NLPWESSEX, natural law publishing

nlpwessex.org

Resources

Home

Earlier Peak Oil And Energy Crisis News

2015

2014

2013

2012

2011

2010

2009

2008

2007

"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 grandfather’s 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. "
The Peak Oil Crisis
Falls Church News-Press, 31 December 2014

'We need a new way of thinking' - Consciousness Based Education

Home

2014 - 2013 - 2012 - 2011 - 2010 - 2009 - 2008 - 2007

"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 oil’s 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.'"
Oil prices fall 46% in 2014, worst since 2008
USA Today, 31 December 2014

"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 grandfather’s 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 Peak Oil Crisis
Falls Church News-Press, 31 December 2014

"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."
U.S. opens door to oil exports after year of pressure
Reuters, 30 December 2014

"A third of Britain’s 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 UK’s 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."
Third of listed UK oil and gas drillers face bankruptcy
Telegraph, 29 December 2014

"When the oil world’s most important man says anything, people pay attention. But the usually aloof Ali al-Naimi, Saudi Arabia’s 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 Naimi’s 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 cartel’s 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 Brazil’s deepwater fields, need to realise it is not worth the bother. A person briefed by Saudi officials said the country’s national oil company has been told to prepare for at least two years of lower oil prices, something that kingdom’s finance minister on Thursday also alluded to. Indeed, after releasing the 2015 budget, Ibrahim al-Assaf, Saudi Arabia’s 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 Naimi’s 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 anyone’s 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."
High-cost oil production not worthwhile
Financial Times, 29 December 2014

"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."
Saudi 2015 budget based on oil price around $60 - analysts
Reuters, 28 December 2014

"Ali al-Naimi, Saudi Arabia’s veteran oil minister, has set out a comprehensive and convincing analysis of the oil market and his country’s 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 cartel’s 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 Naimi’s argument, however, is that those market forces favour producers in the Middle East, which have some of the world’s 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 Naimi’s 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 Naimi’s 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."
The short-term oil price play of Saudi Arabia
Financial Times, 26 December 2014

"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 can’t 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.'"
Exclusive: Arab OPEC sources see oil back above $70 by end-2015
Reuters, 23 December 2014

"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."
North Sea oil collapse fears 'too dramatic'
BBC Online, 19 December 2014

"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 geology—deeply buried shale rock that contains diffuse hydrocarbons—looms 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 oil—the amount that's recoverable without regard to cost—puts 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 oil—those that can be recovered economically today—is 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 nations—Saudi Arabia, Kuwait, and the United Arab Emirates—total 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."
How Long Can the U.S. Oil Boom Last?
Bloomberg, 19 December 2014

"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."
UK using less energy despite growing economy, report finds
BBC Online, 18 December 2014

"Saudi Arabia’s 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 country’s 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 kingdom’s 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 country’s 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 kingdom’s 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."
Saudi oil minister says crude price falls are temporary
Financial Times, 18 December 2014

"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 world’s 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 isn’t 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. It’s 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 wouldn’t 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 can’t stay low forever. Oil production hasn’t 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."
Bankers See $1 Trillion of Zombie Investments Stranded in the Oil Fields
Bloomberg, 18 December 2014

"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..."
Cheap oil could kill, not cure, our economy
London Times, 16 December 2014, Print Edition, P27

"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 Mackenzie’s 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."
UK energy firms go under as oil price tumbles
Guardian, 15 December 2014

"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."
Why the falling oil price could drive global economic growth
London Times, 13 December 2014, Print Edition, P63

"Whether a much lower oil price turns out to be a net positive, or instead something rather more sinister, depends on what’s 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 China’s 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. What’s 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."
Falling oil prices - the benefits and the costs
Telegraph, 12 December 2014

"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."
Opec: World energy watchdog IEA cuts oil demand forecast
Telegraph, 12 December 2014

"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."
Russia India: Putin agrees to build 10 nuclear reactors
BBC Online, 11 December 2014

"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.'"
Oil price collapse claims WA's Red Fork Energy, shale gas company in receivership
ABC News (Australia), 11 December 2014

"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."
Opec veteran says oil price a 'disaster' and cartel powerless
Telegraph, 11 December 2014

"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."
South Stream demise leads Croatia to revive gas terminal project
Mail, 10 December 2014

"North America, once a sponge that sucked in a significant portion of the world’s oil, will instead be supplying the world with oil and other liquid hydrocarbons by the end of this decade, according to ExxonMobil’s 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 world’s biggest exporters of that fuel by 2025, even as domestic demand for it increases, according to Bill Colton, Exxon’s 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, Exxon’s 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 world’s climate. Exxon’s 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 company’s long-term vision, and that the company expects prices to rise and fall, sometimes dramatically, throughout the period. Exxon’s 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 world’s 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."
Exxon sees abundant oil, gas far into future
Associated Press, 10 December 2014

"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."
Saudi Arabia snubs Iranian Plea for oil price rise
London Times, 9 December 2014, Print Edition, P32

"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."
LNG boom over as China looks to sell out of long-term deals
Reuters, 9 December 2014

"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. It’s as simple as that. This calls into question the sky-high valuations we currently see for stocks and bonds."
Plunging oil prices will starve the world of its economic fuel
Hellenic Shipping News, 8 December 2014

"... more than a trillion barrels of crude oil from unconventional sources—the equivalent of more than 30 years of extra supply—have 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, Citigroup’s 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 gas—a 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."
The Case for $35 a Barrel Oil
Barron's, 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 Europe’s 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 continent’s 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, Italy’s 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 Russia’s 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, Eni’s 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, Mozambique’s president, met with Mr Renzi in Rome on Wednesday, a day after the Italian premier’s visit to Algiers."
Italy’s Renzi pivots to Africa for alternatives to Russian gas
Financial Times, 5 December 2014

"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."
Cheap oil drives power away from the axis of diesel
London Times, 5 December 2014, Print Edition, P52

"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."
For Saudi Arabia, It's About More Than Just Low Oil Prices
Business Insider, 5 December 2014

"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."
More than $150 bln of oil projects face the axe in 2015
Reuters, 5 December 2014

"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."
Israel urges EU to back Cyprus gas pipeline
International Business Times, 4 December 2014

"There’s no question that shale gas production—enabled by hydraulic fracturing techniques—has 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 can’t 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 EIA’s 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 they’re too impermeable for the gas to move through them, so this isn’t a case of the first few wells bleeding the store dry. But to the extent that sweet spots can be identified, they’re 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."
US natural gas production could peak in 2020
ArsTechnica, 4 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 nation’s 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 EIA’s. 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."
The uncertain dash for gas
Nature, 3 December 2014

"Curbing the world’s 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 report’s 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 people’s 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 UN’s 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 world’s governments,' said Bailey. The report builds on recent scientific studies which show that soaring meat demand in China and elsewhere could tip the world’s 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.'"
Eating less meat essential to curb climate change, says report
Guardian, 3 December 2014

"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.'"
OPEC won't stop US oil production growth
BBC Online, 3 December 2014

"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."
Key facts about the great oil crash of 2014
Washington Post, 3 December 2014

"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."
Why is Saudi Arabia using oil as a weapon?
BBC Online, 3 December 2014

"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."
Canadian Oil Sands Cuts Dividend, Citing Debt Load and Crude Price Drop
Wall St Journal, 3 December 2014

"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. Libya’s 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 Arabia’s 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."
Martin Woolf - Two cheers for the sharp falls in oil prices
Financial Times, 2 December 2014

"Eastern European nations reacted with shock and anger to Russia’s 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 Moscow’s military involvement in Ukraine. The much-vaunted project, backed by Russia’s 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 Gazprom’s European customers. But there were fears in Brussels that the pipeline would cement Gazprom’s 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 Stream’s 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, Hungary’s foreign minister, said alternative sources of energy would now have to be explored, including gas from Azerbaijan. Aleksandar Vucic, Serbia’s prime minister, told the country’s 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."
Anger and dismay as Russia scraps $50bn gas plan
Financial Times, 2 December 2014

"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."
Putin drops South Stream gas pipeline to EU, courts Turkey
Reuters, 2 December 2014

"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."
October oil shale permits drop: is the slowdown here?
Reuters, 1 December 2014

"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. OPEC’s idea is to try to knock out U.S. shale producers by driving prices lower than they can afford. That way Saudi Arabia, the cartel’s 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 won’t help. Libya is in chaos. Venezuela’s economy, already on life support, depends on oil for 95 percent of its export revenue. Iran’s oil minister on Friday told Bloomberg News that he has doubts the strategy will even work: 'There’s 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, it’s 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 OPEC’s 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; it’s future wells that are at risk as oil companies slash investment for the next few years. 'Don’t 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. There’s 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 Bakken’s biggest operator, Continental Resources (CLR), run by billionaire Harold Hamm, holds about 1.2 million acres of land in the region. That’s 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 didn’t 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."
The American Oil Boom Won't Last Long at $65 Per Barrel
Bloomberg, 1 December 2014

"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 Gulf’s 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 won’t 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 group’s 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 Dakota’s 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 Russia’s 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 Egypt’s 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."
Saudis risk playing with fire in shale-price showdown as crude crashes
Telegraph, 30 November 2014

"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."
‘Putin sent tame oligarchs on deniable missions to win bid’
Sunday Times, 30 November 2014, Print Edition, P12

"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 world’s 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. 'It’s really the very first paper on the subject so what we’re doing is really to introduce the material for other experts to think about it,' Sir Andrei said.
Scientists predict green energy revolution after incredible new graphene discoveries
Independent, 30 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."
Oil price drop may drive Europe back to Russian gas next year
Reuters, 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."
Struggle over Libya's oil risks breaking up country: rival PM
Reuters, 28 November 2014

"The dramatic slide in oil prices has underscored the fragility of Stephen Harper’s entire resource-based approach to the economy [in Canada]. For this government, Alberta’s oilsands were the key to Canada’s 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. China’s 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 won’t stay down forever. But no one knows whether this slide will last a few weeks, two years or a decade."
Falling oil price skewers Stephen Harper’s economic plan: Walkom
Toronto Star, 28 November 2014

"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 don’t 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 they’re getting crunched now – supply will eventually fall. But that may not happen quickly because the big production projects that are already under construction can’t 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."
Why oil prices will bounce back … eventually
Globe and Mail, 28 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."
The ‘age of abundance’ in oil and gas poses fresh dilemmas for companies
Financial Times, 23 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 doesn’t 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."
Oil at $75 Means Patches of Texas Shale Turn Unprofitable
Bloomberg, 20 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 Riyadh’s 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 tycoon’s 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 Saudi’s 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 Putin’s 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 Saudi’s enemies will run into real economic trouble well before Riyadh begins hurting."
Dr John C Hulsman - A crude conspiracy: Saudi Arabia’s oil war is about far more than economics
CITY AM, 17 November 2014

"The U.S. shale boom does not appear to be slowing in response to the oil-price slump, with the country’s 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."
U.S. Shale-Oil Surge to Continue Amid Price Slump: IEA
Bloomberg, 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 Russia’s 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."
New China-Russia Gas Pact Is No Big Deal
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.'"
Oil prices likely to fall further, says IEA
BBC Online, 14 November 2014

"Although there are no scientific grounds to ban fracking, shale gas will do little to solve Europe’s 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 USA’s 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."
Scientists bury hopes of EU shale gas revolution
EurAactive, 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, crude’s 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."
Oil’s dive set to transform LNG market
Financial Times, 13 November 2014

"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."
Sluggish oil price prompts Premier to scale back Falklands project
Financial Times, 13 November 2014

"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 sector’s 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 Amsterdam’s 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."
Supply-chain suffers as oil majors battle price plunge
Arab News, 11 November 2014

"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 wasn’t political ideology, the failure of Mr Gorbachev’s so called “Perestroika” reforms, or the desire of most people behind the iron curtain to own a pair of Levi’s jeans and listen to pop music that saw the Kremlin’s 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 Hitler’s 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 father’s 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 Russia’s belligerent President Vladimir Putin with the same economic weapon that defeated his masters when he served in the KGB. Saudi Arabia’s 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."
Cheap oil will win new Cold War with Putin - just ask Reagan
Telegraph, 10 November 2014

"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."
Collapse in oil prices should come as no surprise
Toronto Star, 9 November 2014

"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 world’s largest producer of natural gas in 2010, the United States also became the world’s 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."
U.S. Oil Exports Hit 57 Year High
Breibart, 8 November 2014

"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."
The diplomat who said 'No' to Saudi oil
BBC Online, 8 November 2014

"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."
Oil prices hitting industry
Houston Chronicle, 7 November 2014

"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 Dakota’s Bakken Shale, said Wednesday that the company wouldn’t add drilling rigs next year. ConocoPhillips Co. said that next year’s budget would fall below the $16 billion spent this year, dropping plans for some new wells in places such as Colorado’s Niobrara Shale."
Drillers Cut Expansion Plans as Oil Prices Drop
Wall St Journal, 7 November 2014

"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 it’s finished late next year, Cheniere Energy’s (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, Cheniere’s 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; that’s 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 we’re having on the rest of the world sometimes surprises us,' says Souki. 'We’re going to represent 25 percent of the gas sold to Spain. We’re 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. It’s 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 won’t have a few producers able to decide arbitrarily what they want to charge.'"
U.S. Natural Gas Exports Will Fire Up in 2015
Bloomberg, 6 November 2014

"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 doesn’t 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 household’s 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."
Green levies on energy bills to double by 2020, official estimates show
Telegraph, 6 November 2014

"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."
Putin blames politics for falling energy prices
Reuters, 6 November 2014

"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."
Vladimir Putin: oil price decline has been engineered by political forces
Telegraph, 6 November 2014

"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 fracking’s greatest enthusiasts.  What about the economic growth argument? It’s 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 what’s 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 it’s a signal of a weakening greenback, and when it falls it’s 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 hasn’t become cheap, rather the dollar has been exhibiting renewed strength.... Houston, TX-based Baker Hughes BHI +1.57% of the world’s 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 it’s no longer feasible for companies to launch new drilling projects.' The range of prices came in around $55 to $70 barrel. In North Dakota’s Bakken Core it’s $61-$70, at Eagle Ford in South Texas it’s $53-$60, in New Mexico it’s $68."
Sorry Fracking Enthusiasts, Oil's Decline Is Wholly A Dollar Story
Forbes, 5 November 2014

"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."
Crude oil at four-year low after Saudi Arabia price cut
BBC News, 4 November 2014

"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 Kerry’s talks in Jeddah last month with King Abdullah and Prince Bandar, Saudi Arabia, the world’s 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 OPEC’s 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."
Oil politics: The secret US-Saudi deal
Daily Mirror (Sri Lanka), 31 October 2014

"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 region’s 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 lays claim to billions of tons of Arctic oil and gas
Telegraph, 31 October 2014

"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."
Russia-Ukraine gas deal secures EU winter supply
BBC Online, 31 October 2014

"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 EIA’s 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 EIA’s scenario is highly unlikely. The EIA’s 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."
The Peak Oil Crisis: A Reality Check
Post Carbon Institute, 30 October 2014

"Many industry executives say that, after nearly 50 years of production, Britain’s oil sector has reached a crucial point. To put it bluntly, Britain’s 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."
Clock Is Ticking for Oil and Gas Industry in Britain
New York Times, 29 October 2014

"After years of false starts, Goffart confirmed suspicions that the French energy giant’s foray into mining bitumen from Northern Alberta’s oil sands was a dud. The company’s $11-billion Joslyn mine was being shelved indefinitely, he said. Costs were too high. Workers had to be let go–150 Canadian staff by year-end. Total’s 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 Chevron’s 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 Alberta’s oil sands is, by Total’s reckoning, getting harder to justify. Not only are costs inflating, but returns on a barrel of the province’s ultra-viscous crude 'are remaining stable at best,' squeezing margins, he said. The combination 'cannot be sustainable in the long term.' (Just ask Norway’s Statoil–it 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. That’s '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, it’s $105.54. By comparison, oil can still be tapped for under $10 per barrel in some jurisdictions–a 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, haven’t 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.'"
Is oil sands development still worth it?
Globe and Mail, 29 October 2014

"Steel plants and car makers fear National Grid’s 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 Government’s 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."
Steel plants and car makers fear National Grid's plans to keep lights on this winter may force them to cut use of electricity
This is Money, 25 October 2014

"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 don’t 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 world’s 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 won’t 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; it’s 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, OPEC’s clout is bound to shrink — so oil prices will probably stay well below $100 a barrel for the foreseeable future."
Oil: blindsided by fracking technology
The Telegram, 25 October 2014

"Lower oil prices could put a stop to the nation’s 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 don’t 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."
Oil slump is threat to LNG projects: falling prices could cut export revenue by $11bn
The Australian, 25 October 2014

"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 today’s 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 spread—the difference between the West Texas Intermediate (WTI) and world (Brent) price—was 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 techniques—horizontal 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 shales—are 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 solar’s 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 America’s 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."
The Oil Price Swoon Won’t Stop the Shale Boom
Wall St Journal, 23 October 2014

"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 Britain’s 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."
Britain's energy paradox: why you'll pay to phase out coal plants... and also to keep them open
Telegraph, 23 October 2014

"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."
Wind farms outstrip nuclear power
BBC Online, 22 October 2014

"The U.S. shale oil and gas renaissance has effectively stripped Russia from its status as biggest non-OPEC oil producing state. And Russia won’t 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 Russia’s 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 OPEC’s 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 doesn’t 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. To Produce More Oil & Gas Than Russia...For Decades
Forbes, 22 October 2014

"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 that’s 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. That’s 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 can’t travel as far in the rock. As long as the fracking cracks don’t 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. It’s '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 Texas’s 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 Louisiana’s 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.' That’s 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 Dakota’s 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. That’s fine with producers if downspacing still leads to higher total profits from a field. Here’s 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, that’s still a recovery rate of 6.4 million barrels from the same land at a cost of $88 million. Profits in this scenario at today’s 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 EOG’s tight well spacing tests in Texas’s 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 company’s 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. That’s 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 they’re 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 they’re leaving in the ground by crowding wells so closely together, Mariani said."
Oil Producers Cramming Wells in Risky Push to Extend Boom
Bloomberg, 22 October 2014

"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 nation’s capital. The prize is named for the nation’s 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. 'He’d 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 today’s energy security challenges,' Moniz said. 'His emphasis on energy market structures as a critical energy security consideration is an important part of America’s 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."
Yergin: Energy security is more than strong supply
Houston Chronicle, 21 October 2014

"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. It’s a sad end to the life of one of Big Oil’s 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 didn’t hide his conviction that Peak Oil was a fast approaching reality, insisting at the time that the world’s 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 Total’s headquarters in La Défense, the west Paris business district, to woo a who’s who of presidents, prime ministers, strongmen and dictators in places like Iraq, Iran, Uganda, Equatorial Guinea, Yemen, Angola and Burma. But none of De Margerie’s 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 Russia’s Novatek and China’s 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 I’m 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."
Total's CEO De Margerie Dies In Plane Crash; Moustachioed Dealmaker Predicted Peak Oil
Forbes, 21 October 2014

"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. That’s when Saudi Arabia cut prices for its biggest customers. The move signaled that the world’s 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 there’s 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."
Why Oil Prices Went Down So Far So Fast
Bloomberg, 20 October 2014

"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 world’s biggest economies. The global economy is certainly weak. Japan’s GDP fell in the second quarter. Germany’s did too, and may be heading towards recession (recent figures for industrial production and exports were dreadful). America’s growth has accelerated recently, but its recovery is weak by historical standards. Just before this week’s 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 slowdown—notably in Germany—took 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 world’s 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’ club—from America in particular. Thanks partly to increases in shale-oil output, the United States pumped 8.8m b/d in September—13% 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, Libya’s production—hit by civil war—crashed 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, Iraq’s 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."
Both symptom and balm
Economist, 18 October 2014

"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 world’s 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 Bank’s 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 Deloitte’s Petroleum Services Group, told The Sunday Telegraph. 'It’s 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 can’t 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 UK’s 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. 'We’re 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 industry’s 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. It’s not just Britain’s 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 country’s 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 Osborne’s 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 don’t 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."
UK fracking faces bust amid Opec oil price war
Telegraph, 18 October 2014

"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."
Russia welcomes India's decision to go for more nuclear energy
Press Trust of India, 17 October 2014

"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."
Consumers paying £410 more for energy than 10 years ago - despite using 17% less fuel
ITV News, 17 October 2014

"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. Norway’s 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 company’s 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 can’t keep up spending if costs don’t 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 Total’s Darricarrere."
Oil Slump Means Canceled Projects as Investment Declines
Bloomberg, 16 October 2014

"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."
Smart meters can be hacked to cut power bills
BBC Online, 16 October 2014

"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."
UK's wind farm 'folly': Electric bills to soar by £1000 thanks to reliance on wind power
Express, 16 October 2016

"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. London’s 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 month’s 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."
Peak Oil Notes,
ASPO USA, 16 October 2014

"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."
Tumbling oil price hits Putin where it hurts
London Times, 15 October 2014, Print Edition, P28

"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."
Lockheed Claims Breakthrough on Fusion Energy
Scientific American, 15 October 2014

"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.""
World oil demand slashed by top energy agency as price fall continues
Telegraph, 14 October 2014

"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 country’s 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, there’s no problem if we experience a surge in demand. But if it’s narrow, then predicting and preventing spikes in demand becomes very important if we want to keep the lights on. The UK’s 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 UK’s energy future relies are not economical to run. The biggest challenge to the UK’s energy supply margin isn’t 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 haven’t yet kicked in. The net result is that the UK’s 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 hadn’t 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 it’s 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 isn’t the changing energy mix, it’s 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.' Parr’s assessment is echoed by others who are watching the UK’s 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."
How close is the UK to a power blackout?
Guardian, 14 October 2014

"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."
Putin beats sanctions by signing arms and energy deal with old rival China
London Times, 14 October 2014, Print Edition, P32

"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."
On a grain of information, the oil price slumps
London Times, 14 October 2014, Print Edition, P42

"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."
Russia Plans Giant State Oil Services Company to Replace Western Firms
St Petersburg Times, 14 October 2014

"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 Europe’s 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 commission’s 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 paper’s 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 report’s 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.'"
Wind power is cheapest energy, EU analysis finds
Guardian, 13 October 2014

"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 should’ve been as high as $146 that summer, but they shouldn’t 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. We’re 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. They’re now hovering in the mid-$80 range and could certainly go lower. That’s 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? That’s a real possibility now. They’ve certainly gotten more efficient at drilling, and don’t need the same price they did to remain profitable. But we’re getting pretty close. Back in July, Goldman Sachs estimated that U.S. shale producers needed $85 a barrel to break even. That’s 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."
U.S. Oil Producers May Drill Themselves Into Oblivion
Bloomberg, 13 October 2014

"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."
Oil falls more than $1 on Kuwait, Saudi signals; China offsets
Reuters, 13 October 2014

"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."
EXCLUSIVE-Privately, Saudis tell oil market: get used to lower prices
Reuters, 12 October 2014

"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."
Britain will run out of electricity unless it axes green target, warns ex-Minister
Mail, 12 October 2014

"Poland’s ambition to achieve energy independence from Russia is being undermined by drillers giving up on the nation’s shale wells after disappointing results. The highest test flows during the country’s five-year search for unconventional gas were just 30 percent of what’s 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 won’t extend all those expiring this year, according to Slawomir Brodzinski, the nation’s 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 it’s leaving after poor results at Poland’s biggest fracking operation in the northeastern Baltic Basin. The 'poorly understood' formation may hold more gas than Texas’s Barnett Shale, where commercial output from 2000 helped turn the U.S. into the world’s largest gas producer, according to the U.S. Energy Department."
Fracking Setback in Poland Dims Hope for Less Russian Gas
Bloomberg, 10 October 2014

"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.'
Saudi Arabia to pressure Russia, Iran with price of oil
Andolu Agency (Turkey), 10 October 2014

"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 chicken—who 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 early—a sustained, long term drop in prices is required to convince companies to cut back on supply."
Oil price drop puts fracking to the test
CNBC, 10 October 2014

"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."
Here's why shale oil stocks are tanking
CNBC, 10 October 2014

"The second independent report on the performance of Andrea Rossi’s 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 Rossi’s 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."
The Peak Oil Crisis: Cold Fusion
Church Falls News Press, 9 October 2014

"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 country’s 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 company’s 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."
Venezuela, in a Quiet Shift, Gives Foreign Partners More Control in Oil Ventures
New York Times, 9 October 2014

"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 Dakota’s Bakken Shale. 'We’re 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. Hercules’s 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 bank’s 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."
Fracking Firms Get Tested by Oil’s Price Drop
Wall St Journal, 9 October 2014

"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."
First nuclear power station in a generation given go-ahead... but costs soar £8 BILLION before construction even starts
Mail, 8 October 2014

"The world’s longest sub-sea electricity cable is due to be laid between Northumberland and Norway to cope with the UK’s 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 Council’s 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."
World first energy cable gets the go-ahead to link Norway and Northumberland
Evening Chronicle, 8 October 2014

"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.'"
As oil prices tank, new era of abundance seen dawning
Reuters, 7 October 2014

"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."
Oil giant considers North Sea exit
Herald, 6 October 2014

"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."
Iran won't replace Russia as top gas supplier - Tass quotes Rouhani
BBC Online, 4 October 2014

"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 fracturing—or '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 fields—the Marcellus shale in Pennsylvania—produces about 13 billion cubic feet of natural gas per day—or 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."
What natural gas supplies mean for your winter heating bill
CNBC, 3 October 2014

"Gas and electricity will be significantly cheaper this decade than previously thought, according to new official estimates that undermine the Government’s 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'."
Expensive green energy a 'bad gamble' as ministers slash gas price forecasts
BBC Online, 3 October 2014

"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."
Eight big new gas power plants vie for consumer subsidies
BBC Online, 3 October 2014

"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."
Falling energy prices point to weakening world economy
Reuters, 2 October 2014

"The EU spends more than €1 billion ($1.26 billion) a day on fossil-fuel imports and most of that goes to Russia—by far the largest supplier of the bloc’s gas and oil....Output from Norway’s gas fields is expected to decline in the early 2020s, so large gas discoveries would be needed to maintain the country’s 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 Continent’s 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 can’t afford to do,' said Pierre Noel of the International Institute for Strategic Studies."
Energy Czar Leads Effort to Ease Russia’s Gas Grip
Wall St Journal, 2 October 2014

"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."
Foreign-owned projects boost Russian oil output in Sept
Reuters, 2 October 2014

"Russian oil output rose to near a post-Soviet record last month, a sign the biggest source of revenue for President Vladimir Putin’s 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 Russia’s oil industry by banning exports of some equipment and technology, blaming Putin’s government for stoking a separatist insurgency in eastern Ukraine. Russia denies involvement. Production in the oil and gas sector hasn’t 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.' "
Russia Oil Production Near Record With Sanctions Yet to Bite
Forbes, 2 October 2014

