Sun4.jpg (8555 bytes)

NLPWESSEX, natural law publishing

"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.... If we are to solve the issues that are ahead of us,

we are going to need to think in completely different ways."

  Paddy Ashdown, High Representative for Bosnia and Herzegovina 2002 - 2006



** To Go Direct To Current Energy News Reports - Click Here **
To Go Direct To 2015 News Reports Archive - Click Here **


Peak Oil and Energy Crisis News

Earlier Peak Oil And Energy Crisis News










"Ten years ago you couldn’t avoid it if you tried. Books by James Howard Kunstler, Richard Heinberg, Kenneth Deffeyes, and others were warning that worldwide oil production would inevitably peak soon, based on analysis similar to that of celebrated geologist M. King Hubbert, who predicted, in 1956, that U.S. oil production would peak between 1965 and 1970. Darn if he wasn’t right. With the presumed world peak in oil production, national economies hooked on injecting oil straight into their largest arteries then began to decline. Peak oil doesn’t mean oil would disappear – half of it would still be left – just that less of it would be produced each year going forward, and shell-shocked economies would fall into a permanent state of recession as consumers battled, Mad Max-like, for every last barrel. Except “events never play out the way one expects,” said James Murray, a speaker at a session entitled “Is Peak Oil Dead and What Does It Mean for Climate Change?” at the AGU Fall Meeting in the City by the Bay. Technology came to the rescue, in the forms of fracking and three-dimensional directional drilling. U.S. oil production soared upward 54 percent in just five years, from 3.3 billion barrels in 2009 to 5.1 billion barrels in 2014. Although world oil production increased by only 8.5 percent in that time, it was enough to keep it from peaking. So is peak oil now an outdated concept, or does it still lie in our future? The latter, most experts at the AGU meeting were saying, while admitting they hadn’t foreseen the technological revolution that has allowed U.S. oil and gas production to soar over the past decade. Those resources are finite, and the cost of extracting them increases once the low-hanging fruit are picked. Oil has dropped to about $35 per barrel because oil producers, hungry for unconventional oil from tar sands and gas from shale, overproduced. Yet they’re still not making money, said James Murray from the University of Washington. Shale oil – what the industry calls “tight shale” – “is profitable for drillers, hotels and restaurants, but not for investors,” he said. Cash flow in this sector was $10 billion in the red in 2014, even as yet more money is plowed into it from, Murray thinks, investors desperate for yields as the Federal Reserve keeps inerest rates extremely low. Murray said the break-even price for conventional oil is $20 per barrel, but $75 per barrel for tight oil. So oil companies are drawing back: U.S. oil production seems to have peaked in July 2015, and even the Eagle Ford shale basin in Texas and the Bakken field in North Dakota are cutting back. “The world may be close to peak oil production,” Murray concluded....David Hughes, president of Global Sustainability Research, Inc. in Calgary, pointed out that “the remaining reserves [of fossil fuels] are large, but of lower quality and require more energy to produce.” He estimated that more than 90 percent of what are known in the field as 'unconventional sources' – shale gas and oil and tar sands oil – 'are not recoverable.'"
Whatever became of 'peak oil'? Still to come?
Yale Climate Connections, 18 December 2015


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



2015 - 2014 - 2013 - 2012 - 2011 - 2010 - 2009 - 2008 - 2007


"Oil explorers shut down more rigs in U.S. fields to finish out the worst year for drilling cutbacks in almost three decades. Rigs targeting crude in the U.S. fell by 2 to 536 in the past week, Baker Hughes Inc. said on its website Thursday. Natural gas rigs were unchanged at 162, bringing the total of working rigs to 698. Drillers searching for oil idled 59 percent of their rig fleet this year, the steepest annual cut since at least 1988. The downward slide in working rigs probably will continue into the new year, crimping output from shale fields by at least 400,000 barrels a day, Andrew Cosgrove and William Foiles, analysts at Bloomberg Intelligence, said in a Dec. 28 report. Rigs designed to drill straight down into traditional fields have been hit harder than those capable of boring sideways through shale, Baker Hughes’ data showed. Vertical rigs are taking a bigger hit “as lower oil prices pressure development of legacy fields, mainly in Texas,” the analysts wrote. Two-thirds of oil rigs in the U.S. have been parked since drilling peaked in October 2014. Growing supplies of crude outpaced demand, deflating prices below $40 a barrel and forcing severe spending cutbacks throughout the industry. U.S. crude dipped below $35 -- its lowest price in 11 1/2 years -- earlier this month. U.S. oil production fell to a low this year of 9.1 million barrels a day with the decline in drilling, but rose to 9.2 million as of Dec. 25....Demand for the costliest rigs -- those searching in deep seas for crude -- is at its lowest since a 2010 federal moratorium that shut most Gulf of Mexico exploration after the oil spill disaster at BP Plc’s Macondo well."
Worst Year for Oil Rigs in Quarter Century Closes With a Whimper
Bloomberg, 31 December 2015

"Uranium has fallen from around $US152 per pound in 2007 to well under $US60 since the global financial crisis, with a low just above $US28 in May 2014. This year, it peaked around $US40 in March. It is currently trading at $US35.35, which is just off the year's lows. Mr Schembri said that the price would return to $US40, rising to $US50 in the longer term. At these price levels, existing mines would remain viable and new ones would open, he said. ... Toro Energy, which hopes to develop the Wiluna uranium desposit in Western Australia, was upbeat about the future in its 2015 annual report. "Market sentiment continues to improve as emerging economies embrace low-emission nuclear power," said Toro. "Demand increases of between 15 per cent and 22 per cent by 2020 and 37 per cent to 58 per cent by 2025 are expected." Long-term prices for a pound of uranium were around $US44-$US45, the company said, with China, India and Japan the key drivers of demand. Globally, said Toro, there were 442 reactors around the world producing 380 gigawatts of power. In 2025, this is expected to increase to 512 reactors producing 471 gigawatts. In 2030, there are expected to be 576 reactors producing 560 gigawatts. Australia, which produces 11 per cent of the world's uranium and is the world's third-largest producer after Canada and Kazakhstan, currently has three operating uranium mines: Ranger in the Northern Territory, Olympic Dam (the world's largest uranium deposit) in South Australia and Four Mile in South Australia. Australian-listed uranium miners and explorers include Energy Resources of Australia, BHP Billiton, Rio Tinto, Paladin Energy, and Mintails. There are a numerous proposals for new Australian mines, including four well-advanced proposals in Western Australia alone: Lake Way (Wiluna), which Toro Energy hopes to mine; Yeelirrie and Kintyre, which Canadian uranium miner Cameco wishes to develop; and Mulga Rock, which Vimy Resources has an interest in. However, the new mines – which could create up to 1300 long-term jobs and be worth $1 billion a year to Western Australia by 2020 – have still not been formally approved and are dependent on the uranium price improving as forecast."
Australian uranium in demand as China goes full steam for nuclear
Sydney Morning Herald, 31 December 2015

"It is misleading to say the world sits on excess stocks of 3 bn barrels of oil, 2.7 bn of which are already needed in both crude and product stocks for a smooth operation of the refining and distribution system. Most of the stock build since mid 2014 seems to be related to US light tight oil which refineries could not accommodate due to their original designs."
Where actually is that much-hyped global oil glut?
Crude Peak Oil, 29 December 2015

"In 2015, the fracking outfits that dot America’s oil-rich plains threw everything they had at $50-a-barrel crude. To cope with the 50 percent price plunge, they laid off thousands of roughnecks, focused their rigs on the biggest gushers only and used cutting-edge technology to squeeze all the oil they could out of every well. Those efforts, to the surprise of many observers, largely succeeded. As of this month, U.S. oil output remained within 4 percent of a 43-year high. The problem? Oil’s no longer at $50. It now trades near $35. For an industry that already was pushing its cost-cutting efforts to the limits, the new declines are a devastating blow. These drillers are “not set up to survive oil in the $30s,” said R.T. Dukes, a senior upstream analyst for Wood Mackenzie Ltd. in Houston. The Energy Information Administration now predicts that companies operating in U.S. shale formations will cut production by a record 570,000 barrels a day in 2016. That’s precisely the kind of capitulation that OPEC is seeking as it floods the world with oil, depressing prices and pressuring the world’s high-cost producers. It’s a high-risk strategy, one whose success will ultimately hinge on whether shale drillers drop out before the financial pain within OPEC nations themselves becomes too great..... Even a plunge in U.S. output may not be enough to drain a global supply glut that has almost 3 billion barrels of oil and products like gasoline in developed countries’ storage tanks, according to the International Energy Agency. The world will likely be oversupplied by about 1 million barrels a day through the first half of next year before balancing, Jefferies LLC analysts including Jason Gammel said in a Dec. 18 research note."
Shale's Running Out of Survival Tricks as OPEC Ramps Up Pressure
Bloomberg, 28 December 2015

"With oil prices touching decade lows, misery pervading the oil and gas sector, and 2016 just around the corner, forecasters are out in force with their predictions – and by and large calling for a long, low oil-price run. After missing the signs that led to oil’s crash to US$35 a barrel, the oracles now believe nearly free oil will keep rushing into a saturated global market. Goldman Sachs analysts are out in front, as they often are, predicting prices could touch US$20 a barrel in 2016 — and potentially stay low for the next 15 years. Scotiabank sees West Texas Intermediate oil averaging “no more than US$40-45 per barrel for 2016 and US$45-50 for 2017.” Suncor Energy Inc., as part of its efforts to ensnare competitor Canadian Oil Sands at the bottom of the cycle, says “oil price futures suggest we won’t see US$55 per barrel until at least 2020.” Really? The fact is that oil – and gas — forecasting is a crap shoot, that too many people become invested in their own views to see contrarian trends, and that reality changes all the time. That’s why everyone missed the current crash, and why predictions that oil is down and out should be regarded with skepticism. Corporations are adjusting their plans to the “lower for longer” oil environment, based on two top assumptions: Growing U.S. tight oil has ushered an era of oil abundance, and the OPEC cartel has unraveled, leaving oil prices adrift at a time the market is so obsessed with a 1.5 per cent world supply surplus it has pushed down oil prices by more than 60 per cent."
Why oil forecasting is a crap shoot, and free oil for the world ain’t going to happen
Financial Post, 24 December 2015

"After 37 miserable years of the so-called Islamic Republic (IR) and more than $1.6 trillion of oil income, Iran's oil and gas infrastructure has become ineffective and is suffering from poor management and chronic corruption. As a result, the well-respected healthy national oil company, with a 6.3 million b/d crude production prior to the revolution, plunged to a near bankrupt industry with at best a little above 3 million b/d production. Iranian output has reached a plateau for some time now, and production has been on the wane by over 200,000 barrels/day/per year for the past decade. Pressure dropping in reservoirs and continuous year-to-year decline in production appear to have been triggered by long periods of technical constraints on operations and by natural aging of the Iranian fields. The lack of regular maintenance and application of new technology, and particularly extensive neglect of the fields in the last several years under sanctions, have resulted in further damage to the Iranian reservoirs. Geologically, high degradation of reservoirs can take place while wells have been shut-in or declining in production. This condition is exacerbated if gas injection has not been performed on reservoirs for a while. According to U.S. EIA, the National Iranian Oil Company (NIOC) needs to inject at least 260 million cubic meters of gas daily to its matured oil fields. But in recent years, NIOC has never had the capability to inject more than half of this volume per day, and recently, since the production of gas is hardly even equal to domestic consumption, no gas remains to be injected. Therefore, EIA concludes that old Iranian oil fields are naturally losing pressure, which causes 8 to 13 percent oil production to deplete each year. Currently, the majority of power plants in the country use liquid fuel due to scarcity of gas, which leads to terrible air pollution. ...Investors that are planning to make deals with the Islamic Republic should be aware that they still face a lot of uncertainty and risk with the possibility of the return of sanctions looming for years to come. Oil companies planning to do business in Iran should be wary of the problem of chronic corruption in the governing system of the country. There are bureaucratic attitudes that dominate the business environment in Iran. So long as this ill-managed regime is in control, investments in the Iranian oil industry, along with opportunities they might provide, could also be a great risk to prospective contractors. Further, the present governing system in Iran certainly raises questions over the security of investments by major oil companies in Iran. Therefore, the question is, can NIOC deliver as its officials claim? The fact is, the capabilities of Iran's petroleum industry fall short of said rhetoric."
Iran delusional about its oil potential
OilPrice, 24 December 2015

"Opec said demand for its crude will slide to 2020, though less steeply than previously expected, as rival supplies continue to grow. The organization will need to pump 30.7 million barrels a day by the end of the decade, Opec said on Wednesday in its annual World Oil Outlook. That’s 1.7 million barrels more than projected a year ago, and 1 million less than the group pumped in November. The forecast underlines the struggle faced by the organization of petroleum exporting countries as it seeks to defend market share against a surge in output from rivals such as the US and Russia. While Opec is slowly taming the expansion of competitors, the collapse in oil prices means the financial costs of its strategy are immense. Brent crude futures touched an 11-year low of $36.04 a barrel on 21 December. “Although lower oil prices continue to foster some demand growth, their impact seems to be limited by other factors,” the group said. “The removal of subsidies and price controls on petroleum products in some countries and ongoing efficiency improvements will all likely continue restricting oil demand growth.” The 30.7 million barrels of daily output needed from 12 of Opec’s members in 2020 is about 300,000 a day less than required this year, when it repeatedly pumped above its production target before scrapping the limit altogether earlier this month. The supply total excludes Indonesia, which formally rejoined Opec on 4 December. Opec assumes that prices will rise to average $80 a barrel in nominal terms in 2020, and $70.70 in real terms. .... The group cut forecasts for non-Opec supply in 2020 by 1 million barrels a day to 60.2 million a day as “market instability” leads to reductions in spending and drilling. Non-Opec supply will still grow by 2.8 million barrels a day this decade, including 800,000 barrels of additional US shale oil. Opec said the outlook, which incorporated some data set in the middle of the year, was “clouded by uncertainties.” The report also forecasts supply and demand through to 2040. Non-Opec supply will contract in the last two decades of the period to 59.7 million barrels a day, the group said. As a result, demand for Opec’s crude will rise to 40.7 million barrels a day, expanding its market share to 37%. Almost $10 trillion, in 2014 terms, will need to be invested in the oil industry through to 2040 to develop the required supplies, with $7.2 trillion of this in exploration and production."
Opec sees demand for its crude oil falling for rest of the decade
Bloomberg, 24 December 2015

"Petroleos Mexicanos plans to cut jobs next year after posting a record loss and seeing oil production fall to a 25-year low. The state-owned oil producer is set to announce the staff reduction as part of the plan to restructure the company and to synchronize itself to industry standards, interim Chief Financial Officer Rodolfo Campos said in a phone interview Wednesday. Mexico is opening its energy industry to foreign companies for the first time in decades to help stem a persistent decline in production at a time when falling prices are already reducing income. Oil output at Pemex in 2015 will drop to the lowest since at least 1990 as a series of accidents and budget cuts curbed supply. The company is nearing $100 billion in debt and recently posted a record loss of about $10.2 billion in the third quarter....Pemex’s output is set to drop 6.7 percent from 2014, falling for an eleventh straight year. Production is more than 100,000 barrels a day below the original 2.4 million forecast for the year by Chief Executive Officer Emilio Lozoya."
Pemex to Announce Job Cuts With Oil Production at 25-Year Low
Bloomberg, 24 December 2015

"According to Inside EVs, a website that reports on EV sales, through the first 11 months of 2014 there were 110,011 EVs sold in the U.S. This year, sales in the first 11 months have fallen to 102,898 vehicles — a decline of 6.5%. Annual EV sales did grow rapidly from 2011 to 2013, but haven’t grown much beyond 2013's 97,507 vehicles sold. But 100,000 vehicles per year is nothing to sneeze at, right? Well, let’s compare that against overall vehicle sales. According to Automotive News, the first 11 months of 2014 saw overall vehicle sales in the U.S. of 15,015,434 automobiles (cars, light-duty trucks, and SUVs). That means that electric cars sales accounted for about 0.7% of the market. But what’s much more revealing is that overall vehicle sales in the U.S. this year through November were 15,826,634 automobiles. Thus, in one year the number of cars sold in the U.S. has increased by 811,200 vehicles. That’s a one-year increase that’s more than double the total EV sales of the past 5 years — and almost all of those vehicles run on petroleum."
The Fallacy Of Peak Oil Demand
Forbes, 22 December 2015

"Security researcher Brian Wallace was on the trail of hackers who had snatched a California university's housing files when he stumbled into a larger nightmare: Cyberattackers had opened a pathway into the networks running the United States power grid. Digital clues pointed to Iranian hackers. And Wallace found that they had already taken passwords, as well as engineering drawings of dozens of power plants, at least one with the title "Mission Critical." The drawings were so detailed that experts say skilled attackers could have used them, along with other tools and malicious code, to knock out electricity flowing to millions of homes. Wallace was astonished. But this breach, The Associated Press has found, was not unique. About a dozen times in the last decade, sophisticated foreign hackers have gained enough remote access to control the operations networks that keep the lights on, according to top experts who spoke only on condition of anonymity due to the sensitive nature of the subject matter. The public almost never learns the details about these types of attacks — they're rarer but also more intricate and potentially dangerous than data theft. Information about the government's response to these hacks is often protected and sometimes classified; many are never even reported to the government. These intrusions have not caused the kind of cascading blackouts that are feared by the intelligence community. But so many attackers have stowed away in the largely investor-owned systems that run the U.S. electric grid that experts say they likely have the capability to strike at will. And that's what worries Wallace and other cybersecurity experts most. "If the geopolitical situation changes and Iran wants to target these facilities, if they have this kind of information it will make it a lot easier," said Robert M. Lee, a former U.S. Air Force cyberwarfare operations officer. "It will also help them stay quiet and stealthy inside." In 2012 and 2013, in well-publicized attacks, Russian hackers successfully sent and received encrypted commands to U.S. public utilities and power generators; some private firms concluded this was an effort to position interlopers to act in the event of a political crisis. And the Department of Homeland Security announced about a year ago that a separate hacking campaign, believed by some private firms to have Russian origins, had injected software with malware that allowed the attackers to spy on U.S. energy companies. "You want to be stealth," said Lillian Ablon, a cybersecurity expert at the RAND Corporation. "That's the ultimate power, because when you need to do something you are already in place.""
AP Investigation: US power grid vulnerable to foreign hacks
Associated Press, 21 December 2015

"China’s coal consumption has been falling for two years and may never recover as the moment of "peak coal" draws closer, the International Energy Agency (IEA) has said. The energy watchdog has slashed its 2020 forecast for global coal demand by 500m tonnes, warning that the industry risks unstoppable decline as renewable technologies and tougher climate laws shatter previous assumptions. In poignant symbolism, the peak coal report came as miners worked their final shift at Britain’s last surviving deep coal mine at Kellingley in North Yorkshire, closing the chapter on the British industrial revolution. Mines around the world are at increasing risk as prices slump to 12-year lows of $38 a tonne, and the super-cycle gives way to a pervasive glut. The IEA said the $40bn Galilee Basin project in Australia may never become operational. There is simply not enough demand, even for cheap, open-cast coal."
International Energy Agency sees 'peak coal' as demand for fossil fuel crumbles in China
Telegraph, 19 December 2015

"Inflation will fall back to levels not seen since before the Second World War across the advanced world this year. The past 12 months are set to mark the first year since 1932 that inflation has fallen below 2pc in every economy in the G7, according to City analysts, reflecting the drag brought on by a slump in commodity prices. A dramatic oil price rout beginning in the summer of 2014 has pulled down price growth across the group. Not since the Great Depression has price growth been so weak, according to historical data compiled by economists Carmen Reinhart and Kenneth Rogoff."
Oil price rout sends inflation to lowest levels witnessed since Great Depression
Telegraph, 19 December 2015

"Ten years ago you couldn’t avoid it if you tried. Books by James Howard Kunstler, Richard Heinberg, Kenneth Deffeyes, and others were warning that worldwide oil production would inevitably peak soon, based on analysis similar to that of celebrated geologist M. King Hubbert, who predicted, in 1956, that U.S. oil production would peak between 1965 and 1970. Darn if he wasn’t right. With the presumed world peak in oil production, national economies hooked on injecting oil straight into their largest arteries then began to decline. Peak oil doesn’t mean oil would disappear – half of it would still be left – just that less of it would be produced each year going forward, and shell-shocked economies would fall into a permanent state of recession as consumers battled, Mad Max-like, for every last barrel. Except “events never play out the way one expects,” said James Murray, a speaker at a session entitled “Is Peak Oil Dead and What Does It Mean for Climate Change?” at the AGU Fall Meeting in the City by the Bay. Technology came to the rescue, in the forms of fracking and three-dimensional directional drilling. U.S. oil production soared upward 54 percent in just five years, from 3.3 billion barrels in 2009 to 5.1 billion barrels in 2014. Although world oil production increased by only 8.5 percent in that time, it was enough to keep it from peaking. So is peak oil now an outdated concept, or does it still lie in our future? The latter, most experts at the AGU meeting were saying, while admitting they hadn’t foreseen the technological revolution that has allowed U.S. oil and gas production to soar over the past decade. Those resources are finite, and the cost of extracting them increases once the low-hanging fruit are picked. Oil has dropped to about $35 per barrel because oil producers, hungry for unconventional oil from tar sands and gas from shale, overproduced. Yet they’re still not making money, said James Murray from the University of Washington. Shale oil – what the industry calls “tight shale” – “is profitable for drillers, hotels and restaurants, but not for investors,” he said. Cash flow in this sector was $10 billion in the red in 2014, even as yet more money is plowed into it from, Murray thinks, investors desperate for yields as the Federal Reserve keeps inerest rates extremely low. Murray said the break-even price for conventional oil is $20 per barrel, but $75 per barrel for tight oil. So oil companies are drawing back: U.S. oil production seems to have peaked in July 2015, and even the Eagle Ford shale basin in Texas and the Bakken field in North Dakota are cutting back. “The world may be close to peak oil production,” Murray concluded....David Hughes, president of Global Sustainability Research, Inc. in Calgary, pointed out that “the remaining reserves [of fossil fuels] are large, but of lower quality and require more energy to produce.” He estimated that more than 90 percent of what are known in the field as 'unconventional sources' – shale gas and oil and tar sands oil – 'are not recoverable.'"
Whatever became of 'peak oil'? Still to come?
Yale Climate Connections, 18 December 2015

"Russian President Vladimir Putin said on Thursday the $50 per barrel price for oil factored in the 2016 budget was too optimistic and the government needed to make adjustments. "We had calculated next year's budget based on $50 per barrel. This is a very optimistic valuation today. Now it's already $38. That's why we will have to correct something there," Putin said at his annual news conference. He said the peak of the economic crisis in Russia had passed but the government's forecasts for 0.7 percent economic growth in 2016 and 1.9 percent growth in 2017 were based on assumptions the oil price would be $50 per barrel."
Russia's Putin says $50 per barrel oil in 2016 budget 'too optimistic'
Reuters, 17 December 2015

"40,000 Alberta oil jobs lost since the price of petroleum plummeted late last year. According to Petroleum Labour Market Information, 185,000 will have been lost by spring, as a result of the market crash.... Between January and June, suicides spiked 30% compared to 2014. At this rate, 654 Albertans will have killed themselves this year, an unprecedented number for a region that already had the second highest suicide rates amongst the 10 provinces. Only Saskatchewan, another energy-dependent region, has a higher rate, and it’s seen 19% more suicides this year. In a widely circulated story this week, the CBC correlated Alberta’s suicides with economic recession."
The boom, the bust, the darkness: suicide rate soars in wake of Canada's oil crisis
Guardian, 14 December 2015

"Turkmenistan on Sunday started work on its part of a natural gas pipeline to Afghanistan, Pakistan and India (TAPI), a $10 billion project designed to reduce its dependence on gas sales to Russia and China. The ground-breaking ceremony took place near the city of Mary in the southeastern part of the central Asian country, close to the giant Galkynysh gas field which is meant to provide gas for the 1,814-kilometre (1,127-mile) link. "By December 2019, the pipeline will be completed. It will have a capacity of 33 billion cubic metres," Turkmen President Kurbanguly Berdymukhamedov said at the ceremony also attended by Afghan President Ashraf Ghani, Pakistan Prime Minister Nawaz Sharif and Indian Vice President Hamid Ansari. Although it is backed by hydrocarbon resources, the TAPI project faces several risks, such as the deteriorating security situation in Afghanistan and lack of clarity about its financing. TAPI's construction is led by state gas firm Turkmengas and none of global energy majors have so far committed to the project that will cost as much as a third of Turkmenistan's total 2016 budget. The only company known to be in talks on TAPI currently is Dubai-based Dragon Oil which produces oil off Turkmenistan's Caspian coast. Gazprom was also looking to join the project in the past."
Turkmenistan starts work on gas link to Afghanistan, Pakistan, India
Reuters, 13 December 2015

