more
than a billion dollars in federal support but have struggled to meet volume targets
mandated by law. About half of the initial market in
cellulosics is expected to be derived from corn residue. The biofuel industry and
administration officials immediately criticized the research as flawed. They said it was
too simplistic in its analysis of carbon loss from soil, which can vary over a single
field, and vastly overestimated how much residue farmers actually would remove once the
market gets underway." Study: Fuels from corn waste not better than gas Associated Press, 21 April 2014 |
"Gazprom on Friday shipped the first oil from the country's only offshore Arctic field in operation to Europe, marking the latest step
in the development of the environmentally fragile and ice-cold site.
Greenpeace activists scaled the Prirazlomnaya oil rig last fall
to be arrested, initially on charges of piracy in protest
of the company messing with the pristine area and posing the risk
of pollution. The buildup of Russian
oil supplies to Europe is also taking place as their political ties deteriorate
rapidly over Ukraine. 'Today's event has a large significance for the
strengthening of Russia's position on the global oil market,' Gazprom chief
Alexei Miller said in a statement. President Vladimir Putin gave the command,
in a live video linkup with the oil rig, to export the cargo,
stressing the importance the government attaches to this remote
and pioneering project. Miller was on hand at the oil rig for the
occasion. The consignment of 70,000 tons will make its way to northwestern
Europe, bought by one of Europe's biggest energy companies, Gazprom said
in the statement, without disclosing the customer. The quality of the oil, branded 'Arco' for Arctic
oil, is worse than that of Russia's best-known blend Urals, said Grigory Birg,
an oil analyst at InvestCafe, a brokerage. Therefore, it is likely
to sell at a cheaper price, he said.
The company anticipates to ship a total of 300,000 tons this year,
a fraction of the country's annual oil exports of more than 200 million
tons. It did not say whether the entire amount is destined for Europe. Gazprom
dedicated a fair share of its statement Friday to an attempt to allay
fears of a possible environmental disaster at the field. The design
of the partially Russia-built oil rig 'fully' removed the threat of spills
during the production, storage and loading of oil, it said.
The onboard storage tank has concrete walls that are three meters thick
and coated with stainless steel, which is resilient to corrosion and wear.
'It is factor of safety exceeds the actual loads many times over,'
the statement said. Sitting 60 kilometers offshore, the Prirazlomnoye field
holds 72 million tons of recoverable oil. Production started in December
and is expected to reach 6 million tons a year some time after 2020." |
"Russia's parliament has agreed
to write off almost $10 billion of North Korea's Soviet-era debt, in a deal expected to
facilitate the building of a gas pipeline to South
Korea across the reclusive state. Russia has
written off debts to a number of impoverished Soviet-era allies, including Cuba. North Korea's struggling communist economy
is just 2 percent of the size of neighbouring South Korea's. The State Duma lower house on Friday ratified a 2012 agreement to write
off the bulk of North Korea's debt. It said the total debt stood at $10.96 billion as of
Sept. 17, 2012. The rest of the debt, $1.09 billion, would be redeemed during the next 20
years, to be paid in equal instalments every six months. The outstanding debt owed by North Korea will be managed by Russia's state development bank,
Vnesheconombank.Russia's Deputy Finance Minister Sergei Storchak told Russian media that
the money could be used to fund mutual projects in North Korea, including a proposed gas
pipeline and a railway to South Korea....Moscow has
been trying to diversify its energy sales to Asia away from Europe, which, in its turn,
wants to cut its dependence on oil and gas from the erstwhile Cold War foe. Moscow aims to
reach a deal to supply gas to China, after
a decade of talks, this May." |
"Royal Dutch Shell is committed to expansion in Russia, Chief
Executive Ben van Beurden told Russian President Vladimir Putin at a meeting on Friday
amid sanctions imposed on the country after its annexation of Ukraine's Crimea region.
Shell plans to expand Russia's only liquefied natural gas (LNG) plant with Russian partner Gazprom, he said at a
meeting at Putin's residence. 'We, of course, will
pledge all the necessary administrative guidance and support,' Putin said in response in a
meeting that was later broadcast on national television. The United States and European
Union have imposed targeted sanctions against a list of Russian and Ukrainian individuals
and firms in retaliation for Moscow's annexation of Crimea last month. EU and U.S.
diplomats have indicated that they may consider wider sanctions against whole sectors of
the Russian economy
if Russian forces were to enter Ukraine.
'We are very keen to grow our position in the Russian Federation,' van Beurden said. 'We
look forward with anticipation and confidence on a very long-term future here in Russia.' BP boss Bob Dudley said this week the sanctions had not
impacted the company's business in
Russia." |
"According to data from The Energy Information Administration (EIA)
in their 2014 Early
Release Overview, oil imports decreased from 12.55 million barrels per day in 2005,
(60 percent of daily U.S. consumption), to 7.45 million barrels per day, (40 percent of
daily U.S. consumption), in 2012. Preliminary data from the same report shows that imports
dropped even further in 2013, to 32 percent of overall consumption. So what accounts for
the drop in imports? There are two likely reasons. First, domestic supplies have increased
due to a new drilling technique called hydraulic fracturing, also known as fracking, which
involves the injection of more than a million gallons of water at high pressure into
drilled wells thousands of feet below the surface. The
pressure causes the rock layer to crack so that crude (unrefined) oil flows up the well.
Because hydraulic fracturing freed up oil that was previously inaccessible, U.S.
production boomed, particularly in states like Texas, North Dakota, and Alaska. According
to more EIA
data, total spending by oil (and natural gas) companies grew 11 percent on average per
year from 2000-2012, and spending on development activities increased by 5 percent ($18
billion) in 2013. All this culminated in the U.S. production of 7.9
million barrels of crude oil per day in 2013, a level the country hasnt hit
since 1988. U.S. production is expected to continue rising, to 8.4 million barrels per day
in 2014, and 9.1 million barrels per day in 2015. Second,
imports decreased because high gasoline costs, fuel efficient cars, and the 2008 recession
all led to lower national oil consumption, which decreased from 20.8 million barrels per
day in 2005, to 18.64 million barrels per day in 2013. Although consumption hasnt
recovered to pre-2005 levels, it started to pick up in 2012, and the EIA predicts that
consumption will continue to rise along with domestic production in 2014. Despite
increased domestic oil production and lower oil consumption, the US remains the largest
importer of oil in the world, and spent $427 billion on imports in 2013. The U.S spent almost as much on imports in 2013 as the sixth through
tenth largest oil importing countries (Korea, The Netherlands, Germany, The United
Kingdom, and Spain) combined. However, the U.S. is only the 34th largest consumer of
imported oil per capita. Countries that rank before it as the top importers per capita
include Singapore, Luxembourg, and The Netherlands." |
"Its getting more expensive to export a barrel of oil from
Canada by pipeline. A combination of higher costs for system expansions, larger payouts to
landowners and more strident regulatory conditions is pushing up fees charged by pipeline
companies to shippers, industry experts say. The total cost of moving oil and natural gas
on Canadian-regulated pipelines has shot up 60% in five years, according to National
Energy Board (NEB) data. Tolls on the Enbridge Inc.