"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."
Oil price hits two-year low after Saudi price cut
BBC Online, 2 October 2014

"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,' Iran’s 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 basin’s 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."
Russia and Iran Lock NATO Out of Caspian Sea
The Diplomat, 1 October 2014

"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 India’s 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 government’s 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 world’s poor out of poverty, but achieving this largely through polluting fossil fuels will lead to dangerous climate change."
India will be renewables superpower, says energy minister
Guardian, 1 October 2014

"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."
First UK homes heated with 'poo power' gas from sewage
BBC Online, 1 October 2014

"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."
North Sea needs £1 trillion to tap remaining oil and gas
Telegraph, 30 September 2014

"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't—or won't—pay. 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."
Why Peak-Oil Predictions Haven't Come True
Wall St Journal, 28 September 2014

"Russia’s 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 world’s 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 Putin’s 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 Russia’s Arctic. Rosneft and Exxon won’t 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 Putin’s grandest ambitions. As Russia’s existing fields in Siberia run dry, the country needs to develop new reserves as it vies with the U.S. to be the world’s largest oil and gas producer."
Rosneft Says Exxon Arctic Well Strikes Oil
Bloomberg, 27 September 2014

"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 world’s most remote places with the help of America’s largest energy company. Russia’s 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 world’s most important crude-producing areas. The announcement was made by Igor Sechin, Rosneft’s 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 Putin’s 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 Russia’s Arctic offshore. Rosneft and Exxon won’t 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 Putin’s grandest ambitions. As Russia’s existing fields in Siberia run dry, the country needs to develop new reserves as it vies with the U.S. to be the world’s 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 company’s wells fell in 2012 and 2013 and is expected to be flat this year. "
Russia Says Arctic Well Drilled With Exxon Strikes Oil
Bloomberg, 27 September 2014

"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."
Russia, Ukraine agree interim gas deal: EU energy chief
AFP, 26 September 2014

"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."
Statoil calls off 40,000-bpd Canadian oil sand development
Reuters, 25 September 2014

"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."
Peak Oil Notes
ASPO-USA, 25 September 2014

"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."
Household energy bills rise 4% while price paid for gas and electricity by Big Six suppliers falls by up to 20%
Mail, 25 September 2014

"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."
Russia's Novak warns no scope for gas re-exports to Ukraine
Reuters, 25 September 2014

"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."
Not a saviour: Qatar says it won't liberate Europe from dependency on precarious Russian gas
Al Balwaba, 24 September 2014

"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."
EU plans for Iran gas imports if sanctions go
Reuters, 24 September 2014

"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.'"
Wood Mackenzie: US tight oil technology could boost output by 25%
Wood Mackenzie, 24 September 2014

"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."
Technology boost for Scotland's oil reserves in North Sea
BBC Online, 24 September 2014

"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."
Brent oil falls as glut outweighs Mideast turmoil; US oil up
Reuters, 23 September 2014

"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 Malaysia’s 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."
TAPI project: Top US firms drop out of race to finance gas pipeline
The Express Tribune (Pakistan), 23 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 gas’s advantage. 'Under the best of circumstances, natural gas-fired electric power plants can only make a modest dent on abating climate change—and, 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 'EPA’s 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 Administration’s confidence in a natural gas bridge."
Study Backs Environmentalist Worries About Natural Gas
Forbes, 21 September 2014

"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.'"
One-Fifth of Russia's Oil Production Is at Risk Due to Sanctions
Moscow Times, 21 September 2014

"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."
Russia makes fast neutron reactor progress
World Nuclear News, 19 September 2014

"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."
Russia's Gazprom, hit by Ukraine crisis, faces lowest gas output in history
Reuters, 18 September 2014

"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. Russia’s 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."
The Peak Oil Crisis: It‘s All Around Us
Falls Church News-Press, 17 September 2014

"Vermont’s 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 city’s 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 we’re able to do it, and we’re 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. It’s part of a broader movement that includes a statewide goal of getting 90 percent of Vermont’s energy from renewable resources by 2050, including electricity, heating, and transportation."
100% of power for Vermont city now renewable
Associated Press, 15 September 2014

"Germany’s 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."
Sun and Wind Alter Global Landscape, Leaving Utilities Behind
New York Times, 13 September 2014

"Oil prices dropped once again last week with London’s 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."
Peak Oil Review
ASPO, September 2014

"Russia’s 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 Russia’s 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."
Sweeping new US and EU sanctions target Russia's banks and oil companies
Guardian, 12 September 2014

"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 committee’s 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."
Flawed energy system 'to add £359m to consumer bills’
Telegraph, 12 September 2012

"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."
IEA Cuts 2015 Oil Demand Forecasts
Wall St Journal, 11 September 2014

"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."
Poland says Russia's gas deliveries cut by half
i24news, 11 September 2014

"Sir Ian Wood, the North Sea’s most eminent businessman, has warned there are only 15 years of reserves left before the industry’s 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."
Scottish people being misled over oil and gas reserves
Telegraph, 10 September 2014

"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."
Smart energy meters could hit families in pocket, say MPs
Mail, 10 September 2014

"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."
£215 energy smart meters to cut bills by just 2pc, PAC warns
Telegraph, 10 September 2014

"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."
Brent crude hits 16-month low below $100 on weak data
Reuters, 8 September 2014

"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. That’s more petroleum and gas than Iran holds and enough to meet the world’s entire annual consumption of crude oil for five years at current rates. 'There aren’t 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 world’s last remaining great frontiers, the Arctic is expected to play a major role in supplying the world’s 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."
Arctic drilling is inevitable: if we don’t find oil in the ice, then Russia will
Telegraph, 7 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."
China now gets more oil from the Middle East than the US does
Vox, 3 September 2014

"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 doesn’t belong there. Research from the University of Melbourne has found the book’s forecasts are accurate, 40 years on. If we continue to track in line with the book’s 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 world’s 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 didn’t happen, the model predicted 'overshoot and collapse' – in the economy, environment and population – before 2070. This was called the 'business-as-usual' scenario. The book’s 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 doesn’t 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 book’s forecasts."
Limits to Growth was right. New research shows we're nearing collapse
Guardian, Comment Is Free, 2 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."
Greenhouse gas fear over increased levels of meat eating
BBC Online, 1 September 2014

"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"."
Russia warns EU of Ukraine gas shortage
BBC Online, 29 August 2014

"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."
A Big Summer Story You Missed: Soaring Oil Debt
The Tyee, 29 August 2014

"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 government’s 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."
Denmark aims for 100% renewable energy
TCE, 27 August 2014

"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."
Europe will be Russia's hostage over gas supplies for at least another decade
BBC Online, 26 August 2014

"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 costs—as well as any natural-gas fuel savings—are 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.""
Slow Going for Natural-Gas Powered Trucks
Wall St Journal, 25 August 2014

"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."
'Widespread methane leakage' from ocean floor off US coast
BBC Online, 24 August 2014

"The construction of the world’s 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 world’s largest tidal power project in Scotland. "Our ambition for Scotland’s emerging wave and tidal sectors remains great. The Pentland Firth development takes our ambition to the next level and further cements Scotland’s 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."
World's largest tidal energy project to be constructed near Orkney
STV, 22 August 2014

"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, France’s 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. That’s why you’re 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 Bakken’s US$44.30 a barrel cost..... “Deal activity has cooled in Canada’s 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."
Cost-cutting fever grips oil sands players as economics called into question
Financial Post, 22 August 2014

"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."
Oil industry on borrowed time as switch to gas and solar accelerates
Telegraph, 20 August 2014

"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."
Germany meets 75% of domestic electricity demand with renewables
Renewables International, 19 August 2014

"Wind power has generated a new record high of 22% of the UK”s 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 UK’s power on the same day. Solar and biomass each provided 3% of the country’s 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. RenewableUK’s director of external affairs Jennifer Webber said “We’re 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 country’s energy mix."
Wind power generates record level of energy
Western Morning News, 18 August 2014

"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 department’s 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 technology’s “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”."
Wind farm 'needs 700 times more land' than fracking site to produce same energy
Telegraph, 14 August 2014

"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 didn’t give a reason for the 6.5 percent gap. In an e-mail, Pemex’s press department attributed the difference to evaporation, statistical variations and storage, without commenting on the inclusion of water. Pemex was probably “setting goals they weren’t achieving and postponing the moment to correct the information,” Adrian Lajous, the oil company’s chief executive from 1994 through 1999, said in a phone interview from Mexico City."
Mexico Oil Output Bloated by Water Barrels, Official Says
Bloomberg, 13 August 2014

"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."
Support for fracking has declined to 24 per cent, energy department finds
Telegraph, 12 August 2014

"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."
Ukraine starts test imports on gas link from Slovakia
Reuters, 16 August 2014

"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 Canada’s 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 world’s 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 world’s 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 report’s 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 ConocoPhillips’s Foster Creek development and Shell’s 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, Europe’s 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 didn’t directly address the study’s findings with regard to the oil sands."
Oil sands at biggest risk from falling crude price: Study
Business News Network, 15 August 2014

"Chinese companies have shelled out more than $30-billion in Canada’s 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 buyer’s remorse stemming from many of China’s 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 China’s problems are directly related to the land its companies acquired. Some could not have been predicted."
China faces buyer’s remorse in Canada’s oil patch
Globe and Mail, 17 August 2014

"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."
Labour attacks Coalition as UK's energy bills soar 21 per cent in three years
Independent, 17 August 2014

"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."
EDF Energy shuts three UK nuclear reactors after fault found
Reuters, 11 August 2014

"The world’s 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 Libya’s 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 world’s 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."
Oil and gas company debt soars to danger levels to cover shortfall in cash
Telegraph, 11 August 2014

"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."
Putin says Russia should aim to sell energy in roubles
Reuters, 14 August 2014

"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."
US Natural Gas production continues steep rise
North Denver News, 13 August 2014

"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.'"
Nearly 4% of the world's oil supply is offline due to conflict
Vox, 9 August 2014

"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."
ExxonMobil starts drilling for oil in Russia's Arctic - Rosneft
Telegraph, 9 August 2014

"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."
US gas producers eye mature wells for growth
Argus, 8 August 2014

"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."
UK Winter gas gains 4% as Ukraine mulls cutting Russian EU supplies
Platts, 8 August 2014

"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 alone—roughly 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 alone—which is constantly shifting—can 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."
Petrobras's New Oil Stems Decline
Wall St Journal, 7 August 2014

"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 Iran’s 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."
Vladimir Putin signs historic $20bn oil deal with Iran to bypass Western sanctions
Telegraph, 6 August 2014

"The “dash for gas” in the Nineties accelerated depletion of our gas reserves. Labour’s 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 industry’s 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."
Shale gas: 'The dotcom bubble of our times'
Telegraph, 4 August 2014

"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."
Kingfisher: Energy cost 'biggest household fear' in Europe
BBC Online, 4 August 2014

"Saudi Arabia’s 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 kingdom’s 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 France’s were awarded the Shaybah gas project, covering a 200,000 square kilometre. In May 2004, Russia’s Lukoil was awarded stake in 29,900 sq km Block A and China’s Sinopec was awarded stake in 38,800 sq km Block B. Italy’s ENI and Spain’s 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. China’s 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 country’s 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 world’s fifth-largest deposits, estimated Baker Hughes Inc. Russia’s 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 Aramco’s 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."
S. Arabia’s gas initiative fails to pay off
Dawn, 3 August 2014

"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."
Tony Blair will advise on controversial gas pipeline from Azerbaijan to Italy
Guardian, 2 August 2014

"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 growth—92%, on an energy-adjusted basis—has 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."
Guest blog: Hamilton has it right on oil
Platts (blog), 30 July 2014

"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."
Russia's Rosatom, China may develop floating nuclear power plants
Reuters, 29 July 2014

"It’s 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 Canada’s 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."
Bomb Trains: The Crude Gamble of Oil by Rail
Vice News, 29 July 2014

"For seventy years, one of the critical foundations of American power has been the dollar’s standing as the world’s most important currency. For the last forty years, a pillar of dollar primacy has been the greenback’s 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 energy—with potentially profound ramifications for America’s strategic position.    Since World War II, America’s geopolitical supremacy has rested not only on military might, but also on the dollar’s standing as the world’s leading transactional and reserve currency. Economically, dollar primacy extracts “seignorage”—the difference between the cost of printing money and its value—from 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 greenback’s 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 dollar’s standing as the world’s premier reserve asset, and that can be “recycled” into the U.S. economy to cover American deficits.  Many assume that the dollar’s prominence in energy markets derives from its wider status as the world’s foremost transactional and reserve currency. But the dollar’s 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 America’s 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 currency—including to settle Chinese hydrocarbon purchases—and 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."
The Rise of the Petroyuan and the Slow Erosion of Dollar Hegemony
The World Financial View, 28 July 2014

"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."
China needs to import more food to ease water, energy shortages: official
Reuters, 28 July 2014

"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 Denmark’s Aarhus University, Vermont Law School and the CNA Corporation, a nonprofit research and analysis organization, said in the reports. “It’s 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 it’s 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."
Report: World faces water crises by 2040
Al Jazeera, 29 July 2014

"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."
Worldwide water shortage by 2040
Phys.org, 29 July 2014

"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.""
GOVERNMENT WARNED ON BIOMASS ENERGY
Press Association, 24 July 2014

"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."
Voters want more renewables to tackle energy insecurity
Business Green, 24 July 2014

"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."
EU sets 'ambitious but realistic' energy savings target
BBC Online, 23 July 2014

"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."
Germany is most energy efficient major economy, study finds
AFP, 18 July 2014

"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...."
Tony Blair to advise on Azerbaijan gas project
Financial Times, 17 July 2014

"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."
Energy crisis warning after power imported from England
Herald, 12 July 2014

"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."
Global oil exploration nears $1 trillion - where are the finds?
Reuters, 11 July 2014

"Britain’s 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."
Safety limits could be raised to keep nuclear power stations open
London Times, 11 July 2014

"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. "
North Sea oil revenues will decline more sharply, says OBR
Telegraph, 10 July 2014

"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."
Fossil industry is the subprime danger of this cycle
Telegraph, 9 July 2014

"Thanks to favorable weather and record production from solar and wind power, renewable energy accounted for approximately 31 percent of Germany’s electricity generation in the first half of 2014. Non-hydro renewables made up 27 percent of the country’s 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 Germany’s 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.”"
Renewable Energy Provided One-Third Of Germany's Power In The First Half Of 2014
Climate Progress, 8 July 2014

"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."
Shale 'could meet 41pc of UK's gas needs', says National Grid
Telegraph, 10 July 2014

"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."
Total CEO keeps costly drilling strategy to end: 2014
Reuters, 8 July 2014

"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."
Russian oil production expected to drop
UPI, 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."
Blood for Oil
TIME, July 7-14, 2014, European Print Edition, P23

"The U.S. will remain the world’s biggest oil producer this year after overtaking Saudi Arabia and Russia as extraction of energy from shale rock spurs the nation’s 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 world’s 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 bank’s 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. didn’t 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, America’s oil benchmark. The U.S., the world’s largest oil consumer, still imported an average of 7.5 million barrels a day of crude in April, according to the Department of Energy’s 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. 'It’s 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 Europe’s 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 hasn’t made the impact on prices you would expect,' said Blanch. 'Typically such a large energy supply growth should bring prices lower, but in fact we’re 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 Nigeria’s production is crimped by oil theft and sabotage. Libya will resume exports as soon as possible from two oil ports in the country’s 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 world’s 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. 'There’s 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 country’s total private fixed-structure spending for the first time, he said."
U.S. Seen as Biggest Oil Producer After Overtaking Saudi Arabia
Bloomberg, 4 July 2014

"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."
Germany Shelves Shale-Gas Drilling For Next Seven Years
Wall St Journal, 4 July 2014

"The U.S. will remain the world’s biggest oil producer this year after overtaking Saudi Arabia and Russia as extraction of energy from shale rock spurs the nation’s 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 world’s 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 bank’s 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. didn’t 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, America’s oil benchmark. The U.S., the world’s largest oil consumer, still imported an average of 7.5 million barrels a day of crude in April, according to the Department of Energy’s statistical arm. ... “The shale production story is bigger than Iraqi production, but it hasn’t made the impact on prices you would expect,” said Blanch. “Typically such a large energy supply growth should bring prices lower, but in fact we’re not seeing that because the whole geopolitical situation outside the U.S. is dreadful.” "
U.S. Seen as Biggest Oil Producer After Overtaking Saudi Arabia
Bloomberg, 4 July 2014

"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."
Britain 'at risk' of energy BLACKOUTS for the next two years
Express, 30 June 2014

"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"."
Scotland 'has modest reserves' of shale gas and oil
BBC, 30 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."
Windfarms and solar energy: healthy returns for investors, but risks
Guardian, 28 June 2014

"Volkswagen has revealed the wallet-crushing price for its record-breaking XL1 model - the world’s 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 VW’s 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."
World's most energy efficient car will lose you pounds
Western Morning News, 27 June 2014

"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 UK’s 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 year’s 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."
Scottish shale gas and oil 'no game-changer'
Telegraph, 27 June 2014

"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."
Disappointing day for Arctic oil
The Artic Journal, 27 June 2014

"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 2013—and six EU countries, including Lithuania and Bulgaria, are entirely dependent on Gazprom for supplies."
EU Under Pressure to Overhaul Energy Strategy
Wall St Journal, 26 June 2014

"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."
Gazprom seeks HK listing, may use yuan in China gas deal
Reuters, 26 June 2014

"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."
US eases oil export restrictions
BBC Online, 26 June 2014

"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. Let’s 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 world’s 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 world’s 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."
The Peak Oil Crisis: Iraq on the Precipice:
Falls Church News-Press Online, 25 June 2014

"Millions of barrels of crude oil flowing from shale formations around the country—not just North Dakota—are 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 day—the 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 underground—in intense heat and under tremendous pressure—the 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."
Oil From U.S. Fracking Is More Volatile Than Expected
Wall St Journal, 24 June 2014

"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."
Austria defies US, EU over South Stream during Putin visit
Deutsche Welle, 24 June 2014

"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."
Iraq conflict threatens vital growth of oil sector: analysts
AFP, 22 June 2014

"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."
Israel accepts first delivery of disputed Kurdish pipeline oil
Reuters, 20 June 2014

"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."
Norway would only help EU with gas crisis if price right
Reuters, 20 June 2014

"The IEA’s 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.” It’s 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."
IEA says ‘peak oil demand’ could hit as early as 2020
Renew Economy, 18 June 2014

"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 cartel’s production capacity up until 2019 was expected to come from Iraq. “Given Iraq’s 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 Opec’s 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 country’s 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 country’s 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."
IEA warns on Opec oil production risks
Financial Times, 17 June 2014

"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. “It’s sheer coincidence – they have nothing to do with each other so won’t last forever,” he added. Mr Rühl was presenting BP’s latest annual statistical review, an oil industry bible which contains country-by-country data on oil and gas production, consumption and reserves. This year’s review highlights the huge impact America’s 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 America’s 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 world’s 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 country’s 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, BP’s chief executive, said this year’s 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 China’s energy demand growth, which slowed to 4.7 per cent in 2013, down from a ten-year average of 8.6 per cent, and China’s GDP growth, which stood at 7.7 per cent last year."
BP says oil price at its most stable since early 1970s
Financial Times, 16 June 2014

"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."
Worldwide coal consumption reaches 44-year high
United Press International, 16 June 2014

"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."
Petroleum output hits high
Business Insider, 16 June 2014

"US production of liquid petroleum is surpassing its previous peak, reached in 1970, in the latest landmark for the country’s 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 world’s 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 government’s 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 Arabia’s crude oil production of about 9.7m b/d and sustain that for a long time were “completely overblown”, he added."
US petroleum production hits 44-year high
Financial Times, 15 June 2014

"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."
EU agrees plan to cap use of food-based biofuels
Reuters, 13 June 2014

"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 can’t stand $140 if it spikes that high,” said Chris Skrebowski, a veteran oil analyst and former editor of Petroleum Review. Iraq is Opec’s 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 can’t 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 Syria’s 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."
Iraq’s civil war threatens structure of global energy supply for years
Telegraph, 12 June 2014

"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."
'Why won't you pass on falling gas prices to struggling families?'
Mail, 10 June 2014

"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."
Huge Russia-China gas deal still leaves door open to Japan
Reuters, 7 June 2014

"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."
Gazprom signs agreements to switch from dollars to euros
Itar-Tass, 6 June 2014

"[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. It’s the biggest Mexican company and the country’s 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. ....  Mexico’s 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 Nieto’s 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; Norway’s Statoil; and Colombia’s 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 world’s 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. Cantarell’s 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 & Poor’s, says the petroleum embedded in shale is the 'low-hanging fruit' of Mexico’s energy overhaul. 'We could see a lot of investment coming very quickly from Texas.' That’s because one so-far underexplored shale formation lies in northern Mexico across the border from Texas’s 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."
Pemex, Mexico’s state oil giant, braces for a the country’s new energy landscape
Washington Post, 6 June 2014

"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."
First major tar sands oil shipment arrives in Europe amid protests
Guardian, 6 June 2014

"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 today’s 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."
Renewable sources key to lower energy costs
Financial Times, 5 June 2014

"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 doesn’t shine or the wind doesn’t 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."
Stop feeding renewable energy beast, urges E.On
Telegraph, 3 June 2014

"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."
Ukraine conflict wake-up call for EU's looming fuel and energy crisis – Oxfam
Guardian, 3 June 2014

"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."
Peak Oil Revisited
Feasta, 3 June 2014

"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.'"
IEA: $48 trillion needed to satisfy global energy demand
UPI, 3 June 2014

"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."
Watchdog Group Releases Global Energy Investment Report
NPR, 3 June 2014

"After spending the past decade and more than $200 billion acquiring mines and oilfields from Australia to Argentina, China’s attention is turning to food. The world’s 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 can’t 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 world’s 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."
Food Replacing Oil as China M&A Target of Choice: Commodities
Bloomberg, 30 May 2014

"In 2011, the main political parties in Angela Merkel’s 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 Japan’s 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 Germany’s electricity and 60 percent of its total energy.  Is achieving this goal possible, especially given that until recently nuclear was Germany’s 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 Germany’s 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 nation’s 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 Union’s 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 country’s gas comes by pipeline from Vladimir Putin’s Russia, making Germany dependent on a country whose leader is now openly hostile to his western neighbors."
On the Road to Green Energy, Germany Detours on Dirty Coal
Environment 360, 29 May 2014

"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.'"
Shale and non-Russian gas imports at heart of new EU energy strategy
Guardian, 28 May 2014

"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."
Shale and non-Russian gas imports at heart of new EU energy strategy
Guardian, 28 May 2014

"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 Russia’s 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."
Japanese Lawmakers Propose $6Bln Gas Pipeline From Sakhalin
RIA Novosti, 28 May 2014

"Mexico’s President Enrique Peña Nieto has gone where no other Mexican president has dared to tread since the nation’s wildly popular oil nationalization in 1938. Late last year, he pushed through an historic measure to reprivatize much of Mexico’s 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 nation’s 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 government’s 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 NAFTA—including the World Bank, the State Department-funded Wilson Center, and the Mexican business association Coparmex—have 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 Mexico’s 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."
Mexico’s Oil Privatization: Risky Business
Foreign Policy In Focus, 27 May 2014

"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 report’s 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 state’s 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 EIA’s 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 California’s shale oil and that someday, if not sooner, they will be successful. The California shale story raises once again questions about just where America’s 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."
The Peak Oil Crisis: The Monterrey Shale Debacle
Fall Church News-Press, 27 May 2014

"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.'"
'Ukraine must pay gas debts' – EU Energy Commissioner
RT, 26 May 2014

"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."
Gazprom warns of higher prices for Europe after deal
London Times, 24 May 2014, Print Edition, P50

"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."
No shale gas potential in Weald basin, concludes British Geological Survey
Guardian, 23 May 2014

"The Government’s dream of kickstarting a fracking revolution has suffered a major setback after a survey of one of the UK’s 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: 'It’s 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 UK’s shale gas and oil resources'. Ministers have repeatedly pointed to the success of fracking in the US, where it has driven down gas prices."
No gas found in the Weald basin: Does this spell the end of the Government’s dream of a fracking revolution?
Independent, 23 May 2014

"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."
Russia's gas king taunts crumbling Europe over China pipeline coup
Telegraph, 23 May 2014

"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.'"
So much for Britain's fracking revolution
Mail, 23 May 2014

"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 report’s 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.... Friday’s 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 Fayed’s estate for oil drilling beneath it, but an appeal court judge later said £82.50 would have been more appropriate."
Fracking planned for Tory heartlands as report reveals billions of barrels of shale oil in southern England
Telegraph, 22 May 2014

"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. Iran’s 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 country’s 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 May Sign Agreement to Build 8 Reactors in Iran
RIA Novosti, 22 May 2014

"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 Gazprom’s 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 Beijing’s 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."
Russia and China sign historic $400bn gas deal
Telegraph, 21 May 2014

"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 Russia’s 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."
South Stream Launch Allows to Avoid Russian Gas Transit Via Ukraine - Medvedev
RIA Novosti, 21 May 2014

"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."
US shale gas, oil boom should be viewed in proportion: IEA's Birol
Platts, 20 May 2014

"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."
Survey suggests support for fracking in UK falls below 50%
BBC Online, 20 May 2014

"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."
Brazil says to export more oil in 2014 than it will import
Reuters, 20 May 2014

"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."
U.S. officials cut estimate of recoverable Monterey Shale oil by 96%
Los Angles Times, 20 May 2014

"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."
Soaring energy and housing costs force poorest homes to turn to food banks
Observer, 18 May 2014

"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."
Energy sanctions against Russia would be 'inappropriate', EU says
Reuters, 16 May 2014

"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."
UK 'needs more home-grown energy'
BBC, 16 May 2014

"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 Peak Oil Crisis: Parsing 2014
Falls Church News-Press, 14 May 2014

"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 Middle East Has A Huge Advantage In The Global Oil Market
Business Insiders, 13 May 2014

"...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."
Lord Howell of Guildford, Chairman of the Windsor Energy Group, formerly served as Secretary of State for Energy
British fracking policy – a change of direction needed
Journal of Energy Security, 12 May 2014

"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."
George Friedman - Borderlands: The View from Azerbaijan
Stratfor, 12 May 2014

"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'."
First British shale gas 'to fuel homes next year’
Telegraph, 11 May 2014

"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."
Energy-saving technologies cutting firms' fuel bills
BBC Online, 9 May 2014

"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."
Insight - End of oil boom threatens Norway's welfare model
Reuters, 8 May 2014