"The oil price has fallen to a new seven-year low after the International Energy Agency (IEA) forecast a slowdown in growth in demand for oil. The price of Brent crude oil fell below $39 a barrel at one point, its lowest since December 2008. The IEA said demand in the current quarter was growing by 1.3 million barrels a day, down from 2.2 million barrels in the previous quarter. The IEA predicts that will slip back to 1.2 million barrels a day next year. The price of Brent crude fell to $38.90 a barrel at one point, before recovering slightly to $39.13 - still down 60 cents in the trading session. US crude oil also fell, down 50 cents to $36.12 a barrel. Oil prices are down more than 10% over the week. The trigger was a meeting of oil producers' cartel Opec late last week, which broke up in disarray as the member countries failed to agree to put a lid on production. Opec producers pumped more oil in November than in any month since late 2008, almost 32 million barrels per day. That comes at a time when the world's economic growth is slowing, blunting demand for raw materials. The IEA said that although consumption was likely to have peaked in the third quarter, demand growth of 1.2 million barrels a day was still healthy. Earlier this week, the US Energy Information Administration forecast that US shale oil production, now a major source of oil supply, would fall in January for the ninth month in a row. Sustained falls in output could help to stabilise the price of oil, although some market forecasters suggest the price could continue to fall to as low as $20 a barrel."
Oil hits new seven-year low on glut warning
BBC Online, 11 December 2015

"Russia's Gazprom (GAZP.MM) has held talks with a small Siberian energy firm on using its gas to fill a pipeline to China if the state-controlled giant's own projects to produce and transport the gas are not ready in time, industry sources said. As part of Russia's strategic shift eastwards prompted by rows with the West, Gazprom agreed last year to start pipeline gas supplies to China in 2018-2019, raising them gradually after that to make China one of the biggest customers for Russian gas. However, Gazprom has less money available to finance the scheme than it had expected because low world gas prices have hit its revenues, while sanctions imposed on Russia over Ukraine are making it hard to secure loans from the West. One industry source told Reuters that Gazprom had asked the privately-owned Irkutsk Oil Company, which holds large gas reserves in the region and some infrastructure, to pledge up to 7 billion cubic metres of gas per year for Gazprom's future supplies to China. "There is an agreement in principle, but we don't know the prices yet," the source said."
Gazprom may use third party gas to fill China pipeline: sources
Reuters, 11 December 2015

"Russia is battening down the hatches for a Biblical collapse in oil revenues, warning that crude prices could stay as low as $40 a barrel for another seven years. Maxim Oreshkin, the deputy finance minister, said the country is drawing up plans based on a price band fluctuating between $40 to $60 as far out as 2022, a scenario that would have devastating implications for Opec. It would also spell disaster for the North Sea producers, Brazil’s off-shore projects, and heavily indebted Western producers. “We will live in a different reality,” he told a breakfast forum hosted by Russian newspaper Vedomosti. The cold blast from Moscow came as US crude plunged to $35.56, pummelled by continuing fall-out from the acrimonious Organisaton of Petrol Exporting Countries meeting last week. Record short positions by hedge funds have amplified the effect. Bank of America said there was now the risk of “full-blown price war” within Opec itself as Saudi Arabia and Iran fight out a bitter strategic rivalry through the oil market. Brent crude fell to $37.41, even though demand is growing briskly. It is the lowest since the depths of the Lehman crisis in early 2009. But this time it is a 'positive supply shock', and therefore beneficial for the world economy as a whole. ...The International Energy Agency said in its monthly market report that Opec has stopped operating as a cartel and is “pumping at will”, aiming to drive out rivals at whatever cost to its own members. Opec revenues will fall to $400bn (£263bn) this year if current prices persist, down from $1.2 trillion in 2012. This is a massive shift in global wealth. .... The Russian contingency plans convey a clear message to Riyadh and to Opec’s high command that the country can withstand very low oil prices indefinitely, thanks to a floating rouble that protects the internal budget. Saudi Arabia is trapped by a fixed exchange peg, forcing it to bleed foreign reserves to cover a budget deficit running at 20pc of GDP. Russia claims to have the strategic depth to sit out a long siege. It is pursuing an import-substitution policy to revive its industrial and engineering core. It can ultimately feed itself. The Gulf Opec states are one-trick ponies by comparison. The deputy premier, Arkady Dvorkovich, told The Telegraph in September that Opec will be forced to change tack. “At some point it is likely that they are going to have to change policy. They can last a few months, to a couple of years," he said. Kremlin officials suspect that the aim of Saudi policy is to force Russia to the negotiating table, compelling it join Opec in a super-cartel controlling half the world’s production.  Abdallah Salem el-Badri, Opec’s chief, came close to admitting this last week, saying the cartel is no longer big enough to act alone and will not cut output unless non-Opec producers chip in. ... Russia is in effect calling Opec’s bluff, gambling that it has the greater staying power. It cannot easily cut output since its main producers are listed companies, answerable to shareholders. Any arrangement would have to be subtle."
Russia plans $40 a barrel oil for next seven years as Saudi showdown intensifies
Telegraph, 11 December 2015

"Drained by a 17-month crude rout, some U.S. shale oil companies are merely hanging on for life as oil prices lurch further away from levels that allow them to profitably drill new wells and bring in enough cash to keep them in business. The slump has created dozens of oil and gas "zombies," a term lawyers and restructuring advisers use to describe companies that have just enough money to pay interest on mountains of debt, but not enough to drill enough new wells to replace older ones that are drying out. Though there is no single definition of a zombie, most investors and analysts consulted by Reuters say they tend to have exceptionally high debt loads and face the prospect of shrinking oil reserves. About two dozen oil and gas companies whose debt Moody's rates toward the bottom of its junk bond scale broadly fit that description. Investors and analysts mentioned SandRidge Energy Inc., Comstock Resources, and Goodrich Petroleum Co as some of that group's more prominent members. To stay alive, zombie companies have curbed costly drilling and are using revenue from existing production to pay interest and other expenses in a process some describe as "slow-motion liquidation." Bankruptcies and defaults loom because the cutbacks in new drilling have been so deep that many companies risk getting caught in a vicious circle of shrinking oil reserves, falling revenue and declining access to credit, experts say.  As long as oil prices stay below the estimated break-even level of $50 a barrel, the zombie group is set to grow. In fact, so many oil companies are struggling that "zombies" are the topic of a keynote address at a big energy conference in Houston on Thursday."
Zombies appear in U.S. oilfields as crude plumbs new lows
Reuters, 10 December 2015

"Crude prices fell on Monday in the first trading session after OPEC members failed to agree on output targets to reduce a bulging oil glut that has cut prices by more than 60 percent since June 2014. The Organization of the Petroleum Exporting Countries failed to agree on an oil production ceiling on Friday after a disagreement between Saudi Arabia and Iran meant that the group for the first time in decades didn't even mention an output quota, which previously stood at 30 million barrels per day (bpd). "Past communiques have at least included statements to adhere ... or maintain output in line with the production target (of 30 million barrels per day). This one glaringly did not," Barclays bank said. By ditching any output limits, analysts said the group was sending a message to other producers such as Russia or North American shale drillers that it was willing to accept low oil prices to defend market share."
OPEC decision to keep output high pulls oil prices close to 2015 lows
Reuters, 7 December 2015

"Turkey’s president renewed his rhetorical attacks on Russia on Saturday, vowing to break his country’s dependence on the Kremlin’s oil and gas. During a televised speech, Recep Tayyip Erdogan kept up the verbal barrages that Turkey and Moscow have exchanged since Nov 24, when the Turkish air force shot down a Russian jet fighter. Turkey imports almost all of is energy, with more than half of its gas imports – and about 10 per cent of its oil – coming from Russia. Mr Erdogan made a point of commending Turkey’s energy-rich friends like Qatar and Azerbaijan. “It is possible to find different suppliers,” he said, referring to energy imports.  Since the jet was shot down, Russia has banned imports of food from Turkey and prevented its citizens from going on holiday in the country. But Mr Erdogan said that his country “will never bow down to pressure from Russia,” adding that he “did not care whether Russia buys Turkish food or not”. Russia has also suspended negotiations with Turkey on a proposal for a new gas pipeline across the Black Sea. But Mr Erdogan claimed that Turkey had already decided to break off the talks because of Russia’s “non-compliance with our demands”."
Erdogan vows to break Turkey's dependence on Russian oil and gas
Telegraph, 5 December 2015

"The next two quarters will be tough on crude prices, but 2016 will be a year of transition for oil markets, IHS Vice Chairman Dan Yergin said Friday. Yergin told CNBC's "Squawk Box" he expects oil markets to begin to balance next year or in 2017. "The oil market "can't stay low like this because you're not going to have the investment you need," he said." "By 2020, the world oil market is going to need another 7 million barrels a day of production." "Right now, the whole mantra is slow down, postpone, cancel projects," he added. Multinational energy companies and U.S. shale oil producers have slashed capital spending in order to protect their balance sheets as their revenues plummet and cash flow dries up. Crude prices began to sink from historic highs last fall, and the downturn accelerated after OPEC announced it would not cut supply to balance oil markets. Despite expectations that high-priced American crude production would collapse at $70 a barrel, U.S. producers can perform well at $55 to $60 per barrel. However, current prices in the $40 to $50 range are creating "great pain," he said. Yergin said he does not expect OPEC to change its policy of maintaining current oil output levels to defend market share. The 12-member orgnization is meeting Friday in Vienna....After years of sanctions on Iranian oil, Iran's leaders have said they plan to bring 500,000 barrels per day to markets as soon as possible, and they anticipate reaching 1 million barrels. The world is already oversupplied with about 1.5 million barrels of oil."
Yergin: Why oil prices cannot stay this low
CNBC, 4 December 2015

"....researchers report that they’ve created a novel type of flow battery that uses lithium ion technology—the sort used to power laptops—to store about 10 times as much energy as the most common flow batteries on the market. With a few improvements, the new batteries could make a major impact on the way we store and deliver energy."
New type of ‘flow battery’ can store 10 times the energy of the next best device
Science/AAAS, 27 November 2015

"Fuel accounts for more than 70 percent of Russia's exports (in countries such as Iraq, Libya, Venezuela, Algeria or Kuwait, it exceeds 90 percent), but oil rents only make up 13.7 percent of the country's gross domestic product. So there's a dependence on oil revenue but perhaps not a life-threatening addiction. Kuwait and Saudi Arabia have more to worry about, with oil rent at 57.5 percent and 43.6 percent, respectively."
Putin Doesn't Mind Oil's Fall
Bloomberg, 26 November 2015

"A wave of company failures is “inevitable” in Britain’s oil and gas industry, with businesses supporting the wider energy sector the first to fail, according to advisory firm FRP. The prediction comes in the wake of the Autumn Statement, which set out a bleak prediction for future of the North Sea industry with an expected collapse in tax receipts, but offered no relief for the sector. Data from the Office for Budget Responsibility predicted that the tax take from the North Sea would collapse from £2.2bn last year to just £130m in 2015/16, highlighting the intense pressure the sector is under from the oil price crash. Four years earlier the sector’s tax contribution was almost £11bn. "
UK oil industry 'to face wave of company failures'
Telegraph, 26 November 2015

"One of the biggest stories over the past year and a half has been oil's epic tumble, which has reduced the price of a barrel of crude from nearly $110 to just more than $40. But one strategist says the commodity is set to stage a striking turnaround. According to Emad Mostaque, a strategist at consulting company Ecstrat, crude oil is now trading at what is known as "half cycle costs"; that is, roughly the cost of getting the oil out of the ground. His point is that $42 oil does not account for other important costs like that of finding the oil or purchasing the land in which the crude is situated. That would imply that the supply of oil will dry up over time. "The case for triple digit oil is simply that demand stays where it is but supply starts to roll over into next year, but particularly into 2017, due to lack of investments," Mostaque said in a Tuesday "Trading Nation" interview." Further, the market is extremely susceptible to geopolitical risks, he said. This is because there is no "geopolitical premium" baked into current prices, and yet falling oil prices could themselves create instability in one or more oil-producing nations. If that happens, "you could easily get up above $130, because we just don't know where the easy oil is, because we're slashing our exploration spending," Mostaque said."
The surprising case for $100 oil
CNBC, 25 November 2015

"Most of Britain’s major cities will be run entirely on green energy by 2050, after the leaders of more than 50 Labour-run councils made pledges to eradicate carbon emissions in their areas. In a highly significant move, council leaders in Edinburgh, Manchester, Newcastle, Liverpool, Leeds, Nottingham, Glasgow and many others signed up to the promise ahead of the crucial international climate talks that will take place next month in Paris. Labour said this would cut the UK’s carbon footprint by 10%. The pledge, coordinated by Lisa Nandy, the shadow energy and climate change secretary, will mean green transport, an end to gas heating and a programme of mass insulation of homes in cities across the UK."
Most of Britain's major cities pledge to run on green energy by 2050
Guardian, 23 November 2015

"Low gas prices are here to stay for the rest of this decade, new official forecasts suggest, raising the prospect of lower fuel bills for consumers. The Department of Energy and Climate Change has slashed its projections for wholesale gas prices for the second year running, cutting its estimate of gas prices for 2020 by 14pc, new figures released on Wednesday show. Wholesale electricity price forecasts, which are linked to gas, have also been revised down again, with 2020 projections cut by 12pc on last year's - making subsidised renewable energy even more expensive by comparison. Experts said the fall in gas prices has been driven by a combination of the plunge in oil prices, increased global supplies of liquefied natural gas (LNG), and mild winters in Europe.""
Gas prices to stay low for the rest of the decade, Government forecasts
Telegraph, 19 November 2015

"The UK will close all coal-fired power plants by 2025, the first major country to do so, but will fill the capacity gap largely with new gas and nuclear plants rather than cleaner alternatives. The announcement came in a speech by the energy secretary, Amber Rudd, which she described as a “reset” of Britain’s energy policy on Wednesday. Rudd said she wanted policy to focus on making energy affordable and secure. The government wanted a “consumer-led, competition-focused energy system that has energy security at the heart of it”, she said, adding that the balance had swung too far in favour of climate change policies at the expense of keeping energy affordable."
UK to close all coal power plants in switch to gas and nuclear
Guardian, 18 November 2015

"US production peaked in April and has since been drifting lower, dropping 274,000 barrels a day to 9.324m b/d in August, as a result of the sharp slowdown in drilling that followed last year’s crash in oil prices. The slowdown would have been sharper but for two factors: projects coming on stream in the Gulf of Mexico, where lead times are longer and reactions to price movements are slower; and the strength of production in the Permian basin. Output from the other two principal US tight oil “plays” — the Bakken formation of North Dakota and Eagle Ford in south Texas — has been falling. By December the US government’s Energy Information Administration thinks oil production in the Bakken will be down 12 per cent from its peak at the end of last year, while production in Eagle Ford will be down 25 per cent from its peak in March. Production in the Permian, however, is expected to be down just 1 per cent from its level in September. Amrita Sen of Energy Aspects, a consultancy, expects the divergence to persist. By April of next year total US production is likely to be down about 1m b/d from the equivalent period of 2015, but that drop will be driven by other regions. Output in the Permian will be “certainly not be falling”, she says. The Permian, a region about 300 miles by 250 miles that stretches from west Texas into eastern New Mexico, is the most recent of the US shale regions to be developed, and producers there are still climbing the learning curve, raising productivity faster than in other areas. That has made them cut activity there less than in Eagle Ford or the Bakken. EOG Resources, an independent oil group that was the leader in opening Eagle Ford, said this month it had paid $368m for drilling rights on 26,000 acres of the Delaware basin, part of the Permian. It also almost doubled its estimate of its recoverable resources in the region, from 1.35bn barrels of oil equivalent to 2.35bn boe....Some observers have become so excited about the basin’s prospects they have begun to draw parallels with the Marcellus, the most prolific shale gasfield in the US. However, there is no evidence yet that the Permian will become the “Marcellus of oil”, eclipsing all other regions, according to RT Dukes of Wood Mackenzie, the research company. The striking feature of the Marcellus was that the wells kept on getting better. By contrast estimated recoveries from Permian wells are about the same as in the Bakken."
Future of US shale oil lies in Permian basin
Financial Times, 16 November 2015

"Saudi Arabia is conducting a major budget review to counter claims that it is running out of money as falling oil prices cut government income. Advisers to the royal court and members of the newly powerful economic council have admitted to the Telegraph that the dependence on oil revenues for 80pc to 85pc of government income was a “dilemma”. However, they played down the idea that the reduction in the oil price to well below $100 a barrel, currently regarded as “break even” for the budget, to something nearer $40 presented a terminal crisis for the country, as some have claimed. “The economic council believes that this is a window of opportunity to create new prospects for economic diversification,” they said in a statement. “There are new areas that have not been tapped yet in a market that is the largest in the region with a high purchasing power and hi-tech.” The change in leadership in Riyadh following the death of King Abdullah in January has added to the uncertainty over Saudi Arabia’s future caused by the changing politics of the international oil price. The new King Salman, and his favoured younger son, Prince Mohammed bin Salman, who was promoted at the age of just 30 to be head of the royal court, head of the economic council and defence minister, have continued their predecessor’s policy of maintaining oil production."
Saudis consider economic refocus as low oil prices bite
Telegraph, 15 November 2015

"Britain will no longer pursue green energy at all costs and will instead make keeping the lights on the top priority, Amber Rudd, the energy secretary, will vow this week. Households already face paying over-the-odds for energy for years to come as a result of expensive subsidies handed out to wind and solar farms by her Labour and Lib Dem predecessors, Ms Rudd will warn. In a major speech setting out a new strategy, the energy secretary is expected to say that from now on, policies will balance "the need to decarbonise with the need to keep bills as low as possible". "Energy security has to be the first priority. It is fundamental to the health of our economy and the lives of our people," she will say... Ms Rudd is also expected to make clear that eking out more power from Britain’s ageing and polluting coal-fired power stations is not the solution to keeping the lights on, and new gas and nuclear plants are needed instead. The energy department is understood to be considering announcing a closure date for Britain’s remaining coal plants - potentially requiring a shutdown as early as 2023, although policy details were still being thrashed out this weekend. Any such move would be highly controversial as coal power stations produced 29 per cent of UK electricity last year and the closure of some plants has already increased the risk of blackouts. But Ms Rudd is expected to warn that the remaining old coal plants are becoming increasingly unreliable, highlighting breakdowns at several plants earlier this month that forced National Grid to resort to emergency measures to keep the lights on."
Amber Rudd: end to pursuit of green energy at all costs
Telegraph, 15 November 2015

"In a note on Friday, JPMorgan's Vivek Juneja broke down the results from the 2015 Shared National Credits exam, a Federal Reserve initiative to review and classify large syndicated loans. The review captures any loan bigger than $20 million that is shared by three or more supervised institutions. The SNC provides insight on so-called classified loans, or loans with unpaid interest and principal outstanding that are in danger of defaulting. According to the results of the SNC, classified loans to oil and gas companies jumped four-fold. The report said: "O&G classifieds rose to about 12% of total O&G commitments, well above the 5.3% ratio of classifieds for all other loan commitments. Put another way, O&G classified loans now account for 15% of total classifieds, up from 3.6% a year ago." That means around one in seven loans to oil and gas companies are edging toward default."
TROUBLING: Oil and gas companies are edging toward default
Business Insider, 13 November 2015

"More than 100m barrels of crude oil and heavy fuels are being held on ships at sea, as a year-long supply glut fills up available storage on land and contributes to port congestion in key hubs. From China to the Gulf of Mexico, the growing flotilla of stationary supertankers is evidence that the oil price crash may still have further to run, as the world’s energy infrastructure starts to creak under the weight of near-record inventory levels. The amount of oil at sea is at least double the levels of earlier this year and is equivalent to more than a day of global oil supply. The numbers of vessels has been compiled by the Financial Times from satellite tracking data and industry sources. Unlike the last oil price collapse during the financial crisis only half of the oil held on the water has been put there specifically by traders looking to cash in by storing the fuel until prices recover. Instead, sky-high supertanker rates have prevented them from putting more oil into so-called floating storage, shutting off one of the safety valves that could prevent oil prices from falling further. JBC Energy, a consultancy, said in many regions onshore oil storage is approaching capacity, arguing oil prices may have to fall to allow more to be stored profitably at sea."
Oil glut deepens with 100m barrels at sea
Financial Times, 11 November 2015

"Oil tankers are set to deliver the biggest volume of Iraqi crude to U.S. shores in more than three years, as OPEC's second-largest producer vies for market share as pressure mounts on U.S. shale production. According to Reuters shipping data, tankers carrying nearly 20 million barrels of Iraqi oil are due to sail to the United States in November, almost 40 percent above the amount booked to arrive in October. At an average rate of more than 660,000 barrels per day (bpd), it would be the largest monthly import since mid-2012, according to U.S. data. The supply surge is emerging at a time when low oil prices are muscling U.S. shale producers out of the market, heightening competition among some OPEC members to secure market share. In Europe, Saudi Arabia is targeting traditional buyers of Atlantic Basin and Russian crudes. In the United States, where Saudi Arabia has long been the biggest OPEC supplier, favourable prices are helping Iraq regain share among U.S. refiners that run heavier, high sulphur or sour grades."
Flow of Iraqi oil to U.S. reaches 3-year peak in November
Reuters, 11 November 2015

"The oil market will remain oversupplied until the end of the decade as the push for cleaner fuels and greater efficiency offsets the effect of lower prices, the world’s leading energy forecaster said. In its annual outlook, the International Energy Agency said oil demand would rise by less than 1 per cent a year between now and 2020, slower than necessary to quickly mop up an oil glut that has driven prices to multiyear low. The slowdown in oil demand growth follows a near 15-year surge in consumption, driven by the rapid industrialisation of China and other emerging market economies. But Beijing is now moving away from dirtier fuels and to less energy-intensive growth as it heads towards a more consumer-led economy. “We are approaching the end of the single largest demand growth story in energy history,” Fatih Birol, executive director of the IEA, told the Financial Times. Mr Birol was appointed IEA head in September after 20 years with the west’s energy watchdog. “Demand is not as strong as we have seen in the past as a result of efficiency [and climate] policies [globally],” he added, saying the growth in renewables will further restrict demand for oil. The IEA does not expect crude oil to reach $80 a barrel until 2020 under its “central scenario”, as excess supplies are slowly soaked up. After 2020, oil demand growth is expected to grind almost to a halt, increasing just 5 per cent over the next 20 years, the IEA said."
Oil glut to swamp demand until 2020
Financial Times, 10 November 2015

"Renewable energy accounted for almost half of all new power plants in 2014, representing a “clear sign that an energy transition is underway”, according to the International Energy Agency (IEA). Green energy is now the second-largest generator of electricity in the world, after coal, and is set to overtake the dirtiest fossil fuel in the early 2030s, said the IEA’s World Energy Outlook 2015 report, published on Tuesday. “The biggest story is in the case of renewables,” said IEA executive director, Fatih Birol. “It is no longer a niche. Renewable energy has become a mainstream fuel, as of now.” He said 60% of all new investment was going into renewables but warned that the $490bn of fossil fuel subsidies in 2014 meant there was not a “fair competition”. Amid the energy transition, the IEA said the price of oil, currently under $50 a barrel, was likely to recover only to $80 by 2020 and see modest growth beyond.The IEA said investment in oil exploration and production was set to fall by 20% in 2015, as high cost projects in the US, Canada, Russia and Brazil continue to be shelved. But it said US shale oil producers could move back into profit with prices of $60-$70 a barrel.The IEA, which was founded in response to the oil shocks of the 1970s, also warned that if the oil price remained at $50 for a decade or more, cheaper oil from the Middle East would come to dominate exports, with 75% market share. Birol said that the scenario was “unlikely”, but that if it came to pass, “reliance on a very few number of countries in a region that is in turmoil may not be the best news for oil security.”“Now is not the time to relax,” he said. “Quite the opposite: a period of low oil prices is the moment to reinforce our capacity to deal with future energy security threats.”"
Renewable energy made up half of world's new power plants in 2014: IEA
Guardian, 10 November 2015