system, which carries the bulk of Canadian crude exports into the U.S., doubled over the
period, the data show. Experts say most of that increase can be attributed to system
expansions undertaken by Enbridge since 2008, including construction of its Alberta
Clipper pipeline to Chicago. New pipelines are expensive, and tolls tend to decline over
time as assets depreciate. But the overall escalation comes with regulators increasingly
flexing their muscles, attaching new environmental, financial and technical conditions to
pipeline approvals in response to public calls for greater scrutiny on the industry." |
"France's Total has not renewed
its only shale gas exploration licence in Poland, a spokesman for the company said
on Monday, highlighting the problems Warsaw faces in reducing its reliance on Russian
energy. The company said that, despite the presence of gas, it had concluded the area it
was exploring in eastern Poland near the Ukraine
border was not economically viable. Poland launched a major push into shale three years
ago when Prime Minister Donald Tusk announced it would seek to produce unconventional gas
on a commercial scale in 2014 to help the country wean itself off predominately Russian
supplies. Poland has increased its efforts to
diversify its energy portfolio following supply shutdowns linked to disputes between Russia and Ukraine,
which are now threatening to come to a head following Moscow's annexation of Crimea. In
March 2012 a government report cut Poland's estimated shale gas reserves by about 90
percent." |
"Otherwise
known as fire ice, methane hydrate presents as ice crystals with natural methane gas
locked inside. They are formed through a combination of low temperatures and high
pressure, and are found primarily on the edge of continental shelves where the seabed
drops sharply away into the deep ocean floor, as the US Geological Survey map shows. And
the deposits of these compounds are enormous. 'Estimates suggest that there is about the
same amount of carbon in methane hydrates as there is in every other organic carbon store
on the planet,' says Chris Rochelle of the British Geological Survey. In other words,
there is more energy in methane hydrates than in all the world's oil, coal and gas put
together. By lowering the pressure or raising the temperature, the hydrate simply breaks
down into water and methane - a lot of methane. One cubic metre of the compound releases
about 160 cubic metres of gas, making it a highly energy-intensive fuel. This, together
with abundant reserves and the relatively simple process of releasing the methane, means a number of governments are getting increasingly excited about
this massive potential source of energy. The problem, however, is accessing the hydrates.
Quite apart from reaching them at the bottom of deep ocean shelves, not to mention
operating at low temperatures and extremely high pressure, there is the potentially
serious issue of destabilising the seabed, which can lead to submarine landslides. A
greater potential threat is methane escape. Extracting the gas from a localised area of
hydrates does not present too many difficulties, but preventing the breakdown of hydrates
and subsequent release of methane in surrounding structures is more difficult. And
escaping methane has serious consequences for global warming - recent studies suggest the
gas is 30 times more damaging than CO2. These technical challenges are the reason why, as
yet, there is no commercial-scale production of methane hydrate anywhere in the world. But a number of countries are getting close. The US, Canada and Japan have
all ploughed millions of dollars into research and have carried out a number of test
projects, while South Korea, India and China are also looking at developing their
reserves." |
"Russian
President Vladimir Putin said on Thursday it would not be possible for Europe to stop
buying Russian gas and that he was hopeful a deal could be reached with Ukraine on gas
supply. 'We sell gas in European countries which
have around 30-35 percent of their gas balance covered by supplies from Russia. Can they stop buying Russian gas? In my opinion it is
impossible,' he said. Putin said that transit via Ukraine is the most dangerous element in
Europe's gas supply system." |
"Germany faces a renewed debate on energy in the wake of the ongoing
Ukraine crisis. To a large extent, the country depends on Russian oil and natural gas
imports. Just recently Chancellor Angela Merkel made it clear that 'all of Germany's
energy policies must be reconsidered.' According to
Germany's Energy Balances Group (AGEB), imported rose to 71 percent of all sources of
energy last year. The most important energy supplier is Russia: It provides 38 percent of
Germany's natural gas imports, 35 percent of all oil imports and 25 percent of coal
imports, covering a quarter of the country's entire energy needs. There are no suitable
alternatives in sight that could cover shortfalls of this magnitude. Germany can supply
only 15 percent of its gas needs using its own resources, the Association of Energy and
Water Industries (BDEW) says. Most of its gas is supplied by Norway and the Netherlands.
Both countries could increase their short-term shipments via pipelines, but not in the
long run, because experts believe North Sea gas reserves are slowly being used up." |
"The world needs to triple the
energy it gets from renewables, nuclear reactors and power plants that use
emissions-capture technology to avoid dangerous levels of global warming, United Nations
scientists said. Investments needed to keep climate
change within safe limits would shave a fraction of a percent off annual global growth,
the UN said yesterday in the third part of its most comprehensive study on warming. A
delay in stemming rising greenhouse gases will cut chances to limit the global temperature
increase, add to costs and lead to increasingly reliance on unproven technologies, they
said. 'The longer we wait to implement climate policy, the more risky the options
well have to take,' Ottmar Edenhofer, a co-chair of the 235 scientists who drafted
the report, said in a phone interview from Berlin. 'We need to depart from business as
usual, and this departure is a huge technological and institutional challenge.' The
UN said governments must accelerate efforts to build wind farms and solar parks and
provide incentives to develop carbon capture and storage technology, or CCS, for
fossil-fuel plants by making it more costly to emit carbon. The study aims to guide envoys
from 194 nations next year as they devise a new accord to slash greenhouse gases.' The
researchers said emissions growth accelerated to an average of 2.2 percent a year for the
2000-2010 period from an annual 1.3 percent the preceding three decades. That puts in
jeopardy the target agreed upon by climate treaty negotiators to stabilize warming since
pre-industrial times to below 2 degrees Celsius (3.6 degrees Fahrenheit)." The
possible situation in 2100 is 'either youll have some fossil-fuel power generation
with carbon capture and storage, or a complete switchover to renewables and smart energy
storage,' Jonathan Grant, director of climate change at consultants PwC in
London, said by phone. 'The problem with some of those scenarios is the transition takes
too long.' Global greenhouse gas emissions would have to be lowered between 40 percent and
70 percent by mid-century from 2010 levels, and to 'near-zero' by the end of the century,
efforts that would be likely to limit warming to 2 degrees Celsius, the UN
Intergovernmental Panel on Climate Change said yesterday in a statement handed out in
Berlin. Without extra effort to cut greenhouse gases, current trends may triple their
concentration in the atmosphere this century, pushing warming since 1750 from 3.7 degrees
Celsius to 4.8 degrees Celsius, according to the report. That would raise the risk of
melting glaciers and sea ice, lengthening droughts and heatwaves and intensifying storms
and flooding." |
"Global crude oil supplies fell month-on-month in March by a steep
1.2 million b/d to 91.75 million b/d, with a decline in output from members of the
Organization of the Petroleum Exporting Countries accounting for near 75% of the loss,
according to the International Energy Agencys most recent Oil Market Report. Due to
sharply lower supplies from Iraq, Saudi Arabia, and Libya, OPEC crude oil supplies in
March fell 890,000 b/d to just 29.62 million b/dthe lowest level in 5 months.