"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. That’s 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 SA’s 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 aren’t 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."
Oil Industry Risks $1.1 Trillion of Investor Cash
Bloomberg, 8 May 2014

"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.’"
British businesses and motorists pay one of highest fuel tax rates in the world as petrol sales fall to lowest on record
This Is Money, 6 May 2014

"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 UK’s 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. REF’s 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 don’t 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 people’s 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. "
UK 'has already approved enough green energy to hit targets’
Telegraph, 6 May 2014

"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."
UK energy too cheap, says study
Guardian, 6 May 2014

"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 republic’s 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 Europe’s market, either through pipeline or in LNG [liquified natural gas] form.' Energy supplies from Iran – holder of the world’s 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 Europe’s gas supply market, shipping 76pc of its exports of the heating fuel to the region last year."
Iran offers Europe gas amid Russian energy embargo fears
Telegraph, 4 May 2014

"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."
Slovakia and Ukraine agree over gas supply
BBC Online, 27 April 2014

"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.' Russia’s 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 Russia’s 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."
Nuclear Icebreakers Clear the Way for Arctic Oil
Moscow Times, 27 April 2014

"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 Britain’s 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 week’s vote by miners to agree to the closure of two of Britain’s remaining three deep pit mines. ‘If the Prime Minister says he does not like what Russia’s doing in Ukraine, Putin can always turn round and say he’ll 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 Britain’s last three deep mine pits will close within 18 months after the admission by UK Coal, Britain’s biggest coal producer, that it could no longer go on. On Tuesday, UK Coal’s 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 UK’s 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 Britain’s electricity generation needs."
Britain STILL depends on coal for 40% of its electricity
Mail, 26 April 2014

"The Danish state’s 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 search "too expensive" in Denmark
Copenhagen Post, 25 April 2014

"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 Ottawa’s 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."
Oil industry scrambles to retrofit rail cars
Globe and Mail, 24 April 2014

"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."
Oil and gas industry 'worth £35bn annually' to UK economy
BBC Online, 23 April 2014

"Hydraulic fracturing has opened a whole new world of oil and gas, but even Exxon Mobil Corp. says it’s not the world’s 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? 'That’s 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 world’s 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. That’s 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. 'We’re going to use the fuels more efficiently to generate more electricity,' Pirog said."
Biggest energy source for the future isn't oil and gas, Exxon says
Dallas Business Journal, 23 April 2014

"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 biofuel–made from the non-edible parts of plants, wood waste and other non-food feedstocks–was 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? Here’s how much cellulosic biofuel was produced in the first quarter of this year, according to the American Fuel and Petrochemical Manufacturers: 75,000 gallons."
The Brutal Bust in Next-Generation Biofuels in One Chart
The Atlantic, 23 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."
Marcellus shale legacy wells showing increasing depletion rates
Philadelphia Examiner, 22 April 2014

"Shinzo Abe, Japan’s 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 world’s 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 world’s 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. Russia’s total gas exports to the EU are 130bcm."
Europe braces for gas showdown with Russia, helped by Japan's nuclear restart
Telegraph, 22 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."
Arctic Oil Rig Raided by Greenpeace Ships First Oil
Moscow Times, 20 April 2014

"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."
Russia writes off 90 percent of North Korea debt, eyes gas pipeline
Reuters, 19 April 2014

"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."
Shell committed to Russia expansion despite sanctions
Reuters, 18 April 2014

"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 hasn’t 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 hasn’t 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."
Why Are U.S. Oil Imports Falling?
TIME, 17 April 2014

"It’s 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."
Cost of oil transported by pipelines up 60% in five years, NEB says
Financial Post, 16 April 2014

"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."
France's Total calls time on Polish shale license
Reuters, 14 April 2014

"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."
Methane hydrate: Dirty fuel or energy saviour?
BBC Online, 17 April 2014

"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."
Putin says not possible for Europe to stop buying Russian gas
Reuters, 17 April 2014

"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."
Germany has no alternative to Russian gas
Deutsche Welle, 17 April 2014

"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 we’ll 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 you’ll 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."
Renewables, Nuclear Must Triple to Save Climate, UN Says
Bloomberg, 13 April 2014

"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 Agency’s 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/d—the 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. OPEC’s '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 month’s 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 Russia’s legacy fields and ongoing (and extensive) repairs on Kashagan field’s 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 month’s report, reflecting lower Russian demand projection in the wake of its annexation of Crimea."
IEA: Global oil supplies plunge in March on lower OPEC output
Oil & Gas Journal, 11 April 2014

"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."
Europe must speak with one voice on energy
Financial Times, 11 April 2014

"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, Norway’s 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."
Paolo Scaroni - Chief executive of Eni
Shell drops innovative gas field project
E & T, 11 April 2014

"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, Russia’s need for new customers means it’s 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, Russia’s deputy prime minister said he 'hoped' a deal would be signed in May. The crisis in Ukraine has increased the importance of Russia’s 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 it’ll 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 company’s 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 won’t 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.  "
Putin Expected to Sign China Gas Deal as Crisis Forces Hand
Bloomberg, 10 April 2014

"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 Commission’s chief, Jose Manuel Barroso, to Bulgarian politicians, warning the country not to stand in the way of the EU’s 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 Bulgaria’s 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. Russia’s 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. Ukraine’s premier, Arseniy Yatsenyuk, accused Russian president Vladimir Putin of preparing the ground for seizure of the Donbass region, home to most of Ukraine’s 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."
Russia's South Stream pipeline in deep freeze as EU tightens sanctions noose
Telegraph, 7 April 2014

"Jan Arps is the most influential oilman you’ve 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 didn’t 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 Arps’s formula that exaggerate future production. That casts doubt on how close the U.S. will get to energy independence, a goal that’s 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.' Lee’s 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 earth’s 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 world’s 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 Bakken’s output alone will be 1.7 million barrels a day, from 1.1 million now. Predicting the future is an inherently uncertain business, and Arps’s method works as well as any other, said Scott Wilson, a senior vice president in Ryder Scott’s 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, that’s 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 don’t 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."
Old Math Casts Doubt on Accuracy of Oil Reserve Estimates
Bloomberg, 5 April 2014

"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."
Hayle offshore energy test facility Wave Hub secures international company Carnegie Wave Energy to take on its last berth
The Cornishman, 4 April 2014

"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'."
Energy minister vows to curb the spread of solar farms
Telegraph, 4 April 2014

"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."
Russia raises gas prices for Ukraine by 80 percent
Reuters, 4 April 2014

"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 Korea’s KNOC, China’s Sinopec Corp., and Abu Dhabi’s 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."
Oil sands investment slowing because of tough market, not new SOE rules, execs say
Financial Post, 4 April 2014

"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."
Kashagan oil field: Stuck between 'a widow maker' and 'a rotating bomb'
Reuters, 3 April 2014

"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."
Iran, Russia working to seal $20 bln oil-for-goods deal - sources
Reuters, 2 April 2014

"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 Britain’s 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.'"
Coal is new black gold under the North Sea
Sunday Times, 30 March 2014

"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 Moscow’s 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; Moscow’s 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. Europe’s 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."
Michael Levy - Hot air about American gas will not scare Putin
Financial Times, 29 March 2014

"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, Iraq’s 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.  Iraq’s 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 Iraq’s oil production is likely to spark tensions within Opec, which controls the world oil market. Baghdad currently operates outside the cartel’s 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 Iraq’s oil production comes amid hopes that neighbouring Iran will soon boost production if sanctions are lifted. Hussain al-Shahristani, Iraq’s Deputy Prime Minister for Energy, said earlier this year that Baghdad and Tehran were cooperating on petroleum strategy in a move that has challenged Saudi’s 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."
Russia's Lukoil opens giant Iraq oil field, adding to crude glut
Telegraph, 29 March 2014

"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..."
One-Third of Texas Was Running on Wind Power This Week
Motherboard, 28 March 2014

"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."
German economy minister says no alternative to Russian gas
Reuters, 28 March 2014

"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."
Ukraine agrees to 50% gas price hike amid IMF talks
BBC, 26 March 2014

"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."
Fracking won't crack our dependence on Russian gas imports
Guardian, 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 Italy’s 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 Siberia’s northwestern Yamal peninsula in January to a group led by Russia’s 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."
Russia gas plan in doubt, says Eni chief
Oil & Gas, 23 March 2014

"Shale reserves are not a miracle; they are a high-cost source of fuel...."
Checkmate for cheap unconventional gas
Financial Times, 21 March 2014

"Britain has begun this year to import gas from Russia under a formal contract for the first time, just as European calls to loosen Moscow’s grip on energy supply mount because of the crisis over Ukraine. The country’s 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 Europe’s biggest supplier of gas, providing around a third of the continent’s 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."
Britain starts Russian gas imports under 2012 deal just as tensions mount
Reuters, 21 March 2014

"European leaders have rushed through plans aimed at breaking the Kremlin’s 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 Putin’s 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. Ukraine’s 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. Poland’s 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 country’s 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. Britain’s prime minister, David Cameron, said there is no symmetry in the economic damage that each side can do to the other, arguing that Russia’s reliance on Gazprom sales matters far more than Europe’s 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 Putin’s 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'."
Europe scrambles to break gas dependence on Russia, offers Ukraine military tie
Telegraph, 21 March 2014

"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."
Americans want U.S. oil kept on U.S. soil, poll says
Reuters, 20 March 2014

"The UK government’s 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."
Green deal plans 'reduce to a trickle'
Guardian, 20 March 2014

"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. 'We’re 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,' ICF International concluded.... Beyond gas, the study predicts that companies will have to pour $12.4 billion per year into crude oil infrastructure, including pipelines, valves, manifolds and separators. Another $2.5 billion will be needed annually for infrastructure associated with natural gas liquids such as ethane, butane and propane. Most of the pipeline capacity for natural gas liquids — some 3.2 million barrels a day — will be needed by 2020, according to the projections. If spending falls short, oil and gas development could be constrained, the report warns. 'Sufficient infrastructure goes hand in hand with well-functioning markets,' ICF says. 'Insufficient infrastructure can constrain market growth and strand supplies, potentially leading to increased price volatility and reduced economic activity.' INGAA President Don Santa said he was confident that there would be enough capital to fund the infrastructure buildout."
US energy boom demands $641B in infrastructure, study finds
Fuel Fix (Blog), 18 March 2014

"Yesterday Chesapeake Energy, the second largest U.S. based oil and gas company, filed with the Securities and Exchange Commission to sell off its oilfield services unit which does the majority of the company’s oil and gas exploration, hydraulic fracking and drilling. Stung with high costs and mired in more than $20 billion in debt on its U.S. shale operations, the company continues to sell off billions in its assets base as it struggles to right itself. Its actions follow a developing trend of cutbacks, spin- offs, divestures and write downs for oil and gas majors operating in U.S. shale formations. In the last 10 days, British Petroleum, Chevron, ExxonMobil and Royal Dutch Shell have all announced they will be spending less on oil and gas exploration in the U.S. Allen Brooks, Managing Director of Parks Paton Hoepfl & Brown, an independent Houston, Texas based investment banking firm, stated yesterday, 'Chevron is the latest major oil company to implicitly declare that the oil industry has entered a new era – one marked by higher costs and more disciplined capital investment programs.' Brooks further stated several of the majors have announced plans or are considering separating their North American shale gas operations into stand alone entities, possibly positioning their U.S. operations for sale over time. These new directions by the oil and gas majors are acknowledgements their energy returns on energy investments are becoming increasingly difficult and hampering their profits despite the initial high expectations for U.S. shale formations over the last several years."
Oil and gas majors now cutting back in U.S. shale gas fields
Examiner, 18 March 2014

"North Carolina’s ‘bottomland’ forest is being cut down in swathes, and much of it pulped and turned into wood pellets – so Britain can keep its lights on.The UK is committed by law to a radical shift to renewable energy. By 2020, the proportion of Britain’s electricity generated from ‘renewable’ sources is supposed to almost triple to 30 per cent, with more than a third of that from what is called ‘biomass’. The only large-scale way to do this is by burning wood, man’s oldest fuel – because EU rules have determined it is ‘carbon-neutral’. So our biggest power station, the leviathan Drax plant near Selby in North Yorkshire, is switching from dirty, non-renewable coal. Biomass is far more expensive, but the consumer helps the process by paying subsidies via levies on energy bills. That’s where North Carolina’s forests come in. They are being reduced to pellets in a gargantuan pulping process at local factories, then shipped across the Atlantic from a purpose-built dock at Chesapeake Port, just across the state line in Virginia. Those pellets are burnt by the billion at Drax. Each year, says Drax’s head of environment, Nigel Burdett, Drax buys more than a million metric tons of pellets from US firm Enviva, around two thirds of its total output. Most of them come not from fast-growing pine, but mixed, deciduous hardwood. Drax and Enviva insist this practice is ‘sustainable’. But though it is entirely driven by the desire to curb greenhouse gas emissions, a broad alliance of US and international environmentalists argue it is increasing, not reducing them. In fact, Burdett admits, Drax’s wood-fuelled furnaces actually produce three per cent more carbon dioxide (CO2) than coal – and well over twice as much as gas: 870g per megawatt hour (MW/hr) is belched out by wood, compared to just 400g for gas. Then there’s the extra CO2 produced by manufacturing the pellets and transporting them 3,800 miles. According to Burdett, when all that is taken into account, using biomass for generating power produces 20 per cent more greenhouse gas emissions than coal. And meanwhile, say the environmentalists, the forest’s precious wildlife habitat is being placed  in jeopardy. Drax concedes that ‘when biomass is burned, carbon dioxide is released into the atmosphere’. Its defence is that trees – unlike coal or gas – are renewable because they can grow again, and that when they do, they will neutralise the carbon in the atmosphere by ‘breathing’ it in – or in technical parlance, ‘sequestering’ it. So Drax claims that burning wood ‘significantly reduces greenhouse gas emissions compared with coal-fired generation’ – by as much, Burdett says, as 80 per cent. These claims are questionable.  For one thing, some trees in the ‘bottomland’ woods can take more than 100 years to regrow. But for Drax, this argument has proven beneficial and lucrative. Only a few years ago, as a coal-only plant, Drax was Europe’s largest greenhouse gas emitter, and was often targeted by green activists. Now it boasts of its ‘environmental leadership position’, saying it is the biggest renewable energy plant in the world. It also gets guaranteed profits  from the Government’s green energy subsidies. Last year, these amounted to £62.5?million, paid by levies on consumers’ bills. This is set to triple by 2016 as Drax increases its biomass capacity. In the longer term, the Government has decreed that customers will pay £105 per MW/hr for Drax’s biomass electricity – £10 more than for onshore wind energy, and £15 more than for power from the controversial new nuclear plant to be built at Hinkley Point in Somerset. The current ‘normal’ market electricity price is just £50 per MW/hr. Mr Burdett admitted: ‘Our whole business case is built on subsidy, like the rest of the renewable energy industry. We are simply responding to Government policy.’ Company spokesman Matt Willey added: ‘We’re a power company. We’ve been told to take coal out of the equation. What would you have us do – build a dirty great windfarm?’ Meanwhile, there are other costs, less easily quantifiable. ‘These are some of our most valuable forests,’ said my trail companion, Derb Carter, director of the Southern Environmental Law Centre in Chapel Hill, North Carolina."
The bonfire of insanity: Woodland is shipped 3,800 miles and burned in Drax power station
Mail, 16 March 2014

"On February 6, 1974, Secretary of State Henry Kissinger under President Nixon unveiled ‘Project Independence,’ a comprehensive national energy plan to achieve energy independence by the end of the decade. The main goal of Project Independence was to reduce vulnerability. The nation’s 'overall objective can be summed up in one word that best characterizes this nation and its essential nature. That word is independence…In the last third of the century our independence will depend on maintaining and achieving self-sufficiency in energy. What I have called Project Independence 1980 is a series of plans and goals set to ensure that by the end of this decade Americans will not have to rely on any source of energy beyond its own.' There were three main components of the plan: accelerating domestic supply, energy conservation and demand management, and emergency programs."
Ben Gottesdiener - Attempts at Independence
Washington University, Political Review, 15 March 2014

"Before contemplating the use of US oil and gas as a strategic weapon, it might be useful to review a few key fundamentals. First, consider the following oil production, consumption and import/export numbers reported by British Petroleum for 2012. Russia produced 10.6 million barrels per day (mbd), consumed 3.2 mbd, leaving 7.4 mbd available for export. The United States produced 8.9 mbd, consumed 18.5 mbd, and imported 10.5 mbd. All the talk of America 'soon overtaking Russia' as the world’s largest oil producer comes with a rather sizeable asterisk: even if that eventually occurs, the US will still be required to import an additional five to six million barrels of oil per day, while Russia would have an additional 7 to 8 mbd to export. This fact places the Russian Federation in a considerably stronger energy-security position than the United States. Second, such action would likely penalize US citizens. Chris Nelder, an independent energy analyst and journalist hits the nail on the head: 'I don’t think U.S. consumers are willing to pay higher prices for natural gas, grid power, and gasoline to enable the uncertain possibility that doing so would ‘stick it to Putin’ some years down the line.' Petroleum geologist and energy analyst Arthur Berman also warns there would be unintended consequences to exporting American natural gas. 'The U.S. imports nearly 4 billion cubic feet of gas per day. It seems a bit premature to be discussing natural gas export when you are a net importer and are likely to remain one until at least 2018 according to the EIA.' Least we forget, conventional gas in the US accounts for almost 60 percent of the total produced and is declining at about 20 percent per year. Unconventional gas, meanwhile, is declining at more than 30 percent each year. 'Taken together,' Berman calculates, 'the US needs to replace 19 billion cubic feet per day each year to maintain production at flat levels. That’s almost four Barnett shale plays at full production each year.' It is clear the United States is going to have an increasingly difficult time in the coming years meeting its own gas needs. How it is in America’s energy-security interest to export domestic supplies when the US is already a net-gas importer, however, is not clear. Part of the problem seems to be a broadly held, though empirically unsupportable position that the US tight oil and gas boom of the past several years is a sustainable and expandable phenomenon. Yet geoscientist David Hughes—a thirty-year veteran of the Canadian Geological Survey whose data derives from over sixty-five thousand oil and gas wells shows what is commonly referred to as the 'tight oil boom' is more likely to be a temporary bump."
'The Oil and Gas Weapon Won’t Work': Davis & Leggett on Ukraine
Triple Crunch Log, 13 March 2014

"A test sale from the U.S. emergency oil reserve on Friday may or may not be a subtle warning to Russia, but it will have little effect on U.S. imports from the world's biggest producer, which will likely slow to a trickle this year. The Department of Energy will take bids later on Friday to sell 5 million barrels of sour crude from the nation's Strategic Petroleum Reserves, to be released from salt dome caverns in Texas and Louisiana. But the sale is unlikely to displace already shrinking Russian crude imports, which have significantly changed in variety and geography over the past few years. Four years ago, Gulf Coast refiners imported as much as 177,000 barrels-per-day (bpd) of Urals sour blend crude from Russia's Black Sea or Baltic ports. Now, however, most Russian barrels are light sweet ESPO or Sokol grades that cross the Pacific Ocean from Siberia to West Coast refineries. Even those are quickly losing ground as cheap crude from U.S. shale plays, such as North Dakota's Bakken, squeeze out more foreign oil.Imports from Russia stood at 16.3 million barrels in 2013, making it the 13th largest supplier, according to data from the U.S. Energy Information Administration (EIA). That was equivalent to 2 percent of the volumes imported from Canada, the largest oil exporter to the United States. The Bakken shipments 'will keep imports to a minimum' although the threat of rising rail costs due to tougher regulations may still keep some barrels flowing, said Al Troner, president of Asia Pacific Energy Consulting (APEC). 'I don't think they will abandon Russian imports altogether - no refiner wants to completely cut off slate alternatives.' Russia remains the world's top oil-producing nation with 10.58 million barrels-per-day of output in February, according to BP Statistics. But a growing share of that is now headed to China and other countries in Asia, where demand is rising."
SPR or not, Russian oil sales to U.S. already on the way out
Reuters, 13 March 2014

"Unnoticed by the mainstream media, US shale oil covers up a recent decline of crude oil production of 1.5 mb/d  in the rest of world (using data up to Oct 2013). This means that without US shale oil the world would be in a deep oil crisis similar to the decline phase 2006/07  when oil prices went up. The decline comes from many countries but is also caused by fights over oil and oil-related issues in Iran, Libya and other countries which can be seen on TV every day.... While the mainstream media lulls the public into believing that US shale oil is a revolution, peaking oil production in many countries eats like a cancer through the oil supply system. The big problem is that more oil dependent infrastructure is being built which will not be needed when US shale oil peaks and the underlying decline is revealed."
World crude production 2013 without shale oil is back to 2005 levels
Crude Oil Peak, 13 March 2013

"U.S. daily crude production will slow next year for the first time since the nation’s shale oil boom began three years ago, according to a new federal estimate. In its first forecast of the nation’s energy position in 2015, the U.S. Energy Information Administration projected Tuesday that oil producers will increase production by about 750,000 barrels of oil per day in 2015. That’s a drop from an expected daily increase of 1.03 million barrels in 2014 and the growth of the past two years. Falling oil prices could dampen the incentive for energy companies to produce as much crude in 2015, a symptom of shrinking demand for motor fuels as automakers sell more efficient cars, said John Staub, head of the EIA’s exploration and production team. 'People aren’t traveling quite as much as in the past,' Staub said. Still, the EIA’s projected daily production of 9.3 million barrels per day in 2015 comes close to levels in 1972, one of the nation’s highest years for oil production on record. The agency believes the nation set a record in 2013 with a production increase of 1 million barrels, the largest in history. The nation’s oil wells began to blossom from Texas to North Dakota three years ago when producers shifted their focus to oil after natural gas prices plummeted on a flood of supply. If the federal projections for 2015 prove accurate, U.S. crude production will have grown about 64 percent since 2011. The EIA said the growth  likely will continue to drive petroleum imports out of the market next year, when government analysts expect liquid fuel imports to shrink to 24 percent of U.S. consumption, its lowest share since 1970. But the end of the oil boom may be approaching. Last month, the EIA predicted that U.S. oil output would peak in 2016 at 9.5 million barrels, just shy of the nation’s record in 1970. Production will begin to drop in 2020, according to the agency. Oil production is 'ultimately based on how good those investments look,' because even though production rates at North American shale plays are declining rapidly, there’s still plenty of oil there, said John Lee, a professor of petroleum engineering at the University of Houston. 'These big shale plays they are by no means fully developed.' If the U.S. government accedes to the oil industry and lifts a ban on selling crude overseas, oil prices would rise and production would keep increasing after 2020, but that idea has met strong political opposition, Lee said. 'Politically, I think (lifting the ban on crude exports) would be very difficult to get through,' Lee said."
US oil boom will slow in 2015, feds forecast
Fuel Fix (Blog), 7 March 2014

"North America may be in the midst of an energy renaissance, but that could be slowed or derailed by several limitations, including nature. While shale plays and oil sands fields have multiplied North American oil production, a labor shortage, regulations and geology continue to present hurdles for the industry, speakers at the IHS Energy CERAWeek conference said Friday at the Hilton Americas-Houston. For example, in any given shale play, between 3 percent and 9 percent of the acreage holds the most profitable and productive wells, said Raoul LeBlanc, managing director of onshore oil industry research for IHS. LeBlanc compared productive underground reserves to nutrient-dense snacks. 'You have PowerBars and popcorn in your pantry,' LeBlanc said. 'Right now we’re eating the PowerBars. And at some point, the PowerBars will run out.' Since most drilling so far has focused on the best acreage, production growth in some of the hottest plays in the United States, like the Bakken and the Eagle Ford shales, will likely slow, he said. 'At some point we’ll have to go to the second best,' LeBlanc said. 'It’s not a catastrophe. It’s not a disaster. It’s just not as good.' As growth in some plays slows down, however, other emerging plays could pick up steam, LeBlanc said. He highlighted the Wolfcamp and Bone Spring shale regions as examples of emerging plays that could become prolific producers, depending on oil prices. 'We need a price that will incent us to go get it,' LeBlanc said. 'So as long as the price is there, I’m very comfortable about the resource.'
Is shale running short on ‘PowerBars’?
Fuel Fix (Blog), 7 March 2014

"The path toward U.S. energy independence, made possible by a boom in shale oil, will be much harder than it seems. Just a few of the roadblocks: Independent producers will spend $1.50 drilling this year for every dollar they get back. Shale output drops faster than production from conventional methods. It will take 2,500 new wells a year just to sustain output of 1 million barrels a day in North Dakota’s Bakken shale, according to the Paris-based International Energy Agency. Iraq could do the same with 60. Consider Sanchez Energy Corp. The Houston-based company plans to spend as much as $600 million this year, almost double its estimated 2013 revenue, on the Eagle Ford shale formation in south Texas, which along with North Dakota is one of the hotbeds of a drilling frenzy that’s pushed U.S. crude output to the highest in almost 26 years. Its Sante North 1H oil well pumped five times more water than crude, Sanchez Energy said in a Feb. 17 regulatory filing. Shares sank 7 percent."
Dream of U.S. Oil Independence Slams Against Shale Costs
Bloomberg, 27 February 2014

"Annual household energy bills could rise by more than £600 within seven years so power companies can keep the lights on. Sky News has learned the watchdog has written to the Treasury ahead of next week's budget to warn of rising costs. In a new forecast, consumer champion Which? has predicted energy companies will need to spend £118bn on new infrastructure between now and 2020. This would include building new power stations, replacing grids and building wind farms as part of a drive to sustain Britain's power supply and cut down on carbon emissions. Which? believes this cost will inevitably be passed on to consumers, and that households and businesses will foot the bill. This would mean that the average bill would exceed £2,000 a year even if wholesale costs of gas and electricity remain stable - an annual rise of £640 per household. Richard Lloyd, executive director of Which?, said: 'I don't think consumers know that this is heading their way and that decision has already been made by the Government. This is a massive chunk potentially on everyone's bills. This means one thing: that household bills are set to rise, and to rise for many people very steeply for the foreseeable future.'"
Annual Energy Bills 'To Rocket By 2020'
Sky New, 14 March 2014

"Post Carbon Institute has an incredibly detailed (and gorgeous!) map of all US shale oil and gas wells (they count 63,000 through June 2012 using data from Drilling Info). I’ve embedded it below so you can get lost in the crazy amount of detail..."
David Wogan - Here’s where all the US shale oil and gas wells are – map
Scientific American (Blogs), 14 March 2014