"With oil prices down 45 percent from where they were last year, the troubling economic climate for continued exploration and drilling is having repercussions in Utah. The Southern Utah Wilderness Alliance was celebrating what it viewed as the demise of Enefit's big oil shale extraction project in eastern Utah after the head of the parent company said it had been "stopped," and there was no business plan to continue. An article posted on Estonia Public Broadcast included comments from Hando Sutter, chief executive officer of the state-owned Eesti Energia, about the Enefit project's remote location and other challenges."
Low energy prices lead to turmoil, rumors for Utah oil operations
KSL, 7 November 2015

"Royal Dutch Shell’s chief executive says uncertainty over pipelines such as Keystone XL, killed by the U.S. government on Friday, played a role in the company’s decision to scrap a major oil sands project last month – a sign that export constraints are squeezing some of the industry’s largest players. Last month, Shell took a $2-billion (U.S.) hit after halting construction of its 80,000 barrel-per-day Carmon Creek development in northwest Alberta. It cited high costs and insufficient pipeline capacity to move the supplies to market as reasons."
Shell says it halted oil sands project over pipeline uncertainty
Globe and Mail, 6 November 2015

"The head of the Ukrainian state-run energy company Naftogaz has said a proposed new pipeline to pump Russian gas to Europe would spell the end for Ukraine's gas transport business. In September, Russia's Gazprom formed a consortium with E.ON, BASF/Wintershall, OMV , ENGIE and Royal Dutch Shell to develop the Nord Stream-2 pipeline, which could allow Russia to bypass Ukraine completely from 2019. "If Nord Stream-2 operates, Ukraine will be dead as a transit land for Russian gas," Naftogaz CEO Andriy Kobolev told the German daily Handelsblatt in an interview published on Friday. A U.S. official this week said the pipeline risked depriving Ukraine of more than $2 billion in transit fees, and ran counter to the EU's goal of reducing its energy reliance on Russia. Gazprom already sends gas to Germany across the Baltic Sea via the Nord Stream pipeline, and Nord Stream-2 would double the capacity of that pipeline to 110 billion cubic metres (bcm) per year. Naftogaz has said that it lost at least 34 billion cubic metres of gas transit volume last year because of Nord Stream. Ukraine, which has the capacity to pump 151 bcm of gas a year to Europe, transported 62 bcm of Russian gas in 2014."
Nord Stream-2 pipeline to kill Ukraine's gas transit business - Naftogaz CEO
Reuters, 6 November 2015

"Just as the energy industry has brushed aside concerns that the world could run out of oil, industry executives now say they believe it is demand, rather than supply, that is nearing its apex. In 1985, Ian Taylor, today the chief executive of the world's largest oil trader Vitol, was part of a team at Royal Dutch Shell that forecast oil prices would rise five fold to $125 a barrel in 2015 as global reserves were expected to become more scarce. Now he says it is unlikely to ever reach those levels again. Oil today stands at around $50 a barrel, having more than halved since June 2014 after global supplies dramatically rose due in large part to the U.S. shale oil boom but also due to the unlocking of huge offshore reserves in Brazil, Africa and Asia. "We all talk about 'peak supply' and maybe with shale that is becoming a disabused concept. I have begun feeling that... we are coming to peak demand towards 2030," Taylor said on Wednesday at The Economist Energy Summit in London. "I believe we may not see $100 (a barrel) ever again," Taylor said.... The United Nations believes sharp reductions in fossil fuel use are also necessary to protect the earth from catastrophic effects of climate change. Higher fuel efficiencies for cars and the industry's switch towards less-polluting sources of energy such as gas, biofuels, solar and wind power, mean that oil demand could plateau in the coming decades. Fossil fuel consumption could be further clipped if governments tighten regulations in order to combat climate change at a U.N. conference in Paris next month.... BP earlier this week said the world is no longer at risk of running out of oil or gas for decades ahead. Existing technology is capable of unlocking so much fossil fuel that global reserves would almost double by 2050 to 4.8 trillion barrels of oil equivalent (boe), the British giant said. With new exploration and technology, the resources could leap to a staggering 7.5 trillion boe, it said."
"Peak demand" means world may never see oil at $100 a barrel again
Reuters, 5 November 2015

"The UK is sitting on a plutonium stockpile that represents "thousands of years" of energy in the bank, according to a leading nuclear scientist. Tim Abram, professor of nuclear fuel technology at the University of Manchester, made the comments at a briefing to discuss the fate of the UK's plutonium. The Sellafield nuclear plant in Cumbria has around 140 tonnes of the material. It is now the largest stockpile of civil plutonium in the world. The government is yet to decide on its fate, although the Department of Energy and Climate Change (DECC) stated in 2013 that rather than being disposed of, its preference was that it should be reused as fuel. This is not, however, a straightforward process; it requires new nuclear reactors to be built that are capable of using plutonium as fuel. Plutonium is extracted from reprocessed nuclear waste and was originally stockpiled as a source of fuel for a new breed of experimental nuclear reactors. But in the 1990s, the government-backed programme of research to develop these new reactors was cancelled, on both cost and safety grounds. This left Sellafield storing plutonium with no long-term plan for it. It also, somewhat ironically, put new nuclear reactor technology back on the government's list of priorities. DECC tasked the Nuclear Decommissioning Authority (NDA) with assessing the technical, safety and economic pros and cons of the three "credible" types of new generation nuclear reactor that would allow the plutonium to be used as fuel. The NDA said it was still "in the middle" of this complicated consultation. "A decision is expected to be made by ministers on how to proceed during 2015/16," the authority said in a statement. "However, only when the Government is confident that its preferred option could be implemented safely and securely, in a way that is affordable, deliverable and offers value for money, will it be in a position to proceed.""
UK plutonium stockpile is 'energy in the bank'
BBC Online, 4 November 2015

"Advanced biofuel made from agricultural waste — the so called Holy Grail of the alternative energy industry — will not be competitive with conventional fuel until the oil is back to $70-$80 per barrel, DuPont has said.  This prediction from the US chemicals group, which last week formally opened the world’s largest cellulosic ethanol plant, underscores the challenge facing makers of “second-generation” biofuels. After a decade pursuing an elusive production process, companies are finding their business models threatened by the changing economics of the industry — as well as the politics of the US."
Biofuel needs $70 oil to compete, says DuPont
Financial Times, 4 November 2015

"Only 1% of the Bakken Play area is commercial at current oil prices. 4% of horizontal wells drilled since 2000 meet the EUR (estimated ultimate recovery) threshold needed to break even at current oil prices, drilling and completion, and operating costs. The leading producing companies evaluated in this study are losing $11 to $38 on each barrel of oil that they produce, the very definition of waste. Although NYMEX prices are about $46 per barrel, realized wellhead prices in the Bakken are only $30 per barrel according to the North Dakota Department of Mineral ResourcesAt that price, approximately 125,000 acres of the drilled play area of 10,500,000 acres is commercial (green areas in Figure 1)....There has been much debate about the break-even price for tight oil plays in the U.S. This discussion is largely meaningless because there is no single break-even price for any play. Break-even price depends on EUR and every well has a different EUR.  EUR depends on reservoir geology and geology varies geographically. Drilling and completion technology cannot make up for bad geology. An area with poorer geology costs more to produce and will never perform as well as an area with better geology. And technology comes at a price. Longer laterals and more frack stages mean that a higher EUR is needed to to pay out the additional costs..... Sweet spots are found and not predicted. They are evident only after thousands of wells have been drilled and produced for some time. By then, all land has been captured. A company has to work with the position it was able to acquire in the land grab that characterizes shale plays. Late entrants like Statoil in the Bakken or Devon in the Eagle Ford pay a premium to buy into an existing sweet spot. The failure of a late entrant like Shell in the Eagle Ford resulted from paying a premium for a position outside the sweet spot. There are no significant differences in technology or operator competence among the companies evaluated in this study. Technical success in the Bakken is largely based on luck in the initial selection of a lease position. The manner in which operating companies have managed their production growth, cash flow and balance sheets, however, differs considerably and is based on choice and not on luck. Figure 3 shows key financial data for companies evaluated in the Bakken Play. On average, the evaluated companies spent more than double their cash flow on drilling and completion (capex) in the first half of 2015. In other words, they lost more than a dollar for every dollar they earned. Companies like Whiting and Marathon outspent cash flow by a factor of more than 3-to-1 while a company like XTO (ExxonMobil) earned more than it spent. Evaluated companies’ debt-to-cash flow ratio averaged 6.3. This means that it would take more than 6 years to pay off their debt if all revenue were used for that purpose. Many banks use a debt-to-cash flow ratio of 2.0 as the threshold for calling loans (debt covenant). The E&P industry’s average ratio from 1992 to 2012 was 1.58 (also see Assessing Systemic Risk With Debt to Cash Flow). Every company evaluated in this study, therefore, is in the danger zone as far as banks are concerned. Marathon and Whiting have debt-to-cash flow ratios of 5 times greater than the threshold of 2.0, while EOG, Statoil and XTO are at least below the average for this group of companies. A continuation of low oil pricing may have profound and negative implications for Whiting, Marathon, Hess and Continental based on this financial performance data....Tight oil is expensive to produce. The biggest increase in Bakken production occurred after oil prices reached more than $90 per barrel in 2011 (Figure 4). Since oil prices collapsed in 2014, capital and operating costs have fallen almost as much as product prices. Lower costs, hedges, a price rally to around $60 per barrel from March to early July 2015, and continued availability of outside capital have allowed most producers to survive. Higher-priced hedges are running out and service company costs cannot fall much further without bankrupting those companies. Also, I do not believe that efficiency gains are significant going forward. All Bakken producers in this study can break even at $60-70 per barrel wellhead oil prices at current low drilling and completion costs. At $30 realized prices, they are all in serious trouble. Their investor presentations give little sense of how perilous their situation is in this price environment.... Bakken oil production has fallen only 26,000 barrels per day since its peak in December 2014 and the number of producing wells reached an all-time high of 12,940 in July. This makes no sense at all given the economics of $30 oil. If producers cannot change their behavior and demonstrate discipline in their spending, the market will do it for them with much lower oil prices."
Art Berman - Only 1% of the Bakken Play Breaks Even at Current Oil Prices
The Petroleum Truth Report, 3 November 2015

"When the International Energy Agency published a report four years ago heralding a “golden age of gas,” it seemed little could derail a bright future for the energy source. Now, with prices slumping and demand in key consuming countries such as China looking shaky, the energy industry’s optimism about gas seems to have fizzled out. ... Particular concern hovers over the market for liquefied natural gas—gas that is chilled into liquid form, then loaded on ships for transport elsewhere. In recent years, major oil-and-gas companies, such as Chevron Corp. and Royal Dutch Shell PLC, have invested billions of dollars in LNG projects in countries like Australia and Qatar, while further vast sums have been spent on plants that turn LNG back into gas in consuming countries, all in the belief that the world’s need for the fuel would rise rapidly—especially as countries, particularly in Asia, sought to move away from more-polluting energy sources such as coal. Yet the pessimism now surrounding the LNG industry was unmistakable at this past week’s Gastech conference, a major annual industry event held in Singapore. “The entire industry is worried because it is hard to tell when China’s demand will pick up again,” said an LNG strategist at a Malaysian energy company who attended the event. “Rising demand from smaller countries such as Pakistan, Egypt and Bangladesh is not enough to offset the declining demand from north Asia.” LNG prices are certainly in a funk. Two years ago, gas headed for big North Asian countries like Japan and Korea sold at around $15 to $16 a million British thermal units. In October, deliveries there are selling for $6.65 a million BTUs, down 12% from September, according to research firm Energy Aspects. It expects prices to fall further in Asia next year, to under $6 per million BTUs, as a wave of new gas supply in countries from the U.S. to Angola to Australia comes on line. LNG prices are like “a train wreck happening in slow motion,” Neil Tomnay, global head of gas and LNG research at Wood Mackenzie, said in an interview. “The gas market is not presently oversupplied. But the concern is with all the new supplies coming online, that’s all going to change.” Gas producers can no longer rely on China’s rapid industrialization to soak up extra supply, with its economic growth slowing. The industry now believes China won’t be able to digest all of the LNG it has contracted to buy, Mr. Tomnay said. Currently, LNG accounts for 5% of China’s total energy mix, and Beijing wants to increase that to 10% by 2020. Yet recent data show Chinese LNG imports have fallen 3.5% so far this year, compared with a 10% rise in 2014. In line with Mr. Tomnay’s comments on oversupply in China, oil giants PetroChina Co. and Cnooc Ltd. offered three cargoes of LNG for resale in September, according to Energy Aspects. The gas market is likely to see more such reselling if demand remains tepid, he said."
Hopes for ‘Golden Age of Gas’ Evaporate
Wall St Journal, 30 October 2015

"The plummeting price of oil has ripped into the once booming US energy industry so dramatically that the oil sector has laid off 87,000 people so far this year. Chevron became the latest company to dismiss workers on Friday, announcing that it would lose between 6,000 and 7,000 jobs – the second four-figure round of dismissals at the company since July. The company is cutting investment by a fourth. “With the lower investment, we anticipate reducing our employee workforce by 6,000-7,000,” the chairman and CEO, John Watson, said in a statement."
Chevron will cut up to 7,000 jobs as impact of falling oil prices continues
Guardian, 30 October 2015

"Russian oil output is poised to break a post-Soviet record for the fourth time this year as the nation’s producers once again prove themselves resilient to a slump in crude prices. Production of crude and a light oil called condensate is on track to reach 10.77 million barrels a day in October, topping the previous month’s revised figure and setting a record for the second month running, according to Bloomberg estimates based on Energy Ministry data. Russian production has withstood a collapse in oil prices amid a global supply glut, while output in the U.S. has fallen about 5 percent from its June peak. Oil-extraction and export tax rates shrink in Russia at lower prices, giving companies a buffer against the slump, while the weaker ruble has reduced costs. “Russian oil companies are insulated from oil price corrections,” said Artem Konchin, an oil and gas analyst at Otkritie Capital in Moscow. “Through the tax framework, the government took the brunt of the blow, just as it used to take most of the windfall profits. The rest of the story is in the ruble depreciation.” The production figure for October is derived from output data from the Energy Ministry’s CDU-TEK unit for the first 28 days of the month. The remaining days were estimated using an average of the previous seven days."
Russia Oil Production Poised for Record as Industry Defies Slump
Bloomberg, 29 October 2015

"Shell, though, is far from alone. It may have made the biggest U-turn on a new project since the market rout, but this week’s third-quarter results show the speed at which the industry is reacting to the market collapse. As cash flow dwindles, the oil majors are scrambling to cut costs in order to maintain their dividends. As a result, any new project requiring an oil price of more than $60 a barrel — almost 50 per cent below last year’s peak — is now either being scrapped or deferred until industry costs have come down sufficiently. Hence BP’s decision to delay its Mad Dog 2 project in the Mexican Gulf. Along with French oil major Total, the UK-based energy group has pledged to balance its books on $60 oil, aiming to cover its dividend from cash flow by 2017. Norway’s Statoil also says the “break-even” price for its Johan Castberg project in the Arctic, awaiting a green light, is now $60 a barrel."
Oil majors rush cuts to hit $60 break-even
Oil and Gas, 28 October 2015

"As the price of oil continues its decline, economists have warned on a lack of upward price pressures for the commodity for at least another two years. Thomas Pugh economist at Capital Economics predicts oil could hit $55 per barrel for Brent crude at the end of 2015, with oil to remain in surplus for another couple of years. "The market is still going to be in surplus by this time next year, so by the time you actually have supply and demand starting to equate, it will be well into 2017," he told CNBC via telephone. The oil industry is full of booms and busts. The norm for oil for the last decade has been $90 - $100 per barrel, but Brent is currently trading closer to $45 a barrel. The U.K. oil giant BP announced on Tuesday it was slashing costs as it prepares for a long term low oil price environment. The company is planning for oil to be around $60 per barrel until 2017."
Pouring oil on troubled waters: 'Surplus until 2017'
CNBC, 27 October 2015

"U.S. imports of foreign oil are rising again after a long decline, as the oil bust forces domestic producers to scale back. Less than a year after the Organization of the Petroleum Exporting Countries opted to continue production despite plummeting prices, member countries including Saudi Arabia and Iraq are clawing back market share they ceded to oil companies pumping in Texas and North Dakota. U.S. crude imports declined 20% between 2010 and 2014 amid the domestic energy boom but have recently started to rise again. Total crude-oil imports rose for three straight months between April and July—a total of 1.7% in the period, according to the most recently available data from the Energy Information Administration. Imports of light crude grew more rapidly, from 5.6% of total imports in April to 11% in July. On the Gulf Coast, vessels carrying nearly a week’s worth of imports waited offshore Friday to unload, according to shipping tracker ClipperData. The slowdown in the nation’s shale-oil output has pushed up the price of high-quality U.S. oil relative to global prices, giving U.S. refiners a reason to buy from countries such as Nigeria. Until very recently, the boom in U.S. shale-oil production forced countries that exported oil to the U.S. to hustle for new customers....the shifts in oil flows spurred by declining U.S. output show how some of the ripple effects of the shale-oil boom are going into reverse following the plunge in oil prices. U.S. oil producers have sharply cut spending on new drilling, and transportation companies that profited from shipping crude by rail and barge in recent years have seen volumes decline... Globally, the glut of crude oil that sent prices tumbling last year still persists, and benchmark oil and gasoline prices remain near six-year lows. Falling U.S. output is unlikely to have an immediate impact on prices, because other countries are still pumping at high rates and Iran is expected to increase production in the coming months. In the U.S., however, the adjustments have been swift. U.S. crude production has fallen to about 9 million barrels a day from a 43-year peak of 9.6 million barrels in April and is forecast to keep declining."
After Years of Decline, U.S. Oil Imports Rise
Wall St Journal, 26 October 2015

"SNP ministers must start being open and honest about Scotland’s finances after it emerged the taxpayer has made a loss for the first time from the North Sea oil and gas industry, Labour has said. Jackie Baillie, Labour’s wealth creation spokesman, urged the Scottish Government to revive its practice before the independence referendum of publishing regular civil service bulletins examining revenues from the key sector. She said new official figures showing oil producers claimed back £39 million more from the Exchequer than they paid in tax in the past six months demonstrated the SNP’s “fantasy economics”. Ms Baillie said there would have been a “devastating impact” on schools and hospitals if Scots had voted for independence last year. But she argued that the Scottish Government must be “transparent” about the sector “rather than trying to avoid talking about a serious issue because it’s politically inconvenient.” Nicola Sturgeon told voters during last year’s referendum that Scotland was on the verge of a second oil boom. ...The official figures from HM Revenue and Customs (HMRC) are thought to show the first loss recorded by a six-month period since North Sea oil started production 40 years ago. Although the Treasury collected £248 million in corporation tax and petroleum revenue tax (PRT) in the first half of this year, it paid out £287 million in rebates to producers. SNP ministers based their financial planning for independence on an oil price of $113 (£74) per barrel, claiming the sector would generate between £15.8 billion and £38.7 billion for the public purse over five years."
North Sea oil 'makes first loss in 40 years'
Telegraph, 22 October 2015

"Greenhouse gas emissions in Europe have plunged to the lowest level ever recorded after the EU’s member states reported an estimated 23% drop in emissions between 1990 and 2014. The bloc has now overshot its target for 2020 of cutting emissions by one-fifth – at the same time that its economy grew by 46%, according to the EU’s climate chief, Miguel Arias Canete . “We have shown consistently that climate protection and economic growth go hand-in-hand,” he said. “This is a strong signal ahead of the Paris climate conference.”... The study says that it will be “challenging” for the EU to achieve its 2030 goals of a 27% share of renewables in its energy mix, and 27% energy efficiency improvement. Even if this is achieved, European countries will still have to double or even triple their emissions cutting efforts after 2030 to get onto a path that could limit global warming to 2C by mid-century."
Europe's greenhouse gas emissions fall to record low
Guardian, 20 October 2015

"Britain’s oil giants are preparing to make further cuts to their investment plans in the face of plummeting crude prices. Shell, like many oil explorers, has already slashed spending and jobs to counteract the effects of a 40pc slump in oil prices in the past year, with the price sliding as low as $43 a barrel from highs of more than $110 in 2014. However, Shell is this week expected to unveil a new round of cuts alongside its third quarter results, which are set to show a 38pc slump in sales to $67bn (£43.7bn) and a 54pc drop in adjusted earnings. The budget cuts will come on top of the £10bn reduction in investment that was announced in January. The company also halted drilling in the Arctic in September after disappointing tests. Many oil firms are expected to burn through their cash flows this year, leaving spending cuts and asset sales as tools to avoid sacrificing their dividends. Shell’s position is complicated by a pending cash-and-shares takeover of BG Group, which at current prices is worth more than £40bn."
Shell and BP prepare for further cost-cutting as oil prices stay low
Telegraph, 24 October 2015

"Stagnating rig productivity shows U.S. shale oil producers are running out of tricks to pump more with less in the face of crashing prices and points to a slide in output that should help rebalance global markets. Over the 16 months of the crude price rout, production from new wells drilled by each rig has risen about 30 percent as companies refined their techniques, idled slower rigs and shifted crews and high-speed rigs to "sweet spots" with the most oil. Such "high-grading" helped shale oil firms push U.S. output to the loftiest levels in decades even as oil tumbled by half to less than $50 a barrel and firms slashed rig fleets by 60 percent. But recent government and private data show output per rig is now flatlining as the industry reaches the limits of what existing tools, technology and strategies can accomplish. "We believe that the majority of the uplift from high-grading is beginning to wane," said Ted Harper, fund manager and senior research analyst at Frost Investment Advisors in Houston. "As a result, we expect North American production volumes to post accelerating declines through year-end." Drillinginfo, a consultancy with proprietary data, told Reuters well productivity has fallen or stabilized in the top three U.S. shale fields - the Permian Basin and Eagle Ford of Texas and the Bakken of North Dakota – since July or August. The U.S. Energy Information Administration, whose benchmark drilling productivity index is based in part on Drillinginfo data, forecasts next month's new oil production per rig in U.S. shale fields to stay at October levels, which it estimates at 465 barrels per day (bpd). The big challenge of shale oil work is that well output drops off quickly - often more than 70 percent in the first year alone. So producers need to keep squeezing more oil out of new wells drilled by the currently deployed rig fleet just to offset steep declines in what existing wells produce. If that is no longer possible and firms remain reluctant to add rigs because of low crude prices and an uncertain outlook, overall production is set to sink. (Graphic: Chip Davis, managing partner at energy venture capital firm Houston Ventures, says the downward pull of declining output from older wells is getting stronger. In the Eagle Ford, production from so-called legacy wells fell by 145,485 bpd last month, a drop that was 23 times larger than the 6,293 bpd lost in September of 2010, before the fracking boom brought thousands more wells online. "The boulder that is decline is much bigger in size and rolling much faster than before," Davis said. "We’ve got very few rigs to buttress the rate of decline." That growing drag suggests the fall in U.S. output could be sharper than a 10 percent drop the EIA sees between a peak of 9.6 million bpd in April and next August, when it expects production to bottom at 8.66 million bpd before starting to recover. Producers' coping strategies with the worst cash crunch in years could be also hurting productivity of new wells. To save money, many have started drilling shorter and cheaper vertical wells. They have also cut back in some cases on the size of multi-million dollar hydraulic fracturing jobs for long horizontal wells. Both factors can hurt the average amount of oil being added by new wells. Analysts say it is hard to predict how much U.S. output will fall and whether it will undershoot official forecasts because lower production could lift prices and that in turn might prompt producers to redeploy idle rigs to pump more. But for now, most companies are budgeting less next year for new drilling work and the U.S. rig count has tumbled to 595, according to Baker Hughes."
U.S. oil output slide looms as shale firms hit productivity wall
Reuters, 21 October 2015