'Libyan and Iraqi outputs were down on worsening civil unrest and operational issues,
respectively, while Saudi Arabia curbed supplies last month in the wake of weaker demand
from refiners during the peak spring refinery turnaround period,' IEA said. OPECs
'effective' spare capacity in March was estimated at 3.53 million b/d, up from 3.31
million b/d in February. Following an upward revision
to demand and reduced forecast for non-OPEC supplies, the 'call on OPEC crude and stock
change' for the second quarter was raised by 100,000 b/d to 29.4 million b/d and for the
second half by 350,000 b/d to an average 30.6 million b/d. For all of 2014, the non-OPEC
supply forecast has been revised lower by 250,000 b/d compared with last months
report due to downward adjustments to the forecast for countries of the former Soviet
Union, and to a lesser extent to smaller changes to Europe and Latin America output. Output from both Russia and Kazakhstan is projected to fall in 2014
because of accelerated declines at Russias legacy fields and ongoing (and extensive)
repairs on Kashagan fields leaky pipeline system. The
forecast of global demand growth has been marginally trimmed to 1.3 million b/d in 2014
vs. 1.4 million b/d in last months report, reflecting lower Russian demand
projection in the wake of its annexation of Crimea." |
"Can Europe credibly threaten
Russia with energy sanctions? The answer, at least in the short term, is no. Today, we
rely on Russia for around a third of our gas across the EU. But that average figure masks a dependency
more than 50 per cent for some countries including Austria, Finland, Greece, Poland,
Hungary, and the Czech Republic. .... So who, in
Europe, took the decision to rely on Russia for our lifeblood? The answer is that no one
did. Europe did not choose an energy policy on the basis of the optimisation of supply
security, competitiveness and environmental impact. We have ended up with one, as a result
of different and often incompatible ideas dreamt up by internally focused EU commissioners
and individual member states. A few examples. The emissions cut targeted by the so-called
20-20-20 by 2020 programme? That means less coal and more gas. Do not like nuclear power?
Even more gas. No gas grid interconnections between European countries? More long-term
take or pay contracts. Not happy with domestic shale gas production? More gas from Russia.
Do not like Russia? In that case, it is probably worth rethinking policies 1-4. But there
has been no one to add up the consequences of our ideas, and if necessary take a different
tack.... If the EU really does want to be independent, it needs to launch a medium-term
programme made up of shale gas-friendly regulation, increasing alternative imports,
improving interconnections between member states, energy efficiency, rational renewables,
more nuclear, perhaps even more coal. That will have consequences in terms of costs, jobs
and the environment. But whatever road we choose, we need to make sure someone is driving
the car. If we really do want secure, competitive and clean energy we need to put someone
in charge of it. A senior energy commissioner, who sits above the other four for any
decision within their portfolios which affects energy policy, and therefore has the power
to make the really difficult political decisions and trade-offs that energy requires. This
senior commissioner would also need the authority to define which decisions are within the
remit of the EU, and which can be left to individual member states." |
"Shell has suspended plans to
deploy technology for subsea gas compression in a major Norwegian gas field that would
allow extracting resources without a platform. The technology, expected to be deployed at
Ormen Lange, Norways second biggest gas field, was hailed for its potential to
revolutionise offshore gas extraction. If successful, the innovation would allow
continuing gas extraction at the site which provides about a fifth of UK gas without
having to build a platform, meaning lower additional cost. The technology, consisting of
subsea pumps capable to squeeze out the resources from below the seabed, was developed by
Norwegian company Aker Solutions, who also built a pilot project at Ormen Lange hoping
Shell and its partners would eventually expand it. However, Shell decided not to go
forward with the project, citing rising cost of oil and gas production in general and the
fact the technology had not been extensively tested to be the main motives behind the
decision. 'The oil and gas industry has a cost challenge,' said Odin Estensen, the
chairman of the Ormen Lange Management Committee in a statement. 'This, in combination
with the maturity and complexity of the concepts and the production volume uncertainty,
makes the project no longer economically feasible.'
A Shell spokeswoman said: 'We are not giving up on offshore compression at Ormen Lange,
but we can't give any timeline (of how long the postponement could last).' Statoil,
however, is moving ahead with its own subsea compression project at the Aasgard field in
the Norwegian Sea and expects to be the first in the world to have such a project running
when it starts up in 2015." |
"Vladimir Putin is
more likely to sign a 30-year deal to supply pipeline gas to China next month after more
than a decade of false starts because the crisis in Ukraine
is forcing Russia to look
for markets outside Europe.
While Putin and President Xi Jinping will make the final decision in Beijing next
month, Russias need for new customers means its pushing to complete a deal
first mooted in 1997, a manager at gas-export monopoly OAO Gazprom (GAZP) and a government official said,
asking not to be named because talks are ongoing. In China yesterday, Russias deputy
prime minister said he 'hoped' a deal would be signed in May. The crisis in Ukraine has increased the importance of Russias
relationship with China, its largest trade partner outside the European Union and the only
country in the United Nations Security Council not to censure its actions in Crimea.