"The International Energy Agency expects the pressure on global oil markets to ease, in spite of rising geopolitical tensions, because of surging supply from Iraq and other producers. 'While international tensions may be on the rise, the pressure on oil markets seems set to ease,' the Paris-based group said in its widely followed monthly report. It also noted the extreme cold weather that had dug into US oil stocks in January had abated. US oil prices rose above $100 for the first time in five months in February because of exceptionally cold weather in the US and robust refining demand. Brent, the international marker, also rose, supported by fresh supply outages in Libya and the tensions in Ukraine. However, in recent weeks prices have eased back. Nymex April West Texas Intermediate is currently trading at $98.36 a barrel, while ICE Brent April is at $107.44.The IEA, which advises western governments on energy policy, said Iraq’s oil production had increased by 530,000 barrels a day in February to a 35-year high of 3.62m b/d. Exports rose 572,000 b/d at 2.8m b/d as infrastructure bottlenecks at Iraq’s southern export terminal were finally resolved. The IEA also noted Opec crude supplies in February had breached 30m b/d for the first time in five months, led by the surge in Iraqi production, which offset a fresh dip in Libyan output....Turning to non-Opec output, the IEA said it expected supplies to increase by 1.7m b/d in 2014, the highest rate of growth since at least the 1990s. 'The projected 2014 increase in non-Opec supply is expected to be driven by the relentless growth in US and Canadian supplies and gains in Russia, China and Brazil,' the IEA said. The IEA has been criticised by some analysts and investors for consistently overestimating non-Opec supply growth over the past decade. 'In seven of the last 10 years the IEA has overestimated non-Opec production growth for the following year. Given its role to ensure adequate supply, it is concerning that it has been so consistently optimistic and wrong,' Investec Asset Management wrote in a recent white paper on global oil supply. Many think its forecasts will again prove too optimistic. Taking just one of many examples, ambitious Brazil keeps lagging behind growth rates that have been talked about for many years,' analysts at JBC Energy wrote on Friday. 'data shows that crude output was down by more than 50,000 b/d month on month and merely flat year on year as increases in pre-salt production are eaten by declines in other offshore as well as onshore output.'"
IEA says supply surge led by Iraq will ease oil tensions
Financial Times, 14 March 2014

"A Brigham Young University professor has discovered a way to transform natural gas into liquid alcohol fuel, a process that could revolutionize world markets for an abundant natural resource. The finding by chemist Daniel Ess has important implications for Utah, which is ranked No. 10 in the United States for natural gas production and No. 11 for natural gas proven reserves. Being able to tap into the state's nearly 7,000 natural gas wells and produce fuel cheaply could ultimately reduce dependence on petroleum and emissions by cutting out a key step in the production process. The study by Ess and the Scripps Research Institute was published Thursday in Science magazine, detailing an unexpected breakthrough regarding a group of ordinary metals that trigger the conversion of natural gas to liquid alcohol. Researchers found that metals like thallium and lead trigger that conversion, which occurs at 180 degrees Celsius — or the relatively low temperature of 356 degrees Fahrenheit. Ess said the discovery ultimately allows those on the production line to bypass an expensive, high-energy step. 'In Qatar, where there is the largest amount of natural gas, they take it and separate out the components,' he said. Super-heating the natural gas cocktail of several hydrocarbons, Ess added, is 'really energy intensive and capital intensive because the temperatures have to be taken up so high. … What our study shows is that we can use these main compounds to transform natural gas into liquid alcohol.'  That conversion makes it a significantly cheaper process, he said."
BYU chemist makes breakthrough discovery on natural gas
KSL, 13 March 2014

"The U.S. could suffer a coast-to-coast blackout if saboteurs knocked out just nine of the country's 55,000 electric-transmission substations on a scorching summer day, according to a previously unreported federal analysis. The study by the Federal Energy Regulatory Commission concluded that coordinated attacks in each of the nation's three separate electric systems could cause the entire power network to collapse, people familiar..."
U.S. Risks National Blackout From Small-Scale Attack
Wall St Journal, 12 March 2014

"Opec has upgraded its forecast for world oil demand, raising the prospect of higher petrol prices ahead of next week's Budget. The cartel of 12 oil-exporting nations, which control a third of global supply, expects consumption to increase by 1.14m barrels per day (bpd) in 2014, a rise of 50,000 barrels on its previous estimate. In total, Opec economists expect the world will require 91.1m bpd of oil this year. An increase in demand could see motorists in the UK paying more at the pump. Retailers Tesco and Asda have recently launched a price war, cutting the cost of a gallon of fuel at their service stations but further cuts could be placed on hold by rising oil demand. A tighter global oil market will also add to pressure on Chancellor George Osborne not to raise fuel duty on petrol and diesel when he presents the Budget next week. 'The assumption that the global economy will see a gradual recovery in 2014, led by growth acceleration in the major OECD economies, remains valid,' said Opec in its latest monthly report, which also warned 'that recent developments in Ukraine have added to this year’s growth risk'. ... The group restated its assessment of UK production saying that output from the North Sea had fallen 10pc in 2013 to its lowest level since 1977. Opec expects North Sea oil production to be as low as 800,000 bpd this year despite the economy growing at a faster pace than the rest of Europe."
UK petrol price fears as Opec raises oil forecast
Telegraph, 12 March 2014

"Investors are turning away from the North Sea due to a lack of significant new reserves, according to the founder of a leading oil and gas exploration company. Sir Bill Gammell, who founded Edinburgh-based Cairn Energy, said the balance of potential rewards and risks for investors in the North Sea was 'not attractive'. Sir Bill, who is to stand down as chairman of the company after 25 years on the board, said he did not believe the North Sea was 'disappearing' but argued a decline was evident in recent falls in production."
Bill Gammell: investors are shunning North Sea oil... but I'm shunning indyref debate
The Herald, 8 March 2014

"EU leaders are rapidly drawing up plans to send some of their stocks of Russian gas back to Ukraine and other eastern European countries that need it, if Vladimir Putin reacts to western sanctions over the Crimea crisis by starving the continent of energy. Russia’s largest gas producer, Gazprom, said on Friday that Kiev had missed a deadline to pay $440m for gas received in February and threatened to cut off the country’s supply if it did not make the payment. Gazprom provides Ukraine with around half its gas, and other countries in eastern and southern Europe, including Poland and Greece, reportedly have low stocks of gas. Although Gazprom said the threat to Kiev would not affect the supply to the rest of Europe, western leaders are steeling themselves for a possible battle with Moscow over energy supplies. At least half of the Russian gas that is piped to Europe passes through Ukraine. Gazprom last cut off supplies to Ukraine in early 2009, leading to a slump in the supply of Russian gas to Europe. 'Either Ukraine makes good on its debt and pays for current supplies, or there is risk of returning to the situation of early 2009,' Gazprom CEO Alexei Miller said on Friday, adding that Ukraine now owed $1.89bn in unpaid bills."
EU leaders draw up plans to send gas to Ukraine if Russia cuts off supply
Guardian, 7 March 2014

"As bankers, traders and investors gathered at Gazprom's London offices for its annual champagne reception, the message from the world's most powerful gas trader was clear: the Russians don't want another gas war with Ukraine. The company, the Moscow bourse's biggest, lost over a tenth of its value on Monday as forces loyal to Russian President Vladimir Putin tightened their grip on Ukraine's Crimea region, rejecting the authority of a new pro-Western government in Kiev. Gazprom, once the world's third most valuable stock, was now worth $84 billion, five times less than during the oil boom of 2008. Fund managers with billions invested wanted to know how long the bleeding would last. 'The political agenda is out of our control,' Gazprom's export boss Alexander Medvedev told the gathering, among them the world's leading oil trader, Ian Taylor from British trading house Vitol. 'But if you look at what kind of economic decisions were taken during the Cold War, you would really hope wise people will take the right decisions....Over the past decade, Gazprom, 51-percent controlled by the state, has twice cut its supplies to Ukraine over pricing disputes with Kiev. That action also cut supplies to the EU, which gets 50 percent of Russian deliveries via Ukraine. Gazprom also helped the Kremlin nationalise Royal Dutch Shell's Sakhalin gas project as Putin re-established Russia's grip on the energy sector after predecessor Boris Yeltsin let it slip with the collapse of the Soviet Union. Though Gazprom says it defends its economic interest in such disputes, they can cost billions of dollars in value and draw criticism from investors that it is a stick for Moscow to beat its neighbours."
Insight: Third time unlucky - why Gazprom wants no new gas war
Reuters, 7 March 2014

"Britain must find new sources of energy fast as the quantity of imported natural gas is expected to increase at a much faster rate than the government had previously expected, the chief executive of Centrica has warned. 'In primary energy, the UK’s production of gas is falling rapidly,' Sam Laidlaw has told an international energy conference in Houston. 'North Sea oil and gas output has fallen by 38pc over the last three years. By 2020 we will be reliant on imports to meet 70pc of the country’s gas needs. So when it comes to security of supply, there is a pressing need for solutions.' Energy Minister Michael Fallon had previously said in November than Britain would import three-quarters of its natural gas by 2030, up from about 50pc at present. Late last year, Centrica signed a new deal with Qatar to import liquefied natural gas by tanker. The Gulf state already accounts for 15pc of UK supplies. Rising energy bills and a growing dependence on imported gas have increased pressure to step up development of shale resources in the UK through fracking. The vulnerability of UK energy supplies has also been exposed by the unfolding dispute between Russian and Europe over Ukraine in Crimea. Russia is Europe's largest supplier of gas and a significant exporter to the UK....Centrica has said that in the UK an estimated 3.7 gigawatts of coal-fired electricity generating capacity will be shut down by the end of 2015 as a result of European directives to curb emissions. The country’s reserve capacity is forecast to shrink to 4pc, increasing the risk of power cuts, the company said."
UK energy security at risk as gas imports surge - Centrica
Telegraph, 5 March 2014

"Russian energy giant Gazprom has increased the price of gas supplies to Ukraine, sending a chilling reminder of the power Russia holds over European energy markets. The price rise comes as escalating unrest in Ukraine threatens to boil over into war – a situation that has already stoked fears of disruption to energy supplies from Russia to other parts of the world. Gazprom chief executive Alexei Miller said his company would raise prices next month because Ukraine was not able to pay its debts in full, and would owe the company around $2bn if it did not meet its bill for February. In the past, Russian president Vladimir Putin has granted Ukraine a discount on its gas supplies. However, the deal, which has to be renegotiated every three months, has not been renewed and has handed Russia a mechanism with which to ratchet up pressure on Kiev. Mr Putin insisted that Gazprom’s decision was unrelated to political tensions. 'This makes perfect commercial sense. This has nothing to do with situation in Ukraine. We gave them money, they failed to deliver,' he said in a televised conference."
Russia cancels Ukraine's gas discount and demands $1.5bn
Telegraph, 4 March 2014

"Relying on shale gas would be a 'very expensive' solution to meeting the world’s growing demand for energy, the chief executive of BHP Billiton, the mining, oil and gas group, has said. Andrew Mackenzie, who took over at BHP last year, also called for a price to be put on greenhouse gas emissions to address the threat of global warming, and said the mining industry needed to do more to develop technology to capture and store carbon dioxide.... Speaking to the Financial Times in Houston, Mr Mackenzie said it was 'completely impractical' to suggest that shale gas could be the sole answer to providing affordable energy for the world while cutting carbon emissions. 'We have to be a little cautious about extrapolating the US experience to the rest of the world,' he said. Outside North America, shale reserves were still unproven and required much more testing and development, he added. 'It’s not particularly helpful to talk about how all our problems can be solved by something that is a very expensive solution for most countries.' BHP has gas production in the US and Australia, but also mines coal burnt in power plants, uranium used for nuclear power and copper used for electric wires, so Mr Mackenzie argues that it has an 'objective' view of the competition between different energy sources. He expects natural gas to be the world’s fastest-growing fossil fuel over the next three decades, and BHP has committed to investing $4bn a year in capital spending in its shale oil and gas business, in a planned total across the group of $16bn. It has had a bruising experience in US shale, being forced to write down $2.8bn in 2012 on assets it acquired the previous year for $4.8bn. However, it has been working to improve the efficiency of the business and says it has cut production costs in the Eagle Ford oil and gas shale formation of south Texas by 30 per cent over the past year."
BHP chief warns of shale gas reliance
Financial Times, 4 March 2014

"Household spending on energy rose 55pc over a decade, excluding the impact of inflation, as soaring prices more than offset a 17pc drop in consumption, new data show. Electricity, gas and other household fuels such as heating oil cost a typical household £106 a month in 2012, up from £69 a month in 2002, the Office for National Statistics (ONS) said - with both figures expressed in 2012 money. Energy costs increased from 3.3pc of a household's annual income to 5.1pc as a result. Consumption fell over the same period as cash-strapped consumers responded to the rising prices by cutting back on their energy usage, and as homes were fitted with insulation and energy-efficient boilers. Despite political controversy over household energy price rises in recent years, the ONS said the surge in costs had mostly taken place between 2004 and 2009.... The ONS also highlighted how retired people faced a greater burden from energy costs than their working-age counterparts, even after receipt of winter fuel payments and cold weather payments. A retired household - averaging 1.5 people - spends £97 a month on energy, comprising 7pc of their disposable income. A working-age household, by contrast, with an average 2.6 people, spends £110 a month but this comprises only 4pc of their disposable income."
Household energy costs leap 55pc in a decade, despite falling usage
Telegraph, 3 March 2014

"The North Sea produces almost half of the energy Britain needs. Scottish nationalists hope the taxes it generates, which amounted to £6.5 billion ($10.1 billion) last year, will make an independent state rich. But the oil and gas is running out. Production fell by 6% a year on average between 1999 and 2010; since then it has dived by nearly 40% (see first chart). Meanwhile costs are spurting upwards: it is nearly five times more expensive to extract a barrel of North Sea oil than it was in 2002. Investment in exploration, which once rose and fell with the oil price, is at rock bottom (see second chart) even though nine billion barrels may remain unfound. On February 25th Malcolm Webb of Oil & Gas UK, an industry body, said exploration is facing its biggest challenge in 50 years. Some of these problems are simply signs of age. Britain’s offshore fields have gushed for longer than pioneers expected; as a result, much time and cash must be spent maintaining ageing kit. As the most profitable reserves dwindle, drillers are opening up smaller fields in more difficult locations, such as the deep, wild waters found west of the Shetland Islands. Yet roughnecks say the British government’s policies have made an ever-trickier job harder. Oilmen once thought the North Sea a safe harbour from risks run in more exotic places, but successive tax grabs have changed their minds. The Labour government increased corporation tax for oil firms in 2002 and 2006; in 2011 the coalition raised it again, crushing investment. Westminster has churned through 14 energy ministers in 17 years."
Running on fumes
Economist, 1 March 2014

"Iraq exported 2.8 million barrels of oil per day in February, a top minister said Saturday, a sharp month-on-month gain and the highest such figure in at least a quarter-century. Production, meanwhile, reached 3.5 million bpd, the deputy prime minister for energy affairs, Hussein al-Shahristani, told reporters in the southern port city of Basra as he inaugurated a refinery. 'Production in February was 3.5 million barrels per day, and we exported 2.8 million barrels per day,' he said. The export figure was the highest since then dictator Saddam Hussein invaded Kuwait in 1990, triggering a crippling embargo and international sanctions that massively restricted Iraq's energy industry. In 2012, when average daily exports reached 2.5 million barrels per day, the oil ministry said it was the highest such figure since 1989. Shahristani said February output would have been significantly higher if not for energy disputes with the country's three-province autonomous Kurdish region."
Iraq oil exports hit 25-year high in February
AFP, 1 March 2014

"Prime Minister Nouri al-Maliki's dispute with Iraq's Kurdish minority over its independent oil exports has escalated with the central government blocking Kurdistan's share of the state budget and banning two airlines that operate between Europe and the Kurds' semiautonomous northern enclave. Kurdistan's president, Massoud Barzani, warned Maliki that his actions are 'a declaration of war against the people of Kurdistan.' The simmering feud between the autocratically inclined Maliki and the independence-minded Kurds seems set to escalate sharply. But Maliki is facing a potentially explosive parliamentary election on April 30, the first since U.S. military forces withdrew in December 2011. He hopes it will bring him a third term as premier, while battling a widening insurgency by the minority Sunnis and al-Qaida that many in Baghdad fear will eventually spread to Iraq's all-important oil industry, which is largely in the Shiite-controlled south."
Iraq: 'This is war,' say Kurds in oil fight with Baghdad
United Press International, 28 February 2014

"Power companies are being refused insurance cover for cyber-attacks because their defences are perceived as weak, the BBC has learned. Underwriters at Lloyd's of London say they have seen a 'huge increase' in demand for cover from energy firms. But surveyor assessments of the cyber-defences in place concluded that protections were inadequate. Energy industry veterans said they were 'not surprised' the companies were being refused cover. 'In the last year or so we have seen a huge increase in demand from energy and utility companies,' said Laila Khudari, an underwriter at the Kiln Syndicate, which offers cover via Lloyd's of London. The market is one of few places in the world where businesses can come to insure such things as container ships, oil tankers, and large development projects and to secure cash that would help them recover after disasters."
Energy firm cyber-defence is 'too weak', insurers say
BBC Online, 27 February 2014

"Investment in the UK’s North Sea, which hit a record level of £14.4bn last year, is forecast to fall by half within three years. The forecast by industry group Oil and Gas UK confirmed that overall output fell by 8 per cent, to an average of 1.43m barrels of oil equivalent a day last year. That fall followed a 31 per cent drop in production levels between 2010 and 2012."
North Sea investment forecast to fall by half
Financial Times, 26 February 2014

"Britain's oil and gas industry has warned it faces its 'biggest challenge in 50 years' due to the low levels of exploration. Industry body Oil and Gas UK said only 15 wells were drilled last year.That was despite strong levels of investment, reaching a record last year and sustained this year. Exploration drilling was down from 44 wells six years ago, only sufficient to recover a fraction of the estimated oil and gas remaining offshore. The annual activity survey by Oil and Gas UK found a rapid increase in production costs, up by 15% last year. The average cost of extracting a barrel of oil was up by 27% in only a year, to reach £17. The number of fields with cost per barrel above £30 has doubled in the last 12 months. Rising costs were cited last week by Centrica, which has decided to focus future investments in Norway and North America, rather than UK waters. With rising costs, production tax payments to the UK Treasury are expected to fall from £6.5bn during the 2012-13 financial year to £5bn in the current year. However, there is a more positive picture from high levels of investment in known reserves. That is estimated to reach £13bn during this year, slightly below the £14.4bn record set last year. Much of that was focused in four big fields. Investment is scheduled to fall by nearly half within three years, according to the industry survey. Following the rapid decline in oil and gas production from UK waters in recent years, the rate of fall slowed during 2013 - down by 8% to 1.43m barrels of oil per day, or its gas equivalent. Output is expected to rise during this year, as 25 new fields come on stream. Malcolm Webb, chief executive of Oil and Gas UK, said the results showed the contradictions at play between high investment but worrying trends in drilling, output and costs. He said: 'Even if currently planned wells proceed, the rate of drilling is still too low to recover even a fraction of the estimated six to nine billion barrels yet to be found. Britain's waters contain an abundance of oil and gas yet to be found and it is critical we find the means to turn the current state of exploration around. Rig availability and access to capital are the two main barriers noted by our members.' In addition to exploration wells, the industry last year drilled 120 development wells, a similar level to 2012. Much of the activity was in existing offshore oil and gas reserves, known as brownfield sites. Of 26 such projects, 23 were linked to new tax breaks from the UK Treasury."
Oil and gas industry faces 'biggest challenge in 50 years'
BBC Online, 25 February 2014

"Royal Dutch Shell has launched a broadside against what it says is a 'European energy crisis' that could drive a raft of new coal power plants across the continent at the expense of cleaner alternatives such as gas. Policy confusion in Brussels means as much as 11 gigawatts of coal-fired generating capacity could come on line in Europe over the next four years, according to the company, one of the world’s largest natural gas producers. That would be equal to around a dozen coal plants and it could lead to a situation where coal was locked in as an energy source even though gas is much cleaner to burn, said Dick Benschop, Shell’s head of gas market development. This would imperil the EU’s efforts to cut its greenhouse gas emissions at the same time as state support for wind, solar and other renewable energy schemes has been amounting to as much as €30bn a year, with energy consumers bearing the costs, he said. 'Europe is following a coal-plus-renewables pathway and that is a very unappealing scenario with rather high costs and low results,' he said in an interview with the FT after speaking at a London energy conference. 'At Shell, we call this the European energy paradox,' he told the conference. 'But maybe that’s an understatement. It’s a European energy crisis.' Mr Benschop’s comments underline the growing pressure on EU leaders as they prepare to meet next month to discuss the shape of the bloc’s energy and climate policies as far ahead as 2030.... The EU’s current policies last until 2020 and require a 20 per cent cut in greenhouse gas emissions from 1990 levels and 20 per cent of energy to be derived from renewable sources such as wind farms and solar plants. A new plan proposed in January would require emissions to be cut by 40 per cent by 2030 – a move Shell and many other large industry groups support. However it also says there should be a 27 per cent renewable energy target that would be binding for the EU as a whole but not for individual member states."
Shell hits out at Brussels energy policy
Financial Times, 24 February 2014

"Lundin Petroleum AB (LUPE), the Swedish explorer focused on Norway, said there won’t be any new oil output in the ice-filled waters of the Arctic for at least 15 years because of technical and logistical challenges. 'I don’t think we’ll see any oil production in the Arctic any time soon -- probably not this decade and not the next,' Chairman Ian Lundin said in a Feb. 20 interview in Stockholm. 'The commercial challenges are too big.'  The Arctic holds 30 percent of the world’s undiscovered natural gas reserves and 13 percent of its undiscovered oil, according to U.S. Geological Survey estimates. Still, exploration of the Arctic ocean floor, where 84 percent of these resources are thought to be trapped, has suffered setbacks in recent years.... As companies including Shell and Norway’s state-controlled Statoil ASA (STL) cut planned investments amid rising costs across the industry, expensive Arctic projects could get a lower priority. 'It may take a while to develop the right technology,' Lundin’s chairman said. 'Investments are very, very high so it still has to be commercially justified.' Another factor undermining the appeal of expensive exploration projects is the outlook for crude prices. Brent oil for delivery in 2016 is trading at about $97.45 a barrel, down 11 percent from the current spot price of $110.07 for the global benchmark, according to data compiled by Bloomberg from the Ice Futures Europe Exchange. An exception to Arctic challenges is the southern part of Norway’s Barents Sea, Lundin said. While inside the Arctic circle, it benefits from a less-harsh climate and shallower and ice-free waters, and may hold 8 billion barrels of oil equivalent in undiscovered resources, more than 40 percent of the country’s total. To compensate for dwindling reserves in aging North Sea fields, Norway is pushing into the Barents, which holds 54 of the 61 blocks the government has proposed issuing in its next licensing round. More than half will be in a newly opened area previously disputed with Russia. 'In the Barents Sea we’ll probably see production much sooner because there’s no technological gap,' he said. 'It’s now just a matter of having the reserve base that you’re required to have to justify the investment.'"
Arctic Oil Still Seen Decades Off as Producers Balk at Costs
Bloomberg, 24 February 2014

"Energy-saving homes, appliances and devices are sold as the cost-saving solutions of the future with claims they can cut hundreds of pounds from annual power bills. And with the cost of gas and electricity rising at far above the rate of inflation, these claims are attractive. There are increasing concerns, however, that many of these items, which can be expensive to buy and install, may not be as cost-effective as they claim. Last week, the Energy Saving Trust said customers were being duped into buying fridges, dishwashers and other household appliances that claim to be more energy efficient than they actually are. Even devices created solely to cut energy or water consumption – such as solar battery chargers, water-saving shower heads and plug-in adaptors that claim to cut appliances’ electricity consumption – have been criticised as expensive gimmicks that deliver negligible savings. There are also questions about the claims made regarding bigger purchases."
The energy 'savers' that cost you more
Telegraph, 23 February 2014

"The use of wind, solar, and other renewable energy resources will increase significantly over the next few decades, but fossil fuels such as oil, coal, and natural gas likely will continue to dominate the energy mix and drive the global economy, said Daniel Yergin, one of the world’s foremost energy experts. 'It’s a contest, or even a battleground,' Yergin said in an interview this week. 'Renewables will grow a lot, but they will still be, 20 years from now, a relatively small part of the overall mix.' Yergin is the founder of the consulting firm IHS Cambridge Energy Research Associates, and the author of the definitive history of the oil industry. 'The Prize: The Epic Quest for Oil, Money, and Power' won the Pulitzer Prize for general nonfiction in 1992. His most recent book, 'The Quest: Energy, Security, and the remaking of the Modern World,' is a follow-up to that earlier work. Yergin on Friday delivered the keynote address at the MIT Energy Conference, an annual two-day gathering of industry insiders, academics, and policy makers."
Fossil fuels remain at the forefront, energy expert says
Boston Globe, 22 February 2014