"As President Vladimir Putin tries to restore Russia as a major player in the Middle East, Saudi Arabia is starting to attack on Russia's traditional stomping ground by supplying lower-priced crude oil to Poland. At a recent investment forum, Igor Sechin, chief executive of Rosneft, Russia's biggest oil company, complained about the Saudis' entry into the Polish market. "They're dumping actively," he said. Other Russian oil executives are worried, too. "Isn't this move a first step toward a redivision of Western markets?" Nikolai Rubchenkov, an executive at Tatneft, said at an oil roundtable Thursday. "Shouldn't the government's energy strategy contain some measures to safeguard Russia's interests in its existing Western markets?" European traders and refiners confirm that Saudi Arabia has been offering its oil at significant discounts, making it more attractive than Russian crude. And, even though most eastern European refineries are now technologically dependent on the Russian crude mix, Russia's oilmen are right to be worried. In the 1970s, Saudi Arabia sent half of its oil to Europe, but then the Soviet Union built export pipelines from its abundant West Siberian oil fields, and the Saudis switched to Asian markets, where demand was growing and better prices could be had. The Saudi share of the European crude market kept dropping; in 2009, it reached a nadir of 5.9 percent. Russia's share peaked at 34.8 percent in 2011. In recent years, Saudi Arabia slowly increased its presence, reaching a 8.6 percent share in 2013, but it had never tried its luck in Poland. Like most of central and eastern Europe, Poland has long been a client of Russian oil companies. Last year, about three-quarters of its fuel imports came from Russia, with the rest from Kazakhstan and European countries. Poland, however, is at the center of efforts to reduce the European Union's dependence on Russian energy. Since Putin annexed Crimea from Ukraine last year, Poland, Ukraine's neighbor, has increased military expenditures and other efforts to shore up its security. It's working with its smaller neighbors, too. On Thursday, it announced an agreement with Lithuania, Latvia and Estonia to build a natural gas pipeline to and from the Baltic States, ensuring their future independence from Russian gas supplies. In this context, a new and reliable supplier is a godsend. As for the Saudis, they need to expand outside Asia where demand is falling."
Saudi Arabia's Oil War With Russia
Bloomberg, 16 October 2015

"Barack Obama blocked off the prospects for future oil drilling in the Arctic on Friday, imposing new lease conditions that make it practically impossible for companies to hunt for oil in the world’s last great wilderness. The Department of Interior said it was canceling two future auctions of Arctic offshore oil leases in the Chukchi and Beaufort seas, and turned down requests from Shell and other oil companies for more time on their existing leases."
Obama administration blocks new oil drilling in the Arctic
Guardian, 16 October 2015

"A few weeks ago, a big hedge fund manager in New York asked a major Wall Street bank what was happening to energy sector loans. The answer was sobering. “They said that the covenants on 72 out of the 74 loans to the oil and gas sector had recently been modified,” this investor reports. Or to put this into plain English, this bank now realises that most of its energy sector borrowers are struggling — so it is quietly relaxing the borrowing conditions, to avoid the embarrassment of seeing loans it has made go into default."
The tangle of loose lending to tight oil
Financial Times, 15 October 2015

"More than $200 billion worth of oil and natural gas assets are for sale globally as companies come under renewed financial pressure from the prolonged commodity price rout, according to IHS Inc. There are about 400 buying opportunities as of September, IHS Chief Upstream Strategist Bob Fryklund said in an interview. Deals will accelerate later this year and into 2016 as companies sell assets to meet debt requirements, he said. West Texas Intermediate crude has averaged about $51 a barrel this year, more than 40 percent below the five-year mean. Low prices have slashed profits and as of the second quarter about one-sixth of North American major independent crude and gas producers faced debt payments that are more than 20 percent of their revenue. Companies have announced $181.1 billion of oil and gas acquisitions this year, the most in more than a decade, compared with $167.1 billion the same period in 2014, data compiled by Bloomberg show. “Basically almost everything is for sale,” Fryklund said Oct. 8 in Tokyo. “Low cycles are when a lot of these companies can rebalance their portfolios. In theory, this is when you upgrade your existing portfolio.”"
Oil Slide Means ‘Almost Everything’ for Sale as Deals Accelerate
Bloomberg, 14 October 2015

"Russia has abandoned hopes for a lasting recovery in oil prices, bracing for a new era of abundant crude as US shale production transforms the global energy market. The Kremlin has launched a radical shift in strategy, rationing funds for the once-sacrosanct oil and gas industry and relying instead on a revival of manufacturing and farming, driven by a much more competitive rouble. "We have to have prudent forecasts. Our budget is based very conservative assumptions of oil at around $50 a barrel," said Vladimir Putin, the Russian president. "It is no secret that if the price goes down, investment peters out and disappears," he told a group of investors at VTB Capital's 'Russia Calling!' forum in Moscow. The Russian finance minister, Anton Siluanov, said over-reliance on oil and gas over the last decade had been a fundamental error, leading to an overvalued currency and the slow death of other industries in a textbook case of the Dutch Disease...Igor Sechin, chairman of Russia's oil giant Rosneft, accused the government of turning its back on the energy industry, lamenting that his company is being throttled by high taxes. He warned that the Russia oil sector will slowly shrivel unless there is a change of policy. Mr Sechin said Russia's oil companies are already facing "negative free cash flow". They face an erosion in output of up to 6pc over the next three years as the Soviet-era fields in Western Siberia go into decline. "You have to maintain investment," he said  Rosneft, the world's biggest traded oil company, is facing taxes and export duties that amount to a marginal rate of 82pc on revenues. "This is enormous, it's unbelievable. The attractiveness of the oil industry is all about tax rates," he said...Mr Sechin said Russia faces stiff competition from Saudi Arabia, which has begun ship oil at cut-throat prices into the Baltic through the Polish port of Gdansk, taking local market share from under the noses of the Russians. But the 'game changer' is US shale that has displaced Saudi Arabia as the fundamental price-setter for the world. He said the immediate prospects of the global oil industry now depend on whether shale producers have enough hedging contracts to last beyond the end of the year. Russia is currently the world's largest oil producer, extracting 10.7m barrels a day (b\d), but is living off legacy investments. Plans to develop the off-shore fields in the Arctic and the vast shale reserves of the Bazhenov Basin are not viable at current oil prices, and in any case rely on imported technology that is subject to western sanctions."
Russia abandons hope of oil price recovery and turns to the plough
Telegraph, 13 October 2015

"Higher oil output from Opec and a slowdown in world economic growth means the crude oil glut will persist through next year, the world’s leading energy forecaster said on Tuesday. The International Energy Agency said it expected a “marked slowdown” in oil demand growth as the stimulus from lower prices faded and as economic activity weakened in countries dependent on commodity revenues. “Oil at $50 a barrel is a powerful driver in rebalancing the global oil market,” the IEA said in its closely watched monthly report. “But a projected marked slowdown in demand growth next year and the anticipated arrival of additional Iranian barrelsare likely to keep the market oversupplied through 2016.” An increase in production from Opec member Iran once sanctions are lifted is expected to overshadow the first drop in US oil output since 2008, the IEA added. The collapse in oil prices has supported the strongest oil demand growth in almost a decade, with low prices helping boost demand by 1.8m barrels a day to 94.5m b/d. Gasoline demand has been particularly strong, suggesting motorists have been encouraged to drive more by lower prices. But the IEA forecasts that effect will fade, with demand growth set to slow to 1.2m b/d next year."
Oil market glut will persist through 2016, says IEA
Financial Times, 13 October 2015

"Although US shale oil accounts for less than 5 per cent of the global oil market, it has already had a profound impact. The rapid growth in US shale oil last year was the main factor causing the collapse in oil prices: US oil production increased by more than twice the entire expansion in global oil demand. More generally, the different production techniques and financing structures found in the US shale industry are likely to have a lasting impact on global oil market dynamics, in at least three important ways. First, shale oil is likely to respond far more quickly to changes in prices. The lead times between investment decisions and production of US shale can be measured in weeks, rather than the years taken for conventional production. And the life of a shale well tends to be far shorter than that for a conventional well, with production typically falling by as much as 70-80 per cent in the first year. As such, as prices fall, investment and drilling activity will quickly decline and production will soon follow. But the contraction of the shale industry that we are now observing should not be seen as a fatal blow: as prices recover, US shale is likely to bounce quickly back.  This greater responsiveness of supply limits the extent to which prices need to move to balance the market. In effect, shale oil acts as a form of partial shock absorber for the global oil market: the greater responsiveness of supply damps the volatility of oil prices. Second, US shale producers are far more exposed to the vagaries of the banking system. Relative to the major National Oil Companies (NOCs) and International Oil Companies (IOCs) that dominate conventional supplies, the independent shale producers are much smaller, more highly geared and most are dependent on a continued flow of borrowing to fund the investments needed to maintain production levels. The financial crisis of 2008 demonstrated the role that credit and banking flows can play in spreading and increasing economic volatility. The size and financial strength of the NOCs and IOCs mean that until now the oil market has been largely insulated from these effects. The financial characteristics of the small independent shale producers change that.   Third, shale has introduced manufacturing-like processes into the oil industry. The same rigs are used to drill multiple wells using the same processes in similar locations. This differs from the large-scale, bespoke engineering projects that typify many conventional projects. And, as with many repeated manufacturing processes, US shale is generating strong productivity gains. Productivity growth in US shale, as measured by initial production per rig, averaged in excess of 30 per cent year between 2007 and 2014. US shale throws down the gauntlet of whether the lessons of lean manufacturing can be applied to conventional oil production."
Lessons from shale industry will reshape global oil market
Financial Times, 12 October 2015

"Poland is set to sign a deal to build a highly strategic gas pipeline to the Baltic states as part of an effort to break Russia’s energy stranglehold over the three EU members. The deal is a sign of mounting international support for Lithuania, Latvia and Estonia, coming only days after the UK said it would send troops to join US and German forces in the region to shore up defences against Russia. Energy supplies are one of the chief weak spots Moscow is able to exploit against the Baltic countries. Until recently, they were entirely dependent on Soviet-era pipelines, giving them no leverage to haggle over prices."
Poland and Baltic states set to sign deal to build gas pipeline
Financial Times, 12 October 2015

"President Tayyip Erdogan, angered by Russian incursions into Turkish air space, has warned Russia there are other places Turkey could get natural gas and other countries that could build its first nuclear plant. Russian aircraft twice entered Turkish air space at the weekend as Moscow carried out air strikes in Syria. Turkish F-16 jets have also been harassed by Syrian-based missile systems and unidentified planes since then. "We can't accept the current situation. Russia's explanations on the air space violations are not convincing," the Turkish daily Sabah and other media quoted Erdogan as telling reporters as he flew to Japan for an official visit. Russia's air strikes in support of President Bashar al-Assad's forces have shifted the balance of power in the Syrian conflict and dealt a blow to Turkey's aspirations of seeing Assad removed from power. But beyond protesting, there is little Turkey can do. Russia is Turkey's largest natural gas supplier, with Ankara buying 28-30 billion cubic meters (bcm) of its 50 bcm of natural gas needs annually from Russia. Other major suppliers are Iran and Azerbaijan, with a small amount planned from Turkmenistan. Turkey commissioned Russia's state-owned Rosatom in 2013 to build four 1,200-megawatt reactors in a project worth $20 billion, although a start date for what will be Turkey's first nuclear power plant has not yet been set.... The inflexible nature of gas infrastructure means shifting from one supplier to another is not straightforward. Turkey imports Russian gas primarily through two pipelines, one passing through the northwestern region of Thrace, the other entering Turkey from under the Black Sea. "Erdogan's statements on gas are not realistic at all. Turkey is dependent on Russia in the short and medium terms," said one private-sector gas official. "No gas entry from Thrace means the end of Turkey as that gas pipeline feeds all of Istanbul and the Marmara region. There is no alternative pipeline system that can bring this gas." Turkey could look to boost purchases of liquefied natural gas (LNG) from Nigeria and Algeria to plug a potential gas shortage, although that would be a costly option for a country whose annual energy imports bill already exceeds $50 billion. It is already looking to increase gas imports from Turkmenistan, currently a marginal supplier, but energy analysts say Russia has blocked such moves. Erdogan is due to visit Turkmenistan on Monday. The Trans-Anatolian Pipeline (TANAP), in which Turkey has a 30 percent stake, is expected to bring Turkey 6 bcm of Azeri gas but only after mid-2018 when the pipeline becomes operational. Turkey's surplus in electricity generation means it can afford to live without a nuclear power plant for several years to come."
Angered by air strikes, Turkey's Erdogan warns Russia on energy ties
Reuters, 8 October 2015

"Onshore wind energy has become cheaper than electricity from any other source in the UK for the first time, in what could be a landmark moment for renewable energy in Britain.Yet the Government has been accused of scuppering Britain’s best chance of meeting the country’s ambitious environmental targets through its continued resistance to onshore turbines, despite growing evidence that they are the most affordable option. However, new figures show they not only produce cheaper energy than coal, oil or gas power stations, but also remain far cheaper than offshore turbines, which the Government is championing. Onshore wind farms currently produce about 60 per cent of the UK’s wind power output. Although they are set to remain the predominant form of renewable energy in the next few years despite opposition in Westminster – which has stopped subsidies and given the final say on whether a project should go ahead to local residents – supporters of green energy say the country is missing a chance to maximise their potential. The cost of onshore wind power has fallen from $108 (£70.20) per megawatt hour (mWh) a year ago to $85 today, as they become more efficient and cheaper to build. Over the same period, coal-fired power stations have seen their costs rocket from nearly $98 mWh to $115 and gas from $100 to $114, after the EU agreed new rules that will greatly increase the amount they must pay for their carbon emissions. Offshore wind costs $175 mWh, according to the research, by Bloomberg New Energy Finance. A steep decline in borrowing costs, with bank lending rates hovering around all-time lows, is also much more beneficial for wind farms than for fossil-fuel plants. This is because far more of the cost of renewable energy projects relate to their construction, which is funded by loans."
Wind power now UK's cheapest source of electricity – but the Government continues to resist onshore turbines
Independent, 8 October 2015

"Much of the focus on the impending opening up of Iran has been on what this means for the oil industry. However, even bigger shockwaves could be felt in the natural gas sector, should economic sanctions restricting the Persian Gulf powerhouse be fully lifted. Tehran’s reintroduction to the international community would fire the starting pistol on a natural gas race that could have profound long-term implications for international oil companies such as Royal Dutch Shell, which have ploughed billions of dollars into developing higher-cost gas projects in areas such as Australia. Iran shares access to the world’s single largest natural gas field with Qatar but has so far been unable to fully develop its share of this vast resource. The South Pars field is thought to hold at least 325 trillion cubic feet of natural gas, enough to supply all of Europe’s needs for the next 16 years.   Prior to the imposition of tougher economic sanctions on Iran, the country had made progress in tapping into South Pars, which had been broken down into 24 phases of development. The Iranians were able to move ahead with early phases intended to provide energy for the country’s domestic market but more lucrative plans to export liquefied natural gas (LNG) have been delayed. Iran had signed deals with international oil companies to develop LNG projects under a five-year plan that had envisaged exporting 70m tonnes of the fuel each year. However, many of these deals were cancelled, setting back Iran’s gas industry by decades as its big rival Qatar pressed ahead with its own developments on the other side of the Gulf. Qatar’s North Field, which is adjoined to South Pars, is estimated to hold in excess of 900 trillion cubic feet of gas. Combined, the field is the single largest deposit of the energy source to be found anywhere in the world. The Qataris have raced ahead of Iran in terms of developing their share of the deposit, in partnership with companies such as Royal Dutch Shell, Total and Exxon Mobil. The tiny Arab sheikhdom has the capacity to ship 77m tonnes of LNG per year from 14 so-called LNG trains that stretch along its coast at Mesaieed and Ras Laffan. Since 2005 the Qataris have had a moratorium in place on further developments of its North field but, should Iran begin to suck more natural gas from the adjacent South Pars, this policy may change as both sides race to drain the resource.  Qatar is already predicted to see its income from LNG exports fall over the next decade as output has peaked and global markets become flooded with the fuel source. The moratorium on development of the North Field pushed international oil majors into developing more expensive projects in deep waters close to Australia. Although these projects have been more expensive to develop, they have benefited from being closer to fast-growing Asian markets, where the majority of new demand for LNG is expected to occur. At the same time, the development of the shale gas industry in the US has shut out growth of LNG imports into the world’s largest economy. Many of Qatar’s LNG projects were originally aimed to supply the US market before the North American shale revolution reduced the country’s need for foreign imports from the Middle East. This has contributed to the collapse in LNG prices despite rising demand. Landing prices for spot cargos in Asia have fallen to $8 per million British thermal units (btu), from $20 per btu in 2014. Long-term prices could fall much further should Tehran’s reintegration into the international economy provoke Doha to lift its own moratorium on the development of the North Field. Faced with declining prices, and a market that Citi Research estimates could be oversupplied by as much as 28m tonnes of LNG by 2018, the last thing the industry needs is a flood of cheap Iranian gas to come on stream. Iran’s oil minister, Bijan Zanganeh, has already said that he wants to see his country exporting gas to Europe. But for that to happen the country will first need to attract the investment of international oil companies to build the giant facilities capable of freezing the fuel to a liquid before it can be loaded onto tankers. Even if partners can be found once sanctions are lifted, it would take at least five years to build the infrastructure that would be required for Iran to export LNG on a global scale. However, Iranian gas would have the advantage of being relatively cheap to produce and export when compared with the highly expensive deep-water projects in Australia.  For companies such as Shell, which are betting their future on natural gas, the start of a race between Qatar and Iran to exploit their vast resources could be disastrous. The Anglo-Dutch company and shareholders are poised to commit £47bn to buy BG Group, increasing its exposure to LNG in the long term. Shell has already pulled back on some of its plans for further LNG investments by recently ditching a new $20bn scheme in Queensland, Australia."
Iran to trigger natural gas race with Qatar in Persian Gulf
Telegraph, 8 October 2015

"After oil prices plummeted, I went on the record saying I thought they'd be back above $70 per barrel by the end of 2015. The year isn't over yet, but my prediction isn't looking good. I thought worldwide demand would go up — and it has. The latest from the International Energy Agency shows demand is already up about 1.7 million barrels a day. I thought supply from the United States would go down — and it has. Companies have been laying down rigs, and U.S. production has dropped by 500,000 barrels a day since June. So where'd I go wrong? One word: OPEC. Could oil prices really shrink to… $20 per barrel? I thought supply from the Organization of the Petroleum Exporting Countries — and specifically Saudi Arabia — would also go down. You can't get rich selling anything for less than it costs to maintain the country. I expected they would at least maintain, if not cut, production to command a better price. That didn't happen. Rather than cutting back or holding steady, OPEC drove prices even lower as Saudi Arabia has increased production by almost a million barrels a day. I erred in underestimating OPEC's determination to keep the flow of oil under their control. The OPEC cartel is controlled by leaders whose top priority isn't to make money for stockholders, it's keeping themselves in power. Even knowing that, I didn't expect to see Saudi Arabia, Qatar, Kuwait and the United Arab Emirates all working to increase their market share by bringing new production online over the next few years. They won't be alone going forward. Iran will become an even bigger factor in the next few years now that the removal of sanctions allows them access to more of the world market. And Iraq has some of the world's largest reserves. If the country ever settles down, the Iraqis will have a major say in world prices. When it comes to the price of oil, which remains in the mid-forties, all of that gets taken into account. What doesn't get taken into account is that the nations of OPEC have a long-term strategy, America doesn't. And, on top of all that, we have Russia moving into Syria. That will invariably add a new dimension to the Middle East energy equation. Even as OPEC loses money, they are growing their market share. When prices rise, they'll rake in profits while the competition scrambles to catch up. It's also a geopolitical move. The world depends on oil, and they've got their hands on the spigot. The United States, however, is taking a short-term view. Our economy is powered by cheap energy, and $2 gasoline makes a lot of folks happy. We know it'll hurt when prices go back up — which they will — but the American public has pretty much made energy a back-burner issue. Things are good today, so we'd prefer to wait until tomorrow to worry about the future."
T.Boone Pickens - The problem with my $70 oil call
CNBC, 8 October 2015

"A company drilling for oil on the Golan Heights claims to have found “significant amounts” in the plateau. “We’re talking about a layer 350 meters thick,” Yuval Bartov, chief geologist of Afek Oil and Gas, a subsidiary of the American company Genie Energy, told Channel 2. The layer is ten times larger than the average oil find worldwide, Bartov said, “and that’s why we’re talking about significant amounts. What’s important is to know that there’s oil in the rock, and this we know.” Three drilling sites on the Golan have uncovered what is potentially billions of barrels of oil, enough to fulfill the Israeli market’s 270,000-barrel-per-day consumption for a very long time, the report claimed. Exploratory drilling began in December 2014. In recent weeks, Afek requested permission to drill an additional 10 wells. While it says the oil find is confirmed, the firm says the quality, more precise measures of quantity and cost-effectiveness of extracting the oil won’t be known until the extraction is begun."
Major oil reserve said found on Golan
Times of Israel, 7 October 2015

"Energy is vital for society and the military and NATO continues to consult on and develop its capacity to contribute to energy security. The changing energy landscape and its security implications for NATO Allies and partner countries was the focus of the first Energy Security Strategic Awareness Course held at the NATO School in Oberammergau which concluded on 2 October....The students attended lectures on the geopolitics of energy security, maritime security, cyber defence, the role of the private sector in energy security and other related subjects. They also worked in syndicates to develop their own solutions to energy-related security challenges. The NATO Energy Security CoE provided several speakers. The Dean of the NATO School, Colonel Timothy Dreifke, expressed strong support for the course. “Studying energy security was part of my military education. I felt that the time had come to offer such a course for Allies and partners. Our commandant, Captain Scott Butler, had long been supportive of such a new course. I am glad we could make it happen,” he explained.   The course is likely to become an annual event."
NATO School explores energy security
NATO, 2 October 2015

"Russia and Saudi Arabia—the world’s two biggest oil producers—indicated Friday they weren’t pulling back from huge crude output levels that have helped send prices tumbling. Russia said it produced oil in September at levels not seen since the fall of the Soviet Union, pumping an average of 10.74 million barrels a day, government data showed on Friday. Oil production increased 0.4% from August. On the same day, one of the world’s most influential oil ministers—Saudi Arabia’s Ali al-Naimi—said his country would continue investing in oil and gas, saying his country remained committed to energy resource development, according to a Saudi Press Agency report. The world’s largest exporter has ramped up production above 10 million barrels a day for the past few months."
Russia and Saudi Arabia to Continue Pumping Oil
Wall St Journal, 2 October 2015

"Iran is inviting foreign investors to actively develop its energy industry after sanctions are expected to ease in 2016, under a nuclear deal between Iran and six global powers, deputy Oil Minister Rokneddin Javadi told Reuters on Thursday. "We welcome all oil companies, including the Americans, that meet Islamic Republic’s requirements to invest in Iran. We welcome competition among foreign oil companies," Javadi said in a telephone interview from Tehran.... Iran after the July 14 deal, in which Tehran agreed to curb its nuclear programme in exchange for an end to economic sanctions that have hit the country's oil production. Major Western oil companies started withdrawing from OPEC member Iran after the United States and European Union imposed sanctions on the country in 2012."
Iran invites foreign firms to develop its oil, gas industry
Reuters, 1 October 2015

"The Canadian tar sands, or oil sands, are much more carbon-laden than most other fossil fuels produced in North America, and their possible outsized impact on the climate is one of the primary reasons the proposed Keystone XL pipeline, which would carry tar-sands oil to Texas refineries, is so controversial. Despite long odds as oil prices continue their dip below $50 per barrel, commercial tar-sands mining is coming for the first time to the U.S., where an Alberta company called U.S. Oil Sands has begun producing tar sands from a mine in eastern Utah. Up to 76 billion barrels of recoverable crude oil may be locked up in deposits of thick claylike and hydrocarbon-laced sand called bitumen beneath the state’s red rock canyon country, according to University of Utah estimates. (The Canadian oil industry refers to the sticky bitumen as “oil sands,” but in the U.S., the federal government usestar sands,” a name the Canadian industry considers pejorative because it is used by its critics.) Oil price volatility makes tar-sands development in Utah — the only state in the U.S. with large deposits of it — uncertain. But if successful, it will be a historic moment in the history of oil and gas production in the U.S. “There have been numerous attempts to develop the oil-sands resource in Uintah County, Utah, over the past eight decades,” Jennifer Spinti, a research associate professor for the Institute for Clean and Secure Energy at the University of Utah, said. “While the oil sands have been exploited commercially for use as a paving material, no company has ever produced bitumen at a commercial scale.” If the industry does gain a foothold in the U.S., the climate implications could be significant."
Tar-sands oil mining has now come to the U.S.
Grist, 2 October 2015