Until a China pipeline is built, Russia has few export markets for gas outside Europe,
leaving it vulnerable to sanctions and competition from U.S. exports of shale gas. 'This
time, Russia really may close the China gas supply deal considering that itll be
more flexible on the price,' Ildar Davletshin, an oil and gas analyst at Renaissance Capital,
said by phone from Moscow. 'China, too, needs this contract because the further use of
coal is becoming unbearable in most developed parts of the country.'... Starting not earlier than end of 2018, Gazprom plans to supply as
much as 38 billion cubic meters of gas to China, about 24 percent of the companys deliveries to Europe
last year, which produced about $63 billion in export revenue, according to the company. Gazprom needs the equivalent of about $13.50 per million British thermal
units to profitably finance the pipeline and the development of Siberian gas fields to
feed it, a total outlay of $90 billion, Maxim Moshkov, an energy analyst at UBS AG in
Moscow, said by e-mail. CNPC wont want to pay more than $11 at the border, a price
Gazprom may be forced to meet, cutting into future earnings, Moshkov said. China will
increase natural-gas consumption 11 percent to 186 billion cubic meters this year as
imports advance 19 percent, according to CNPC Economics and Technology Research Institute
report, cited by China Daily. Gas consumption is
likely to be boosted further by a drive to close coal-fired power stations to curb
pollution. " |
"The European Union is close to
freezing plans to complete the $50bn (£30bn) South Stream gas pipeline through the Black
Sea from Russia, the first serious EU action to punish the Kremlin for the seizure of
Crimea. Key details emerged in a leaked briefing by the European Commissions chief,
Jose Manuel Barroso, to Bulgarian politicians, warning the country not to stand in the way
of the EUs tough new line on the project, or attempt to undercut a unified EU
response over Ukraine. 'We are telling Bulgaria to
be very careful,' he said, according to reports in Bulgarias press. Mr Barroso said
there are 'people in Bulgaria who are agents of Russia', a reference to figures in the
ruling Socialist party who have been trying to clinch a bilateral deal with the Kremlin.
The warning came as Ukraine once again rattled investors. Russias Micex index of
stocks fell 2.4pc and the rouble slid 1pc against the dollar after armed pro-Russian
protesters seized government buildings in the eastern Ukrainian city of Donetsk and
declared the region 'independent'. They also stormed offices in Kharkiv and Luhansk.
Ukraines premier, Arseniy Yatsenyuk, accused Russian president Vladimir Putin of
preparing the ground for seizure of the Donbass region, home to most of Ukraines
heavy industry. 'The aim of this scenario is to divide Ukraine into parts and turn part of
Ukraine into a slave territory under a Russian dictatorship,' he said." |
"Jan Arps is the most influential oilman youve never heard of.
In 1945, Arps, then a 33-year-old petroleum engineer for British-American Oil Producing
Co., published a formula to predict how much crude a well will produce and when it will
run dry. The Arps method has become one of the most widely used measures in the industry.
Companies rely on it to predict the profitability of drilling, secure loans and report
reserves to regulators. When Representative Ed Royce, a California Republican, said at a
March 26 hearing in Washington
that the U.S. should start exporting its oil to undermine Russian influence, his forecast
of 'increasing U.S. energy production' can be traced back to Arps. The problem is the Arps
equation has been twisted to apply to shale technology, which didnt exist when Arps
died in 1976. John Lee, a University of Houston
engineering professor and an authority on estimating reserves, said billions of barrels of
untapped shale oil in the U.S. are counted by companies relying on limited drilling
history and tweaks to Arpss formula that exaggerate future production. That casts
doubt on how close the U.S. will get to energy independence, a goal thats nearer
than at any time since 1985, according to data from the U.S. Energy Information
Administration. 'Things could turn out more pessimistic than people project,' said Lee.
'The long-term production of some of those oil-rich wells may be overstated.' Lees
criticisms have opened a rift in the industry about how to measure the stores of crude
trapped within rock formations thousands of feet below the earths surface. In a
newsletter published this year by Houston-based Ryder Scott Co., which helps drillers
calculate reserves, Lee called for an industry conference to address what he said are
inconsistent approaches. The Arps method is particularly open to abuse, he said. U.S. oil production has increased 40 percent since the end of 2011 as
drillers target layers of oil-bearing rock such as the Bakken shale in North Dakota, the
Eagle Ford in Texas, and
the Mississippi Lime in Kansas and Oklahoma, according to the EIA. The
U.S. is on track to become the worlds largest oil producer by next year, according
to the Paris-based International Energy Agency. A
report from London-based consultants Wood Mackenzie said that by 2020 the Bakkens
output alone will be 1.7 million barrels a day, from 1.1 million now. Predicting the
future is an inherently uncertain business, and Arpss method works as well as any
other, said Scott Wilson, a senior vice president in Ryder Scotts Denver office. 'No
one method does it right every time,' Wilson said. 'Arps is just a tool. If you blame Arps
because a forecast turns out to be wrong, thats like blaming the gun for shooting
somebody. As far as Arps being old, the wheel was invented a long time ago too but it
still comes in handy.' Rising reserve estimates gives the U.S. a false sense of security,
said Tad Patzek, chairman of the Department of Petroleum and Geosystems Engineering at the
University of Texas at Austin. 'We have deceived ourselves into thinking that since we
have an infinite resource, we dont need to worry,' Patzek said. 'We are stumbling
like blind people into a future which is not as pretty as we think.' The Arps formula is
only as good as the assumptions a company puts into it, Patzek said. Estimates can be
inflated when Arps is based on limited drilling history for data or on a few
high-performing wells to predict performance across a wide swath of acreage. Forecasts can
also be skewed higher by assuming slower production declines than Arps observed." |
"Wave Hub, the offshore energy
test facility in Hayle, has secured an international company to take on its last berth. Carnegie Wave Energy plans to deploy a device called CETO 6, a fully
submerged technology that produces high pressure water from the power of waves and uses it
to generate clean electricity. The company plans to
have a 3MW array of the technology at Wave Hub in 2016, with the option to expand to 10MW.