"The mothballing of Keadby [coal fired power station] is sad for the dozens of staff who have had to be redeployed. It is part of a far larger problem for the UK as a whole. The plant has been shut down just as Britain braces for a sharp reduction in its power capacity as ageing coal-fired plants and nuclear reactors are decommissioned. Some are even warning the UK could be facing its first wave of blackouts in 40 years. Britain’s power problems are symptomatic of a global industry undergoing wrenching change. Traditional thermal generation is under pressure from climate change policies, volatile commodity markets and the rise of renewables. All of Europe’s incumbent power providers are facing what Peter Terium, chief executive of RWE, the German utility, has described as the 'worst structural crisis in the history of energy supply'. Few experts predict UK power cuts on the scale of the 1970s miners’ strikes, when industry moved to a three-day week and households switched to candlelight. But there could still be a palpable impact, especially if the constraints coincide with an outage on the scale of a nuclear plant such as Sizewell B in Suffolk. 'Your light will flicker or the intensity will be reduced,' says Paul Smith, head of generation at SSE, one of the Britain’s Big Six energy suppliers. 'Or industry will be asked to switch off.' Dieter Helm, professor of energy policy at Oxford university, says the capacity squeeze is the result of years of policy mistakes. 'There have been 20 years of complacency about security of supply,' he says. 'We’ve been living on the legacy of the stuff we built in the 1970s.' The alarm was first sounded by Ofgem, the energy regulator, in a 2009 report that said Britain faced an 'unprecedented challenge to secure supplies to consumers'. It said that by mid-decade, the UK would face a troubling tightening in the electricity margin, the safety cushion of available generation over peak demand. Over the intervening years, its warnings have become even more strident. Last summer it said the margin could drop to between 2 and 5 per cent by the winter of 2015-16 from more than 15 per cent in 2011-12. Ignacio Gálan, head of Iberdrola, the Spanish utility which owns Scottish Power, says: 'Anything less than 10 per cent is risky.' At issue is the lack of plans for new power plants to replace the coal and nuclear facilities being retired over the next few years. Companies complain that the economic signals are absent for investment in new capacity, particularly gas-fired stations. The economics of gas are now so poor that existing plants such as Keadby are being shut. Furthermore, the pledge by the Labour party to freeze gas and electricity prices if it wins the next election was met with horror by the biggest power suppliers. 'It is inconceivable that the board of directors of one of the Big Six would sign off on a big investment in the UK with this price freeze hanging over them,' says Peter Atherton of Liberum Capital. That, in turn, could affect the plans of other companies. 'If you’re a big industrial firm, you’re really going to think twice about building a new manufacturing facility in the UK with reserve margins where they are,' says Ziko Abram, co-director of Kiwi Power, which helps companies reduce energy consumption. 'Not having enough electricity is going to affect your production and returns.' Britain is not the only country where gas-fired generation is in dire straits. All over Europe, the big utilities are mothballing plants. The problem is particularly acute in Germany, where booming renewables have depressed wholesale electricity prices and shoved aside traditional thermal generation. RWE announced this month that it was shutting its Claus C gas plant in the Netherlands – one of the most modern power stations of its kind – just two years after it was commissioned. 'The energy sector in Europe is really in danger,' said Gérard Mestrallet, chief executive of GDF Suez, the French power group, which has been forced to close gas plants equivalent to the capacity of 10 nuclear reactors in recent months. It is the US shale boom that is killing gas-fired power in Europe. As American generators switched to plentiful domestic shale gas, US coal went in search of a new market – and flooded into Europe. Suddenly it became far more profitable for European utilities to generate electricity from cheap US coal than from gas. Fukushima did not help. In the wake of the 2011 tsunami and nuclear disaster, Japan closed all its reactors, and started consuming much more natural gas. As Japanese demand rose, gas prices shot up in Europe and Asia. As a result, the 'clean spark spread' – the profit margin from gas-fired power generation – went into sharp decline. In the UK, it went into a loss. Companies started to take their gas stations offline. Across Europe, the closure of so much thermal capacity was a setback for the utilities, but did not undermine the resilience of the energy system. It was worse in the UK, where the industry was already struggling with the effect of the Large Combustion Plant Directive, an EU measure designed to limit power plant emissions. Some stations could opt in to the directive and commit to cleaning up. Those that opted out received an allocation of hours and would close once they had used them up. But because of the unexpected influx of US coal, Britain’s opted-out coal plants have been burning through their allotted hours more quickly than expected – and so will shut down sooner than thought. By the end of next year, 11.5 gigawatts of coal and oil-fired capacity will have closed due to the directive. The UK authorities have known for years that this was going to happen. But they expected the old plants to be replaced by new offshore wind farms and nuclear reactors. That has not happened. 'We’re not seeing the wave of new construction that the government has pencilled in,' says Liberum’s Mr Atherton. Ministers have not been idle as the reserve margin tightened. In a bid to ensure that the lights stay on, the Conservative-Liberal Democrat coalition has pushed ahead with the most radical reform of the electricity market since privatisation. The energy bill that was passed last year establishes a new subsidy regime for low-carbon generation, which will cost consumers £7.6bn a year by 2020. It also has a new 'capacity mechanism' for gas-fired power, under which generators will be paid to keep their plants available as back-up. That is seen as crucial as the UK brings on more intermittent wind power. The government argues there is no risk of the lights going out. 'Government, Ofgem and National Grid are taking co-ordinated action to ensure security of electricity supply,' it says, citing the capacity market as an example. But experts say the mechanism will be launched too late to get Britain through its coming energy squeeze. 'The first capacity auctions will happen later this year, for delivery in 2018,' says Prof Helm. 'And the crunch is coming in 2015-16.'.... Prof Helm says that was one of the factors behind the current mess. 'The market that was created is not designed to incentivise investment sufficiently,' he says. 'So there was inevitably going to be a crunch.' Others see the problem more broadly – in a privatised energy system where no one is in overall charge of making sure the lights stay on. National Grid is responsible for balancing supply and demand but it cannot build power stations. The companies that can – the Big Six – have no obligation to do so. 'When the gas and power sector was in public ownership, the Central Electricity Generating Board had a national plan of what was required and the government ensured that power stations got built,' says Neil Upton, co-head of energy and infrastructure at King & Wood Mallesons, a law firm. 'Now the primary obligation of the Big Six is to shareholders, not to the UK populace, in terms of security of supply.'... Experts believe power cuts are unlikely. Before it gets to that point, National Grid will pay companies to switch off their energy supply. So shutdowns will be voluntary and by consultation, not forced or by surprise. But what is not in doubt is that if supply tightens, prices will rise. That will inevitably have a knock-on effect on household bills. 'The UK wholesale price is already about twice the German power price,' says Dieter Helm, professor of energy policy at Oxford university. Capacity crunches are not new to the British energy system. In January 2009 the output of the UK’s wind turbines fell close to zero megawatts for a period of 10 days. In May 2008 there were simultaneous unplanned outages at Longgannet coal-fired power station in Scotland and the Sizewell B nuclear plant in Suffolk. Britain has an important safety valve – interconnectors that link up with the European mainland. The country can use them to import electricity at times of tight supply, but they are also used to export power. In a report published last year, the Royal Academy of Engineering warned that, in theory, the interconnectors could export electricity at a time when UK generators were struggling to meet peak demand. The report modelled a worst-case scenario. It assumed that by the end of the decade, ageing power plants would continue to close and not be replaced. What if that was combined with zero wind, two big plant failures and significant exports of power through the UK’s interconnectors? And what if you added an economic recovery that fed into an increase in peak electricity demand from the current 58,000MW to about 60,000MW? In such a scenario, the report said 'the system would struggle to meet demand'. The report emphasised that such a doomsday situation was unlikely."
Energy: Power down
Financial Times, 20 February 2014

"Wind turbines can remain productive for up to 25 years, making wind farms a good long-term choice for energy investors, according to new research. The UK has a target of generating 15 per cent of the nation's energy from renewable resources such as wind farms by 2020. There are currently 4,246 individual wind turbines in the UK across 531 wind farms, generating 7.5 per cent of the nation's electricity. There has been some debate about whether wind turbines have a more limited shelf-life than other energy technologies. A previous study used a statistical model to estimate that electricity output from wind turbines declines by a third after only ten years of operation. Some opponents of wind power have argued that ageing turbine technology could need replacing en masse after as little as ten years, which would make it an unattractive option in economic terms. In a new study, researchers from Imperial College Business School carried out a comprehensive nationwide analysis of the UK fleet of wind turbines, using local wind speed data from NASA. They showed that the turbines will last their full life of about 25 years before they need to be upgraded. The team found that the UK's earliest turbines, built in the 1990s, are still producing three-quarters of their original output after 19 years of operation, nearly twice the amount previously claimed, and will operate effectively up to 25 years.  This is comparable to the performance of gas turbines used in power stations."
New research blows away claims that ageing wind farms are a bad investment
Imperial College London, 20 February 2014

"One might have the impression that hydraulic fracturing (fracking) of shale deposits is the answer to world energy security. Certainly fracking has received much attention and investment, but its prospects must be considered in a broader context. In the US, where practically all such operations have been conducted to date, fracking now accounts for 40% of domestic gas production and 30% of oil production. The price of natural gas has plummeted, and overall US oil production has increased for the first time since 1970, which had otherwise been falling in accordance with the predictions M King Hubbert made in 1956. However, this last point is the salient one. Sources of unconventional oil (listed below) such as tight oil (or ‘shale oil’ in popular discourse) are only commercially viable because the need to match the declining rate of conventional oil production has raised oil prices. It is the rate of production of oil that determines its supply, rather than the size of the reserves: ‘The size of the tap, not the tank.’ Current data for the decline in oil fields’ production indicates that around 3 million barrels per day of new production must be achieved year on year, simply to sustain supply levels. This is equivalent to finding another Saudi Arabia every 3–4 years. In this context, fracking is at best a stop-gap measure. Conventional oil production is predicted to drop by over 50% in the next two decades and tight oil is unlikely to replace more than 6%. Once conventional oil’s rate of loss exceeds unconventional oil’s rate of production, world production must peak. Production of sweet, light crude actually peaked in 2005 but this has been masked by the increase in unconventional oil production, and also by lumping together different kinds of material with oil and referring to the collective as ‘liquids’. (More recently, the term ‘liquids’ is often upgraded to ‘oil’, which is highly disinformative since the properties of the other liquids are quite different from crude oil.). Fracking produces mostly shale gas (rather than oil), and the major growth in global ‘oil’ production has been from natural gas liquids (NGL; in part from shale gas). But the principal components of NGL are ethane and propane, so it is not a simple substitute for petroleum. The energy return on energy invested (EROEI) is worse for all unconventional oil production methods than for conventional oil. This means that more energy must be invested to maintain output. As a rough comparison, conventional crude oil production has an EROEI in the range 10–20:1, while tight oil comes in at 4–5:1. Oil recovered from (ultra)deepwater drilling gives 4–7:1, heavy oil 3–5:1, and oil shale (kerogen) somewhere around 1.5–4:1. Tar sands is around 6:1, if it is recovered by surface mining, but this falls to around 3:1 when the bitumen is ‘upgraded’ by conversion to a liquid ‘oil’ substitute. As conventional oil production has fallen, so has oil’s EROEI as we recover it from increasingly inhospitable locations, and with new technologies. The price of a barrel of oil has trebled over the past decade, but output has effectively flatlined. We may be close to the ceiling of global oil production, and the prospect of filling the gap with oil from alternative sources is daunting. Although fracking has produced sizeable volumes of oil and gas in the US, there is no guarantee that a similar success will be met elsewhere, including the UK, in part because the geology is different. Even in the US, it is the sweet spots that have been drilled, and the shale plays elsewhere across the continent are likely to prove less productive. The shale gas reserves in Poland have been revised down from 187 trillion cubic feet (tcf) to 12–27 tcf: at best, a mere 14% of the original estimate. And most of the production is likely to be gas. Even if we can exhume large volumes of gas at a generous production rate, converting our transport system to run on it would be a considerable undertaking, particularly given the timescale imposed by conventional oil production’s rate of decline. And there are many uses for oil other than to provide liquid fuels, for which substitutes must also be found. Renewables do not provide a comparable substitute for crude oil and the liquid fuels that are refined from it, since the potential contribution from biofuels is relatively minor. Replacing the UK’s 34 million oil-powered vehicles with electric versions is an unlikely proposition, given the limitations of time and resources such as rare earth metals. Mass transit is the more likely future for electric transport than personal cars. The end of cheap, personal transport is a real possibility and may seed changes in our behaviour, such as building resilient communities that produce more of their essentials, such as food and materials, at the local level. There are many uncertainties, but it seems clear that the age of cheap oil is over. We are entering a very new and different phase of human experience."
Peak oil is not a myth
Chemistry World, 20 February 2014

"As the years go by, those studying peak oil are beginning to develop a better understanding of what has been happening since the concept of limits to oil production came to widespread attention. First of all, it is important to understand that in one sense, production of what had been thought of as 'conventional oil' really did peak back in 2005. While there has been growth in certain sectors of the 'oil' industry in the last nine years it has come in what are known as 'unconventional liquids' and as we shall see the maintenance of existing conventional oil production has come at a very high price. The recent growth in the 'oil' production has been nowhere near what had been normal prior to the 'great recession' so that if anyone should wonder why our economy has been stagnant in recent years, one can take the price and availability of oil as a good starting point. US consumption has been falling at 1.5 percent a year since 2005 as opposed to a normal growth rate of 1.8 percent in prior years. In the last decade global oil production grew by only 7.5 percent and not the 23 percent that would have been needed to support the growth the world’s GDP at a rate we would have liked to have seen. Since 2005, total 'oil' production has grown by 5.8 million b/d of which 1.7 million consists of natural gas liquids (NGL). While NGL’s are valuable and a useful form of what we now call 'oil', they do not contain the same energy as crude and have a more limited range of uses thereby contributing less to economic growth. US unconventional liquids (shale oil and NGL’s) now are up by 5.1 million b/d since 2005. Along with an additional million b/d from the Canadian tar sands, North American non-conventional liquids constitute nearly all the growth in the world’s oil supply in recent years. Production of conventional crude has remained essentially flat during the period. Moreover, OPEC production has dropped by nearly two million b/d in the last three years largely due to wars, insurgencies, and embargoes and another 1.7 million b/d of its 'oil' production has been NGL’s and not crude. The world’s existing fields are depleting at rate of circa 4 million b/d each year so without constant drilling of new wells in new fields global production will quickly wither and prices will climb still more. A good estimate is that the oil which now costs about $110 a barrel will be at $140 or above by the end of the decade unless some major geopolitical upheaval sends it still higher. To keep the oil flowing, the world’s oil companies have invested some $4 trillion in the last nine years to drill for oil. About $2.5 trillion of this was spent on simply replacing production from existing oil fields. Even this gigantic expenditure was not enough since conventional oil production fell by 1 million b/d during the period. About $350 billion went to drill shale oil and gas wells in the US, and increase Canadian oil sands production. This was clearly a bargain as compared to maintaining conventional oil production which now is focused on ultra-expensive deep water wells. Recent announcements by the major oil companies indicate that they reached their limit. Profits and production are falling. Expenditures for finding and developing oil fields have tripled in the last decade and the return from these expenditures has not been enough to justify the costs. Nearly all of the major oil companies have announced major reductions in their exploration and drilling programs and several are selling off assets as they are caught in a trap between steady oil prices and rapidly rising operating costs.... What is going to happen in the next few years? First, investments in future production are going down, meaning that in a few years depletion likely will overwhelm new production and output of conventional oil will drop.... With much of the growth in global oil production coming from US shale producers, a fair question is just how long fracked shale oil production will continue to grow — opinions vary. Some foresee the possibility that growth will slow considerably this year, while others think there are two or three years of large production increases ahead. The three months of extremely cold and snowy weather we have had this winter is already hurting production, but most believe production will rebound in the spring. Even though production of conventional oil peaked nine years ago, massive investment and a five-fold increase in oil prices has allowed the economical production of shale and deepwater oil at a profit since 2005. Further growth shale oil production, however, clearly has a half-life, be it one, three or five years. Recent news concerning deepwater oil production is not encouraging. Brazil’s deepwater oil fields which are thought to contain many billions of barrels of oil are not looking too good at the minute due to the very high costs and risks of production. All in all, the recent news from the oil industry tends to be one of growing pessimism."
The Peak Oil Crisis: A Winter Update
Falls Church News-Press Online, 18 February 2014

"Companies that pay low levels of corporation tax in the UK and use large amounts of energy could be penalised under proposals to overhaul the controversial business rates system. Retailers are proposing a radical change to business rates - a tax which is currently charged on commercial properties such as shops, offices and pubs - to focus on energy usage or contributions to the UK economy through corporation tax. A proposal to transform the business rates system from a property-based tax into an energy levy is one of four recommendations published on Tuesday by the British Retail Consortium (BRC), whose members claim the present system is 'outmoded' and 'anachronistic'."
Retailers propose new energy tax to replace business rates
Telegraph, 18 February 2014

"China imported historically high quantities of uranium last year, apparently pre-purchasing at low prices before the commissioning of new nuclear plants. The spot price rose just US25c a pound last week, to $US35.75/lb, insufficient to encourage a uranium explorer to get out of bed in the morning, let alone contemplate starting a new mine. Yet it was reported that this slight upward movement was triggered by news that an 'institutional investor' was in the market for one million pounds of the stuff."
China stockpiles cheap uranium as severe shortage is anticipated
The Australian, 17 February 2014

"Oil flows relatively easily through the porous rocks that make up a conventional reservoir, so a conventional well can tap a large area. As a result, the volume of oil pumped each day declines slowly, on average at 6% per year. By contrast, oil flows much more sluggishly through impermeable tight rock. A well will tap a much smaller area and production declines quite rapidly, typically by 30% a year for the first few years (see chart 2). Maintaining a field’s production levels means constant drilling. The International Energy Agency reckons maintaining production at 1m barrels per day in the Bakken requires 2,500 new wells a year; a large conventional field in southern Iraq needs just 60. This all means that when oil prices rise, producers can quickly drill more holes and ramp up supply. When prices fall, they simply stop drilling, and production soon declines. In early 2009, after prices collapsed with the global financial crisis, Pioneer shut down all its drilling in the Permian Basin. Within six months, output in the affected areas dropped by 13%.... The oil price at which shale producers break even ranges from $60 in the Bakken to $80 in Eagle Ford, reckons Michael Cohen of Barclays, a bank. If exports yielded an extra $1 to $1.30 a barrel, he estimates that might raise total output by as much as 200,000 barrels per day. If the ban were lifted, crude-oil exports could start more or less straight away."
The economics of shale oil - Saudi America
Economist, 15 February 2014

"The biggest western oil companies are continuing to see their oil output decline, despite record investment in recent years spurred by sustained crude prices in excess of $100/barrel, according to data released by the companies. Furthermore, with total world oil output continuing to rise every year, the western majors are seeing their share of the global market fall even faster, with new volumes coming largely from their rivals in places like Russia and a host of smaller companies at the heart of the shale oil boom in the US. Combined output of crude and other liquids by the seven biggest western majors -- ExxonMobil, Shell, BP, Chevron, Total, ConocoPhillips and Eni -- amounted to 9.517 million b/d last year, down 2.2% from 2012 and marking the fourth consecutive year of decline. Liquids output from the same group has been falling every year of late, having been as high as 10.865 million b/d in 2009. As a group, the seven have seen their combined liquids output fall by 1.348 million b/d, or 12.4% over the period from 2009 to 2013. The most notable contribution to the overall decline comes from BP, whose production of oil and other liquids has fallen by more than 30% from 1.695 million b/d in 2009 to 1.176 million b/d in 2013. These figures do not include production associated with BP's current 19.75% stake in Russia's Rosneft or its previous 50% stake in Russian oil producer TNK-BP. This is a much sharper fall than other majors have experienced, and is evidence of the scale of the asset divestment program the company has been going through to cover its actual and potential liabilities in the wake of the disastrous Gulf of Mexico oil spill in 2010. While its peers have not seen production fall by the same degree, they have nonetheless all experienced declining oil production since 2009. Even ExxonMobil, the biggest of the group in terms of production and profitability, saw its oil output fall by 4.5% in 2011 and 5.5% in 2012, the two years with the highest average international oil prices of all time. In 2013 ExxonMobil's oil output rose by 0.8% to 2.202 million b/d, but it still remained more than 200,000 b/d below where it was in 2010. Shell, Chevron, Total, ConocoPhillips and Eni also all saw their liquids production fall in 2013. Total's output declined by 15.5% between 2009-13, Eni's by 17.3% and ConocoPhillips' by 12.4%. Shell has seen the smallest fall of 2.5% over thesame period. According to the International Energy Agency, total world oil supply has risen in recent years from 85.66 million b/d in 2009 to an average of 91.53 million b/d in 2013. As a result, the seven leading western majors have seen their share of this total supply fall from 12.7% to 10.4% over the same period. While this group is seeing its production fall, others have clearly been heading in the opposite direction. The most obvious is Russia's Rosneft, which has grown at breakneck pace in recent years on the back of a debt-funded acquisition spree, including the purchase of former rival TNK-BP. Rosneft is now the world's biggest publicly listed oil producer with total crude and liquids output of close to 4.2 million b/d. In other words, Rosneft alone now produces almost as much oil as ExxonMobil, BP and ConocoPhillips combined. The western majors are not short of either the expertise to produce more oil or the money to fund developments after 2013 marked the third consecutive year of Dated Brent prices above $108/barrel. The recurring challenge for the western companies in recent years has been to find attractive investment opportunities, with several of the world's leading oil reserves holders offering limited, or even no access to international operators. 'It's an access question,' said an official from one of the western majors, who asked not be identified. 'Who will let us in? They'll only let us into the difficult bits like the deepwater projects, or tight gas, that kind of thing,' he said. With their liquids output falling, the so-called 'oil majors' are gradually becoming less oily and more reliant on gas production. Oil accounted for more than 60% of ExxonMobil's total hydrocarbons output in 2009, but by last year this figure had fallen to less than 53%. It is a similar story for Total, where oil's share of total production has fallen from 60.5% in 2009 to 50.8% in 2013. Shell produced more gas than liquids last year, the third time in the last four years this has happened, and BP is not far away from a 50:50 split. Of the seven majors who embody the image of 'Big Oil' the only one bucking the trend towards greater gas exposure is Chevron, where oil continues to account for two thirds of all production -- a full 10 percentage points more than any of the rest of the peer group."
'Big oil' getting smaller as production keeps falling
Platts, 14 February 2014

"Plans to explore for shale gas on a site in a national park located southwest of London have been temporarily put on hold by the local authority after the application received an unprecedented number of responses. The British government is strongly supporting the development of shale gas by offering favourable tax terms as it seeks to reduce dependence on gas imports. Opposition to the unconventional drilling method has been growing in Britain, however, on grounds that it is harmful to the environment and that one project had triggered earth tremors. The South Downs National Park Authority has requested oil and gas explorer Celtique Energie Weald to submit more details on noise and geological aspects of its application to drill for oil and gas and, if found to be present, later extract shale gas on a site at Fernhurst. 'National Park will be submitting a request for further information," the authority's chief executive, Trevor Beattie, said at a planning meeting late on Thursday, according to his speech sent to Reuters. 'This will put the Fernhurst application on hold whilst the applicant provides the additional information we require.'"
Local British authority puts shale gas exploration on hold
Reuters, 14 February 2014

"If you thought shale gas was a nightmare, you ain't seen nothing yet. A subterranean world of previously ignored reserves is about to be opened up. These are the vast coal deposits that have proved unreachable by conventional mining, along with gas deposits around them. To the horror of anyone concerned about climate change, modern miners want to set fire to these deep coal seams and capture the gases this creates for industry and power generation. Some say this will provide energy security for generations to come. Others warn that it is a whole new way to fry the planet. A primitive version of the technology behind this Dantean inferno of underground coal gasification (UCG) has already been running for 50 years.."
Fire in the hole: After fracking comes coal
New Scientist, 13 February 2014

"The founder of shale gas firm Cuadrilla is planning a venture to frack in the Irish Sea, the BBC has learned. Dr Chris Cornelius believes there are large volumes of offshore shale gas that could be extracted. If successful, it would be the first such project in the world. Dr Cornelius' new firm Nebula Resources was awarded three licences in the Irish Sea last month by the Department for Energy and Climate Change and hopes to begin exploration soon. 'Certainly offshore shale gas is a new concept, and there's no reason with the UK's history of offshore development that we can't develop these resources offshore,; he told the BBC. No longer involved with Cuadrilla, he now hopes to drill the world's first offshore shale gas wells..... The British Geological Survey has estimated that the UK's total offshore shale gas resources could be between five and 10 times the size of the resources available onshore. 'We're very comfortable that the resource is there and the numbers are absolutely ginormous,' Dr Cornelius said. 'Is any of that exploitable? That's the billion dollar question and we won't know that for many years.' Though it has only recently become controversial, fracking has been used on a smaller scale for many years, to improve the flow from conventional oil and gas wells. It has also been routinely undertaken offshore on conventional reserves, including in the North Sea. But fracking the large numbers of wells needed to extract offshore shale gas commercially has never been done. Professor Dieter Helm of Oxford University is sceptical about whether offshore shale gas could be a big contributor to UK energy in the next decade, but says that it could have potential in the longer term. 'It's perfectly plausible that in 20, 30 or 40 years, the fracking technology will have so advanced and the way in which we deal with the offshore environment will have so advanced that this could be a really big industry. The task in the next 10 years is to try these things out, see if they work.'"
Shale gas pioneer plans world’s first offshore wells in Irish Sea
BBC Online, 13 February 2014

"US scientists have announced an important milestone in the costly, decades-old quest to develop fusion energy, which, if harnessed successfully, promises a nearly inexhaustible energy source for future generations. For the first time, experiments have produced more energy from fusion reactions than the amount of energy put into the fusion fuel, scientists at the federally funded Lawrence Livermore National Laboratory in California said on Wednesday. The researchers, led by physicist Omar Hurricane, described the achievement as important but said much more work is needed before fusion can become a viable energy source. They noted that did not produce self-heating nuclear fusion, known as ignition, that would be needed for any fusion power plant. Researchers have faced daunting scientific and engineering challenges in trying to develop nuclear fusion - the process that powers stars including our sun - for use by humankind. 'Really for the first time anywhere, we've gotten more energy out of this fuel than was put into the fuel. And that's quite unique. And that's kind of a major turning point, in a lot of our minds,' Hurricane told reporters. 'I think a lot of people are jazzed.' Unlike fossil fuels or the fission process in nuclear power plants, fusion offers the prospect of abundant energy without pollution, radioactive waste or greenhouse gases. Unlike the current nuclear fission energy that is derived from splitting atoms, fusion energy is produced by fusing atoms together. Experts believe it still will be many years or decades before fusion can become a practical energy source. 'I wish I could put a date on it,' said Hurricane. 'But it really is [just] research. And, you know, although we're doing pretty good, we'd be lying to you if we told you a date.'"
Scientists achieve 'turning point' in fusion energy quest
Syndney Morning Herald, 13 February 2014

"The prices and profits of British Gas have been questioned by the energy minister, who suggested it might have to be broken up. In a letter to regulators, Ed Davey said profit margins made by the "big six" energy firms when supplying gas were higher than previously thought. He called on regulators to study the dominance of British Gas, which said it would participate in any discussions.... Tables accompanying Mr Davey's letters show that Centrica, which owns British Gas, saw profit margins of 11.2% for its gas business in 2012 and a 41% share of the gas market. SSE also has a high profit margin of 11.4% but a much smaller market share; therefore this was not seen as such a problem. A spokesman for the company said: "SSE expects that it should make an average profit margin in energy supply of 5% over the medium term. "In recent years our accounts show that we have made less than that. Profit margins from supplying gas, in particular, can be heavily influenced by the weather in any given year, as abnormally cold temperatures can increase the amount customers use." Rival EDF made a 4.1% loss on gas in 2012. The analysis compares this with the profit margins of supermarkets, which typically range from 3.5% to 5%."
Energy firms' gas profit margins questioned by minister
BBC Online, 10 February 2014