"Shell’s decision to put its Arctic oil exploration plans in deep freeze will have several knock-on effects for global oil exploration, environmental protests and the future of the company itself. The broader Arctic retreat by energy firms once bullish about polar prospects has now left just two working operations in the region: BP’s Prudhoe Bay field, which feeds the Trans-Alaskan pipeline, and Gazprom’s largely symbolic Prirazlomnoye platform in the Pechora Sea. Publicly, Shell blames disappointing exploratory results, high operating costs and strict US environmental regulations for its decision to quit Alaska’s Berger field after about $7bn (£4.6bn) of investment. But company sources also accept that Arctic oil polarised debate in a way that damaged the firm. “We were acutely aware of the reputational element to this programme,” one said."
Shell has frozen its Arctic oil drilling – but it's still hungry for fossil fuels
Guardian, 28 September 2015

"One hundred and fifty miles from the Alaskan coast lies what must be the most expensive oil well ever drilled. Shell’s decision to abandon the Burger J prospect, along with its entire Arctic exploration campaign, marks an outcome that many at the oil major must have dreaded since it bought the leases in 2008. That is not because of the cost — enormous though it is — of setting up remote platforms and drilling into rock that lies beneath 140ft of water. Shell is reckoned to have spent about $7bn on the exploration effort; some estimates put the figure even higher. But its balance sheet is strong enough to absorb the loss. Nor will the public ill-will generated by years of exploration in pristine Arctic waters last for ever. Indeed, for some senior executives at Shell, the prospect of success in the Arctic was more worrying than the possibility of failure. Building the permanent facilities needed for actual production would have been far more contentious than the limited (if sometimes hapless) exploration work. Among the people on record as opposing Arctic drilling is Hillary Clinton, the frontrunner for the Democratic nomination for president. That is a battle that Shell will no longer have to fight. More worrying, from Shell’s point of view, is the prospect of a declining reserves base. In common with several of the other oil majors, it is pumping oil faster than it can book new reserves of bankable assets. This was the reason for pushing on in the Arctic against public criticism and deteriorating economic prospects for so long. If, as some of the company’s executives believed, the Chukchi Sea blocks held about 35bn barrels of oil, Shell’s reserve base would have been secured and much effort would have been devoted to winning hearts and minds and pushing down costs. As it stands, the reserve base will continue to decline. Shell’s $70bn purchase of BG Group, if completed, will bring access to some identified resources — for instance off the coast of Brazil — but the cost of development is high and success is very uncertain. In the long run, this is little short of an existential challenge. Can the existing reserves base be replaced with resources that can be developed commercially? Or is a period of corporate decline inevitable? For the past three years Shell has failed to find sufficient resources to replace production despite heavy exploration expenditure. In 2014 it replaced only 26 per cent of its oil and gas production. Over the past three years the figure is just 67 per cent. The problem is not a shortage of oil and gas. The problem is access. Over the past decade, according to the BP Statistical Review, global oil reserves rose 24 per cent, despite 10 years of growing production, and gas reserves climbed 20 per cent. But the majors do not have access to much of it. Saudi Arabia and Venezuela are closed to foreign ownership. Much of Iraq is a war zone and politics limits access in areas such as Kurdistan even for the boldest independents. Libya is in a state of civil war. Iran is walled off by sanctions, which the nuclear deal only partially removes. Russia is also subject to sanctions. There are significant volumes of oil and gas to be developed from shale rocks in the US and elsewhere but the economics do not look good at $50 a barrel."
Big oil faces shrinking prospects
Financial Times, 28 September 2015

"The man tasked with saving the UK’s North Sea oil industry says it will take two years or more to recover from its problems and that Britain should start preparing for life without oil. Last year Sir Ian Wood wrote a report, commissioned by the government, into how to maximise the North Sea’s oil and gas, which has been a big driver of the economy since the 1970s but has been in long-term decline since the late 1990s. In an interview with the Financial Times, Sir Ian Wood warned: “Oil at $35 to $55 [per barrel] is the likely scenario into 2017, and I think the best guess right now for a recovery in the North Sea is 2017-18.” The North Sea today produces about 1.5m barrels of oil per day, compared with 4.5m at its peak. Its problems have increased significantly over the past year, however, as the price of Brent crude has dropped from $115 a barrel last June to about $50. The Office for Budget Responsibility, the UK’s independent forecaster, has told ministers to expect just £2bn from North Sea tax revenues between 2020 and 2040. Officials believe any revenue generated during that period will be all but cancelled out by the costs of decommissioning old platforms. The government has become so concerned about the entire future of the industry that it has put in place a rescue plan involving tax breaks and greater co-operation between operators. But Sir Ian, who devised that plan, believes the pain is far from over. North Sea divisions of multinational producers would find it increasingly difficult to secure funds from head office, he warned, not least because it was cheaper to drill for oil in every other part of the world. “It is going to be a very tough budgeting round for the [multinational] operators. I think there will be significant reductions in the level of budget made available [to their UK branches].” Since the beginning of 2014, about 5,500 jobs have been lost in the industry, while exploration has slowed significantly. Executives say permanent damage could be done if companies fail to maintain capital spending, stop exploring for new oil and start decommissioning early. Sir Ian echoed those warnings: “The industry will lose jobs, whole teams, plants and equipment. But we must be really careful we don’t lose infrastructure, as the damage will then be permanent.”"
Britain must prepare for life without oil, says expert
Financial Times, 27 September 2015

"Heirs to the Rockefeller family, which made its vast fortune from oil, are to sell investments in fossil fuels and reinvest in clean energy, reports say. The Rockefeller Brothers Fund is joining a coalition of philanthropists pledging to rid themselves of more than $50bn (£31bn) in fossil fuel assets. The announcement was made on Monday, a day before the UN climate change summit opens on Tuesday. Some 650 individuals and 180 institutions have joined the coalition. It is part of a growing global initiative called Global Divest-Invest, which began on university campuses several years ago, the New York Times reports. Pledges from pension funds, religious groups and big universities have reportedly doubled since the start of 2014."
Rockefellers to switch investments to 'clean energy'
BBC Online, 23 September 2014

"A wave of bankruptcies and closures is sweeping across the oil patch, with dozens of hydraulic-fracturing companies at risk, industry experts say. Most of the companies that help oil-and-gas explorers drill and frack wells are small, privately owned and just a few years old. They are part of a flood of new entrants in the energy business—one that is drying up as oil prices languish below $50 a barrel. One of the latest casualties is Pro-Stim Services. Launched in 2011 with backing from Turnbridge Capital LLC, a private-equity firm, the company did work for oil-and-gas producers eager to coax more fuel out of the ground in places like Texas and Louisiana. “The Haynesville Shale was blowing and going at that time,” said Bubba Brooks, who founded the company in Longview, Texas, after working in the oil industry for close to 20 years.  Pro-Stim survived its early years despite stiff competition. Even though a new competitor seemed to enter the market every week, the price of oil was strong—and rising—and demand for fracking services was high. But U.S. crude prices plunged by 50% between last summer and the start of 2015, and Pro-Stim shut down earlier this year. Several other companies are in a similar fix. At least five frackers have filed for bankruptcy, stopped fracking, or shut their doors altogether, according to consulting firm IHS Energy. Other analysts say that number may be higher, and they expect many more companies to follow suit or consolidate in a merger frenzy. Energy analysts at Wells Fargo & Co. say as much as half of the available fracking capacity in the U.S. is sitting idle. Traditionally, oil-field service companies that helped drill and complete wells were massive conglomerates—such as Schlumberger Ltd. and Halliburton Co. —with operations all over the world. Schlumberger has dual headquarters in Paris and Houston, and Halliburton is based in both Houston and Dubai. They, too, are struggling with low oil prices and, along with their peers, have laid off 55,000 people around the globe so far during the current downturn. To cope, big service companies are also slashing their prices, in some cases so low that it is driving out smaller players, analysts and industry experts say. Small startups began to challenge the Schlumbergers and Halliburtons of the world in 2008, as American wildcatters embraced fracking, the process of blasting a slurry of water, sand and chemicals down a well to break apart densely packed rock, unlocking trapped oil and natural gas. The high-intensity technique has helped push U.S. oil production to its highest level in nearly half a century. The drilling boom, which began in the wake of the global economic recession and later picked up steam, offered the dozens of new outfits plenty of fracking work from Texas to North Dakota. “There was that first initial overbuild; everybody kind of went crazy. Mom-and-pop shops were popping up,” said Caldwell Bailey, a consultant at IHS. There are nearly 50 firms in North America that frack wells, he said. Even when oil prices peaked at more than $100 a barrel last summer, the keen competition among small fracking companies meant many of them were battling to protect their profit margins. The market has gone from cutthroat to nearly nonexistent in some oil-and-gas fields. So far this year, the amount of fracking work has fallen about 40% from a year earlier, and the price of a frack job has fallen 35%, according to Spears & Associates, a consulting firm for oil-service companies."
Fracking Firms That Drove Oil Boom Struggle to Survive
Wall St Journal, 23 September 2015

"French energy group Total announced Wednesday that is was slashing capital spending, delaying the start date of several projects and upping its cost-cutting targets in a response to dramatically lower global oil prices. In the group's Strategy and Outlook presentation Wednesday, Total's Chief Executive Patrick Pouyanne told investors that the group was reducing the amount it spends on oil and gas projects from a peak of $28 billion in 2013 to $23-24 billion this year and further to $20-21 billion in 2016. The group saw a "sustainable level" of capex of $17-19 billion from 2017 onwards, according to the presentation. Total was one of the first oil majors to announce a sharp cost-cutting regime in 2014, reacting quicker than others to the sharp decline in global oil prices on the back of a glut in supply and lack of demand. From a peak price of $114 a barrel in June 2014, now, a barrel of benchmark Brent crude costs $49.66."
Total to slash spending by $3B as oil price bites
CNBC, 23 September 2015

"Across the [oil] industry, the scale of the cost-cutting challenge is huge. Wood Mackenzie, the energy consultancy, says $1.5tn of future spending is uneconomic with oil at under $50 a barrel and unlikely to go ahead. As such, industry operators are trying to drive down the cost of new projects by 20-30 per cent....In the North Sea — an ageing, high-cost oil region hit hard by the market slide — some big efficiency savings have been identified. Shift patterns are being changed to cut costs. A move to a “three weeks on, three weeks off” rota for offshore workers will require fewer crews but see staff spending longer stints on platforms. Companies are also trying to cut the time taken to issue “permits to work”. Up to 100 of these permits are needed every day to ensure maintenance work on platforms is completed quickly but workers can wait hours for them. Other efficiency improvements include ensuring that all repairs to a piece of machinery are done at the same time, to minimise the time it is out of action."
Oil price slide forces companies to rethink how they operate
Financial Times, 22 September 2015

"U.S. drillers have cut the rigs in operation three straight weeks as cheap oil is causing them to hold up production plans, triggering an increase in prices on Monday..... "The current rig count is pointing to U.S. production declining sequentially between 2Q15 and 4Q15 by 255,000 barrels per day at the observed path of the U.S. horizontal and vertical rig count across the Permian, Eagle Ford, Bakken and Niobrara shale plays," Goldman Sachs said. "The implied year-on-year growth by 4Q15 of 120,000 barrels per day is lower than the prior week's estimate of 125,000 barrels per day," it said. Analysts said low prices would have a bigger impact in the longer term as producers struggle to cut enough costs. "While operators are seeking an average cost reduction of 20-30 percent on projects, supply chain savings through squeezing the service sector will only achieve around 10-15 percent on average," energy consultancy Wood Mackenzie said.  "$1.5 trillion of uncommitted spend on new conventional projects and North American unconventional oil is uneconomic at $50 a barrel," Woodmac added. Despite such a cut to U.S. spending plans, analysts said prices were expected to remain at low levels for some time to come as other producers, especially in the Middle East and Russia, keep pumping near record levels."
Oil prices rise as U.S. drilling declines
Reuters, 21 September 2015

"Plunging oil prices have rendered more than a trillion dollars of future spending on energy projects uneconomic, according to a study that suggests that the impact on industry operators is worsening. A report published Monday says $1.5tn of potential investment globally — including in North America’s shale-producing heartlands — is “out of the money” at current oil prices close to $50 a barrel and unlikely to go ahead. Industry operators expect capital spending on new projects to decline by between 20 and 30 per cent on average in the wake of the price slide, says Wood Mackenzie, the energy consultancy. It calculates that $220bn of investment has been cut so far, about $20bn more than it estimated two months ago and much of it the result of projects being deferred. Such a decline in spending means that the price crash since last summer — the result of weaker Chinese demand, record US production and Saudi Arabia’s decision not to cut output — could resemble the savage downturn of the mid-1980s. After a brief recovery in the spring, oil prices spiralled lower in July. Brent crude — the global benchmark — fell to its lowest point in more than six years during August’s wider market turmoil. It now stands at $47.47 a barrel, down from $115 in June last year. Just half a dozen new projects will be approved this year, says the Wood Mac report, and 10 or 11 in 2016, compared with an annual average of 50 to 60. Onshore US producers, including the “fracking” industry, which has unlocked previously hard-to-access reserves, have reacted fastest to the market collapse. “Deep cuts” in North America account for more than half of a 45 per cent fall in capital spending across the Americas.... a prolonged period of low oil prices over a number of years is likely to be needed to bring about more profound changes to industry costs, the report argues. Despite comparisons with the 1980s, Wood Mac believes that such a deeper, structural shift is unlikely. “In our view oil prices will rise sharply from 2017, and there is a real risk that cost inflation pressures will then return,” it says."
Plunging oil prices put question mark over $1.5tn of projects
Financial Times, 21 September 2015

"The number of Britons with asthma could almost double by 2050 because the air inside homes is becoming more polluted as they become more energy-efficient, a new report warns. The trend towards airtight houses could also worsen allergies as well as breathing problems, and even exacerbate lung cancer and heart problems, according to a leading expert in indoor air quality. Airborne pollutants created by cooking, cleaning and using aerosols such as hairsprays will increasingly stay indoors and affect people’s health as homes are made ever more leak-proof to help meet carbon reduction targets, a report by Professor Hazim Awbi claims. Small amounts of chemicals found in detergents can stay on the fibres of washed clothes, be emitted into the air and combine with particulate matter from logs burned in a real fire, for example."
Asthma could be worsened by energy-efficient homes, warns study
Guardian, 20 September 2015

"The retrenchment in drilling for U.S. oil is threatening to leave a different market short: natural gas. “The impacts of oil rig counts extend beyond oil: the outlook for U.S. natural gas is critically dependent on the outcome of this balancing act in U.S. oil rigs,” Anthony Yuen, a strategist at Citigroup Inc. in New York, said in a report to clients Wednesday. “If the oil market remains oversupplied and oil-rig counts fall, the decline in associated gas production would leave the market short of gas.” Associated gas is the gas that comes out of oil wells along with the crude. Supplies of this byproduct from fields including the Bakken formation in North Dakota and the Eagle Ford in Texas may fall by about 1 billion cubic feet a day next year as drillers idle rigs in response to the collapse in oil prices, Yuen said. That’s about 7 percent of U.S. residential gas demand. The U.S. Energy Information Administration has already forecast that shale gas production will drop in October for the fourth straight month, a record streak of declines. U.S. oil has lost half its value in the past year amid a worldwide glut of crude. Drillers have responded by sidelining almost 60 percent of the country’s oil rigs since Oct. 10."
Shale Oil's Retreat Threatens to Leave U.S. Short on Natural Gas
Bloomberg, 17 September 2015

"A new report published by Oil & Gas UK has projected that the North Sea industry will need a £2bn reduction in operating costs of existing assets by the end of 2016. The new economic report says that the oil and gas industry industry is making efforts to improve international competitiveness in a challenging business environment. The report said that the offshore sector is facing challenges such as a drop in commodity prices due to reduced production, and the increasing costs. Oil & Gas UK economic director Mike Tholen said: "Strong investment in asset integrity over the last four years, coupled with measures being taken to improve the efficiency of assets offshore, have resulted in better output from many existing fields and we expect the rate of decline in production from those fields to slow significantly over the next two years. "Taken together with the start-up of the sizeable Golden Eagle field, the government's provisional data show that production in the first half of 2015 was 3% higher than the same period in 2014, an indication that over this year, we are likely to see annual production increase." The improvement will be balanced to some extent by operating expenditure of £1.1bn relating to new fields brought on stream in the intervening period. According to the report, the positive production outlook is expected to help reduce the average operating cost per barrel of oil equivalent (boe) for across all fields. The cost will be reduced from an estimated £17.80 in 2014 to £17 this year and by a further £2-£3/boe to around £15boe by the end of next year. Oil & Gas UK chief executive Deirdre Michie said: "Last year, more was spent than was earned from production, a situation which has been exacerbated by the continued fall in commodity prices. "This is not sustainable and investors are hard-pressed to commit investment here because of cash constraints. "Exploration for new resources has fallen to its lowest level since the 1970s and with so few new projects gaining approval, capital investment is expected to drop from £14.8bn (2014) by £2bn-£4bn in each of the next three years." Michie added that employment generation in the sector has dropped by 15% since the start of 2014 to 375,000 jobs. Michie said: "Over 43 billion boe have been produced to date from the UKCS and almost half again remains to be extracted...."
North Sea oil and gas industry expects £2bn cost improvement by 2016, says report
Offshore Technology, 10 September 2015

"Russia will not cut oil production, Arkady Dvorkovich, Deputy Prime Minister of the Russian Federation, told CNBC Friday. "For Russia, given the structure of production, it's very difficult to cut supply artificially," he said. "If oil prices will be low enough for a long period of time, supply will go down in (a) natural way, and I think this (is the) most efficient stabilizer for the market." Russia is a major oil producer and is highly dependent on the proceeds from the sale of oil, the prices of which have roughly halved in value since 2014 as a result of oversupply in global oil markets and concerns about weakening demand. Moscow meanwhile has been keen to keep its production high to defend its market share. Dvorkovich said that Russia was used to fluctuating oil prices. "Certainly, we are better off with prices more like $80, $90 per barrel, but even with $50 and $60 we can optimize, rationalize budget expenditure and other spending to live normally with those levels."
Russia will not cut oil production: Deputy PM
CNBC, 4 September 2015

"China's economic slowdown has finally left its imprint on global stock markets. But the impact has been discernible in the oil market for many months and it has gone further in the last few days. The reason: China is the world's biggest importer of crude oil. It took top spot in April this year and even before that was behind only the United Sates. Slower economic growth in China means less demand for oil than there would otherwise have been. Of course there are other factors behind the oil price collapse of the last year, some of them leading to abundant supplies. The rise of shale oil in the United States and Saudi Arabia's unwillingness to respond by curbing its own output have also put pressure on the oil price. But demand is an important element. .... Cheaper oil is a great boon for struggling economies that have to import the stuff. There are plenty of them around, notably the eurozone. But it is an increasingly serious problem, certainly economically and perhaps politically too, for oil-exporting countries. Oil accounts for a very large share of government revenue in many countries. The IMF says it's more than half for many oil exporters and as high as 80-90% in some, including Iraq, Qatar, Oman and Equatorial Guinea. The IMF has also estimated the oil price it would take for some countries in the Middle East and North Africa (and a couple in the former Soviet Union) to balance their government budgets. For all of them that "breakeven" price is higher than today's level. For several, including Saudi Arabia and Iran it would take a lot more than double what it is now to balance the budget. For Libya it is more than $200 a barrel, higher than the oil price has ever been. Economists at Deutsche Bank have done a similar analysis and extended it to a few more countries. They suggest that Venezuela and Nigeria would also need an oil price of about $120 a barrel to balance the books. The IMF is forecasting a deficit in the Saudi government finances of 14% of national income this year. Saudi Arabia has reserves it can draw on, savings built up in years of higher oil prices. The same is true of some other oil producers, but such a low oil price would be a problem even for these countries if it were to persist for several years. The state has had a central role in the economic life of many countries across the Middle East and North Africa. It has been called a social contract. The World Bank said: "The old development model - or social contract - where the state provided free health and education, subsidized food and fuel, and jobs in the public sector, has reached its limits." This social contract is not confined to the oil producers, though an earlier World Bank report said that oil is important to other countries in the region as migrant workers get jobs in the sector and send funds home. The limits on this social contract were a key factor behind the political turmoil known as the Arab Spring. And many of the big oil exporters in the region are relatively authoritarian political regimes. Rising living standards and public services funded by oil revenue play an important part in the political balance in countries such as Saudi Arabia."
China's slowdown and cheap oil
BBC Online, 25 August 2015

"America’s oil boom is faltering, and with US crude oil prices hitting lows unseen since 2009 this week, experts believe the fall may continue taking thousands of jobs with it. Consumers may cheer the lower prices at the pump, but jobs are being lost in the energy industry across the world. In June, the Energy Information Administration said the US petroleum industry lost about 6.5% of its jobs from October to April, or about 35,000 of its 538,000 workers, citing US Bureau of Labor Statistics data. On Wednesday, Royal Dutch Shell said it would eliminate 6,500 jobs worldwide as the company tries to reduce costs because of the lower oil prices. Declines in oil and natural gas extraction and support employment tend to lag declines in crude oil prices, so given the recent return to lower prices, more job cuts could be on the way. Global stock markets have been rattled by the fall and continuing woes in China. The Dow Jones Industrial average hit a low for 2015 on Thursday and is expected to come under renewed pressure on Friday. “Globally there’s probably been approaching a quarter-million layoffs from the oil industry. And hundreds and billions in cancelled projects,” said Walter Zimmermann Jr, vice president and chief technical analyst at United-ICAP. ... The boom that started in 2008 when oil prices reached nearly $150 a barrel – high enough to make new fracking technology affordable. All that fracking oil has contributed to a glut and the inevitable boom and bust cycle has come full circle again. But the price is also being hit by the jitters affecting financial markets overall, such as the stronger US dollar, general weakness in commodity prices, fears about China’s economy and uncertainty about the Federal Reserve’s possible interest-rate hike."
US crude oil prices hit lowest since 2009, eliminating thousands of jobs
Guardian, 21 August 2015

"Non-Opec oil production is set to plunge next year by the most in 24 years as Saudi Arabia’s strategy of shielding its market share squeezes drillers including producers in the US shale industry, according to the International Energy Agency (IEA). Weaker oil prices are set to trigger a fall of 500,000 barrels per day in 2015 in non-Opec production, the IEA said in a monthly report which suggested a Saudi push to knock out US shale gas production appeared to be working. About four fifths of that total will come from US shale, said the report from the IEA, Paris-based..."
Oil production will slow to trickle as Opec tightens grip
London Times, 11 September 2015

"Oilfield services company Baker Hughes Inc. said Friday the number of rigs exploring for oil and natural gas in the U.S. this week declined by 16 to 848. But Utah was one of eight states in which the numbers were unchanged. Baker Hughes said 652 rigs were seeking oil and 196 explored for natural gas. A year ago, with oil prices about double the prices now, 1,931 rigs were active. Among major oil- and gas-producing states, only Alaska posted an increase — up one."
Oil and natural gas rig count falls by 16 to 848
Associated Press, 11 September 2015

"The U.S. oil boom could take a big hit next year in the largest plunge in global crude production since 1992, as OPEC’s strategy of fighting for a bigger cut of the global market seems to be working, the International Energy Agency says. The shale plays in Texas and North Dakota at the center of the nation’s energy supply surge over the last seven years could lose 400,000 barrels a day in 2016 after the latest collapse in oil prices. That’s because oil is trading below the break-even price for most shale plays, the IEA said. “In the U.S., the recovery in drilling activity and output expected for next year is starting to look elusive,” the IEA said. Oil futures contracts for 2016 are around $10 a barrel lower than they were in July. The IEA expects drilling and completion activity in the U.S. to decline by 20 percent to 70 percent next year. Outside of the Organization of Petroleum Exporting Countries, crude production in the United States, Russia, the North Sea near the United Kingdom and other regions could fall by 500,000 barrels a day, the biggest decline in more than two decades, and U.S. output “is likely to bear the brunt” of that, even after putting out 1.7 million additional barrels of oil last year, the IEA said. “On the face of it, the Saudi-led OPEC strategy to defend market share regardless of price appears to be having the intended effect of driving out costly, ‘inefficient’ production,” the Paris-based group said in its monthly Oil Market Report on Friday....Oil production in the U.S. shale plays has for months been considered far more resilient to the oil-market crash than investors and market participants had expected. Technological breakthroughs like multi-well drilling on platforms called pads have enabled more efficient drilling since 2013, making the nation’s number of rigs a less important factor in its oil production. And further advances have been made this year to make drilling more efficient and to make oil wells more fertile. But the IEA says even these advances can’t withstand the pressure of the latest crude crash..... “Oil’s price collapse is closing down high-cost production from Eagle Ford in Texas to Russia and the North Sea,” the group said. “Marginal fields are being shut or are at risk as companies seek to stem losses from high operating costs. Spending curbs are also accelerating decline rates.” A Barclays survey showed this week oil producers expect to cut capital spending by 10 percent to 15 percent in North America, on top of their 35 percent cut in spending this year."
IEA: U.S. oil production could fall sharply in 2016
Fuelfix (Blog), 11 September 2015