It is the third customer to commit to the renewable energy test site, located in St Ives
Bay, in the past four months. Wave Hub, which consists of a giant 'socket' on the seabed
connected to the grid network onshore by an underwater cable, now has three customers with
the potential to generate a capacity of 30MW. Others have been reserved by UK-based
Seatricity, which plans to install a device this spring prior to building out a 10MW array
in the next two years; and Finnish multi-national utilities firm Fortum, which has
reserved a berth for an array of up to 10MW, will shortly be confirming the wave
technology it has selected." |
"Ministers have vowed to curb
the growth of massive solar farms that blight the countryside, pledging they will not
allow it to become 'the new onshore wind'. In a
solar strategy released on Friday, the Department of Energy and Climate Change (DECC)
said: 'We want to move the emphasis for growth away from large solar farms.' It
unveils plans to instead put more solar panels on rooftops of commercial buildings and to
install up to 4 million panels on buildings in the Government estate, including up to
24,000 schools. DECC admits that the spread of solar farms has been 'much stronger than
anticipated in government modelling' and that this 'can have impacts on visual
amenity'." |
"Russia raised the gas price for Ukraine
on Thursday for the second time this week, almost doubling it in three days and piling
pressure on a neighbour on the brink of bankruptcy
in the crisis over Crimea. The increase, announced in Moscow by Russian natural gas producer Gazprom, means Ukraine will pay 80 percent more
for its gas than before the initial increase on Monday. Prime Minister Arseny Yatseniuk said the latest move, two weeks after
Moscow annexed Ukraine's Crimea region, was unacceptable and warned that he expected Russia to increase pressure on Kiev by limiting supply to his
country. 'There is no reason why Russia
would raise the gas price for Ukraine ... other than one - politics,' Yatseniuk told
Reuters in an interview in the Ukrainian capital Kiev. 'We expect Russia to go further in
terms of pressure on the gas front, including limiting gas supplies to Ukraine.'... The
latest rise will be to $485 per 1,000 cubic metres - two days after Gazprom announced a 44
percent increase in the gas price to $385.5 per 1,000 cubic metres from $268.5 due to
unpaid bills. This is much more than the average price paid by consumers in the European
Union.... Earlier this week, the Russian Federation Council, the upper house of the
parliament, voted to annul the agreement on the Black Sea Fleet after Crimea was annexed
by Russia. On Thursday, Gazprom also said Ukraine had to increase the level of gas in
storage to ensure its stable transit to Europe. According to Ukraine's Energy Ministry the
country holds 7.2 billion cubic metres in gas storage. It needs 12-14 billion cubic metres
to ensure a stable flow of gas to Europe in winter." |
"After binging on Canadian oil
and gas assets at top prices, state-owned enterprises (SOEs) from Korea, China and Abu
Dhabi are focused on making them profitable rather than looking at more acquisitions,
executives said Friday. Efforts to turn Canadian holdings into good businesses amid
unexpectedly tougher conditions are playing a bigger role in discouraging new purchases
than rules adopted by the federal government restricting SOE investments in the oil sands to minority positions, said
executives for Koreas KNOC, Chinas Sinopec Corp., and Abu Dhabis TAQA,
providing a rare glimpse into their closely-held Canadian units....Capital cost pressures in the oil sands have tripled, operating costs in
the oil sands at least doubled, we had a change in the oil
sands royalty regime, we had greater environmental regulations, costs of compliance have
increased, we had continued delays in pipelines that allow us to move products out to
maximize revenue, (there is) negative public sentiment toward the oil sands, plus you have
the emergence of other opportunities in the U.S. and elsewhere,' Mr. Ukrainetz told an industry conference organized by the Canadian
Association of Petroleum Producers and Scotiabank." |
"Western oil majors struggling
to restart production at one of the world's biggest offshore
oilfields in Kazakhstan have found that whole kilometres of pipeline are defective, two
people recently returned from the $50 billion project say. Replacing the damaged section
altogether may be a better bet than trying to repair it. Oil company investigators have
yet to announce conclusions about what went wrong at Kashagan in October, when onshore pipes carrying corrosive gases sprang leaks and brought offshore production in the Caspian Sea to a halt a month after
start-up. Yet early
accounts of findings collected from engineering, banking and industry sources, some of whom have just
returned from the site, reveal that the scope of technical faults may delay oil flows
longer than expected. The project has presented huge engineering challenges throughout the 13 years since work began. Much
of it is built on artificial islands to avoid damage from pack ice in a shallow sea that
freezes for five months a year. The oil is 4,200 metres (4,590 yards) below the seabed at
very high pressure, and the associated gas reaching the surface is mixed with some of the
highest concentrations of toxic, metal-eating hydrogen sulphide (H2S) ever encountered. It has now emerged that sulphur-laden sour gas burped out from the oil
field during production last year may have weakened long stretches of processing
pipelines, two sources said. 'The problem goes on for kilometre after kilometre, it's a
systemic problem,' an industry source briefed by Kashagan engineers told Reuters. That
defective stretch of pipeline runs mainly through hard-to-reach swampy terrain, making
intervention costly and difficult. A banker briefed by management of one of the companies
involved in engineering work said he was told the best course of action could instead be
to lay a new line alongside the old one.... Output
remains stuck at zero despite initial projections of 180,000 barrels per day in the early
phase of production build-up on a field that aims to produce 1.66 million barrels a day at
peak - as much as OPEC member Angola. According to
Reuters calculations, by mid-year, lost revenue is likely to amount to between $4 billion
and $12 billion.... Kazakh officials have said they have no plans to nationalise the
project so far and say they hope it could restart in the second half of 2014 and produce
22 million barrels of crude by the end of the year. Up to now, Kashagan has missed out on
around $2.7 billion in oil revenue, a fact likely to cast a shadow over state
decision-making. The contractual terms stipulate the government may refuse to reimburse
the costs, potentially the entire $50 billion bill, if the consortium misses the final
deadline. That was set by the state as October 2013. The Kashagan spokesman said that
output had in fact briefly reached commercial levels, as written in the contract, of
75,000 bpd before its shutdown, but not for long enough to count. A nine-month delay from
September 2013 to July 2014 will cost the consortium at least $12 billion of lost oil
revenues based on full scale output of 450,000 barrels per day. Even if minimal output
levels of 150,000 bpd are taken into account, lost revenues would still be a hefty $4
billion, according to Reuters calculations." |
"Iran and Russia have
made progress towards an oil-for-goods deal sources said would be worth up to $20 billion,
which would enable Tehran to boost vital energy exports in defiance of Western sanctions,
people familiar with the negotiations told Reuters.
In January Reuters reported Moscow and Tehran were discussing a barter deal that would see
Moscow buy up to 500,000 barrels a day of Iranian oil in exchange for Russian equipment and goods. The White
House has said such a deal would raise 'serious concerns' and would be inconsistent with
the nuclear talks between world powers and Iran. A
Russian source said Moscow had 'prepared all documents from its side', adding that
completion of a deal was awaiting agreement on what oil price to lock in. The source said
the two sides were looking at a barter arrangement that would see Iranian oil being
exchanged for industrial goods including metals
and food, but said there was no military equipment involved. The source added that the
deal was expected to reach $15 to $20 billion in total and would be done in stages with an
initial $6 billion to $8 billion tranche. The Iranian and Russian governments declined to
comment." |
"SCIENTISTS have discovered vast deposits of coal lying under the
North Sea, potentially holding enough energy to power Britain for centuries. They
have studied data, from seismic tests and boreholes, collected all over the North Sea for
oil and gas exploration, but instead used it to build a picture of coal deposits.