"Campaigners who claim Britain is engaged in a 'gas grab' in Algeria at the expense of its commitment to human rights and climate change will protest at an investor conference at the London Stock Exchange on Monday morning. A demonstrations will take place outside the meeting taking place in Paternoster Square from 8.30am to 9.30am, which is supported by the government's UK Trade & Investment (UKTI) arm and the Algerian embassy. It comes as a highly critical report, Reinforcing Dictatorships: Britain's Gas Grab and Human Rights Abuses in Algeria, is published....'The Algerian regime, lacking in popular legitimacy, is seeking to deepen its relations with western capitals such as London. Arms and gas deals being made at this investor conference in London directly contribute to the longevity of an authoritarian and repressive regime at the expense of the human rights of the Algerian people,' said Hamza Hamouchene, the report's author and chair of the Algeria Solidarity Campaign, which has been working alongside the London-based oil and gas watchdog Platform. Algeria has some of the largest natural gas reserves in Africa and is already an important supplier of energy to the UK via liquefied natural gas (LNG) shipped to import terminals such as the Isle of Grain in Kent. A recent briefing from the UKTI Defence and Security Organisation said Algeria could provide as much as 10% of the UK's gas needs through the newly expanded terminal in the south of England. Platform says documents it has obtained under the Freedom of Information Act show the British government is engaged in a high-level push to strengthen energy ties with Algeria. Partly as a result of the takeover of the US oil firms Amoco and Arco in 1998 and 2000 respectively, BP is one of the largest foreign investors in Algeria, with two operating fields and assets estimated to be worth about $5bn. BG also has interests there as the operator of the Hassi Ba Hamou permit. Of the £303m worth of UK export licences to Algeria approved between 2008 and June 2013, £290m worth were classified as 'military', according to research carried out by the Campaign Against Arms Trade group. In a separate 2013 briefing produced by Amnesty International, the Algerian authorities were accused of restricting freedom of expression, dispersing demonstrations and harassing human rights defenders. On Sunday the British government defended the investor conference and the UKTI activities, but said human rights was one of the subjects under discussion between the two countries."
Activists accuse Britain of 'gas grab' in Algeria despite human rights abuses
Guardian, 9 February 2014

"Israel has taken a step closer to becoming a natural gas exporter after Australia's Woodside Petroleum Ltd signed a deal to take a 25 percent stake in the huge East Mediterranean Leviathan gas field. The Australian company, considered a leader in the booming liquefied natural gas (LNG) sector, signed a preliminary agreement on Thursday to buy a quarter of the Leviathan field off the coast of Israel for up to $2.55 billion. Leviathan is estimated to hold about 19 trillion cubic feet (540 billion cubic metres) of natural gas, enough to supply all of Europe for over a year. The field is being developed by U.S.-based Noble Energy Corp , which will remain the project's lead partner with a 30 percent stake, while the other groups involved, Israel's Delek Group, Avner Oil Exploration and Ratio Oil Exploration, will each sell one-quarter of their stakes to Woodside."
Israel takes step towards becoming a gas exporter
Reuters, 7 February 2014

"The United States is awash in oil, yet analysts at RBC Capital Markets don't expect that to pull benchmark crude prices much lower. In its five-year outlook, published Thursday, RBC analysts said soaring U.S. production will be absorbed by the rest of the world 'with only modest price impact' over the next year. The world's largest economy is churning out record amounts of crude, and is mulling whether to export some of it abroad—something it hasn't done in decades.  Last month, the Energy Information Administration said the U.S. would pump huge amounts of oil and natural gas through at least 2016, with annual crude production challenging the 1970 record of 9.6 million barrels per day. The bank pointed out that U.S. production has surged by nearly 50 percent since its 2008 low, to its current 8 million barrels per day (bpd). With the shale boom accelerating, RBC estimates that production could grow by at least 700,000 bpd each year through 2016. That could lead to oil supply from the U.S. partly displacing that from OPEC, which is in the throes of supply disruptions amid turmoil in Libya and Iraq. 'We see OPEC continuing to cede market share to the U.S. in the near to medium term,' said the analysts, who do not view supply growth from non-OPEC countries as a major threat to prices.  They wrote that they expect U.S. oil production to reach 11 million bpd in 2018 and for 'the U.S. to become the world's largest oil producer in late 2016.'  In spite of these crosswinds, RBC said, 'we don't believe the current wave of U.S. oil growth will cause an oil price collapse.' It foresees West Texas Intermediate trading between $92 and $94 in 2014-15, with Brent floating in a range of $102 to $103."
US cranking out crude, but don't expect lower prices: RBC
CNBC, 6 February 2014

"Large-scale fracking in the UK is not likely to lead to big reductions in household gas bills, Chancellor George Osborne has said. Extracting shale gas would boost tax receipts and aid the UK economy, Mr Osborne said. But he played down expectations that consumers would see big reductions in prices in evidence to a Lords committee. David Cameron has previously said it had 'real potential' to cut bills. Speaking to the House of Lords economic affairs committee, Mr Osborne said both he and the prime minister were big supporters of fracking. But he said he did not want to suggest that the UK would see the kind of price cuts seen in the US - where prices are down by up to 40%."
Osborne: Fracking may not slash household energy bills
BBC Online, 4 February 2014

"Shale gas is no more than a long-term possibility for the UK and should not be a key plank of energy policy for the next decade, one of the most senior Liberal Democrats in the cabinet has warned. Vince Cable, the business secretary, told the Guardian shale gas would not be a reality in the UK for at least a decade, and that energy policies should focus on renewable energy. His views are at odds with the attitude of many senior members of the Tory party, who have spoken out in favour of shale gas exploitation as a form of indigenous energy that could bring down energy bills and an alternative to investment in renewable energy."
Vince Cable: shale gas won't be a reality in UK for at least a decade
Guardian, 4 February 2014

"Natural gas once promised to revolutionise the transport industry in the 1970s, as skyrocketing petrol prices following the Arab oil embargo forced some hard-pressed motorists to convert their vehicles to the cheaper fuel. But gas conversion in cars never really caught on in Britain as oil markets quickly stabilised and the high cost of converting engines to run off the fuel put off many consumers. That’s not to mention the propensity for some natural gas-powered cars back then to catch fire unexpectedly. Today, natural gas is once again being tipped to transform the global transportation industry as governments impose tighter controls on emissions and large industrial users seek cheaper fuel sources to reduce the cost of hauling goods around the world. A recent study by Wood Mackenzie claims that demand for natural gas for transportation will surge over the next 20 years and could even have a significant impact on world oil markets. The Edinburgh-based company expects that consumption of gas in the transport industry will quadruple to 160bn cubic metres a year, accounting for 3.4pc of total world demand by 2030. Cars, large ships and even trains will increasingly convert from diesel and other oil-based fuels, according to the energy consultancy firm.'Gas has traditionally played a niche role in global transport but it is now garnering greater attention due to two principal drivers,' said Noel Tomnay, head of global gas research for Wood Mackenzie.'First, oil and gas price differentials are now making investment in gas refuelling infrastructure worthwhile and second, increased environmental restrictions on emissions are encouraging wider global uptake.' Despite Wood Mackenzie’s forecast for the growing use of natural gas in transport, its application in practice faces significant challenges such as the availability of refuelling points and the poor driving range of vehicles using the fuel. The choice of new natural gas vehicles (NGVs) on the market is also limited, with alternatives such as hydrogen and electric power attracting more investment. Car manufacturers are spending billions of pounds to develop more efficient electric cars, which could have greater appeal than natural gas.... The impact which the growing use of natural gas for transportation would have on oil markets could be profound. According to Wood Mackenzie, natural gas used for transportation in 2012 was equivalent in raw energy terms to about 700,000 barrels a day (b/d) of crude oil. By 2030, this will be equal to about 3m b/d of oil. Diesel demand, mainly for large articulated lorries and buses, as well as gas oil used in shipping, will be the hardest-hit areas of the market. Wood Mackenzie forecasts that 10pc of the global bunker market for shipping will be met by liquefied natural gas (LNG) by 2030. As with the outlook for most hydrocarbons, increasing urbanisation in China will also play a critical role in the use of natural gas in transportation."
Natural gas tipped to transform transport industry
Telegraph, 2 February 2014

"The world's first magma-based geothermal energy system has been built in Iceland, taking advantage of the Earth's heat to generate electricity. Regular geothermal systems are now an established science - where water is pumped deep below ground, boils, turns to steam and drives a turbine as it returns back to the surface. But Iceland's new system is the first to produce that steam in a region of molten, rather than solid, rock. It's only the second time that researchers have successfully drilled into a magma bubble. The first was in Hawaii, where a concrete plug was installed at the bottom of the hole for safety. In Iceland, however, the researchers installed a valve where superheated steam could flow through in sufficient quantities to generate 36 megawatts of power. Preparations were made to connect the steam output to a nearby electrical plant in Krafla in Northeast Iceland, but then the hole had to be closed after a valve failure. Nonetheless, the Iceland Deep Drilling Project (IDDP) believes that it can reopen the hole, 2.1 kilometres below the surface."
Iceland drills into magma for renewable energy
Wired, 1 February 2014

"California, the third-largest oil-refining state in the U.S., is bringing in a record volume of oil from Canada by rail as it faces shrinking supplies fromAlaska and within the state. The most populous U.S. state received 709,014 barrels of crude from Canada by rail in December, a 4.9 percent increase from November and up from zero a year ago, data posted on the state Energy Commission’s website show. Canada made up 67 percent of the state’s total oil-by-rail receipts. North Dakota, where fields in the Bakken formation are producing a recordvolume of crude, shrank to a 5.9 percent share....Oil-by-rail receipts from Wyoming totaled 221,793 barrels in December, making up the second-largest share of the state’s volume at 21 percent. North Dakota sent 62,325 barrels and New Mexico 12,927. Alaskan oil output has declined every year since 2002 as the yield from existing wells shrinks. Alaska North Slope crude production averaged 567,600 barrels a day in December, down from 582,150 a year earlier, data posted on the Alaska Department of Revenue’s website today showed."
California Getting Record Volume of Canadian Oil by Rail
Bloomberg, 1 February 2014

"Permanently anchored in the choppy waters of the eastern Mediterranean, the gas tanker Excellence is in a constant state of alert, waiting for the phone call that Israel needs fuel. The only country in the world to rely on a boat for its emergency energy supplies, the unconventional system proved its worth last month when a rare snowstorm swept Israel, leading technicians to call in for help to meet the surging demand. The gas, imported and stored on board in liquid form, was'regassified' and pumped through a special buoy into an underwater pipeline. In less than an hour, the Israel Electric Corp (IEC) had received its badly needed boost. Israel is near a tipping point. Sometime in the next year or so, gas will surpass coal to become the main fuel for electricity production, a shift made possible by the discovery of huge offshore natural gas fields."
Israel’s back-up gas supply floats far offshore
Reuters, 31 January 2014

"It will take five years and the drilling of 20 to 40 fracking wells to judge whether the UK has a viable shale gas industry, the chairman of the only company yet to have used modern hydraulic fracturing techniques here has told the Guardian. Lord Browne of Madingley, former chief of BP and now chairman of Cuadrilla, said the work must be done, because exploiting shale gas was 'a national imperative'. He said the process would take so long because of the UK's strict planning laws. 'We have very tight regulation, particularly on planning permission,' he said. Browne, who is also a government adviser on business, was speaking on the fringes of a debate on fracking held by the thinktank Policy Exchange. He said that the UK had the potential for a large amount of shale gas exploration, but that aspiring companies would need much more information on whether the gas reserves are economic to exploit, and that could only come from further exploration.' ... 'We have an idea of the UK's potential for shale - what we now need to do is figure out how much we can produce economically and how fast, which means wells need to be drilled and need to be fracked – there is no other way to do it,' said Browne, who is also a managing partner at Riverstone Holdings, the venture capital firm that backs Cudrilla. Tony Bosworth, energy campaigner at Friends of the Earsh, said: 'Despite all the government bluster about fracking, the industry still doesn't know if it's viable in Britain, and it will take years to find out. And with experts warning it won't cut fuel bills and will do little to tackle climate change, the coalition's shale gas enthusiasm is looking increasingly ill-judged.'"
UK shale gas viability check will take five years, says Cuadrilla boss
Guardian, 31 January 2014

"Coal use has increased markedly in the UK in the past few years, reaching about 40% of electricity generation despite its high greenhouse gas emissions. That is partly because coal is cheap at present, as the massive exploitation of gas in the US has meant that coal that would have been burned there is now exported abroad. But Browne was downbeat on the potential for carbon capture and storage, which some experts have advocated as a way of rendering coal and other fossil fuels low-carbon. He said: 'Carbon capture and storage (CCS) is a very interesting idea – I tried to do the first CCS [project in the UK, while leading BP] but there was a gap between what it would cost and what we could afford. There are very few places in the world where CCS could be made to work. I would not rule it out but I would not rule it in.' Prof Dieter Helm, an energy economist at Oxford University, agreed: 'Don't get terribly excited about CCS any time soon – the volume of [carbon dioxide] gas is greater than the stuff that comes out of the ground. And there aren't enough holes [in which to store the CO2].'"
UK shale gas viability check will take five years, says Cuadrilla boss
Guardian, 31 January 2014

"Oil and gas production is booming in much of the world, but it's not boosting Big Oil's bottom line. As supplies of easily obtainable oil dwindle and prices remain flat, the world's oil majors are getting less in return for the vast sums they invest on big, risky projects that don't always pan out. Royal Dutch Shell and Exxon Mobil announced drops in fourth quarter profits Thursday. Chevron announced similar results Friday.... 'Almost all growth in crude production globally is coming from small, nimble risk tolerant US independents engaging in fracking,' Morgan Downey, a New York based commodities trader and author of the book 'Oil 101,' writes in an e-mail. 'Big oil has missed out on fracking and is sitting on the sidelines with a heap of cash possibly waiting for a fall in oil prices, and biding their time for potential acquisitions of these smaller growth companies.'"
Chevron follows Shell, Exxon Mobil profit slide. Is Big Oil in trouble?
Christian Science Monitor, 31 January 2014

"Brazilian state-run energy giant Petroleo Brasileiro, or Petrobras, said Friday that domestic crude oil production in 2013 fell short of the company's target as output at mature fields declined and new offshore platforms were delayed. Petrobras produced 1.93 million barrels of crude in 2013, down 2.5% from 2012, Petrobras said. That was also less than the company's target of 2.02 million barrels a day. In December, output was up 0.4% from November at 1.96 million barrels a day, the company added. Brazil's crude oil output was undercut by ongoing maintenance at aging offshore platforms as Petrobras tried to reverse natural declines at mature oil fields in the Campos Basin, where more than 85% of Brazil's crude is produced. 'It's important to note that natural declines at fields in production during 2013 were in line with levels expected by the company and compatible with industry standards,' Petrobras said. Petrobras officials have said that output at Campos Basin fields are declining at the rate of about 10% a year.... Petrobras continued to boost crude oil production from the pre-salt region, an area off Brazil's southeast coast where billions of barrels of crude were discovered trapped under a thick layer of salt. Output from fields producing from the deposits surged to a record 344,900 barrels a day in December—not including a single-day record production of 390,000 barrels on Jan. 14, Petrobras said.  Total crude oil and natural gas production averaged 2.54 million barrels of oil equivalent, or BOE, in 2013, Petrobras said. That was down from 2.59 million BOE in 2012."
Petrobras 2013 Crude Oil Output Falls Short of Target
Wall St Journal, 31 January 2014

"After pushing up domestic crude oil production by about three million barrels a day (mb/d) in the United States, shale oil has inspired speculation about radical shifts in the global oil market. Radical shifts are certainly on the horizon, but something other than shale is likely to be driving them. That something is Iraq. Iraq is ramping up oil-exports in 2014, according to the Economist Intelligence Unit. The draft budget anticipates average exports of 3.4 mb/d, marking a nearly 30% increase from 2013 export levels. Considering the political struggle between Baghdad and the semi-autonomous region of Kurdistan, the budget forecast seems bullish but not beyond the realm of possibility. New sources of production in the south are coming on-stream and infrastructure bottlenecks are easing. Iraq is currently the world’s third-largest oil exporter. and has the resources and plans to increase rapidly its oil and natural gas production as it recovers from three decades punctuated by conflict and instability. 'The emergence of Iraq as an oil power of the nature of Saudi Arabia is the big thing in the future of the oil business,' said Henry Groppe, a seasoned oil and gas analyst from Texas, in an interview on Wednesday with Toronto’s Globe & Mail .'It dwarfs everything else. It’s the thing that everybody ought to be watching and following as closely as possible.' Oil exploration efforts in the post Saddam era have suggested that Iraq’s oil resource is much bigger than analysts had previously anticipated. International oil companies have already secured contracts that imply an epic increase in Iraq’s oil production capacity by 2020. 'Reaching output in excess of 9 mb/d by 2020 would equal the highest sustained growth in the history of the global oil industry,' the International Energy Agency concluded in the 2012 Iraq Energy Outlook. The barriers to achieving these admittedly ambitious targets are as big as they are diverse, including everything from infrastructure inadequacies and skilled labor shortages to financial risks and lack of security. While it is questionable whether Iraq will be able to meet this ambitious target, increasing Iraq’s oil production by half of that target would make Iraq the largest contributor to global supply growth over the next 20 years and on course to displacing Russia as the world’s second-largest oil exporter by 2030. In any scenario, Iraq is the primary force affecting the long-term outlook for oil markets. 'Almost every second barrel of world oil production growth in the next two decades will come from Iraq, with the potential to provide prosperity for all of Iraq’s 32 million people,' said Dr. Fatih Birol, the lead author of the IEA’s report in 2013."
Sorry, Shale. Iraq Is The Real Oil Revolution
Forbes, 31 January 2014

"To export or not to export American oil? That was the question explored yesterday at the Senate Energy and Natural Resources Committee. Analysts and business leaders from both sides of the debate presented the pros and cons of lifting the decades-long ban on exports of domestic crude. Whether or not to lift that ban, in the face of exploding supplies of American crude oil, is a tough question with a complex answer. But as you’ll see, the answer is this: the ban should be lifted. Yes, the U.S. is producing oil at levels not seen in decades. But we still have to import roughly 40% of our needs. So it would seem, on its face, that there would be no point in ending the ban. The wrinkle comes in the reality that not all crude oil is the same. Some is heavy, some is light. Some is'sour,' with high sulfur content, other is 'sweet.' Much of the boomtime oil flowing out of the Eagle Ford shale of Texas and the Bakken formation of North Dakota is relatively light and is easy to refine in refineries that are not terribly complex. The problem is that U.S. oil refineries were not ready for this kind of high-quality oil. Over the past decade (before the shale oil boom) refiners spent tens of billions to optimize their plants based on the assumption that their crude oil supplies would be getting heavier and more sour — like Canadian oil sands or heavy oil from Venezuela and Mexico. To process that gunk you need more complex refineries with hydrotreaters and cokers. As it turns out, the refiners made the wrong upgrades at precisely the wrong time. After already sinking so much capital to optimize their plants for heavy crudes, they can’t easily turn around and just gulp up the light crudes that American drillers are producing. Even factoring in higher transportation costs it makes more sense for them to import heavy crudes from other parts of the world rather than to use the lighter shale oil. Naturally, with less demand for their product at home, the U.S. shale producers want to be able to export their oil to less complex overseas refineries where they can get higher prices. One of the most vociferous proponents of lifting the ban is Harold Hamm, the billionaire founder and CEO of Continental Resources Continental Resources, one of the biggest producers in the Bakken. Hamm gave his testimony to the senate yesterday, explaining that contrary to popular belief U.S. oil is being exported, but as refined fuels, not crude oil."
Why America's Crude Oil Export Ban Should Be Lifted
Forbes, 31 January 2014

"High gas and electricity prices will continue to plague Europe for at least 20 years, damaging the competitiveness of industries that employ almost 30m people, the world’s leading energy forecaster has warned. In findings likely to inflame claims EU climate change policies are damaging the bloc’s manufacturers, the International Energy Agency said Europe will lose a third of its global market share of energy-intensive exports over the next two decades because energy prices will stay stubbornly higher than those in the US. A number of EU countries have embraced green energy subsidies, shunned nuclear power and resisted the shale exploration that has fuelled a manufacturing renaissance in the US, prompting growing anger among industry leaders who say this has been a recipe for competitive ruin. Fatih Birol, the IEA’s chief economist, said environmental policies alone had not pushed up energy costs but the price gap between the EU and the US was going to last much longer than some expected.'This is a new thing and it’s structural. It’s not a one-off,' he told the Financial Times.'Europe didn’t realise the seriousness of this competitive issue,' he said, warning the situation raises concern for the almost 30m people working in heavy industries such as iron, steel and petrochemicals across the continent. European gas import prices are currently around three times higher than in the US while industrial electricity prices are about twice as high, creating an energy price gap Dr Birol said would last'at least 20 years'. Although industry leaders blame the region’s ambitious climate change policies – especially generous renewable energy subsidies – Dr Birol said he had'great respect' for the EU’s climate actions and it was a mistake to say they were chiefly responsible for the bloc’s dilemma.'Too much of the blame for Europe’s high energy prices is being directed at its ambitions on climate change while the main factor – the high cost of imported energy – is being all but ignored,' he said in a speech to London’s Imperial College where he elaborated on the IEA’s analysis of the problem.'Even renewable subsidies, which have become a serious burden in some markets, are still far from being the dominant factor in price formation,' he said. It was important to recognise the big role natural gas played in electricity generation in Europe, which has yet to experience anything like the US shale boom that has driven down prices."
Energy price gap with the US to hurt Europe for ‘at least 20 years’
Financial Times, 29 January 2014

"North Sea oil and gas exploration is at a 'crossroads', according to a report on the industry. Deloitte's Petroleum Services Group (PSG) found the number of fields starting to produce in the UK hit its highest level for five years, with a 44% increase in 2013 compared with the previous year. But it also found a 28% drop in exploration and appraisal drilling. Optimism and pessimism are about equal within the industry, the firm's energy partner Graham Hollis said. He added: 'The rise in field start-ups over the last year and increased interest in licensing rounds are positive indicators for the future of the North Sea. 'However, more than ever companies appear to be at a crossroads in their attitude towards it, with optimism and pessimism seemingly present in equal measure. 'We have recently seen a number of announcements of significant, and in some instances all-time high, levels of investment in the UK continental shelf. 'However, a number of other companies, some of whom have been key players in the UK sector for many years, have publicly announced or are taking steps that seem to indicate that the North Sea is no longer a core focus for investment within their global portfolios. 'Any longer-term decline in exploration and appraisal drilling will be of concern and there are measures that seriously need to be considered by industry and government to reinvigorate drilling activity and ensure the longevity of the UK continental shelf."
North Sea oil and gas exploration at 'crossroads' says report
STV, 29 January 2014

"Iraq is poised to flood the oil market by tripling its capacity to pump crude by 2020 and is collaborating with Iran on strategy in a move that will challenge Saudi Arabia's grip on the Organisation of Petroleum Exporting Countries. 'We feel the world needs to be assured of fuel for economic growth,' Hussain al-Shahristani, Deputy Prime Minister for Energy in Iraq told oil industry delegates attending a Chatham House Middle East energy conference. Al Shahristani said on Tuesday that Iraq plans to boost its capacity to produce oil to 9m barrels a day (bpd) by the end of the decade as Baghdad rushes to bolster its economy, which is still shattered by war and internal conflict. Iraq was producing 3m bpd in December, according to the International Energy Agency. Iraq's intention to challenge Saudi Arabia's status as the 'swing producer' in the OPEC cartel could see a dramatic fall in oil prices if Baghdad decides to break the group's quotas and sell more of its crude on the open market. 'It's very difficult to predict actual world (oil) demand by 2020 because the world economy is unpredictable,' said Mr al-Shahristani. .... British oil giants BP and Royal Dutch Shell are also poised to benefit from Iraq's ambitious production plans. Both companies are already managing two huge oil fields in southern Iraq which are vital if Baghdad is to achieve its goal. However, even if Iraq is able to achieve its target of boost production capacity it is unlikely to be able to put in place sufficient pipeline and port infrastructure to export the additional crude. Iraq's main export terminal for loading oil tankers at Al Faw near Basra will require billions of pounds worth of improvements in addition to the refurbishment of its pipeline network. Iraq's ambitious plan could see it clash increasingly with the regime in Saudi Arabia, which has used its influence in OPEC over the last decade to keep oil prices above $100 a barrel. Saudi itself is now under pressure to boost output to maintain market share. The kingdom pumped 9.8m bpd in December up by about 100,000 barrels from the previous month. Experts say that attention within OPEC, which pumps 30pc of the world's crude, could increasingly focus on compliance with more of the group's members tempted to pump more barrels to protect their share of the market as the cartel grapples with the rise of US shale oil production."
Iraq and Iran plot oil revolution in challenge to Saudi Arabia
Telegraph, 28 January 2014

"Moves to start fracking for shale gas across Britain have received a major setback after one of the largest firms involved in the industry dramatically scaled back its plans. The firm, Cuadrilla, has admitted to a BBC investigation that it has decided to 'withdraw previous permit applications for our sites in Lancashire'. The move means that while the firm can drill test sites it cannot frack any gas or oil reserves it finds. Work can go ahead only if it has Environment Agency radioactive waste permits proving extractors can safely remove dangerous waste products. Fracking involves pumping high-pressure water into rock deep underground to open fissures and release trapped gas. A by-product is waste water contaminated by natural low-level radiation. Cuadrilla insisted to BBC Inside Out North West that it does hope in the future to submit new waste permit applications in Lancashire where shale rock is thought to contain huge amounts of natural gas. But radiation waste adviser Dr Trevor Jones told BBC investigators that significant investment is likely to be needed to find a way to solve the waste problem, meaning plans for fracking all across the UK could be held up. The Government has pinned hopes for cheaper energy on the success of fracking....Cuadrilla believes it can overcome the issue of disposing of radioactive water and says it has run successful trials. But these have yet to be proven full-scale. The TV investigation, to be shown at 7.30pm tonight on BBC1 in the North-west, also reveals that almost two million gallons of radioactive water produced by Cuadrilla under earlier rules was authorised for discharge, legally, into the Manchester Ship Canal. Marine expert and explorer Paul Rose, who presents the programme, concludes: 'Fracking may or may not become a boom industry. The operators will know what’s down there only by drilling many more exploratory wells. If the gas is viable, they’ll be producing lots and lots of water contaminated with radiation. The only certainty we have now is that no one, yet, can guarantee how those sorts of volumes are going to be cleaned.'"
Dashed hopes of cheap gas as fracking giant Cuadrilla scales back
Express, 27 January 2014