"The UK’s oil and gas industry expects to continue shedding jobs and heavily cutting its costs despite reducing its workforce by more than 65,000 in the last 20 months. The annual economic report for Oil & Gas UK disclosed on Wednesday that the total number of people employed in the sector had fallen from 440,000 to 375,000 since the beginning of 2014, largely due to the crash in world oil prices. Deirdrie Michie, the industry body’s chief executive, said more jobs would go and cuts in the sector’s cost base would continue before the industry was lean enough to weather the crisis, despite a recent rise in production of 3%."
UK's oil and gas industry braces for further job cuts
Guardian, 9 September 2015

"Britain's North Sea oil and gas sector has shed more than 5,000 jobs since late last year, the country's new Oil and Gas Authority said on Monday, putting an official figure on job losses resulting from a year-long decline in oil prices. North Sea oil companies have been particularly hard hit by the near 55 percent decline in Brent crude prices since June 2014, as they were already facing some of the industry's highest operating costs in one of the world's most mature basins. "Regrettably, this has led to the loss of around 5,500 jobs since late 2014," Andy Samuel, chief executive of the OGA, said in a report summarising the newly-created body's first months. North Sea operators, including Shell (RDSa.L), BP (BP.L), Chevron (CVX.N) and ConocoPhillips (COP.N), have all announced staff cuts, a trend that has raised concerns about an emerging skills gap. The OGA, established as an executive body five months ago, is tasked with helping North Sea operators squeeze as much oil and gas out of the basin as possible. The oil and gas sector employs around 375,000 people and remains an important source of tax revenue, despite those receipts dropping. UK oil production has fallen to the lowest since output started in the mid-1970s as old fields run out of resources. Two operators recently announced their intention to shut fields early, making the OGA's mission more pressing than ever. The body said it had helped mediate commercial discussions between companies involved in the running of Theddlethorpe gas terminal, and the Sullom Voe terminal on the Shetland Islands, key facilities in the North Sea but which are expensive to operate."
North Sea loses 5,500 jobs in oil market downturn - regulator
BBC Online, 7 September 2015

"A leading British maker of oilrigs is set to make almost half its workers redundant, underlining the challenges facing the industry in the North Sea. OGN, which has operations on Tyneside and in Suffolk, received a hammer blow last month when it failed to reach the shortlist to build a platform for Chevron, the American giant."
Hundreds of oil jobs at risk after rig decision
London Times, 7 September 2015

"The plunge in energy prices has forced companies drilling for oil and natural gas in the U.S. to cut spending substantially and lay off thousands of workers in Texas, North Dakota and other states that depend on the industry. And those companies will likely pull back even more if the banks they rely on for loans tighten their purse strings in anticipation of a slow recovery for oil prices. A new report by Moody's says there are more concerns than ever about the impact of low oil prices on U.S. banks that are deeply involved in oil and gas lending. The ratings agency did the analysis in a period when oil prices fell below $40 a barrel for the first time since 2009. "This price decline, along with our expectations that oil prices will remain depressed until at least the end of 2016, is credit negative for U.S. banks with significant energy-lending concentrations because it will result in higher loan-loss provisions in coming quarters," the Moody's report said. Those provisions require banks to set aside money to cover potential losses on loans. "We don't see imminent significant losses coming," Joseph Pucella, a vice president and senior credit officer at Moody's, said of the agency's review of seven institutions with the highest concentration of energy loans among the banks that it rates. On average, energy portfolios account for close to 75% of the seven banks' capital, much more than is the case for such lending at U.S. banks as a whole, according to Moody's. The banks cited – BOK Financial, Hancock Holding Company, Cullen/Frost Bankers, Texas Capital Bancshares, Zions Bancorporation, Comerica and BBVA Compass Bancshares – have stable ratings from Moody's, including some with relatively high ratings. "The banks do have strong capital positions, if you look at their metrics," Pucella said in an interview. "But to the extent that we see oil prices staying depressed over a longer period, that ultimately puts more pressure on the energy companies that these banks lend to, and so it could mean higher losses" for the banks. As far as oil prices are concerned, Moody's, like other analysts, now expects them to stay lower for a longer time than previously anticipated, and well off from a peak of $115 a barrel as recently as June 2014. In its latest forecast for oil, issued in August, Moody's said it expects prices to rise "only gradually" in 2016 and to average $52 a barrel for the year. Previously, the agency forecast oil prices increasing slowly to $60 in 2016. Among the reasons for the more bearish outlook for oil prices are a large buildup in inventories and the potential for Iran to increase oil exports starting in 2016, thanks to the nuclear deal between Tehran and the U.S. and other world powers. "The longer the prices stay low, the greater the risks to the banks," and the less likely they will be to lend to companies drilling for oil and gas, Pucella said. At the same time, Moody's makes clear that lower oil prices are by and large good for most banks, whose concentration of energy loans is much less than that of the regional banks the agency cited in its report."
Cuts in the oil industry could get worse
USA Today, 6 September 2015

"Oil-sands companies are poised to crank up billions’ worth of new production just when the market doesn’t need it, deepening a supply glut even as profit margins in the high-cost sector shrivel. Major producers, such as Suncor Energy Inc., ConocoPhillips Co., Husky Energy Inc. and others, are pressing ahead with expansions that could add roughly 800,000 barrels per day of fresh capacity in northern Alberta by 2018, according to new data compiled by ARC Financial Corp. About half of the total will start up this year, in the midst of a deep slump in energy markets that has prompted thousands of layoffs and rendered some oil-sands production uneconomic. The timing highlights a stark dilemma for companies that sank billions into megaprojects when oil prices were higher, and now face the prospect of a lengthy downturn: Should they keep pumping at all? “At these prices, you’re not even getting a return,” said Jackie Forrest, vice-president at ARC, a Calgary-based private-equity firm. “You’re just covering your operating costs. You’re not even able to pay off a big, upfront capital investment that you made.” U.S.-based ConocoPhillips last week started production from the second phase of its Surmont oil sands project. The joint venture with Total SA of France started construction in 2010 and is expected to yield 118,000 barrels per day by 2017. Also last week, Husky said it took initial steps to boost output at its multibillion-dollar Sunrise joint venture with BP PLC, saying production would climb to 60,000 barrels daily by year-end 2016. It makes sense to go ahead with such projects even as oil prices languish below $50 (U.S.) a barrel, Ms. Forrest said, in part because much of the big capital is spent up front. “If you don’t do anything with this asset, you still spent $2-billion,” she said. It’s a sharp contrast with U.S. shale producers, who have parked drilling rigs by the hundreds to cope with the collapse in oil prices. Production in once-booming regions in Texas has begun to moderate, falling 1.9 per cent between May and June, the U.S. Energy Information Administration reported last week. Oil-sands production, by contrast, is forecast to keep climbing until the end of the decade, even as low prices crimp margins. The break-even cost for steam-driven plants, including operating costs, maintenance and sustaining capital, varies from $47 a barrel up to $65 a barrel, depending on the producer, according to ITG Investment Research. U.S. crude on Friday closed at $46.05 per barrel. Unlike shale drillers, however, oil-sands companies cannot easily cease production to cope with low prices. Nor are they likely to pull back on projects already under development, analysts say. Instead, producers have focused on slashing costs, betting that prices will rise enough over time to justify today’s multibillion-dollar investments."
Oil sands companies expanding production despite oversupply
Globe and Mail, 6 September 2015

"US shale producers reported a cash outflow of more than $30bn in the first half of the year, in a sign of the challenges facing the US’s once-booming industry as the slump in oil prices begins to take effect. The shortfall points to a rise in bankruptcies and restructurings in the US shale oil industry, which has expanded rapidly in the past seven years but has never covered its capital expenditure from its cash flow. Capital spending by listed US independent oil and gas companies exceeded their cash from operations by about $32bn in the six months to June, approaching the deficit of $37.7bn reported for the whole of 2014, according to data from Factset, an information service. US oil production fell in May and June, according to the US Energy Information Administration, and some analysts expect it to continue falling as financial constraints limit companies’ ability to drill and complete new wells. Companies have sold shares and assets and borrowed cash to increase production and add to their reserves. The aggregate net debt of US oil and gas production companies more than doubled from $81bn at the end of 2010 to $169bn by this June, according to Factset. Terry Marshall of Moody’s, the rating agency, said: “The capital markets have been so strong and so open for these companies that a lot of them were able to raise a lot of debt.” Capital markets have remained open for US oil and gas companies despite the crude price more than halving in the past year. However, there are now signs that the flow of capital is slowing. US exploration and production companies sold $10.8bn of shares in the first quarter of the year, but that dropped to $3.7bn in the second quarter and under $1bn in July and August, according to Dealogic. Similarly, those companies were selling an average of $6.5bn worth of bonds every month in the first half of the year, but the total for July and August was just $1.7bn. The next hurdle facing many US oil companies is the resetting of their borrowing base: the valuation of their oil and gas reserves that banks use to determine how much they will lend. Borrowing bases are generally set twice a year, and the new levels, which will typically take effect from October 1, will reflect significantly lower expectations for oil prices than the round agreed in the spring. Edward Morse, global head of commodities research at Citigroup, said there would have to be a shake-up in the US shale oil industry to separate the good companies from the bad. “Just as it drove the industry to spectacular growth, the financial sector is going to drive the industry to consolidate and contract,” he said. US shale oil producers have reported steep improvements in the productivity of the rigs they use and the wells they drill. In the Eagle Ford shale of south Texas, the volume of oil produced from new wells for every rig running has risen by 42 per cent in the past year, from 556 barrels per rig per day to 792, according to the EIA. However, the number of rigs drilling for oil in the US has fallen 59 per cent from its peak last October, and that now appears to be having an effect on the country’s oil output. Virendra Chauhan, of consultancy Energy Aspects, said he expected fourth-quarter oil production in the US to be running at a lower rate than in the same period last year."
US shale oil industry hit by $30bn outflows
Financial Times, 6 September 2015

"Power firms expect new Energy Secretary Amber Rudd to take account of changes in technology that will see the need for fewer power stations as households cut energy use. Rudd, who cut subsidies for wind and solar power after both grew faster than expected, is due to outline her plans for the sector later this autumn. Energy sources say she will focus on how technology could transform the industry. ‘The changes we see coming at an extraordinary pace will result in central power generating capacity becoming redundant. It will mean fewer of everything including fewer big power stations,’ said a high-ranking energy source, speaking after a further delay was announced to the building of a new nuclear reactor at Hinkley Point in Somerset. ‘It’s akin to developments in computing, when the old mainframe computers were made redundant by the advent of hundreds of smaller computers, which proved far more reliable and much, much cheaper.’ Much more electricity could be generated by smaller power stations, including solar ones. Lower demand at peak times is also expected as a result of the ‘internet of things’ ,where appliances can be switched off and on at suitable times. The final element is greater progress on energy storage as firms such as Tesla and GE develop batteries capable of storing a home’s energy needs. Stephen Lovegrove, Permanent Secretary to the Department of Energy, told Parliament: ‘One of the things we’ve recently learnt is that technology across the energy system moves much more quickly than we thought.’"
New power stations? We'll just use less electricity: Britain's new Energy Secretary to outline her plans this Autumn
This Is Money, 5 September 2015

"The low crude price is putting US banks under pressure from regulators to move quickly in classifying oil and gas loans as troubled assets when borrowers slide into difficulty, says a top financier. Bill White, chairman of the Houston office of investment bank Lazard and a former US Deputy Secretary of Energy, highlighted the trend and told the Financial Times it was worrying because it could cut off the prospect of loan extensions and force fire sales of assets. His comments point to tension between regulators that want lenders to take a conservative view of crude prices — which hit their lowest levels since 2009 in the past week — and bankers hoping for a partial recovery. Mr White said that because no regulator wanted to take the blame for a bank failure, the Office of the Comptroller of the Currency, which supervises national banks, was pushing lenders to act expeditiously in moving loans at risk of or in default to their troubled asset or “workout” groups. “What worries me is when things are moved too quickly into the workout,” he said. “This is going to happen and it’s not particularly good news.” Once loans are in the hands of troubled asset specialists, sustaining the borrower takes a back seat to the short-term goal of recovering as many cents as possible on the loan dollar, he said. The US oil boom of the past six years has been fuelled by a surge in borrowing by small and midsized companies..... A prolonged slump in the crude price would pose a risk to banks with a high proportion of loans to oil and gas companies, including BOK Financial, Hancock Holding, Comerica, Texas Capital Bancshares and Cullen/Frost Bankers, according to credit rating agency Moody’s.... Even when oil was at $100 per barrel, the shale industry was not covering its capital spending from its operating cash flows. The plunge in oil prices over the past year is causing severe financial difficulties for the companies that borrowed heavily and have less productive and higher-cost assets..... Texas, the US’s biggest oil-producing state, suffered a wave of bank failures in the 1980s after an oil boom turned into a bust. It is common for periods of financial stress to heighten tensions between banks and their regulators. Extra pressure is emerging from an annual regulatory review under way of syndicated loans of more than $20m. The review will result in a public report on whether banks have a realistic view on the health of their loan portfolios. Many oil companies active in shale-producing zones have been slashing jobs and expenses to offset a fall in cash flow because of the low crude price. Yields on bonds issued by US oil and gas companies have risen sharply as the oil price has fallen, a sign of growing fears of default."
Low crude price puts pressure on US banks over oil and gas loans
Financial Times, 31 August 2015

"... there has been a phenomenal increase in productivity per rig. For example, the EIA estimates that operating a rig for a month in the Bakken would have led to a gross production increase of 388 barrels/day two years ago but can add 692 barrels today. A key factor in the productivity gains is that companies are finding ways to complete wells faster, so that more wells can be drilled each month from the same number of rigs. For example, The Barrel reports that Occidental Petroleum “has seen a 40% decrease in spud to rig release time in the Wolfcamp area of its Permian holdings from 43 days in 2014 to 26 days in March this year with a target of eventually reaching 16 days.” The modest drop in U.S. production has been enough to start to bring inventories down. U.S. crude oil stocks last week were down more than 30 million barrels from April. But that still leaves them way above normal. The drillers’ cash flow is assisted not only by the improvements in efficiency just mentioned but also by the fact that the drop in demand for rigs means companies are seeing drops in day rates and other costs. Even so, major shale producers like EOG, Whiting, Pioneer, and Devon reported before-tax losses each of the last two quarters. West Texas Intermediate averaged $53/barrel the first six months of this year. Last week it went as low as $38 before rebounding back to $45 by the end of the week."
U.S. tight oil production decline
Econbrowser, 30 August 2015

"Ministers moved to slash massive subsidies for solar panels yesterday, amid signs the Government’s enthusiasm for green energy is waning. In a surprise move, Energy Secretary Amber Rudd announced a consultation aimed at cutting the subsidies by almost 90 per cent. If implemented, such a step would remove virtually all incentive for home owners to install the panels and could mean the end of Britain’s solar power boom. In recent weeks, ministers have tightened planning restrictions and reduced subsidies for wind farms. They also closed the £540million Green Deal, which gave out loans for domestic energy efficiency improvements. Ministers claim they are taking ‘urgent action’ to tackle overspend within the Department of Energy and Climate Change and to protect ‘hard-working bill payers’. Its latest consultation says government spending on feed-in tariffs – schemes that pay producers a subsidy for the electricity they generate – should be limited to between £75million and £100million by 2018/19. Feed-in-tariff payments on domestic solar panels will also be cut by £192 a year for the typical household, according to calculations. The Tories have already announced that taxpayer subsidies for wind farms are to be axed a year early, part of a ‘big reset’ of support given to renewable energy. The Government is expected to go further and review all support given to green energy which is funded by levies on bills worth £4.3billion-a-year. The latest announcement will come as an embarrassment for energy minister Amber Rudd, who promised in May to ‘unleash a new solar revolution’. Green energy campaigners have criticised the ‘absurd’ Government plans as ‘politically motivated’."
End of the solar panel boom as subsidies slashed
Mail, 28 August 2015

"That is more wishful thinking than a likely possibility. There is little chance that Riyadh would retreat now just as the worst pain is really beginning to set in for rival producers. Sure, Saudi Arabia is suffering from low prices, but its competitors are hurting worse. U.S. oil production, after years of blistering growth, has not only ground to a halt, but has started to decline. Output peaked in March at 9.69 million barrels per day (mb/d), dropping to 9.51 mb/d in May (the latest month for which accurate data is available). In all likelihood, the decline has picked up pace in the intervening months. And more to the point, U.S. oil production will continue to decline the longer Saudi Arabia holds out. Several companies have already gone bankrupt, and more are no doubt coming down the pike. That will allow Saudi Arabia to achieve its goal of holding onto market share, and letting prices adjust on the back of rival producers."
Why Saudi Arabia won't cut oil production
CNN, 28 August 2015

"The U.S. oil-rig count ticked up by one in the latest week to 675, marking the sixth consecutive week of increases, according to Baker Hughes Inc. The number of U.S. oil-drilling rigs, which is a proxy for activity in the oil industry, has fallen sharply since oil prices headed south last year. The rig count dropped for 29 straight weeks before climbing modestly in recent weeks. Despite recent increases, there are still about 58% fewer rigs working since a peak of 1,609 in October. According to Baker Hughes, gas rigs fell by nine from the prior week to 202.  The U.S. offshore rig count fell to 30 in the latest week, down two from last week and 36 a year earlier.  For all rigs, including natural gas, the week’s total was down eight to 877."
U.S. Oil-Rig Count Rises for Sixth Consecutive Week
Wall St Journal, 28 August 2015

"Total, one of the biggest energy firms operating in the North Sea, has sold off $900m (£585m) of UK gas interests to cut costs, amid the continuing collapse of oil prices. The French group is disposing of its interests in two pipelines – one which delivers gas from 20 North Sea fields – and its ownership of the St Fergus gas terminal in Scotland. The sale brings the value of disposals by Total to more than £1bn in the last two months. It follows an announcement by Maersk Oil yesterday that the company plans to shut the Janice field in the North Sea and cut 200 jobs....Critics fear the retreat of the big oil companies such as Total, Shell and BP, spells the ultimate demise of North Sea production. But the company that bought the Total assets denied this and said companies of its scale and interest could find opportunities larger firms might not."
Total sells $900m of its UK gas assets
Guardian, 27 August 2015

"British Gas is reducing gas prices by five per cent from today but campaigners claim cuts should be much bigger as wholesale costs have now been low for over a year. Some 6.9million British Gas customers on its standard and fix and fall tariffs will pay around £35 less a year for gas. This is the second gas price reduction in six months, bringing the average total saving to £72 a year. However, uSwitch consumer policy director Ann Robinson accused British Gas of 'short-changing' its customers and said since it is the biggest energy provider in the country, it should set an example for other suppliers to follow. Energy providers say they do not cut prices more because they buy stock in advance, thus at a higher price. But Robinson said that excuse 'no longer holds water' and that it was time for big suppliers to treat customers 'fairly'. The wholesale gas price fell 28 per cent in 2014 alone. But the price cuts announced this year by all the 'big six' energy companies have fallen well short of industry estimates, suggesting bills could be reduced by £136 a year if suppliers were to pass on the full drop in wholesale prices. EDF reduced gas bills by a measly 1.3 per cent, E.ON by 3.5 per cent, Scottish Power by 4.8 per cent and Npower by 5.1 per cent."
British Gas is 'short-changing' customers with 5% tariff cut
Mail, 27 August 2015osts
Wall St Journal, 27 August 2015

"Across the industry, international wildcatters like Genel—which got an 18-month extension in Ethiopia—are renegotiating drilling commitments, selling off stakes in licenses and canceling plans to drill exploration wells, in an attempt to pare back budgets that once hinged on expensive drilling programs. 'When capital becomes very scarce, you end up having sensible discussions with governments about how to re-phase activity to reflect the realities of the day,' said Tony Hayward, former chief executive of BP PLC and now chairman of Genel, in an interview. The move by these exploration companies reflects a much broader scramble by the industry—from the world’s biggest integrated oil companies to state-owned giants—to cut costs....Earlier exploration pullbacks have been blamed for subsequent tight markets. In the late 1990s, oil prices crashed, triggering a round of big consolidation and a pullback in exploration spending. That came back to haunt the world when Asian demand took off just a few years later, and supply growth couldn’t keep up—sending prices soaring. 'There’s no doubt that when you take this much capital out of this industry it has consequences on future supply,' Mr. Hayward said. 'It will probably take a couple of years before it becomes really apparent.' The pullback comes on top of cancellations and delays of around $200 billion in new oil and natural-gas projects, according to estimates from energy consultancy Wood Mackenzie. This year, exploration spending across the global oil industry is forecast to fall an average of 30% from last year’s $70 billion. U.S. oil company Exxon Mobil Corp. cut its capital and exploration expenditure by 16% in the second quarter of this year compared with the corresponding period a year earlier. The number of exploration wells either drilled or planned this year around the world is expected to fall 26% to 1,004—the lowest level in five years, according to Mangesh Hirve at U.K. energy database provider 1Derrick. .... 'To make investment decisions you need stability [in the oil price] and there’s no stability at the moment,' said Aidan Heavey, chief executive of Tullow Oil PLC, the U.K.’s biggest independent oil explorer. The Africa-focused company has already slashed its exploration budget by 80% to $200 million. .... This year’s pullback by explorers follows almost two years of lower spending in exploration in the first place, as investors soured on a number of smaller companies after a poor run of drilling and ever-mounting costs. Even before oil prices began to slide last June, the share prices of explorers traded in London—a favorite listing destination for international explorers—were underperforming the bigger oil companies."
Oil Exploration Companies Scramble to Cut C

"Israel has imported as much as three-quarters of its oil from Iraq’s semi-autonomous Kurdish north in recent months, providing a vital source of funds to the cash-strapped region as it fights militants of the Islamic State of Iraq and the Levant (Isis). The sales are a sign of Iraqi Kurdistan’s growing assertiveness and the further fraying of ties between Erbil and Baghdad, which has long harboured fears that the Kurds’ ultimate objective is full-scale independence from Iraq.... The emergence of Israel as one of the biggest buyers of oil from Iraq’s north illustrates another fissure between Erbil and the federal government. Baghdad, like many Middle Eastern capitals, refuses to recognise Israel and has no official ties with the country. The US, a close ally of both Israel and the KRG, has urged Erbil to work with Baghdad on oil sales....Israel’s government does not comment on the source of energy supplies, which it views as a matter of national security. Insiders say it continues to import oil from Azerbaijan, Kazakhstan and Russia, its main suppliers for much of the past decade. Israel is by no means the only country that has been buying more Kurdish oil."
Israel turns to Kurds for three-quarters of its oil supplies
Financial Times, 23 August 2015

"North Sea oil revenues in the first three months of 2015 were down 75% on the previous quarter, the Scottish Conservatives have said. The Scottish government's quarterly national accounts show that the amount received in tax receipts between January and March was £168m. This was down from £742m oil revenues in the final three months of 2014. Finance Minister John Swinney said oil was a bonus - not the basis of the economy. The industry has suffered from the collapse of global oil prices, which have tumbled sharply since June last year. The Scottish Conservatives said the figures for Scotland's geographical share of oil revenues, which they claimed were "buried" in a table in a report, showed "how wildly wrong" the SNP's pre-referendum calculations had been. The Tories said the figures also further demonstrated the case against full fiscal autonomy for Scotland - an SNP policy. In its oil and gas bulletin published in May 2014, the Scottish government estimated that oil revenues would be between £15.8bn and £38.7bn between 2014/15 and 2018/19. It latest bulletin, published in June this year, said revenues could be as low as £2.4bn for 2016/17 to 2019/20, with it highest estimate at £10.8bn, based on a best-case scenario of the oil price returning to 100 US dollars per barrel. Scottish Conservative finance spokesman Murdo Fraser said: 'The plunge in oil revenues for the first three months of this year is incredible. Whichever way you look at it, and with the best will in the world, there is just no way an independent Scotland could survive on this. We knew the price of oil was volatile and that this would be a risk. But to see such a radical drop is alarming.""
North Sea oil revenues fall by 75% in the first three months of 2015
BBC Online, 23 August 2015