The work revealed that the sea bed holds up to 20 layers of coal extending from
Britains northeast coast far out under the sea and that much of it could be
reached with the technologies already in use to extract oil and gas. 'We think there are between three trillion and 23 trillion tonnes
of coal buried under the North Sea,' said Dermot Roddy, formerly professor of energy at
Newcastle University. 'This is thousands of times greater than all the oil and gas we have
taken out so far, which totals around 6bn tonnes.'" |
"Calls are mounting for the US
to export shale gas to Europe to help free the continent from Russian influence. Observers are
right to focus on Moscows energy leverage but they are prescribing the wrong
response. The most useful thing that Europe could import is not American gas itself but
the open economic model that has enabled the US natural gas industry to thrive. Europe
buys nearly 30 per cent of its natural gas from Russia. This has led to concern that President Vladimir Putin might turn off
a few taps to gain leverage in the confrontation with Ukraine. For now, these fears are overblown among other things, Europe has
a lot of natural gas in storage but the fundamental worry is well founded. Yet US
natural gas exports would do little to reduce Russian leverage. They cannot replace
Russian gas in the current crisis since it will be more than a year until any US export
terminals are built. Even once these facilities are up and running, the economics of
sending shale gas to Europe are unlikely to make much sense. Once the cost of shipping is
included, Russian gas is far cheaper; Moscows share of the European market is not
likely to change much. Instead, American gas will flow mainly to Asia. This is not to say
that US exports would not hurt Mr Putin. They would push down the price of gas in Europe,
which is one of the many reasons why they should be allowed. But it is fanciful to suppose
that they could provide a decisive edge against Moscow in a future crisis. Europes
politicians should instead put their energy into copying the successful US policies that
laid the groundwork for a spectacular boom in natural gas production. This might allow
Europeans to produce more gas at home instead of buying it from Russia. The US Energy
Information Administration estimates that Europe has 598tn cubic feet of technically
recoverable shale gas, roughly half as much as the US. Yet almost none of this is being
exploited. In part, that is because the continent is playing catch-up with a boom that
started elsewhere. But there are deeper reasons, too. Many European countries have banned
shale gas production. Those that allow development have slapped on taxes and government
royalties that do much to deter it." |
"Russia's Lukoil has opened a
giant untapped oil field in Iraq that will play a major part in driving up production to
new highs in the Middle Eastern country and potentially force down the price of crude.
Spigots in the West Qurna-2 field, Iraqs second-biggest, were opened officially over
the weekend in a move that will release 120,000 barrels per day of crude oil onto
international markets. The field in Southern Iraq
near Basra will eventually pump out 1.2m barrels-per-day (bpd) of oil. Iraqs
oil minister Abdul Kareem Luaibi has said that West Qurna-2 will enable the country to hit
its target of pumping 4m bpd by the end of the year. Already the second-largest producer
in the Organisation of Petroleum Exporting Countries (Opec) after Saudi Arabia according
to Reuters, Iraq pumped 3.5m bpd last month. However, the sharp rise in Iraqs oil
production is likely to spark tensions within Opec, which controls the world oil market.
Baghdad currently operates outside the cartels quota system, which helps to maintain
oil prices above $100 per barrel, the figure seen by most of its members including Saudi
Arabia as vital for their economies to function. The resurgence of Iraqs oil
production comes amid hopes that neighbouring Iran will soon boost production if sanctions
are lifted. Hussain al-Shahristani, Iraqs Deputy Prime Minister for Energy, said
earlier this year that Baghdad and Tehran were cooperating on petroleum strategy in a move
that has challenged Saudis dominance of the 12-member group. Iraq plans to almost triple its oil production capacity by 2020 to
9m bpd, which if achieved could flood world markets with crude. Although demand for fossil
fuels continues to rise globally the development of shale oil and gas resources in the US
has raised the chances of prices falling amid a glut of new supply. However, gains in
Iraqi production are offset by ongoing political problems in Libya, which have disrupted
exports from the North African country in addition to slow progress in lifting sanctions
on Iran." |
"On Wednesday, March 27th, the
largest state in the contiguous United States got almost one-third of its
electricity by harnessing the wind.
According to the Electric Reliability Council of Texas, which manages the bulk of the
Lone Star State's power grid, a record-breaking 10,296 MW of electricity was whipped up by
wind turbines. That's enough to provide 29 percent of the state's power, and to keep
the lights on in over 5 million homes. ERCOT notes in a statement issued today
that 'The new record beats the previous record set earlier this month by more than
600 MW, and the American Wind Energy Association reports it was a record for any
US power system.' The landmark is further evidence of one of the nation's unlikeliest
energy success stories. Conservative politicians have a renowned aversion to clean energy (though Republican voters favor it overwhelmingly), and Texas is still
deep red. Yet wind farms are cropping up in there faster than almost anywhere else.
ERCOT points out as much, as it boasts of the sector's recent growth..." |
"German Economy Minister Sigmar Gabriel said there was 'no sensible
alternative' to Russian natural gas imports and it was unlikely Russia
would stop deliveries because of the crisis over Ukraine, a German daily reported on
Friday. 'Even in the darkest hours of the Cold War Russia respected its contracts,' the Neue Osnabruecker Zeitung reported Gabriel, who is also energy
minister and vice chancellor, as telling an energy forum." |
"Ukraine's interim government
says it will raise gas prices for domestic consumers by 50% in an effort to secure an
International Monetary Fund (IMF) aid package. An
official at Ukraine's Naftogaz state energy company said the price rise would take effect
on 1 May, and further rises would be scheduled until 2018. Ukrainians are accustomed to
buying gas at heavily subsidised rates. But the IMF has made subsidy reform a condition of
its deal. Ukraine currently buys more than half of its natural gas from Russia's Gazprom,
and then sells it on to consumers at below market prices. Yury Kolbushkin, budget and
planning director at Naftogaz, told reporters that gas prices for district heating
companies would also rise by 40% from 1 July. IMF negotiators are still in Kiev to
negotiate a package of measures worth billions of dollars to help Ukraine's interim
government plug its budget deficit and meet foreign loan repayments." |
"Claims that fracking offers a
panacea to dependence on Russian gas don't even stack up. A study for the oil and gas
industry by consultants Pöyry, found that European
supplies wouldn't even come on stream at scale for at least a decade. The study also shows that while the EU's dependency on gas imports could
be reduced by up to 18% depending on the success of EU shale gas extraction, it is
actually supplies of liquefied natural gas from Qatar that would be displaced by shale
gas. Supplies that are deemed 'secure' by Fallon. Even a shale gas boom will have no
impact on Russian imports until well into the next decade, by which point demand for gas
should be falling sharply in the EU as efforts to limit climate change bear fruit." |
"Financial problems of operators
in US shale gas
and tight oil plays might hold production growth below current expectations, according to
the author of a March comment published by the Oxford Institute for Energy Studies (OIES).