"The oil is ready and waiting – but buyers are few and far between. That is the predicament facing officials from the Kurdistan Regional Government – Iraq’s northernmost province – as they target regular exports of crude that could give a new level of economic viability to their fledgling nation. Since the US-led invasion of Iraq a decade ago, the Kurdish government has been developing its oil industry in defiance of the central government in Baghdad. Crude is now finally flowing via pipeline to Turkey and the KRG has invited bids for it.  A successful tender would catapult the tiny region into the middle ranks of global oil exporters and give its politicians leverage in their dispute with the central government over who should oversee the sale of Kurdish oil. But there is a pressing problem: the largest energy companies and traders are steering clear for fear of upsetting Baghdad, which controls major crude oil supply contracts and some of the world’s largest production projects.... Kurdistan’s giant reserves and attractive geology have made it a hotspot for the world’s largest energy companies, with operators from ExxonMobil to Total taking up exploration licences in recent years. But current production of about 200,000 barrels a day is tiny in the context of a global market of 90m barrels a day, and has not been enough to tempt the largest companies into participating in the Kurdish tender. Executives are also wary of stepping into a dispute which has pitted the KRG and Turkey – which wants Kurdish oil and gas to feed its energy-hungry economy – against Baghdad and the US, which is worried that independent exports of Kurdish crude oil could presage a break-up of the Iraqi state. Last year only a trickle of Kurdish crude made it to Turkey, and that sold at large discounts to reflect the cost of trucking it over long distances. But in December a pipeline linking Kurdish fields to the Turkish port of Ceyhan was finally opened, bringing the possibility of large scale exports."
Oil majors shy away from first major Kurdish export deal
Financial Times, 26 January 2014

"Oil production in the United States rose by a record 992,000 barrels a day in 2013, the International Energy Agency estimated last week. 'We keep raising our forecasts, and we keep underestimating production,' said Lejla Alic, a Paris-based analyst with the agency. The increase left U.S. production at 7.5 million barrels a day, with both November and December production estimated to have been over 8 million barrels a day. American consumption of oil also rose last year, by 390,000 barrels a day, or 2.1 percent, to 18.9 million barrels a day. The agency increased its estimate of U.S. oil use in the final quarter of the year, although it lowered its estimate of the increase in some other countries, including China. Overall, world consumption rose 1.4 percent, making 2013 the first year since 1999 that the use of oil in the United States rose more rapidly than in the rest of the world.... The agency estimated that demand for gasoline in the United States rose as a result of increasing consumer confidence and more sales of sport utility vehicles. Despite the 2013 increases, oil use in most developed countries remains well below the levels of 2007, the last pre-recession year. The United States is estimated to have used 8.5 percent less oil in 2013 than it did in 2007, while demand is down by about 25 percent in Italy and Spain, European countries that were hard hit by the euro area’s problems. Germany stands out, with 2013 usage equal to that of 2007. In the developing world, oil use has been rising steadily. Demand in China and Brazil is up more than 30 percent since 2007, and India’s consumption is 17 percent higher. The agency estimates that in 2014, the 34 mostly rich countries in the Organization for Economic Cooperation and Development will consume less than half the oil used in the world. That would be a first: As recently as 2004, their share was over 60 percent, and in 2013, it was estimated to be 50.5 percent. Over the same period, the U.S. share of the market fell to 21 percent from 25 percent, while China’s share rose to 11 percent from less than 8 percent. But the U.S. share was estimated to have risen slightly in 2013, the first annual increase since 1999. The increase in U.S. production in 2013 exceeded the increase of 836,000 barrels a day in 2012. The largest increase before that, of 751,000 barrels, was in 1951, according to the U.S. Energy Information Administration. In percentage terms, the 15.3 percent increase in 2013 was the largest since an 18.9 percent gain in 1940. U.S. oil production fell steadily from the early 1990s through 2008, but has since risen for five consecutive years, largely because of increased production of shale oil. Not since the late 1960s, when production in Texas was peaking and Alaska oil was beginning to come on stream, has there been such a string of annual increases."
U.S. oil production keeps rising beyond the forecasts
New York Times, 26 January 2014

"About 400,000 carloads of crude oil traveled by rail last year to the nation’s refineries, up from 9,500 in 2008, according to the Association of American Railroads. But a series of recent accidents — including one in Quebec last July that killed 47 people and another in Alabama last November — have prompted many to question these shipments and have increased the pressure on regulators to take an urgent look at the safety of the oil shipments. In the race for profits and energy independence, critics say producers took shortcuts to get the oil to market as quickly as possible without weighing the hazards of train shipments. Today about two-thirds of the production in North Dakota’s Bakken shale oil field rides on rails because of a shortage of pipelines. And more than 10 percent of the nation’s total oil production is shipped by rail. Since March there have been no fewer than 10 large crude spills in the United States and Canada because of rail accidents. The number of gallons spilled in the United States last year, federal records show, far outpaced the total amount spilled by railroads from 1975 to 2012. The stakes are high. In five years, domestic oil production has jumped by 50 percent, to reach 7.5 million barrels a day last year. But with little pipeline infrastructure, energy producers had to scramble for new ways to get their oil to refiners. Rail was the answer. 'The reality is that this came out of nowhere,' said Anthony B. Hatch, a rail transport consultant. 'Rail has gone from near-obsolescence to being critical to oil supplies. It’s as if the buggy-whips were back in style.' Far more toxic products are shipped on trains. But those products, like chlorine, are transported in pressurized vessels designed to survive an accident. Crude oil, on the other hand, is shipped in a type of tank car that entered service in 1964 and that has been traditionally used for nonflammable hazardous liquids like liquid fertilizers. Safety officials have warned for more than two decades that these cars were unsuited to carry flammable cargo: their shell can puncture and tears up too easily in a crash."
Accidents Surge as Oil Industry Takes the Train
New York Times, 25 January 2014

"Eastern Mediterranean countries, including Israel, may be 'fooling their people with false promises of an offshore gas bonanza,' The Economist writes in its latest issue. The influential British financial magazine quotes oil analysts as saying that 'even Israel, whose development of offshore gas is most advanced, is unlikely … to start exporting large amounts by 2020, as it hopes.' The main obstacle to realizing the potential of the gas fields, the magazine says, is not a shortage of oil and gas but 'a lack of regional co-operation.' The estimated potential of the eastern Mediterranean, from the coast of Gaza to southern Turkey, is 122 trillion cubic feet of gas, according to the American Geological Survey, which puts it on a par with the reserves of Iraq. However, weak governments, disputes between countries, a disputed maritime border between Israel and Lebanon and the civil war in Syria all mitigate against the full and timely exploitation of the gas reserves."
Can the promises of an Israeli gas bonanza come true?
Haaretz, 25 January 2014

"Hariga, the biggest oil terminal in east Libya run by the central government, can’t export because gunmen nearby pose a threat to tankers, the port’s inspection and measurement coordinator said. Curbs on the sales helped lift crude prices to a six-month high last year. 'There’s an armed group in boats facing the port, and some men with guns are on the coast itself,' Abdel-Wahab Salem Mohammed said in a phone interview from the facility on Jan. 20. 'One person with a rocket propelled grenade can close the entire thing.' "
Libya Oil Growth Crimped as Gunmen Block Eastern Port Hariga
Bloomberg, 24 January 2014

"When computer coders at the Intercontinental Exchange built a platform for trading natural gas in 2001, they only allowed space for two-digit entries. With gas around $5 per million British thermal units, prices above $99 just didn't seem feasible. A freezing start to 2014 changed all that....The United States has ample supplies of gas, but the price spikes reflect a recurring conundrum: A lack of pipelines to take gas from major supply centers to market. This bottleneck pushes prices higher during periods of high demand like the first few weeks of this year."
Natural gas prices above $100? Better tweak the system
Reuters, 22 January 2014

"New numbers from the International Energy Agency (IEA) might change that. Crude oil production in the U.S. rose by 990,000 barrels a day (bbd) last year, a increase of 15% from the year before. That’s the fastest such absolute annual growth of any country in 20 years. And it’s not just production: The IEA reports that in 2013, U.S. demand for oil grew by 390,000 bbd, or about 2%, after years of decline. For the first time since 1999, U.S. demand for oil grew faster than China’s demand, which rose by 295,000 bbd, the weakest increase in six years. So not only is the U.S. producing a gusher of oil, but it’s also consuming more crude."
U.S. Oil Demand Grew Faster Than China’s in 2013. That Won’t Last
TIME, 21 January 2014

"Global oil demand will increase more quickly this year as economic growth accelerates, outstripping supply even as shale oil production in the United States reaches record highs, the west's energy watchdog said on Tuesday. The International Energy Agency (IEA) said world oil consumption would increase by 1.3m barrels per day (bpd) this year, 50,000 bpd higher than previously forecast. 'Global oil demand growth appears to have gradually gained momentum in the last 18 months, driven by economic recovery in the developed world,' the IEA said in its monthly report. 'Most OECD economies have by now largely exited the restraints of recession, with strong gains in some countries in the energy-intensive manufacturing and petrochemical sectors.' US oil production is increasing rapidly and is forecast to rise by 780,000 bpd this year, but the Organization of the Petroleum Exporting Countries (Opec) will also have to pump more to meet increasing demand. The IEA, which advises most of the largest energy-consuming countries on energy policy, raised its forecast of demand for Opec oil this year by 200,000 bpd to 29.4m bpd. Last year, political unrest led to a plunge in Libyan exports, at times to less than 10% of capacity, and more Iranian barrels disappeared from the market due to sanctions. But Opec crude oil supply edged higher in December, reversing four months of declines, it said, with Saudi Arabia and the United Arab Emirates leading the increase. Libya saw a modest rise and Iraq was the only member to post a fall. Iranian supplies contracted by 320,000 bpd last year but edged higher in December as diplomatic activity aimed at halting Tehran's nuclear activity gained momentum. The IEA said rising US crude production helped balance the effects of supply disruptions among some OPEC countries. 'Most prominent among those shifts was the relentless rise in US crude production, whose 990,000 bpd growth, one of the largest annual gains on record for any country, helped blunt the impact of supply declines elsewhere, notably Libya and Iran,' the report said. The loss of oil production from Libya and Iran has helped keep a floor under prices, but the increasing US output has limited rises. Brent crude averaged around $108.70 a barrel last year, about $3 less than in 2012, and on Tuesday traded around $107. US production growth in 2013 far surpassed the IEA's own projections, registering the fastest absolute annual supply expansion of any country in the past two decades, the report said."
Oil demand to rise as global economy recovers, energy watchdog says
Guardian, 21 January 2014

"More crude oil was spilled in U.S. rail incidents last year than was spilled in the nearly four decades since the federal government began collecting data on such spills, an analysis of the data shows. Including major derailments in Alabama and North Dakota, more than 1.15 million gallons of crude oil was spilled from rail cars in 2013, according to data from the Pipeline and Hazardous Materials Safety Administration. By comparison, from 1975 to 2012, U.S. railroads spilled a combined 800,000 gallons of crude oil. The spike underscores new concerns about the safety of such shipments as rail has become the preferred mode for oil producers amid a North American energy boom. The federal data does not include incidents in Canada where oil spilled from trains. Canadian authorities estimate that more than 1.5 million gallons of crude oil spilled in Lac-Megantic, Quebec, on July 6, when a runaway train derailed and exploded, killing 47 people. The cargo originated in North Dakota. Nearly 750,000 gallons of crude oil spilled from a train on Nov. 8 near Aliceville, Ala. The train also originated in North Dakota and caught fire after it derailed in a swampy area. No one was injured or killed.... until just a few years ago, railroads weren’t carrying crude oil in 80- to 100-car trains. In eight of the years between 1975 and 2009, railroads reported no spills of crude oil. In five of those years, they reported spills of one gallon or less."
More oil spilled from trains in 2013 than in previous 4 decades, federal data show
McClatchy, 20 January 2014

"On Tuesday the Telegraph runs a revealing story, the thrust of which is becoming increasingly familiar: Tory Ministers in the Government have again overstated the evidence on shale gas. While today it is on the likely timetable for fracking, in recent weeks we have seen similar exaggerations on the impact on bills, on the level of community benefit and on the number of jobs that might be created. Unsubstantiated claims degrade the quality of the public debate on shale gas. They provoke more extreme reactions from critics, marginalise moderate voices and inflate a bubble of expectation that is highly unlikely to ever be met. Unfortunately, shale gas is an issue in which overstatement appears to have become the default setting of the government. For this, David Cameron must accept a sizeable share of the blame. His promises concerning the potential benefits of shale gas frequently outrun the evidence or the likely reality. It is not him alone – while his first Energy Minister Charles Hendry wisely warned against betting the house on shale prospects - other Ministers including George Osborne, Owen Paterson, and Michael Fallon, the part time part time Energy Minister, are less measured. By shamelessly cherry-picking their figures and focussing on the most optimistic assessments, this group of Ministers are guilty of making statements that contradict the evidence produced by relevant government departments. Last week, David Cameron promised that shale gas would deliver 74,000 jobs, citing a study from the Institute of Directors last May. As it happens, that figure was superseded by a Strategic Environmental Assessment undertaken by AMEC, commissioned by his own government and published last month, which concluded there would be 16,000 – 32,0000 jobs in the next (14th) licensing round. Even by extending their model to include the current licensed sites, the estimate would be between 10,000 and 25,000 fewer than the figures quoted by the Prime Minister. Then the Prime Minister spoke about the community benefit, putting the figure at £5-10m per well site. Once again the Government’s own, more recent figures (from December) are significantly lower: £2.4-4.8m. Then Michael Fallon waded in, talking about the opportunity to drill '20-40 wells' in the next two years. In truth, as the Telegraph piece makes plain, we are unlikely to see more than one or two wells fracked at all over the next year. Finally George Osborne seems unable to resist repeating one of the most pervasive myths of shale gas extraction in the UK: that it will deliver significantly cheaper energy bills, as in the USA. Differences in geology, extraction rights and the market realities (including the fact that the UK is plugged into a European market many times larger than itself, whereas the US is currently unable to export shale) mean experts have repeatedly warned that this is unlikely to be the case. They include the Government’s Chief Scientific Adviser, David MacKay, who said that 'the effect of UK shale gas production on gas prices is likely to be small.'"
Tom Greatrex MP, UK shadow energy minister
Shale gas is not the silver bullet to all our energy problems
Telegraph, 20 January 2014

"... the maturity of markets such as the US, the EU and Japan means demand in the industrialised world is already on a structural downtrend, and – together with ongoing improvements in energy efficiency and the opportunities for substituting gas for oil – this will inevitably lead to a peak and then a decline in the demand for oil globally. Some say the peak could come within five years. But does this peak demand theory bear scrutiny?... the increase in US oil demand reflects rising US GDP, which also accelerated over the year: official data show GDP rising from the fourth quarter of 2012 through to the third quarter of 2013 at 0.1 per cent, 1.1 per cent, 2.5 per cent and 4.1 per cent. Yet the recent rise in US oil consumption is not solely due to faster economic growth. It also reflects the increasing availability of domestic supply and the competitive pricing of US light-tight oil against both Brent, the global oil price benchmark, and WTI, another US crude oil benchmark. Owing to the ban on exports of US crude oil, and the fact that shale oil is not suitable for refining into the distillate products that US refiners are legally permitted to export, light-tight oil is being sold at a discount against WTI to refiners geared up to produce gasoline. As shown by the EIA’s pricing data, this has led to a stabilisation in the average price of gasoline over the past three years, and even to a modest drop in 2013 versus 2012. Finally, unlike other industrialised countries such as Japan and the EU, the US population is still growing at a healthy rate. According to UN data, in the five years from 2007 to 2012 the US population grew by 14m to 318m, and is expected to rise by a further 82m (to 400m) by 2050. All of this implies that the reduction in US oil demand over 2008-12 was not so much structural as due mainly to the weakness of the US economy following the global financial crisis, and the tightness of the local oil market until recently. As the economy has started to recover and rising domestic supply has made local prices more affordable, US consumers – whose ranks have swollen by 14m since 2007 – have started coming back to market. Against this backdrop, the peak-demand narrative looks deficient at best and a distraction at worst. This is not to deny that improving energy efficiency and increasing substitution of gas for oil will help mitigate the continuing demand pressure that a global population set to expand by a further 800m people over the course of this decade alone will exert. Nor is it to say peak demand will not arrive one day. It is simply to emphasise that if and when peak demand does arrive it will more likely be due to the rationing effect of high prices brought on by supply-side constraints. These are both economic (for example, the astronomical levels of capex now needed to keep production growing even modestly), and geopolitical in nature, but environmental factors will also be increasingly important in future. Such supply-side constraints explain why global oil prices remain at or close to all-time high real levels. They also show why a more robust interpretative model than that offered by the peak-demand narrative is required to understand the dynamics of the global oil market."
‘Peak demand’ oil theory fails scrutiny test
Financial Times, 20 January 2014

"Eni, the Italian oil giant, is giving up on producing natural gas from shale rock in Poland, not long ago considered the most promising country in Europe for the new fuel source. Eni has allowed two of its three shale gas exploration licenses in Poland to expire and is likely to allow the third to lapse, according to a person with knowledge of the matter who spoke only on the condition of anonymity. The acreage, acquired in 2010, had not produced enough gas to be commercially viable, the person said. Other companies have made similar comments about their initial drilling efforts. Exxon Mobil ended its Polish shale gas exploration efforts in 2012; Marathon Oil said it was leaving last year. Chevron is one of the few major players still interested in Poland. 'The geology has not worked out,' said Paul Stevens, an oil analyst at Chatham House, a research institute based in London. The experience in Poland shows how difficult it will be to replicate the United States shale gas boom in Europe or elsewhere. Mr. Stevens said European governments had not been willing to make the necessary investment in research and development that helped companies figure out how to extract natural gas and oil from impermeable rock formations in the United States.... The hot country for shale gas exploration in Eastern Europe is now Ukraine; Chevron, Eni and Shell have all acquired acreage there. In Western Europe, Britain is now in the forefront; Total just agreed to explore for shale gas there. But little, if any, shale gas is being produced in these countries so far. Three years ago, Poland was considered among the most promising of European countries outside Russia for replicating the American shale gas boom. A study in 2011 by the United States Energy Information Administration ranked Poland first among European countries in terms of technically recoverable reserves, with enough to cover domestic demand for about three hundred years."
Eni Is Said to Abandon Polish Shale Aspirations
New York Times, 14 January 2014

"The UK's push for shale gas will result in unavoidable changes to the countryside, the US energy secretary has warned. Ernest Moniz, who took over as energy chief for President Obama's second term, has overseen arguably the biggest changes to US energy production since the discovery of oil. He said the exploitation of shale gas and oil on a vast scale in the US had been 'transformative', vastly reducing energy prices, boosting industry and lowering carbon emissions as more electricity production shifted from coal to gas. But he warned that any boost to the economy would come at a serious cost, as 'you can't avoid' the fact that extracting gas on such a scale involves a massive industrial effort. 'The one thing it's very hard to change is that this is a big industrial enterprise. That's one thing you can't avoid. That is something communities and governments have to cope with.'"
Shale gas extraction 'will transform Britain'
Guardian, 17 January 2014

"Just two weeks into his tenure, Royal Dutch Shell chief executive Ben van Beurden has had the tough job of delivering the oil major’s first profits warning in a decade. The last time Shell, a bellwether for British investors expecting reliable returns, provided such disturbing guidance it was Sir Philip Watts and the scandal over misstating the company’s oil reserves at fault.Mr van Beurden has found himself in a similar position to his predecessor, Peter Voser, in having to deal with the consequences of strategic decisions made by previous hierarchies at the Anglo-Dutch company. Shell said that it expects earnings in the fourth quarter to be 70pc lower at $2.2bn (£1.34bn), but the scarier figure was the blowout in capital expenditure to $44.3bn.... Shell has pressed on with expensive high-risk projects, such as drilling in the Arctic, when some analysts would have preferred to see more capital restraint from management. The company is gaining an unwanted reputation for placing big strategic bets with investors’ money that don’t always pay off. Its significant investment into liquified natural gas (LNG) production and the more exotic gas-to-liquids (GTL) processing are perhaps good examples.Jeroen van der Veer, former chief executive, and Linda Cook, then gas head, aggressively continued to commit Shell to expensive LNG ventures aimed at capturing the US market at a time when gas prices on the east coast of America were only expected to climb higher. At around the same time, Shell rushed into building the world’s largest GTL plant in Qatar at a huge cost of $19bn when rival Exxon Mobil cancelled a similar scheme after deeming it too much of a risk. The company’s commitment to LNG came at a time when natural gas spot futures were trading above $17 per unit compared with around $4 today. More than any other major oil company, Shell miscalculated the dramatic changes that shale gas and oil development in the US would have on energy markets. Although much of its LNG heads to thirsty consumers in Asia, where it commands a higher price, the company is yet to see its bet on refrigerated gas pay off. To be fair, gas wasn’t the issue that Shell chose to raise on Friday. Higher exploration costs and underperforming refining businesses were at the heart of the problems, along with fuel theft in Nigeria."
Shell’s gas gamble has left a sour taste
Telegraph, 17 January 2014

"Oil giant Shell is set to make a staggering £6billion LESS this year, it emerged today. In a shock profit warning, the mega firm said it had been hit by everything from lower production to higher costs for finding oil and gas. Profits in the last three months of 2013 are expected to have plunged from £4.5billion to £1.3billion. That’s likely to mean it will make £10.2billion this year – still a huge amount – but well down from £16.6billion the previous year. The surprise warning spooked investors, wiping a massive £3.9billion off its share price. Shell’s new boss Ben van Beurden admitted the oil giant’s performance was 'not what I expect' from the group in 2013. Van Beurden only took over from Peter Voser as chief executive on January 1. The group also said today it expects hefty writedowns of £429million for the fourth quarter and £1.7billion for the full year....Rival BP also saw shares fall as the market feared an industry-wide impact. The entire sector has already been suffering from low refining margins –how much money is made from processing crude oil into petrol and diesel."
Shell shock as oil giant posts profit warning and expects to make £6BILLION less this year
Mirror, 17 January 2013

"Ministers have been accused of overhyping the potential benefits of shale gas by using fracking industry figures that promise local communities up to £10m in cash – ignoring an independent government-commissioned report that suggested it could be as little as quarter of that. Shale gas companies have promised they will pay local communities £100,000 up front for each exploratory well that is fracked, and then 1pc of any revenues from shale gas drilling. The companies claim this could be worth £5m to £10m over the lifetime of a fracking site - likely to be at least 10 years. This is based on a report by the Institute of Directors, sponsored by fracking firm Cuadrilla. But an independent Strategic Environmental Assessment report by consultants Amec, commissioned by the government and released just last month, estimates the share of the revenues would actually equate to between £2.4m and £4.8m per site.  Yet the government has since opted to use the IoD figures, making no mention of the Amec report. .... A spokesman for the Department of Energy and Climate Change said the discrepancy between the IoD and the Amec estimates was because the IoD assumed more intensive drilling at each site. The IoD estimates one drilling site would have 10 vertical wells, each with up to 4 horizontal wells coming off them, while the Amec report assumed up to 24 vertical wells, each with just one horizontal well. This means production and therefore revenues would be greater under the IoD scenario – although the disruption faced by the local community could also be greater. 'There is uncertainty at this stage about using any scenario for the future of the industry, which is why we are promoting exploration to determine the potential of shale gas,' the DECC spokesman said. ... A government announcement on fracking on Monday initially erroneously promised communities a sum of £5m to £10m each year, before being corrected to say it could be over the lifetime of the site.... A report by Euractiv cited an EU source who said that the tax concessions were designed to advantage shale gas companies, implying it could be open to state aid scrutiny.  A DECC spokesman said: '100pc business rate retention for shale gas operations does not affect the amount of money operators must pay, but means that local government retains this rather than passing it to central government. It does not qualify as State Aid.'"
Government accused of 'overhyping' shale gas benefits
Telegraph, 17 January 2014

"The extent of shale gas drilling about to begin in England and Wales despite safety and environmental fears is revealed on a new map. Our graphic reveals where 'fracking' wells could be situated now PM David Cameron has given it the green light. And he has said town halls will receive 100% of the business rates collected from schemes, rather than the usual 50%. Britain is rich in shale gas reserves and Mr Cameron told MPs just 7% of the fuel in the Bowland Basin in the North West could provide enough energy for 30 years. He said energy firms must explain more clearly how shale gas could be a source of 'low-cost green energy'. He said: 'There are a huge amount of myths being put around to frighten people about shale gas extraction – whereas we can see in the US it can be extracted safely and cleanly, providing effective low-cost green energy for homes and businesses.' Among the licences available up and down the country are 23 covering parts of Merseyside, Cheshire and much of Greater Manchester. Another 12 cover Humberside, 18 take in South Wales and more than 30 cover Nottinghamshire."
Fracking map shows extent of shale gas drilling about to begin despite safety and environmental fears
Mirror, 16 January 2014

"The once-in-a-millennium event at the Fukushima reactor killed nobody, although the tsunami claimed 16,000 lives. However, it was enough to panic Germany’s green middle class. Ms Merkel caved in to shrill demands for the country’s atomic reactors to be closed. This decision, from a former chemist, who is personally pro-nuclear, is perhaps the most important economic call she has made. It is a disaster. In March 2011, at the height of the eurozone recession, Germany switched off eight of its 17 nuclear reactors, cutting 7pc of electricity generation, with another 18pc to go over the next decade. The other nine reactors will be phased out from 2015 to 2022, bringing forward a previous 2036 deadline by 14 years. Germany has also stepped up energiewende, as it switches to meet a target of producing 80pc of the country’s electricity from renewable, wind and solar power by 2050. ....German consumers already pay the highest electricity prices in Europe; before long, the average three-person household will spend around €90 a month for electricity, almost twice as much as in 2000. Currently, more than 300,000 German households a year are seeing their power shut off because of unpaid bills. Two-thirds of the electricity price increase is due to new government surcharges and taxes to subsidise renewable energy. While electricity prices have rocketed and the middle classes receive handouts to put solar panels on their houses, pensions and wages have not kept up, hitting Germany’s poorest hardest. There are some serious practical problems emerging. Solar and wind power is erratic, which means that Germany will require storage capacity for 20bn to 30bn kilowatt-hours by 2050. So far, the storage capacity has grown by little more than 70m kilowatt-hours. Compounding problems, when the wind stops blowing or the sun disappears, the electricity supply needed to power the national grid becomes scarce. This has pushed Germany into increased use of heavy oil and coal power plants, which is why the country released more carbon dioxide into the atmosphere in 2012 than in 2011. Its decision to phase out nuclear power also led to a rise in coal prices, as traders realised that it was likely to keep more coal for domestic consumption. Germany has got used to delivering economic homilies on competitiveness to the rest of Europe. But a new picture is emerging: German industry is in trouble. Energy prices are 40pc more expensive than in France and the Netherlands, and the bills are 15pc higher than the EU average. Even though Germany’s energy-intensive manufacturing sector is given a break with reduced levies, industries such as chemicals and steel are among the hardest hit, with energiewende costs of up to €740m a year."
Germany is a cautionary tale of how energy polices can harm the economy
Telegraph, 16 January 2014