"In the North Sea, a 15-year slump in oil production will almost certainly be halted this year. The turnaround after so many years is but one of a myriad of reasons that the global price of Brent blend crude fell last week to $46 per barrel, from highs of above $65 in the spring – a fall seen on stock markets around the world as a signal to sell. The UK produced about 850,000 barrels a day last year – less than 1% of the world’s total and down from nearly 2.1m a decade earlier. But a surge in investment – mainly before June 2014, when the global price of oil stood at a heady $115 – has, for now, borne fruit: provisional figures have shown a 3% increase in output from the UK continental shelf in the first six months of the year. Output has risen despite a big drop in exploration drilling and jobs (especially compared with June 2014). But that increased production has come at a time of faltering demand and economic growth – not least in China, now the world’s biggest crude importer. The price decline has been exacerbated by increasing supply; and while Britain has been playing its part, the real powerhouses of new output have been elsewhere. One is the US, where the shale 'revolution' has turned the country from a major oil importer into an exporter. In addition new supplies have come from Iraq, while Opec, led by Saudi Arabia, has refused to cut back output to counter the price slump, as it has in the past. The most recent falls in the value of oil have been driven by new factors such as the rapprochement between the west and Iran, stemming from the Middle East country’s willingness to curb its nuclear programme.... These lower energy costs are bad for oil companies and tax revenues in producer nations, but good for importing countries, inflation figures and a swath of heavy-fuel-using sectors such as transport and manufacturing. The AA motoring group reports unleaded petrol now costs around 117p per litre, with diesel at 121p, compared with 132p and 136p respectively at this time a year ago. Gas prices have also slumped, bringing some reductions in household heating bills – but also undermining the economics of both a British shale boom and North Sea investment."
North Sea oil output is set to rise … at just the wrong moment to make a profit
Observer, 22 August 2015

"China's economic slowdown is, and will continue to be, the oil market's biggest problem moving forward, John Kilduff, founder of Again Capital, said Friday. 'This China situation, to me, is very disturbing,' he said in a CNBC 'Squawk Box' interview. 'It's the very key demand center for oil and we're not going to have the kind of growth that we've experienced over the years. The whole commodity infrastructure got built out in the last several years to satisfy what was seen as insatiable Chinese demand for everything,' Kilduff added. U.S. crude futures have taken a tumble since late June, falling from about $60 a barrel to around 6 ½-year lows. 'Some of the data we've been getting out of China is worsening. I think the government's reaction to what's going on with the Shanghai [composite] means it's in a much worse situation than it's being talked about.' The Shanghai composite dropped more than 4 percent overnight, leading Japan's Nikkei 225 index to fall nearly 3 percent. Amid this drop in oil, the latest Federal Reserve minutes and the decline in global equities, the foreign exchange market has seen a reversal in some currency positions, especially within the euro, Boris Schlossberg, managing director of FX strategy at BK Asset Management, said in the same interview."
China is oil’s biggest problem and here’s why: Kilduff
CNBC, 21 August 2015

"The value that commodity producers have lost in the past year almost equals India’s entire economy. Slumping prices for raw materials have wiped out $2.05 trillion from the shares of mining and oil companies since the middle of last year, data compiled by Bloomberg show. That compares with India’s $2.07 trillion gross domestic product. Prices plunged after years of over investment led to a supply glut at the same time that economic growth is slowing in China, the biggest consumer of commodities. The Bloomberg Commodity Index of 22 raw materials dropped Wednesday to its lowest since 2002, paced this year by declines in nickel, sugar, and crude oil."
Commodity Rout Erases $2 Trillion From Stock Values
Bloomberg, 20 August 2015

"Last week reporters at the Wall Street Journal sat down and did some arithmetic. They looked at how much oil was selling for in the spring of 2014 (over $100 a barrel); looked at what it is selling for today (under $50); and concluded that if prices stay low for the next three years, the global oil industry and the countries it finances will be out $4.4 trillion in revenues. As these oil companies, nationalized and publically traded, will be producing roughly the same amount of oil in the next few years, the $4 trillion will have to come mostly out of profits or capital expenditures. This is where the problem for the future of the world’s oil supply comes in. The big oil companies, especially those that export much of their production, have been doing quite well in recent years. National oil companies have earned vast profits for their political masters. Publically traded ones have developed a tradition of paying out good dividends which they are loathe to cut. This leaves mostly capital expenditures on exploring for and producing more oil in coming years to take a dive as part of the $4 trillion revenue hit. Even if oil prices of $50 a barrel or less do not continue for the next three years, this still works out to a revenue drop of $1.5 trillion a year or about three times the planned capital expenditures of some 500 oil companies recently surveyed. The International Energy Agency just came out with a new forecast saying that while current oil prices have the demand for oil products increasing rapidly, there is still so much over-production that the oil glut is expected to last for another year or more before supply/demand comes back into balance. The return of Iran to unfettered production would not help matters. In looking at the next five years there are several trends or major issues that are likely to impact the supply and demand for oil. First is the recent price collapse that no longer makes it profitable to start projects to produce new oil, most of which now comes from deepwater, tar sands, or shale oil fields and is far more expensive to produce than 'conventional' oil. As a result, investment in new oil production projects has dropped substantially in the last year and is likely to fall further. On the demand side of the equation China is the biggest unknown. For the last 30 years the Chinese have enjoyed unprecedented economic growth, but recently the 'world’s factory' has not been doing as well. Its government has been thrashing around wildly trying to stimulate growth and fend off a collapse in its stock market. Some believe China is a huge economic bubble that is about to collapse taking much of the world with it, and obviously reducing its ever-increasing demand for more oil.... Conventional wisdom currently says that oil prices are likely to be closer to $50 a barrel than to $100 for the next year or more. Capital spending on new production to offset declining production from existing oilfields is likely to drop still further leaving us in the situation where depletion may exceed the oil coming from new wells or fields. This is the argument that those who believe that we are at or near the all-time peak of world oil production about now are using."
The Peak Oil Crisis: A $4 Trillion Hole
Falls Church News-Press, 19 August 2015

"With oil prices collapsing and companies in retrenchment, a federal auction in the Gulf of Mexico on Wednesday attracted the lowest interest from producers since 1986. It was the clearest sign yet that the fortunes of oil companies are skidding so fast that they now need to cut back on plans for production well into the future. The auction, for drilling leases, attracted a scant $22.7 million in sales from five companies, but energy analysts said that came as no surprise on a day when the American oil benchmark price plummeted by more than 4 percent. For the first time since the recession, it is approaching the symbolic $40-a-barrel level. Last summer, it was above $100 a barrel. A glut on American and world markets is to blame for the depressed prices, but the unusually large daily decline occurred after the Energy Department, in a report, lowered its oil price projections and showed a considerable increase in inventories. 'The financial squeeze is tighter than people thought, so tight that the companies can’t even bargain-hunt for leases for future production,' said Michael C. Lynch, president of Strategic Energy and Economic Research, a consultancy. 'It’s the long-term production profile that is suffering now, and they will pay for it later.'.... Offshore drilling has suffered from the overall oil market downdraft. Hercules Offshore, a leading shallow-water gulf driller, filed for bankruptcy this month and Fitch Ratings has suggested that more bankruptcies among offshore drillers may be coming soon. An oversupply of rigs is developing as contracts expire. Fitch recently estimated in a report that day rates for ultra-deepwater rigs, which have generally run between $400,000 to $600,000 in recent years, will come down to $325,000."
Oil Companies Sit on Hands at Auction for Leases
New York Times, 19 August 2015

"Wholesale gas prices hit a record low yesterday – piling fresh pressure on suppliers to cut bills. Gas for delivery over the coming winter fell to 44.1p per therm because of plentiful stocks. The drop will deliver savings for energy suppliers. But just one of the Big Six – British Gas – has announced a price cut since last winter. Even then, its paltry 5% off – saving the average customer just £35 a year – won’t take effect until later this month. None of the other big suppliers – SSE, npower, E.ON, Scottish Power or EDF Energy – has followed suit. Some experts reckon the firms will use falling wholesale cost to boost their coffers. Head of natural gas at Energy Aspects Trevor Sikorski said: 'Utility firms will see this as a way of enhancing their profitability.' He added: 'Not enough people pay attention to what they pay for their gas.' Big suppliers have posted mixed results for the first six months of this year. Profits at British Gas nearly doubled to £528million. But npower last week announced half-year profits slumped by two-thirds, with 300,000 customers ditching the firm in the past year. Wholesale costs have been driven lower by an oversupply of gas, with increased imports of liquefied natural gas adding to the glut. Meanwhile, the same factor has led to a drop in oil prices – which hit a six-and-a-half year low yesterday."
Gas price is at record low but will suppliers cut the bills?
Mirror, 17 August 2015

"Wholesale gas prices hit a record low yesterday – piling fresh pressure on suppliers to cut bills. Gas for delivery over the coming winter fell to 44.1p per therm because of plentiful stocks. The drop will deliver savings for energy suppliers. But just one of the Big Six – British Gas – has announced a price cut since last winter. Even then, its paltry 5% off – saving the average customer just £35 a year – won’t take effect until later this month. None of the other big suppliers – SSE, npower, E.ON, Scottish Power or EDF Energy – has followed suit."
Gas price is at record low but will suppliers cut the bills?
Mirror, 17 August 2015

"... data from oil driller Baker Hughes and the Federal Reserve this week indicated that oil companies are starting to reverse their behavior of shutting down wells and halting production, a sign that some companies may think the worst is over for the oil market. On Friday, data from Baker Hughes showed that for the fourth straight week, the number of rigs in use rose, with the total number of rigs online now back to April levels..... Earlier this week we got word that production out of OPEC, the 12-state oil cartel led by Saudi Arabia, hit a three-year high in July despite a continued glut of supply in global markets and prices continuing to decline. But with The Telegraph recently highlighting data that current oil prices have all OPEC members missing their budget projections, governments depending on oil revenues need to bring in whatever they can manage.... Last week, we noted that according to data from Credit Suisse, US oil production has continued to hum along despite the decline in oil rig count. Though, as some readers noted, this chart doesn't tell the whole picture as the rigs already shut down were likely not big producers anyway. And it does look like US production and supply could soon provide the market with some relief, as the Energy Information Administration said in a report this week that daily production is set to fall to 9 million barrels a day next year from a projected 9.4 million barrels in 2015."
The oil industry is acting like the worst is over
Bloomberg, 16 August 2015

"The devastation wrought by the oil price crash on Britain’s North Sea industry is set to be laid bare when one of the region’s biggest contractors reveals that it has cut 4,000 jobs since the start of the year. Wood Group , which provides engineering and production services to some of the world’s biggest oil companies, is understood to have cut more than 10pc of the 45,000-plus employees it has worldwide in the first six months of 2015. 1,000 cuts have been made in Britain. The job losses will be detailed when the FTSE 250 company, which lays pipes for oilfields and helps staff oil rigs, announces its interim results on Tuesday. The price of oil has collapsed over the past year from more than $100 dollars a barrel 12 months ago to below $50. Energy companies have slashed capital expenditure in the face of the lower price, and more than $200bn of investment in new projects is estimated to have been put on hold as a result. The North Sea has been hit hard by reduced spending, as the oil and gas pumped from its offshore rigs is relatively expensive to produce, meaning that it was one of the first areas energy companies looked at when seeking cost cuts.   According to some estimates, the cost of producing a barrel of North Sea oil is $80 from some older fields... Industry body Oil & Gas UK (OGUK) estimates that about 5,500 jobs in North Sea oil or its supply chain had already been lost this year, prior to have the redundancies at Wood Group."
Oil price crash claims 1,000 jobs in North Sea
Telegraph, 16 August 2015

"China continues to present significant risks to the oil market. On August 11, China decided to devalue its currency in an effort to keep its export-driven economy competitive. The yuan fell 1.9 percent on Tuesday, the second largest single-day decline in over 20 years. The yuan dropped by another 1 percent on Wednesday.... For oil, the move has raised concerns that oil demand will take a hit. China is the world’s largest importer of crude, and a devalued currency will make oil more expensive. On August 11, oil prices dropped to fresh six-year lows, surpassing oil’s low point from earlier this year. But with China’s economy – once the engine of global growth – suddenly looking fragile, it would be difficult to argue with any certainty that oil has hit a bottom. China’s economic growth was already slowing, but its GDP growth rate could dip below 7 percent this year, and drop to 6.5 percent in 2016. The EIA estimates that WTI will average just $49 per barrel in 2015, and $54 next year, an acknowledgement that the recent downturn in oil prices may last longer than expected."
There is a new threat to oil prices
Business Insider, 15 August 2015

"The global oil glut will persist well into 2016, the world’s leading energy body said on Wednesday, even as the collapse in prices is pushing up demand at the fastest pace in five years. The International Energy Agency, the west’s oil watchdog, said global oil supplies are still growing at 'breakneck speed' and outstripped consumption in the second quarter by 3m barrels a day, the most since 1998.....Oil’s plunge to below $50 a barrel from a high of $115 a barrel in June last year threw the budgets of oil exporting countries into disarray, rocked the financial markets and forced the world’s biggest energy companies to tear up their investment plans. The oil industry is hunkering down for an extended period of depressed prices and has adopted the 'lower for longer' mantra, the IEA said. While output growth from countries outside the Opec oil producers’ cartel has shrunk from 2014 highs and contributed to the 600,000 barrels a day fall in global supply to 96.6m b/d in July, non-Opec output growth is still running at about 1.2m b/d above 2014 levels so far this year. The agency said this was due to big investments in US shale and other supplies made previously. Although non-Opec supply growth will weaken by the end of this year it will not contract until 2016 when the IEA expects a 200,000 b/d drop to 57.9m b/d, led by lower supplies from the US. ... Demand has reacted more swiftly than supply to lower prices. Global oil demand is forecast to grow 1.6m b/d this year — an upward revision of about 200,000 b/d and the fastest pace in five years — to 94.2m b/d. The US, China, Russia and Brazil were behind the upgrades to estimates. The IEA estimates growth of 1.4m b/d to 95.6m b/d for 2016. 'Even with the slowdown in non-Opec production and higher demand growth, a sizeable surplus remains,' the IEA said. Output from Opec is still near a three-year high above 31.5m b/d, the cartel said on Tuesday, far exceeding the IEA’s assessments of demand for the group’s crude of 30.6m b/d by the end of this year and 30.8m b/d in 2016. Opec crude production, however, inched lower last month by 15,000 b/d as Saudi Arabia slowed production, offsetting increases from Iraq — which reached a record — and Iran, the IEA said. The huge 3m b/d overhang in the second quarter of 2015 will steadily shrink from the latter half of this year and drop to an average 850,000 b/d in 2016, the IEA said. The outlook does not include higher Iranian output should sanctions be lifted.... The IEA said the hundreds of billions of dollars of investment cuts by energy companies will eventually help rebalance the market. But if demand continues as it has done this year, the situation will become 'increasingly sensitive', the IEA added."
Global oil supply grows at ‘breakneck speed’, says IEA
Financial Times, 12 August 2015

"Data from the U.S. Federal Highway Administration show Americans drove a record 1.26 trillion miles during the first five months of 2015, compared with the previous record of 1.23 trillion miles driven in the first five months of 2007. .... U.S. crude oil production is projected to increase from an average of 8.7 million b/d in 2014 to 9.4 million b/d in 2015 and then decrease to 9.0 million b/d in 2016. The forecast is about 0.1 million b/d lower and 0.4 million b/d lower for 2015 and 2016, respectively, than in July's STEO. The decrease in the crude oil production forecast reflects a lower oil price outlook that will reduce expected oil-directed rig counts and drilling and well-completion activities throughout the forecast period. EIA estimates that U.S. crude oil production averaged 9.5 million b/d in the first half of 2015. This level is 0.3 million b/d higher than the average production during the fourth quarter of 2014, despite an almost 60% decline in the total U.S. oil-directed rig count since October 2014. The most recent production estimates indicate U.S. crude oil output was 9.5 million b/d in May. EIA estimates that total U.S. production was unchanged in April and began declining in May, falling 180,000 b/d from the April level. Some of this decline reflects outages in the Gulf of Mexico that are expected to be temporary. The decrease in total production was preceded by declines in onshore production, which began in April. EIA expects U.S. crude oil production declines to continue through the third quarter of 2016, when total crude oil production is forecast to average 8.8 million b/d. Forecast production begins rising in late 2016, returning to an average of 9.1 million b/d in the fourth quarter. A total of 13 projects are scheduled to come online in the Gulf of Mexico in 2015 and 2016, pushing up Gulf of Mexico production from an average of 1.4 million b/d in the fourth quarter of 2014 to more than 1.6 million b/d in the same period of 2016. Expected crude oil production declines from May 2015 through the third quarter of 2016 are largely attributable to unattractive economic returns in some areas of both emerging and mature onshore oil production regions, as well as seasonal factors such as anticipated hurricane-related production disruptions in the Gulf of Mexico. Reductions in 2015 cash flows and capital expenditures have prompted companies to defer or redirect investment away from marginal exploration and research drilling to focus on core areas of major tight oil plays. Reduced investment has resulted in the lowest count of oil-directed rigs in nearly five years and well completions that are significantly behind 2014 levels."
Short Term Energy Outlook
EIA, 11 August 2015

"After Iran struck a deal with world powers over its nuclear programme, Hossein Zamaninia, its deputy oil minister, struck a hopeful tone, saying Europe could be a market for the country’s natural gas in the years to come. Iran may be the world’s third largest gas producer, but it faces several challenges in exporting the country’s most abundant commodity to Europe. These include a looming oversupply of liquefied natural gas; growing competition from other producer countries; demand weakness in the continent; and infrastructure troubles at home. The global LNG market is about to lurch into a period of oversupply. Waves of new liquefaction facilities from Australia to the US will begin loading large volumes of gas as early as this year. By the end of the decade, LNG supply capacity will grow by more than 160bn cubic metres (bcm) a year. Asia should be the first port of call for many of these cargoes, but the gas demand outlook in Asia remains modest for the next few years at least, meaning Europe would take the remainder as it has done this year. Gas coming from Azerbaijan’s giant Shah Deniz field is on the rise. A pipeline from Azerbaijan to Turkey is under construction and works on the Trans-Anatolian pipeline began early this year. This means by 2018, up to 16 bcm of Azerbaijani gas will find its way to Europe. The cancellation of the South Stream pipeline seemed to have knocked Russian efforts to send more gas into southern Europe, but it was quickly replaced with the similar Turkish Stream pipeline. This 60 bcm per year subsea pipeline will compete directly with any effort by Iran to market its gas in Europe. In fact, Iran has been losing market share to Russia in Turkey, the only gateway market into Europe it supplies. In 2010, Iran supplied around 20 per cent of Turkey’s gas imports, but last year it fell to 18 per cent. Over the same period, Russian gas exports to Turkey have almost doubled to 30 per cent. Turkey’s neighbour Greece is now also a target market for new Russian gas. Meanwhile, plans to expand the 45 bcm per year Nord Stream pipeline that brings gas directly from Russia to Germany is moving ahead, giving it a stronger presence in Western Europe. European gas demand has been in decline since 2008, reflecting industrial sector stagnation and the growth of renewable power generation. The only source of long-term upside to European gas demand is the power sector and the impact of carbon emissions policies. While this could eventually increase the volumes of gas used in Europe, emissions prices would have to significantly increase to encourage utilities to switch from burning coal to gas in meaningful volumes."
Iran faces hurdles in supplying gas to Europe
Financial Times, 11 August 2015

"OPEC pumped the most crude last month in more than three years as Iran restored output to the highest level since international sanctions were strengthened in 2012. The Organization of Petroleum Exporting Countries, responsible for 40 percent of world oil supplies, raised output by 100,700 barrels a day to 31.5 million last month, the group said in its monthly market report, citing external sources. This increase came even as Saudi Arabia, which often curbs output toward the end of peak summer demand, told OPEC it cut production by the most in almost a year. Oil prices slumped to a six-month low below $50 a barrel in London last week as rising OPEC supplies, resilient U.S. production and concerns over Chinese demand prolong a global glut. Iran may further expand output after reaching an accord with world powers on July 14 that will ease sanctions on oil exports later this year in return for curbs on its nuclear activity. 'Iran has been rising slowly but surely for a while now,' Abhishek Deshpande, an analyst at Natixis SA in London, said by e-mail. 'It doesn’t need foreign investment to revamp existing infrastructure and prepare fields, resulting in the small increases you can see now. But the bulk of the increase is expected once it becomes clear sanctions will definitely be lifted.' Iran increased output by 32,300 barrels a day in July to 2.86 million a day, the highest since June 2012, according to data OPEC compiles from 'secondary sources' such as media agencies and international institutions. Sanctions to deter the nation’s nuclear research took effect in July that year. Iraq, OPEC’s second-largest producer, led gains in output last month, increasing production by 46,700 barrels a day to 4.1 million, the group’s data show. The report also includes data directly submitted by OPEC’s 12 members. In these figures, Saudi Arabia said it reduced output in July by 202,700 barrels a day to 10.36 million. That’s the biggest reduction since August 2014. A group total was unavailable for these statistics because Libya didn’t provide a production estimate.... OPEC increased estimates for global oil demand in 2016 by about 100,000 a barrels a day. World consumption will climb by 1.3 million barrels a day, or 1.4 percent, to 94 million barrels a day in 2016. The growth rate is slightly lower than this year’s projected 1.5 percent expansion. 'Crude oil demand in the coming months should continue to improve and, thus, gradually reduce the imbalance in oil supply-demand,' OPEC’s Vienna-based secretariat said in the report. Investor concern that oil could by dragged down further by an Iranian sale of crude inventories once sanctions are lifted is overdone, according to a Bloomberg Intelligence survey published Tuesday. Iran’s stockpile of crude amounts to 20 to 40 percent of one day’s global oil demand and the nation will add less than 1 million barrels a day to crude supply next year, most of the survey’s 121 respondents said."
OPEC Supply Reaches 3-Year High as Iran Pumps Most Since ’12
Bloomberg, 11 August 2015

"Hinkley Point, the planned £24.5bn nuclear power station in Somerset, is under intensifying criticism from the energy industry and the City, even as the government prepares to give the final go-ahead for the heavily subsidised project. The plant, due to open in 2023, will cost as much as the combined bill for Crossrail, the London 2012 Olympics and the revamped Terminal 2 at Heathrow, calculated Peter Atherton, energy analyst at investment bank Jefferies. He said that, for the same price as Hinkley Point C, which will provide 3,200MW of capacity, almost 50,000MW of gas-fired power capacity could be built. 'This level of new gas build would effectively replace the entire thermal generation fleet in the UK – much of which is old and inefficient – with brand new, highly efficient, low carbon, gas generation,' said Atherton. Doubts about Hinkley Point have deepened after a detailed report by HSBC’s energy analysts described eight key challenges to the project, which will be built by the state-backed French firm EDF and be part-financed by investment from China. These challenges include: declining demand for power in the UK, currently falling at 1% a year as energy-saving measures take effect; a three-fold jump in the UK’s interconnection capacity with continental Europe by 2022, massively increasing the country’s ability to import cheaper supplies; and 'a litany of setbacks' in Finland, France and China for EdF’s European Pressurised Reactor (EPR) model, the same type as planned for Hinkley Point. HSBC’s analysts described the EPR model as too big, too costly and still unproven, saying its future was bleak. They also pointed out that wholesale power prices have fallen by 16% since November 2011 when the government agreed a 'strike price' for Hinkley Point’s output – effectively a guaranteed price of £92.50 per megawatt hour, inflation-linked for 35 years and funded through household bills."
Planned Hinkley Point nuclear power station under fire from energy industry
Guardian, 9 August 2015

"In a note to clients this week, analysts at Credit Suisse noted that ConocoPhillips and Total have both said the cost of production for US shale will fall 30%, and that 80% of shale oil produced will make financial sense to produce with prices below $60 a barrel at the end of this year. The oil-futures market projects oil prices will bounce back to near $70 a barrel. The price of West Texas Intermediate crude oil finished the week below $44 a barrel. Credit Suisse also notes that, despite the massive drop in the US oil rig count, production has remained steady."
What's happening in the oil market right now is 'unprecedented'
Business Insider, 9 August 2015