But a reorientation of the industry toward 'the most commercially sustainable areas' of unconventional-resource
plays might extend the period of growth, writes the analyst, Ivan Sandrea, an OIES research
associate and senior partner of Ernst & Young London. The producing industry has demonstrated it can create opportunities,
innovate operationally, and address environmental issues despite evolving government
policies and questions of public acceptance, Sandrea writes. 'What is not clear from
higher-level company data is if the industry (both large players and independents) can run
a cash flow-positive business in both top-quality and in more marginal plays and whether
the positive cash flow could be maintained when the industry scales up its operations.' Sandrea cites asset write-downs approaching $35 billion since the
shale boom began among 15 of the main operators.
'While most of the companies that have made write-downs are not quitting, many players in
this industry have already noted that the revolution is not as technically and financially
attractive as they expected,' the analyst writes. 'However, to deem the [business] model
flawed due to the investment write-downs of some large companies would be misleading and
too early in the evolution of the business for some players.' Sandrea
also cites a recent analysis by Energy Aspects, a commodity
research consultancy, showing 6 years of progressively worsening financial performance by
35 independent companies focused on shale gas and tight oil plays in the US. 'This is
despite showing production growth and shifting a large portion of their activity to oil
since 2010, presumably to chase a higher-margin business,' he adds. Oil and gas production
by the companies represented 40% of output in unconventional plays in last years
third quarter. According to the Energy Aspects analysis, total capital expenditure nearly
matches total revenue every year, and net cash flow is becoming negative as debt rises.
Other financial indicators 'add to concerns about the sustainability of the business,'
Sandrea says. Still, shale-gas and tight-oil
development remains 'a fledgling industry' with hope for 'a positive inflection point for
cash flow and a full-cycle risk-adjusted return.' Some operators see that point as still 5
years away. Meanwhile, the industry will remain
challenged. Sandrea says 'above-ground reasons' include the need to constantly acquire and
drill leases, infrastructure needs, transportation costs, increasing costs to manage
environmental considerations as operations grow, and 'the fact that drilling and hydraulic
fracturing costs respond to fluctuations in gas and oil prices as well as demand, leaving
little excess profit for long.' Below ground, he says, rapid production declines and low
recovery rates, despite technical improvements, remain problems in many plays and might
worsen as operators move into increasingly challenging acreage. Unless financial performances improve, capital markets wont support
the continuous drilling needed to sustain production from unconventional resource plays,
Sandrea suggests, asking, 'Who can or will want to fund the drilling of millions of acres
and hundreds of thousands of wells at an ongoing loss?' More likely, he says, 'Parts of
the industry will have to restructure and focus more rapidly on the most commercially
sustainable areas of the plays, perhaps about 40% of the current acreage and resource
estimates, possibly yielding a lower production growth in the US than is currently
expectedbut perhaps a more lasting one.'" Financial questions seen for US shale gas, tight-oil plays Oil and Gas Journal, 25 March 2014 |
"Paolo Scaroni, chief executive
of Eni, is doubtful
about the future of the South Stream project intended to pipe Russian gas under the Black
Sea to Bulgaria, unless the EU and Russia find a way out over Ukraine. However, Mr Scaroni
is clearly relieved that Italys oil and gas group made a profitable exit from a
major Siberian gasfield at the right time. Eni sold
its 60 per cent stake in the Arctic Russia field in Siberias northwestern Yamal
peninsula in January to a group led by Russias Gazprom for nearly
$3bn. The initial investment in 2007 cost $600m. 'We were smart to sell Arctic Russia. We
got the timing right,' Mr Scaroni told the Financial Times, adding that it would have been
much more difficult to get such a deal in the current climate. 'Russian companies now are
more cautious with their cash.' Asked if events
in Ukraine had been part of his calculations, Mr Scaroni said it was 'one of the
issues in the puzzle'. 'I was smelling that Russia is Russia. Russia is not Switzerland,'
he said, noting that Eni had been dependent on Gazprom for transporting the gas out of
Siberia. Eni is renegotiating its long-term and loss-making gas contracts with Gazprom and
Mr Scaroni believes the Ukraine crisis 'strengthens very much our hand', depending how the
situation evolves. 'We feel in very good shape,' he said. Mr Scaroni said Europe is too
dependent on Russian gas to stop imports in the short term, although he believed that
Italy where Russian gas accounted for 28 per cent of consumption in 2012
could get by with difficulty." |
"Shale reserves
are not a miracle; they are a high-cost source of fuel...." |
"Britain has begun this year to
import gas from Russia under a formal contract for the first time, just as European calls
to loosen Moscows grip on energy supply mount because of the crisis over Ukraine.
The countrys biggest utility Centrica signed a deal in 2012 with Russian
state-controlled Gazprom to import 2.4 billion cubic metres of gas over a period of three
years, and the supplies began flowing in January.
Russia is Europes biggest supplier of gas, providing around a third of the
continents needs, and some of this has previously reached Britain from continental
European storage sites. The exports largely go to central and south-eastern Europe rather
than to Britain, which still has significant domestic reserves and gets most of its
imports from Norwegian pipelines or liquefied natural gas (LNG) shipments from further
afield. With domestic production falling by around 7 percent a year, Britain has had to
find more suppliers to fill the gap. One gas analyst said the Russian deal appears to
explain unusually heavy import flows in 2014 via the BBL link from the Netherlands, one of
two pipelines that connect Britain with mainland Europe." |
"European leaders have rushed
through plans aimed at breaking the Kremlins grip on gas and energy supplies,
marking a fresh escalation in the emerging Cold War between Russia and the West. The move
came as the EU slapped sanctions on 12 leading Russians in President Vladimir Putins
inner circle, and vowed 'additional and far-reaching' action if he intervenes in eastern
Ukraine or further destabilises the region. The European Commission has been told to cock
the gun by preparing 'targeted measures' immediately. The South Stream pipeline intended
to link the EU to Russia through the Black Sea by 2018 is now 'dead', according to sources
in Brussels, hitting contractors close to Mr Putin. EU staff are to come up with plans to
shield Europe from energy blackmail by Russia within 90 days, finding ways to prevent
frontline states being picked off one by one.