"Energy giants' claims that 5pc is a fair profit margin have been called into question by a leading City analyst, who said the basis for the claim was 'not clear' and that margins in comparable sectors were far lower. Britain's Big Six energy firms have repeatedly defended their profits in the face of political and consumer anger. Centrica's British Gas household supply business typically makes a 5pc margin after tax, or nearly 7pc pre-tax, while the other five major suppliers including SSE say they aim for a 5pc pre-tax margin. In a research note, Peter Bisztyga, analyst at Barclays, wrote: 'We are used to hearing Centrica and SSE argue that 5pc or 6pc is an appropriate retail energy supply margin. However, the basis for this is not clear to us.' He said: 'We find that 2pc to 4pc is typical in comparable competitive sectors.'... He said figures suggested that 'in Europe, energy supply margins (for both domestic and non-domestic supply) in the 2pc-3pc range are frequent', while margins for non-domestic energy supply sector in the UK have fallen from 5pc in 2010 to 2.6pc in 2012 'as businesses have become more price sensitive during the recession'.  He said that UK water utilities - although not directly comparable - had proposed household supply margins averaging just 1.2pc. Margins in food retail were 'the most legitimate comparator' outside the utilities sector and averaged 4pc across Europe, he said."
Energy giants' claims that 5pc is a 'fair' profit margin challenged by City analyst
January, 15 January 2014

"Household energy bills are hurting. In the past ten years, they've more than doubled. In 2004, the dual gas and electricity average annual bill was £590. It rose most steeply in the following five years to £1,205, and by last year, it was at £1,320. For families in bigger homes, and those in poorly insulated housing, the pain of that rise is particularly acute. And it has fuelled the problems from inflation being well above target for much of the past five years - only returning to its 2% target in this month's figures.  While that has been the case, average pay has lagged, and household budgets have been squeezed. The problem has put pressure on government and on the big energy suppliers to ease the pain."
Heat is on: Why are energy bills so high?
BBC Online, 15 January 2014

"Nearly half of Britons polled in a study said they would be unhappy to have shale gas fracking carried out within 10 miles of their home. The government is actively supporting the development of shale gas, an uncoventional fossil fuel extracted by blasting chemicals, sand and water into rock formations, a method also known as fracking. The government is counting on shale gas production to help it reduce import dependency, but the technology has seen fierce opposition from green activists and local residents who claim it damages the environment. The Institution of Mechanical Engineers (IMechE) poll showed just 14 percent of 2,000 Britons asked were happy to have shale gas exploration close to their homes and that 47 percent were not happy. As many as 30 percent said they had no understanding of what fracking was."
Half of Britons against shale gas drilling in vicinity - poll
Reuters, 15 January 2014

"Europe's energy supply options will broaden later this decade as new pipelines feed natural gas from Russia and the Caspian Sea to consumers in big Mediterranean markets such as Italy, Greece and Turkey.Russian state-owned producer Gazprom will bring its 2400km South Stream gas pipeline on line next year while the massive BP-led Shah Deniz 2 project in Azerbaijan will link into a new Southern Gas Corridor to Europe from 2018-19."
Energy map of Europe about to be redrawn
The Australian, 13 January 2014

"In one of those economic paradoxes, US crude futures climbed by nearly a dollar on Friday to close at $92.72 a barrel after the US jobs report came in much worse than expected. The reasoning of course is that a weaker economy will deter the Federal Reserve from slowing its bond buying program which supports oil prices. Even with Friday’s increase, US crude was still down $1.50 for the week due to lower demand and a large jump in US gasoline and distillate inventories. In London where oil prices have been supported by supply problems in Libya, Sudan, Iraq, and Nigeria in addition to lower Saudi production, Brent futures ended at $107.25, up about a dollar for the week. The large difference between US and London which is the world benchmark price has created a clamor in the US to lift the ban on US crude exports that has been in place since the 1970s. US oil producers would love to get another $10-15 a barrel for their crude which has been suppressed in recent years due to the shale oil boom and lack of access to world markets. If the US resumes crude exports, oil producers would do better, while US refiners who are currently doing quite well buying cheap US crude, refining with cheap US gas, and exporting gasoline and distillates to the world markets at a nice profit would do less well. Lifting the export ban would transfer much of the profit to the producers from the refiners and would likely result in higher prices for US consumers."
Peak Oil Review
ASPO, 13 January 2014

"The man who masterminded London's highly successful Olympic Games has said power blackouts would be 'the best possible thing' because they would force politicians to confront the looming energy crisis. Sir John Armitt, who is also advising the Labour Party on Britain's infrastructure needs, said the country was heading towards an energy-capacity crunch because ministers had failed to ensure the construction of new power stations to take over from decommissioned nuclear and coal plants. And as Britain faces a weekend of freezing weather there were new warnings about the proximity of a capacity crunch from Dieter Helm, a leading energy academic who believes ministers have underestimated future power demand. Angry business leaders dismissed Armitt's comments as irresponsible, but Armitt, who worked on the Sizewell-B nuclear reactor while at the construction group Laing, insisted new capacity was needed."
Blackouts are 'best possible thing' for UK energy crisis, says Labour adviser
Guardian, 10 January 2014

"Ukraine has ceased buying gas from Europe and will instead purchase the fuel solely from Russia, as it offers the lowest prices, Ukraine’s energy minister Eduard Stavitsky said yesterday (9 January). After Russia's gas monopoly Gazprom has brought down the price of its natural gas for Ukraine by a third - to $268 dollars per thousand cubic meter (tcm), Ukraine suspended imports of natural gas from European countries at the beginning of 2014. Ukraine had been paying around $400 per tcm to import an estimated 26-27 billion cubic metres (bcm) of gas from Russia, its main supplier. But last December, Russia agreed to slash the price of gas for Ukraine to $268.50 per tcm after Kyiv walked away from a free trade pact with the European Union. In recent years, the EU had made possible 'reverse gas flows', meaning sending gas to Ukraine from Poland, Hungary and more recently from Slovakia. Although this was basically Russian gas, it was still cheaper than the price of around $400 per tcm Kyiv was paying until recently. Nearly 2 billion cubic meters (bcm) of natural gas has been imported by Ukraine from Poland and Hungary in 2013. According to the December agreement between Moscow and Kyiv, the new price level must be confirmed every quarter, an arrangement that creates financial leverage for Moscow to prevent Kiev from seeking to revive ties with the EU. Asked by EurActiv to comment this development, the Commission said today (10 January) that it had taken note of the media reports regarding the decision of Ukraine not to seek reverse gas supplies. 'Reverse gas flows are for Ukraine a possibility to increase competition and the security of supply. The Commission is a facilitator in the regard, but it’s for this country and companies concerned to decide on reverse flows,' Sabine Berger, spokesperson to Energy Commissioner Guenther Oettinger said."
Ukraine no longer wants reverse gas flows from EU
EurActiv, 10 January 2014

"Investment in North Sea oil and gas production is expected to pick up significantly this year. Energy consultancy Wood Mackenzie has forecast that 14 new fields with the capacity to produce 438m barrels of oil equivalent will be brought on stream by the industry in 2014. However, the Edinburgh-based firm cautions that the next 12 months will be “pivotal” for the UK’s major energy producing basin due to the Scottish independence referendum in September and the final recommendations of the Wood Review, which could lead to significant change in how the industry is regulated. Investment in the area last year reached its highest levels since the boom years of the 1970s, according to a report by the company. 'We anticipate £21.3bn will be spent on capital investment across 2013 and 2014,' said Lindsay Wexelstein, head of UK Upstream Research for Wood Mackenzie, which released its annual UK oil and gas review. Despite the positive outlook provided by investment and new production coming on stream, exploration for undiscovered oil reserves in the North Sea is falling behind, signalling that the offshore region is entering the final stages of its lifespan. 'Due to poor exploration performance in recent years, capital investment is unlikely to be sustained at the current high levels beyond 2015,' said Ms Wexelstein. More than 40bn barrels of oil equivalent have already been produced from the North Sea and estimates of remaining reserves are between 12bn and 24bn, based on what may be viable to extract at current oil prices. The Government appointed Sir Ian Wood last year to develop proposals to maximise its potential. However, the region’s long-term prospects arguably hang on whether Scotland remains in the UK."
Investment in North Sea oil and gas to rise sharply, say analysts
Telegraph, 10 January 2014

"While the head of the watchdog committee overseeing Canada’s intelligence agency is under attack for also being a lobbyist for the controversial Northern Gateway pipeline, it turns out that half of the other Harper government appointees keeping an eye on the spies also have ties to the oil business. NDP Leader Tom Mulcair has joined a growing chorus of critics calling for the resignation of former Conservative cabinet minister Chuck Strahl as chairman of the Security Intelligence Review Committee (SIRC).  The committee oversees the activities of Canada’s spy service, the Canadian Security Intelligence Service (CSIS), including surveillance of groups opposed to construction of the Northern Gateway pipeline from Alberta to the B.C. coast. Strahl has touched off a political controversy for registering with the B.C. government as a lobbyist for Enbridge, the company wanting to build the pipeline. To be clear: Strahl has long had a reputation as one of the straightest arrows in Canadian politics, and there is no evidence of any actual conflict of interest in his work for Enbridge. In a recent television interview, Strahl said he would recuse himself from anything to do with the proposed pipeline that came before the spy service review committee, passing the case to one of the other four members. But a few of them may have their own problems of perception. For example, Denis Losier is an accomplished former New Brunswick politician, bureaucrat and insurance company top executive. But he is also on the board of directors of Enbridge N.B., a wholly-owned subsidiary of the pipeline and gas company of the same name, Strahl’s client. Yves Fortier is one of Canada’s most pre-eminent and highly respected lawyers. He was previously a member of the board of TransCanada Pipelines, the company now behind the proposed Keystone XL pipeline from Alberta to Texas. That project is currently being blocked in the U.S. by the Obama administration, and has been the target of huge protests. Former Reform MP Deborah Grey is one member of the spy service oversight committee with no apparent connections to the oil industry."
Other spy watchdogs have ties to oil business
CBC News, 10 January 2014

"Britain would have to drill up to 2,000 shale wells a year to achieve a substantial drop in energy costs, according to experts. Sir David King, the government's former chief scientist, suggested cost benefits from fracking may only be achieved with major disruption to the landscape. He expressed support for firms drilling to explore the size of the UK's reserves which could reduce reliance on imported gas from Russia and Qatar. But he warned those expecting gas prices to plummet as in the United States, that the far higher concentration of people and resulting planning issues in Britain would make it very difficult to do it 'on anything like the same scale'.... Each well requires tons of sand and water delivered in lorries used to crack open the rocks, he said, which causes damage to roads and problems with 'social acceptance'. And the gas produced from each well drops by around 70pc after the first year, he said. 'If you want to keep up production you need to keep up fracking.' Professor David MacKay, Chief Scientific Officer at the Department of Energy and Climate Change, told peers that the UK's shale gas reserves are estimated to be around a third of the size of those in the North Sea. But he said how much could be extracted, and the impact on energy prices, would remain 'extremely uncertain' until the first 20 to 40 wells are drilled in the coming years."
Up to 2,000 frack wells a year needed to cut gas bills
Mail, 9 January 2014

"Domestic energy consumers are £53 a year worse off today than they were back in January 2013, even after the government has reduced green and social obligations on power companies, according to new calculations. As npower became the last of the big six suppliers to trim back earlier bill increases, uSwitch said consumers were still paying on average £1,264 a year – 4.3% more – for their energy than 12 months ago."
Domestic energy users £53 a year worse off than 12 months ago, says uSwitch
Guardian, 8 January 2014

"The stakes could not be higher for China, the largest investor in South Sudan's oil sector, as fierce fighting continues between forces loyal to President Salva Kiir and those of his former deputy. Some of the largest oil fields China operates are in areas controlled by fighters backing Riek Machar, the country's vice-president until he was sacked in July. Oil production has already dropped by 20% since the onset of the conflict three weeks ago and more than 300 Chinese workers have been evacuated.  The spectre of their Libyan experience also weighs heavily on the Chinese minds - project after project now lies deserted because of heavy fighting during the Arab Spring uprising of 2011, inflicting huge losses on China....China invested some $20bn (£12bn) in Sudan before it split into two countries in 2011, according to Chinese media reports. Another $8bn was pledged to President Kiir during his visit to China the year following secession, to be used for infrastructure projects and the oil sector. The heavy investment seems to have borne fruit, as in the first 10 months of 2013, China imported 1.9 million tonnes of oil (nearly 14 million barrels) from South Sudan, twice as much as China imports from Nigeria each year. Though amounting to less than 1% of China's total oil imports, it makes up roughly two-thirds of oil exported by the world's youngest nation and is expected to increase. Two years ago, China suffered heavy losses in its Libyan projects, including infrastructure, telecommunications and oil. Many constructions were halted and sites looted or destroyed during the revolution which toppled long-time leader Muammar Gaddafi. The total loss was estimated by several Chinese media reports to be in the region of $20bn, although no official figures exist. Compensation talks with the new Libya government stalled as their priority was very much on nation-building and improving the living conditions of the Libyan people. Experts point out that China has taken tremendous risks in its search for oil. This is because the country's economic boom continues to require a great deal of oil - home production is limited and reliance on exports reached 56% in 2012. But all the known global markets have been dominated by Western companies or have been off-limits because of sanctions, leaving China with little choice but to adopt high-risk strategies. Nowadays, more than half of China's investment in the overseas oil sector is found in areas which are considered unstable, including Iran, Nigeria, Sudan, South Sudan and Venezuela."
China's oil fears over South Sudan fighting
BBC Online, 8 January 2014

"China has embarked on the greatest push for renewable energy the world has ever seen. A key element involves more than doubling the number of wind turbines in the next six years. Already the world's largest producer of wind power, China plans further massive increases. From a current installed capacity of 75 gigawatts (GW), the aim is to achieve a staggering 200GW by 2020. By contrast, the European Union countries together have just over 90GW of installed wind capacity. The far western province of Xinjiang is one of seven areas designated for wind development. Against a backdrop of snow-capped mountains, turbines are massed in their thousands over the frozen desert. New units are being installed in a frenzy of construction in which the pace of work has been accelerated. Jiang Bo, an engineer with the manufacturer Goldwind, told me: 'Seven years ago we could only do one wind turbine in about two days - but our current speed is that we can do two in one day.' However, integrating this surge in wind power has posed a series of challenges. The windiest regions, such as Xinjiang, tend to be extremely distant from the biggest cities where the electricity is most needed. And the construction of wind farms has often outstripped the building of the connections needed to link the turbines to the grid. The grid itself, accustomed to handling the predictable output of power stations burning coal, has struggled to cope with the intermittency of wind. The result has been that some wind farms have been ordered to shut down even on windy days - a process known as curtailment. Last year as many as 20%-30% of turbines across China were left idle at particular times but wind industry officials say the problem is now being tackled. ... The most recent figures, for 2012, show that wind only generated 2% of the country's electricity. Coal, the largest contributor, generated 75%. However, since China's total generation is more than that of all European Union countries combined, wind's percentage is large in absolute terms."
China on world's 'biggest push' for wind power
BBC Online, 8 January 2014

"Investors in Gazprom seemed unconcerned about it missing another deadline to sign a massive deal for gas supplies to China by the end of 2013. In fact, Russia’s state gas company has been discussing the planned deal with China’s CNPC for so many years that many started doubting it would ever happen. But now an agreement is within reach...Both Chinese and Russian sources say the two sides are getting close to a pricing arrangement that would allow the gas to arrive in eastern Chinese markets at about $13 per million British thermal units. That would translate into $10-$11 per mBtu at the Chinese border – a price that suits both Chinese and Russian calculations. China has long insisted that it will not pay Gazprom much more than the $9 per mBtu it pays for gas from Turkmenistan, and that the piped gas must be cheaper than liquefied natural gas. 'Price talks have become less difficult for Gazprom now that LNG prices are high,' says Julia Pribytkova, a gas analyst at Moody’s in Moscow....The formula for the deal is expected to be based on a reference to oil price products in Asia, possibly Singapore crude. The Chinese side is quick to point out it no longer needs the Gazprom gas as much as it did when negotiations began a decade ago. China has now constructed alternate gas pipeline links with central Asia and Myanmar. LNG terminals already import shipped gas and more are in the works, to take gas from Qatar, Australia and even Russia itself. 'Russia is already 10 years too late in entering China’s gas market,' says China-Russia energy expert Feng Yujun of the China Institutes of Contemporary International Relations. 'Time is on China’s side,' he adds. But China cannot be too dismissive of Gazprom either. The country faces a large future gas deficit, thanks to plans to cut coal-fuelled pollution in the more prosperous eastern cities. An important part of those plans simply call for moving coal-burning power and industrial projects further out to the poor and arid west, but eastern cities’ manufacturing, heating and power will still require a lot more gas."
Gazprom close to agreeing pricing deal on China gas supplies
Financial Times, 5 January 2014

"Safety rules will probably be tightened on crude oil shipments from North Dakota following a string of railway explosions, threatening to damp an energy boom that has boosted the region’s economy. U.S. regulators yesterday issued a safety alert after a train carrying oil crashed and caught fire earlier this week in North Dakota, where surging production has helped lead a renaissance in domestic energy and driven the state’s unemployment rate to the nation’s lowest. The type of oil pumped from the shale formations of North Dakota may be more flammable and therefore more dangerous to ship by rail than crude from other areas, the Transportation Department said in the alert. Regulators are considering imposing tougher rules on railcar construction, among other steps, potentially raising the cost of moving the crude to market. “A couple years ago, we really weren’t transporting much oil by train,” Brigham McCown, a former administrator of the Pipeline and Hazardous Materials Safety Administration, said today in a phone interview. “The monumental growth in oil transport by rail means there are opportunities to have things not classified right.” This week’s incident, near the town of Casselton, is the fourth major derailment in six months by trains transporting crude. An explosion of a runaway train carrying North Dakota oil in July killed 47 in Quebec. Restrictions on railcars could worsen a shortage of capacity for moving oil to refineries. Pipelines could be affected as well. .... Record volumes of oil are moving by rail as production from North Dakota and Texas have pushed U.S. output to the most since 1988 and pipeline capacity has failed to keep up. North Dakota in particular relies on the railways to carry its crude East or West and away from the bottlenecks to the Gulf Coast refineries.  If the lighter crude releases gases that could be explosive after a rail crash, it could also lead to an explosion after oil leaks from a pipeline, Carl Weimer, the executive director of the Pipeline Safety Trust, an independent advocate for pipeline-safety rules, said in an interview. “If it’s the same type of oil, it could be the same type of issues with pipelines,” Weimer said.  PHMSA, the Transportation Department unit that issued yesterday’s alert, said it is also looking at how corrosive shale oil is to railcars, something Weimer said also could affect pipelines. Three pipeline companies including Enbridge Inc. (ENB) warned regulators that North Dakota oil with too much hydrogen sulfide, which is toxic and flammable, was reaching terminals and putting workers at risk.... Crude from the Bakken, which is along the northwest section of North Dakota and east of Montana, accounts for more than 10 percent of the nation’s oil production, after more than doubling between 2010 and 2012. Drillers use a combination of horizontal drilling and hydraulic fracturing to unlock previously unreachable shale deposits. Bakken crude tends to be flammable because it contains a large fraction of volatile propane and butane, said Zak Mortensen, business development manager for Inspectorate America Corp., which performs oil quality inspections."
Bakken Crude Pegged as More Dangerous Imperils Shale Boom
Bloomberg, 3 January 2014

"China's biggest producer of rare earths, the Inner Mongolia Baotou Steel Rare Earth Group (600111.SS), has acquired nine regional mining companies as part of a government masterplan to consolidate the sector. China produces more than 90 percent of the world's rare earth metals, a group of 17 elements used in a wide range of applications in sectors like renewable energy, telecommunications and defense. Since 2010, it has tried to improve industry regulation, imposing tough new production and export quotas, raising environmental standards and cracking down on smuggling, once the source of nearly a third of the rare earths flowing to international markets. It has also sought to consolidate miners under the control of a small number of state-owned producers."
China Baotou Rare Earth acquires nine regional miners
Reuters, 2 January 2014

"Russia retained the title of the world's top oil producer with 2013 output reaching a post-Soviet high as rising exports to China and strong prices allow the Kremlin to maintain record spending from an overstretched budget. Energy has been the engine of Russia's growth during more than a decade of leadership by President Vladimir Putin, with oil and gas accounting for more than half of budget revenues.... The IEA, the West's energy watchdog, expects Russian production to remain flat at around 10.5 million barrels per day (bpd) until the end of the decade, and then decrease to about 9.5 million bpd by 2035. The IEA says that key to maintaining Russian production levels would be the Kremlin's ability to extract hard-to-recover oil, emulating U.S. successes, and to encourage more production in remote Arctic and East Siberia regions."
Rise in Russian oil output supports overstretched budget
Reuters, 2 January 2014

"World energy power Russia said on Thursday that its oil output hit a post-Soviet high in 2013 while natural gas production at its vast Gazprom holding slipped for the second straight year. The mixed figures — highlighted by yet another dip in oil exports outside ex-Soviet territories — point to lingering problems in a sector that accounts for about half of Russia’s budget revenues. It also remains instrumental to President Vladimir Putin as he battles a rapid economic slowdown that has put a strain on the commitment to broader social spending he made when re-elected to a third term in 2012. The Russian energy ministry’s reporting unit said oil and gas condensate production grew by 1.0 percent last year to reach a new record of 523.3 million tonnes (10.51 million barrels per day). Analysts and Russian media reports attributed the jump to soaring output by state-owned Rosneft — the world’s largest publicly traded oil firm — at the mammoth Vankor field it launched in Siberia in 2009. Gazprom is also ramping up production of gas condensate as its seeks to diversify away from its traditional but stalling pipeline supplies of blue fuel to Europe. Russia had established its previous oil output high in 2012 when it reached 10.40 million barrels per day. Its post-Soviet low came in 1994 when daily output slumped to 6.0 million barrels — less than half of the 12.4 million barrels Russia and 14 other republics produced as part of the Soviet Union in 1988. The current rate outpaces Saudi Arabian output and clinches for Russia the title of the world’s biggest oil producer. But Russia lacks the quick ability of Saudi Arabia to boost output in case of a strong global economic rebound or more serious turmoil in the Middle East. It also appears to be unable to break through any further on large foreign markets to which it has no direct pipeline and that in some cases are starting to depend on US shale oil. Thursday’s figures showed Russia’s exports outside the former Soviet nations declining by 2.2 percent. Russia’s overall natural gas production rose last year amid stiffer competition for state-owned Gazpom from privately-owned firms such as Novatek and Lukoil. Total natural gas output rose by 2.1 percent to 668.0 billion cubic metres (23.6 trillion cubic feet). Gazprom’s production was reported at 476.1 billion cubic metres — down from 478.8 billion cubic metres in 2012 and well off 2011 output of 513.1 billion cubic metres. The drop reflects the reality that almost all of Gazprom’s foreign sales are focused on European and post-Soviet countries now experiencing some of the slowest growth rates in the world. Gazprom has also been slow to shift its focus to liquefied natural gas (LNG) production that could help it reach the growing markets of Asia and Latin America. Russia’s shale supplies are only now being probed in detail and estimates vary over how much oil and natural gas they might hold. The US Energy Information Adminstration (EIA) said last year that Russia had the world’s largest supplies of shale oil but only the ninth-biggest quantity of such untapped natural gas. But the report said that most of Russia’s shale oil rested in western Siberia’s Bazhenov formation that is particularly difficult to extract. The EIA believes only only six percent of that oil may be reached with currently available technology."
Russia’s 2013 oil output highest in post-Soviet era
AFP, 2 January 2014

"Energy firms ‘deliberately inflated’ the price they paid for electricity from their own power stations - leaving customers out of pocket by up to £150 over the last three years, it was claimed today. The so-called Big Six - British Gas, SSE, E.ON, EDF, npower, and Scottish Power - paid £4billion more for power than the market rate, according to shadow energy secretary Caroline Flint. The Labour politician accused the companies of paying over the odds to increase profits in other divisions of their companies or doing deals that were bad for customers."
Big Six energy firms 'deliberately inflated' price paid for electricity from their own power stations
Mail, 2 January 2014

"For a third year, international oil prices have gone nowhere. Brent, the global marker, has averaged more than $108 a barrel in 2013 – like it did in 2012 and 2011 – as feared oversupply from the US shale revolution failed to materialise because of production setbacks in other parts of the world. Many believe 2014 will be the year in which rising output finally overwhelms modest demand growth, sending prices lower and testing Opec’s resolve to balance the market and keep prices stable. “The US shale revolution, coming on top of the maturation of deepwater production, paints a robust supply picture,” says Ed Morse, head of commodities research at Citi. His bank expects Brent to average $98 a barrel in 2014. Others, though, argue supply will disappoint, providing a powerful prop for Brent. 'The patterns of recent years are likely to repeat themselves because nothing has really changed,' says Michael Dei-Michei of JBC Energy, a consultant which is forecasting an average Brent price of $110 a barrel next year.Why the opposing forecasts? The main reason is differing views on the risk of more supply disruptions within Opec....With the prospects for supplies hard to predict, a more fruitful way for investors to assess the oil market may be to look at demand growth, where more clear-cut shifts are discernible. Indeed, the IEA recently raised its forecasts for global oil consumption amid the strongest US demand growth in a decade. It is now forecasting global oil demand growth of 1.2m b/d in 2014....One thing on which everyone appears to agree is that US oil prices will remain volatile in 2014. Surging shale oil production along with severe restrictions on exports has led the North America oil market to diverge from the global market in recent years. And a build-out of pipeline infrastructure has allowed the glut of oil produced in shale rock formations such as the Bakken in North Dakota and Eagle Ford in Texas to move to markets on the US Gulf Coast."
Opec supply risk divides oil strategists
Financial Times, 1 January 2014

".... if you look around and see what the world is now facing I don't think  in the last two or three hundred years we've faced such a concatenation of  problems all at the same time.....[including] the inevitability, it seems to me, of resource wars....  if we are to solve the issues that are ahead of us, we are going to need to think in completely different ways. And the probability, it seems to me, is that the next 20 or 30 years are going to see a period of great instability... I fear the [current] era of small wars is merely the precursor, the pre-shock, for something rather larger to come... we need to find new ways to be able to live together on an overcrowded earth."
Paddy Ashdown, High Representative for Bosnia and Herzegovina 2002 -2006
BBC Radio 4, 'Start The Week', 30 April 2007

"Individual peace is the unit of world peace. By offering Consciousness-Based Education to the coming generation, we can promote a strong foundation for a healthy, harmonious, and peaceful world.... Consciousness-Based education is not a luxury. For our children who are growing up in a stressful, often frightening, crisis-ridden world, it is a necessity."
Academy Award Winning Film Producer David Lynch (Elephant Man, Blue Velvet, etc)
David Lynch Foundation

NLPWESSEX, natural law publishing
nlpwessex.org