Ukraines premier, Arseniy Yatsenyuk, said in Brussels that the West must stop Russia
deploying energy as a 'new nuclear weapon'. The radical shift in EU energy policy comes as
Russia feels the chill of US sanctions imposed on Thursday..... The pan-EU group Gas
Infrastructure Europe said Europe is currently well-stocked with 37bn cubic metres of gas
47pc of storage capacity as a result of a mild winter. 'Most of the European
transmission systems currently can withstand a disruption of Russian gas through Ukraine.
The pipeline network is available for diverting gas flows in case of supply problems from
Russia, from storage and LNG (liquefied natural gas),' said the group. Eight EU states
have LNG hubs, the largest in Britain and Spain. Polands new facility will come on
stream this year. Deutsche Bank said gas reliance on Russia is 93pc in Slovakia, 83pc in
Poland, 81pc in Hungary, 66pc in the Czech Republic and 61pc in Austria. Germany's
dependence is 35pc, falling to 29pc for oil and 19pc for coal. Very little of the
countrys industry relies on power from gas. The one island of vulnerability is the
Baltic region, where Finland, Estonia, Latvia and Lithuania rely 100pc on Russian gas.
There are plans afoot to send a 'regas ship' to the area capable of supplying liquefied
natural gas to a port in Lithuania. 'President Barack Obama could commandeer all US regas
ships in an emergency and send them to harbours in the Baltics,' said Mr Riley. The new
energy plans were tucked away in the so-called climate dossier of the EU summit but
experts said there should be no doubt that the real aim is to confront Mr Putin.
Britains prime minister, David Cameron, said there is no symmetry in the economic
damage that each side can do to the other, arguing that Russias reliance on Gazprom
sales matters far more than Europes reliance on Gazprom. 'Russia needs Europe more
than Europe needs Russia,' he said. Yet how the clash
between Russia and the West goes is not really driven by economic calculation, and may
escalate regardless of sanctions. Mr Putins core demand is that Ukraine remains
'politically neutral', certainly outside the Western military camp. The EU swept this
grievance aside on Friday by signing an Association Agreement that includes a clause
calling for the 'gradual convergence between the EU and the Ukraine in the areas of
foreign and security policy, including the Common Security and Defence Policy'." |
"The number of Americans who
believe U.S. oil should be kept on U.S. soil to lower gasoline prices rose in the last
four months, according to a new
Reuters/Ipsos poll. Some 77 percent of
respondents support export restrictions if that will help them save at the pump, showing
how oil producers have failed to gain popular support to end a decades-old export ban.
Only 69 percent thought so in a similar poll in November. A majority of respondents polled
in March - 71 percent - opposed oil exports if they raise the price of gasoline, up from
67 percent in November. The country remains evenly divided over crude oil exports when
they are not linked to gasoline prices. Major oil producers such as ExxonMobil and Chevron
argue that export restrictions, in place since the 1970s, will depress the price of U.S.
oil and crimp output from new oil fields in North Dakota and Texas, now at a 26-year high.
Oil refiners, on the other hand, say exports will dry up cheap supplies and raise gasoline
prices. Earlier this month, U.S. Energy Secretary Ernest Moniz said the oil industry needs
to do a better job making its case in support of exports, especially since the nation
relies on imports of foreign oil to this day. With voters still fretting over the price of
gasoline, congress is unlikely to push for policy change before the mid-term elections in
November, experts said.... It is unclear what effect oil exports would have on gasoline
prices. But some analysts speculated that they could in fact make gasoline cheaper. The
price of U.S. gasoline is set in a global market because the United States already exports
nearly 5 percent of the gasoline it produces, a figure that is expected to rise in the
coming years, analysts said. That is likely why the price of gasoline, adjusted for
inflation, hovered near $3.35 a gallon in February, despite the explosive growth in the
nation's oil production, some experts said. U.S. exports would add to global supplies and
lower the price of international oil benchmark Brent, some analysts argue. That may in
turn result in lower gasoline prices across America." |
"The UK governments
flagship home energy efficiency programme, the green deal, has all but ground to a halt,
with just 33 plans signed in February. The latest
figures for the policy, once vaunted as the biggest home retrofit since the war aimed
at cutting
energy bills for 14m homes, are by far the worst since the scheme began. 'The scheme
was always going to be something of a slow burner initially, but the number of new plans
is reducing to a trickle,' said John Alker, at the UK Green Building Council. 'There are
fewer new plans now than at the very beginning of the scheme.' 'Government has already had
its wake-up call, it is now crunch time,' Alker said. 'It needs to step in to reduce the
cost of the finance plans, strengthen and make permanent tax incentives, and make energy
efficiency a pre-requisite for anyone getting an extension this summer.' Earlier in March,
energy secretary Ed Davey conceded
that the green deal finance take up had been 'disappointing' and that the scheme has
started off 'too clunky and too complex'. Greg Barker, the minister overseeing the policy,
previously
said he 'would not be sleeping' if 10,000 plans had not been signed by the end of
2013, a forecast he later called 'spectacularly wrong'. The total by the end of February
was 1,754. Labour have
pledged to scrap the 'woeful' green deal. The number of green deal assessments in
February was 18,000, the highest yet, bringing the cumulative total to 163,000, but just
one in 10 go on to complete the deal." |
"Companies will need to invest $641 billion over the next two decades in pipelines, pumps and other infrastructure to keep up with the gas, crude oil and natural gas liquids flowing from U.S. fields, according to a study released Tuesday. The analysis, prepared by ICF International for two natural gas advocacy groups, predicts that $30 billion worth of new midstream infrastructure will be needed each year through 2035 essentially triple the $10 billion in average annual investments over the past decade. 'Were in a heavy growth period right now, said Kevin Petak, an economist with ICF who authored the study. 'The next six years appears to be a pretty heavy period for expenditure and investment.' Almost half of the projected spending $14.2 billion per year will be needed to accommodate new gas supplies and connect new shale plays with existing infrastructure and yet-to-be-built facilities, according to the report. Some 35,000 miles of new transmission pipelines will be needed, along with 303,000 miles of gas gathering lines, the study found. 'Significant development of natural gas infrastructure (is projected) to accommodate the rapidly growing gas supplies from shale,' the report said. 'Much new gas gathering and pipeline infrastructure will be needed well into the future.' The new study finds that many of the gas pipeline projects will span shorter distances than projected in an earlier 2011 analysis, though the overall level of investment is similar because of climbing pipeline costs. 'This is still a substantial amount of new pipe,' |