"Oil majors around the globe are struggling to make the best of a bad situation, but at the moment the return on every project shelved and job shed seems to be yet more adversity. The confirmation last week that BP will pump an additional $1 billion (£646 million) into one of its cornerstone North Sea assets was welcome respite for Britain’s offshore industry, yet next month’s economic report from Oil & Gas UK is still set to make grim reading. Exploration, investment and employment are all on the decline, with no end on the immediate horizon. BP’s decision to extend the life of its Eastern Trough Area Project (ETAP) to 2030 is an apposite sign of the times. With the flood of crude on the market pushing oil prices ever lower, the majors are slashing costs while at the same time attempting to wring every last drop from their existing assets. Those such as BP, Shell and Total are helped by profitable refining operations, but increasing output has exacerbated oversupply. BP managed to cut $1.7bn in costs during the first half of this year, but its profits still plunged by 64 per cent in the second quarter, when the price of Brent crude averaged $62 a barrel. That was down from $110 in the second quarter of 2014. This dramatic act took another downward turn last week as Brent fell through the key $50 barrier to a fresh six-month low. Producers are digging in for a prolonged downturn, as outlined by BP chief executive Bob Dudley during the latest financial results. 'We hold the view that oil prices will be lower for longer,' he said. 'If you look at the impact of what could be increasing Iranian production next year, slower Chinese growth… and if you take the three largest oil producing areas on the planet – the US, Saudi (Arabia) and Russia – all their production is rising.'"
North Sea oil industry struggling on slippery slope
Scotsman, 8 August 2015

"Business is so tough for oilfield giants Schlumberger NV and Halliburton Co that they have come up with a new sales pitch for crude producers halting work in the worst downturn in years. It amounts to this: 'frack now and pay later.' The moves by the world's No. 1 and No. 2 oil services companies show how they are scrambling to book sales of new technologies to customers short of cash after a 60 percent slide in crude to $45 a barrel. In some cases, they are willing to take on the role of traditional lenders, like banks, which have grown reluctant to lend since the price drop that began last summer, or act like producers by taking what are essentially stakes in wells."
‘Frack now, pay later,’ top services companies say amid oil crash
Reuters, 7 August 2015

"The United States has added a Russian oil and gas field, the Yuzhno-Kirinskoye Field, to its list of energy sector sanctions prompted by Moscow's actions in Ukraine, drawing a prompt rebuke from the Kremlin on Friday. The federal government said on Thursday the field, located in the Sea of Okhotsk of the Siberian coast and owned by Russia's leading gas producer Gazprom, contains substantial reserves of oil in addition to reserves of gas. "The Yuzhno-Kirinskoye Field is being added to the Entity List because it is reported to contain substantial reserves of oil," according to a rule notice in the Federal Register. A Kremlin spokesman criticized the move. "Unfortunately, (this decision) further damages our bilateral relations," spokesman Dmitry Peskov told reporters. Gazprom declined to comment. Adding the field to the list means a license will be required for exports, re-exports or transfers of oil from that location, it said. The gas and condensate field was discovered in 2010, according to Gazprom.  Douglas Jacobson, an international trade lawyer in Washington, said the addition "represents a new arrow in the quiver of U.S. sanctions on Russia."  He said the addition means that no U.S. origin items or non-U.S. origin items containing more than 25 percent U.S. content can be exported or re-exported to the field without a Commerce Department license, which he said was not likely to be issued."
U.S. adds Russian oil field to sanctions list
Reuters, 7 August 2015

"If the oil futures market is correct, Saudi Arabia will start running into trouble within two years. It will be in existential crisis by the end of the decade. The contract price of US crude oil for delivery in December 2020 is currently $62.05, implying a drastic change in the economic landscape for the Middle East and the petro-rentier states. The Saudis took a huge gamble last November when they stopped supporting prices and opted instead to flood the market and drive out rivals, boosting their own output to 10.6m barrels a day (b/d) into the teeth of the downturn. Bank of America says OPEC is now "effectively dissolved". The cartel might as well shut down its offices in Vienna to save money. If the aim was to choke the US shale industry, the Saudis have misjudged badly, just as they misjudged the growing shale threat at every stage for eight years. "It is becoming apparent that non-OPEC producers are not as responsive to low oil prices as had been thought, at least in the short-run," said the Saudi central bank in its latest stability report. 'The main impact has been to cut back on developmental drilling of new oil wells, rather than slowing the flow of oil from existing wells. This requires more patience,' it said. One Saudi expert was blunter. "The policy hasn't worked and it will never work," he said. By causing the oil price to crash, the Saudis and their Gulf allies have certainly killed off prospects for a raft of high-cost ventures in the Russian Arctic, the Gulf of Mexico, the deep waters of the mid-Atlantic, and the Canadian tar sands. Consultants Wood Mackenzie say the major oil and gas companies have shelved 46 large projects, deferring $200bn of investments. The problem for the Saudis is that US shale frackers are not high-cost. They are mostly mid-cost, and as I reported from the CERAWeek energy forum in Houston, experts at IHS think shale companies may be able to shave those costs by 45pc this year - and not only by switching tactically to high-yielding wells. Advanced pad drilling techniques allow frackers to launch five or ten wells in different directions from the same site. Smart drill-bits with computer chips can seek out cracks in the rock. New dissolvable plugs promise to save $300,000 a well. 'We've driven down drilling costs by 50pc, and we can see another 30pc ahead,' said John Hess, head of the Hess Corporation. It was the same story from Scott Sheffield, head of Pioneer Natural Resources. 'We have just drilled an 18,000 ft well in 16 days in the Permian Basin. Last year it took 30 days,' he said. The North American rig-count has dropped to 664 from 1,608 in October but output still rose to a 43-year high of 9.6m b/d June. It has only just begun to roll over. 'The freight train of North American tight oil has kept on coming,' said Rex Tillerson, head of Exxon Mobil."
Saudi Arabia may go broke before the US oil industry buckles
Telegraph, 5 August 2015

"British public support for nuclear power and shale gas has fallen to its lowest ever level in a long-running official government survey, which has also briefly ceased polling showing widespread public support for renewable energy. Nuclear and fracking for shale gas are key planks of the Conservative government’s energy policy, but the polling published on Tuesday shows just one in five people now support shale gas and one in three support nuclear. Government sources warned last week that fracking plans could be delayed for 16 months after Lancashire county council rejected applications by shale gas company Cuadrilla to drill and frack wells in Fylde. Plans for a new nuclear power station at Hinkley in Somerset have also come under fire recently, with the Conservative peer Lord Howell of Guildford warning of rising costs of the 'elephantine' project and HSBC criticising the £25bn cost for Hinkley’s new reactors. Green campaigners and renewable trade bodies said the polling showed the government was at odds with the public."
Public support for UK nuclear and shale gas falls to new low
Guardian, 4 August 2015

"Oil and gas production in UK waters is set to rise for the first time in 15 years this year. Industry body Oil and Gas UK said provisional figures showed production for the first six months of the year could be up 2.5% on the same period last year. The Golden Eagle field, which started producing in November, is thought to have played a part. Increased efficiency from existing assets is also being highlighted.....The rise in oil and gas output - of about 40,000 barrels per day - is not, perhaps, what you would expect when the price has been falling and the industry has been slashing at costs and investment. It reflects less downtime for maintenance, and the industry points to its efficiency measures working. But it mainly reflects previous years of investment. More than £30bn in the past few years has secured a second wind for the North Sea and new projects west of Shetland. And with output at around two-thirds of its peak level at the turn of the century, only one field can make a big difference. The Golden Eagle field, 40 miles north-east of Aberdeen and operated by Chinese-owned Nexen, can pump up to 70,000 barrels per day and only started production last November. It has been forecast that output will remain at a slightly higher level for the rest of this decade, before returning to long-term decline as fields deplete."
Oil and gas production in UK waters 'on the rise'
BBC Online, 4 August 2015

"The UK is the only country where total energy consumption is lower today than it was in 1965, according to newly released energy data from BP. Energy consumption has gone down by close to five per cent over the past 50 years - even as the economy has tripled in size and population. This makes the UK the only country in the world where consumption is down over this time period, at least among the countries BP has historical data for. Britain’s energy use peaked in 2005 and has fallen steeply since, with consumption down 6.3 per cent over the past year. Part of the explanation for this is the UK’s dropping industrial output, but rising energy efficiency accounts for the majority of the fall. The industrial sector has improved its efficiency most, data from the department of energy and climate change (DECC) shows, while the transport sector is the only one with no change in energy efficiency since 1970. Today it accounts for 38 per cent of the UK’s consumption. BP’s data reveals that the rise of energy consumption globally is slowing, increasing just 0.9 per cent in 2014, the weakest growth since 2009."
UK energy consumption falls below 1965 levels as industrial output declines and energy efficiency rises
City AM, 3 August 2015

"Oil and gas production from the North Sea is expected to increase for the first time in 15 years despite a global slump in the price of crude and hundreds of job losses in the industry. Offshore watchdog Oil and Gas UK has said that output from the UK Continental Shelf (UKCS) over the first six months of this year could be 2.5pc higher than the same period last year. On these estimates, the body believes that the North Sea could increase production this year for the first time since 2000. While production has climbed, oil and gas operators in the North Sea and Aberdeen have slashed jobs and cut costs aggressively since last November, when the Organisation of the Petroleum Exporting Countries triggered a collapse in the price of oil. Brent crude - a global benchmark for oil - is now trading at just over 50pc down on 2014 at $50 per barrel. ... In March, the Chancellor George Osborne offered some relief to oil and gas operators in the North Sea by cutting taxes on the region. Tax rates on production from older oil and gas fields were cut from 80pc to 75pc, falling to 67.5pc from next year. For newer fields, effective rates were trimmed from 60pc to 50pc. Combined with other incentives, the Treasury claimed that these measures would lead to more than £4bn of new investment and the production of a further 120 million barrels of oil over the next five years. However, despite these incentives, the high cost of operating offshore - estimated to be in the region of $80 per barrel in some older fields - means that the North Sea remains vulnerable to price volatility. BP's chief executive Bob Dudley has warned repeatedly that the region will have to adjust to the new economics of lower prices. There has also been a worrying drop off in exploration activity for new resources in the North Sea. Around16 billion barrels of recoverable oil is still thought to exist offshore of Aberdeen and west of the Shetland Islands. But exploratory drilling in the region fell to just 12 wells last year, down from 44 in 2008."
North Sea oil production rises despite price fall
Telegraph, 3 August 2015

"Russia’s plan for a new undersea route to ship gas to Europe without going through Ukraine has taken another hit with the news that Russia and Turkey have suspended talks for the new Turkish Stream pipeline. Turkish officials told Reuters yesterday that talks were suspended after Moscow failed to sign off on a key gas price discount agreement. In February Ankara obtained verbal agreement a 10.25% price discount on the 28-30 billion cubic meters of gas it buys from Russia but a final signature has not been forthcoming. Russian energy company Gazprom and its Turkish counterpart Botas had six months to sign off on the price but that window lapsed on 29 June without agreement. According to Reuters, Turkish officials said another sticking point has been Russia’s insistence that Ankara grant permits for the construction work on four planned lines in the project. Turkey has so far only given licenses for the first line. Russian Energy Minister Alexander Novak said on 29 July that there was a risk construction of the pipeline could be delayed if a related intergovernmental agreement was not signed soon, the Interfax news agency reported. Earlier this month Gazprom subsidiary South Stream Transport BV, the company developing the pipeline, without warning cancelled the pipe-laying contract with Italian contractor Saipem, throwing the Turkish Stream project into doubt. The Turkish Stream plan sees Russian natural gas piped under the Black Sea to Turkey and then onward to Europe through Greece."
Talks suspended on Russia’s Turkish Stream gas pipeline plan
Global Construction Review, 31 July 2015

"The price of oil could be stuck firmly at around $50 a barrel by 2020, a Goldman Sachs analyst told CNBC, raising new fears about the energy companies that have already started to cut costs, projects and jobs to cope with falling revenues. Several big oil and gas companies announced this week they intend to make cutbacks to stay afloat in this sinking environment. Royal Dutch Shell expects to cut 6,500 jobs, 6,000 for Centrica, and at Chevron, a 2 percent slash to its global workforce. These measures were introduced while Brent crude and West Texas Intermediate (WTI) crude are trading around $53 and $48 a barrel respectively as the Organization of Petroleum Exporting Countries has kept its supply high – and process low – in its battle for market dominance over U.S. shale oil. But Michele Della Vigna, co-head of European equity research at Goldman Sachs, told CNBC Friday that by 2020, they see oil around $50 per barrel. 'What we've learned from this reporting season is that deflation is accelerating from a cost perspective. Efficiency is improving in all the mature regions and productivity is sharply improving in almost all the shale places in the U.S.' 'With all of that compounds to what we think will be a multi (year) deflationary trend in oil. If we look to the end of the decade, we see oil at $50, as this productivity continues and as costs keep coming down.'"
Oil prices could be as low as $50 by 2020: Goldman Sachs
CNBC, 31 July 2015

"Shell sees no quick end to the slump in oil prices and plans to further slash annual spending, sell off assets and bring the total number of job cuts to 6,500 by the end of 2015. But the Anglo-Dutch group has vowed to press on with its expensive and controversial exploration programme in Arctic Alaska, saying it was a 'long-term play' that could not be influenced by current energy prices. Capital expenditure will be reduced by a further $3bn (£1.9bn) meaning a fall of 20% overall across 2015 compared to last year while more than $30bn assets are to be disposed of by 2018 once its takeover of BG is complete."
Shell cuts 6,500 jobs as oil price slump continues
Guardian, 30 July 2015

"Years of mismanagement and politically driven expansion are catching up to the Russian state-owned natural gas company Gazprom. Output this year is forecast to be the lowest in its history, pipeline projects are floundering and it's not doing well in Europe, its key market. In June 2008, when Gazprom's market value reached $360 billion, Chief Executive Officer Alexei Miller predicted the company would be the world's biggest enterprise, worth $1 trillion, in seven or eight years. Miller, who worked with President Vladimir Putin in the St. Petersburg mayor's office in the 1990s, was proud of what he had achieved since taking over in 2001. He returned valuable assets stripped from the company by previous managers, expanded production and increased Gazprom's revenue to $94 billion from $21 billion. Miller could be excused for thinking the sky was the limit. He was wrong. Seven years after his prediction, Gazprom is worth $55 billion. It's not even in the top 100 of global companies. And it's looking like a fish out of water. The Russian economics ministry predicted this week that Gazprom's output would drop to 414 billion cubic meters of gas this year, lower than ever and one-third below capacity. The company had been counting on growth in both domestic consumption and exports. But the former has slumped because of Russia's recession, and the latter have shrunk because Europe, Gazprom's biggest export market, has diversified its energy sources. In 2014, Gazprom's exports were 90 billion cubic meters lower than in 2008. As exports dropped, the company kept investing in extraction and pipelines. The Russian business daily Vedomosti estimated that Gazprom, under Miller, may have spent 2.4 trillion rubles ($40 billion) on unnecessary expansion. He may have done this to benefit Gazprom's billionaire contractors, including Arkady Rotenberg and Gennady Timchenko, both Putin friends who are living under international sanctions. The Russian edition of Forbes says their companies made $1.9 billion just on the abortive South Stream pipeline, which was supposed to supply gas to southern Europe without crossing Ukraine. That investment can still be recouped if the replacement pipeline, Turkish Stream, is built, but so far Gazprom's negotiations with the Turkish gas company Botas haven't yielded a final deal."
Putin's Energy Giant Falls on Hard Times
Gazprom, 30 July 2015

"The Bakken-shale-focused oil-and-gas producer uttered the 'F' word in its 2016 outlook: Fifty. That is the oil price underpinning its cash-flow and production targets for next year. It is slightly above where the price is now but fully one-fifth below the consensus forecast. Whiting’s shares plunged 6% on Thursday. The bigger story from Whiting’s uncharacteristic display of hunkering down is its bearish implication for oil prices. First, consider that based on $50 oil, Whiting plans to lay out $1 billion on capital expenditure in 2016, equal to projected cash flow. That would be a 53% cut in investment versus guidance for this year, leading to just an expected 10% drop in output. That reflects productivity gains with Whiting reporting output gains of 40% to 50% in some recently completed wells. Second, Whiting also said Thursday that its budget is 'flexible.' There is a certain irony in this: The company just trimmed its 2015 budget, having only raised it a couple of weeks ago. The point is that Whiting anticipates that it can move reasonably quickly to add more rigs if oil prices rally—thereby capping that rally. Witness the recent increases in U.S. oil rigs deployed that likely stemmed from the second-quarter rebound in oil prices. The great enabler of all this is capital. Whiting likely has its eye on coming reviews of credit facilities that usually happen in the fall. James Sullivan of Alembic Global Advisors estimates that under Whiting’s 2016 scenario, it may have to rely on asset sales or selling more shares to keep leverage in check next year."
Bakken Driller’s Reset Points to More Pressure on Oil
Wall St Journal, 30 July 2015

"It may be high summer on the calendar, but Canada's energy companies are already looking towards the coming winter. What they see is looking worse now than it was even a month ago.  After a rough start to the year that saw companies lay off thousands of workers amid falling crude prices, lower cash flow and wounded share prices, a spring rally in oil was stirring hopes the dreaded other shoe might not drop. A July-long slide took oil prices back below $50 a barrel, so a rally is looking less likely. 'It's a very difficult time in our industry, one of the most difficult in decades,' said Tim McMillan, chief executive of the Canadian Association of Petroleum Producers, the lobby group for the energy industry. 'The mantra that I've heard pretty consistently from companies is preparing for lower for longer.' Whether the earlier rounds of staffing cuts and budget reductions are preparation enough to weather what's expected to be a dismal winter drilling season is a question that is already starting to be answered. In the next few weeks, Canada's oil companies will get down to the serious work of crafting next year's budgets. Those plans will come together in September on the way to getting approved in November. ... 'Either they're holding their cards tight to their chest and not letting anyone know what their plans are or they don't know themselves at this point,' said Duncan Au, chief executive of CWC Energy Services. 'Even now at $50 [oil] we are seeing maybe those plans that were in place are now starting to be put off or put on hold.' The nature of the oil industry means drillers are the first to get hit when a downturn comes and the first to come back when the cycle turns for the better. Compared to last year at this time, the number of active drilling rigs in Western Canada is down by half. Against this backdrop, many drilling companies have already cut staffing levels by a third."
Who's afraid of $50 oil? (Answer: Canada's oil industry)
CBC, 29 July 2015

"More than 5,500 North Sea jobs have disappeared in the past year due to the slump in the price of oil. Industry watchdog Oil and Gas UK believes that estimate may be conservative, while trade union chiefs say the total is 'at least' 4,000. Unite, which represents many of the workers involved, is concerned the cuts could pose safety issues, placing remaining employees at risk. Experts believe the worrying trend is set to continue as oil bosses conduct 'major reassessments and cost reducing initiatives'. They believe that the oil price could stagnate for years. But despite the adverse impact on jobs, insiders are also predicting a 'silver lining' with firms now adopting innovative methods to boost efficiency....Last year, North Sea exploration reached its lowest level in at least two decades with only 14 explorations wells drilled, compared to 44 in 2008.... Alex Kemp, professor of petroleum economics and director of the Centre for Research in Energy Economics and Finance at Aberdeen University, said: 'There have had to be major reassessments and cost reducing initiatives, and that’s going to continue this year and beyond. 'We’ve done modelling which shows that at a $70 price, there will be much less investment than at $90. Something like $70 could be the position for several years ahead.'"
Thousands of North Sea jobs gone due to oil price slump
Express, 27 July 2015

"Oilfield giants Schlumberger Ltd and Halliburton Co and many others in the oil and gas industry have announced plans to lay off thousands of people in the past few months as global oil prices have fallen more than 40 percent since June last year.    Brent prices fell to near six-year lows in January, hurt by a global supply glut and OPEC's decision not to curtail production. Oil producers in response have trimmed their budgets and lowered the number of rigs planned for 2015, hurting their suppliers and service providers. Schlumberger, the world's No.1 oilfield services provider, said earlier this month that expects little improvement in pricing levels in the near future as customers continue to keep a tight lid on budgets. Houston-based Schlumberger also said in April that it plans to cut another 11,000 jobs, bringing the total job cuts announced this year to 20,000 - about 15 percent of its workforce. Halliburton Co, which is buying smaller peer Baker Hughes Inc in a $35 billion deal, said on Friday it had initiated a company-wide reduction in workforce by about 16 percent during the first half of 2015."
U.S. energy companies slash jobs as oil prices weaken
Reuters, 24 July 2015

"Energy firm bosses should take action now to adopt technological advances and innovative business models if they are to capitalise on long-term opportunities. This was a central theme in a white paper we collated from the discussions and presentations at our recent annual FWB Park Brown Leadership Dinner, taken from an audience of 140 oil and gas industry leaders which outlined a number of key trends business leaders are, or should be aware of. Ian Marchant, current chairman of Wood Group Plc and former chief executive of SSE, was keynote speaker at the event. Speaking in a personal capacity, Marchant said even though the word 'strategy’ is often said and heard, the energy industry often focusses on short-term tactical goals rather than adopting a truly strategic approach, with questions around oil price, and short-term project and cost-planning, dominating the industry over the last year. Marchant went on to outline so-called 'mega-trends' the industry currently faces, which include: * The rise of Asia, particularly China as a global financial powerhouse and increased Chinese ownership of the world’s natural resources, which the attendees said could mean the West's hegemony in oil and gas 'could be short-lived'. * Changes in energy demand and consumption and a potential new 'golden age' for gas led by LPG and fracking. Energy consumption is seen to have plateaued in many of the Organisation for Economic Co-operation and Development (OECD) economies, though consumption is expected to grow by 60 per cent in non-OECD countries, notably India and China. * Resource scarcity, and mentions of peak oil which the report found 'seem to have disappeared from industry rhetoric for now - but they will inevitably return' though it is anticipated access to clean water will become a 'major constraint' in many areas of the world sue to the industry's reliance upon water-intensive processes."
Energy sector needs to embrace innovation, and quickly
Daily Record, 24 July 2015

"Iraq's southern oil exports have risen above 3.0 million barrels per day (bpd) so far in July, according to loading data and an industry source, setting shipments from OPEC's second-largest producer on course for a monthly record. The Iraqi boost is an indication of continued high output from the Organization of the Petroleum Exporting Countries, which is focusing on keeping market share rather than curbing supply to support prices. Exports from Iraq's southern terminals averaged 3.06 million bpd in the first 23 days of this month, up from a record 3.02 million bpd in all of June.... The southern fields produce most of Iraq's oil. Located far from the parts of the country controlled by Islamic State militants, they have kept pumping despite the conflict. Shipments from Iraq's north via Ceyhan in Turkey have remained steady despite tensions between Baghdad and the Kurdistan Regional Government over budget payments....Iraq's growth follows investment by Western oil companies in the southern oilfields and an easing of export bottlenecks. Risks include bad weather, technical problems and unrest."
Iraq's southern oil exports head for another record in July
Reuters, 24 July 2015

"Crude oil futures markets have grown increasingly gloomy about the outlook for prices, but UBS believes the scene is set for a recovery over the next three years, with potential spikes above $US100 a barrel. UBS is sticking with its prediction that Brent crude oil prices will rise to an average of about $US70 a barrel in 2016, then continue north to $US90 by 2018. That contrasts with the forward curve for Brent crude oil, which shows a price of just $US64 in three years' time amid prospects for increased supply from Iran and stubbornly high US production. The $US8 increase from current prices within three years compares with a $US17 recovery the forward curve was signalling six months ago, showing most market participants believe the price weakness will be around for longer. But UBS energy analyst Nik Burns believes that while the markets are likely to stay oversupplied for another 18 months, a turnaround is likely sooner rather than later given the much higher prices needed to stimulate investment in new production that will soon be needed to meet growing demand. 'You only really have one year to 18 months of growth in demand before you get the markets back into balance: the market is going to look through that," Mr Burns said at a briefing in Sydney. "Supply just is not going to be there: that could result in prices heading up to or potentially north of $US100 a barrel.'...Mr Burns said no oil company had sanctioned a new conventional oil development for the last six months as low prices deter investment. That would result in a material drop in conventional oil supply starting to emerge within 18-36 months as fields naturally decline....Mr Burns said in the past five years when oil prices averaged about $US100 a barrel, oil production outside OPEC and the US had been flat even as companies were investing heavily to increase supply. "Everyone was running as hard as they possibly could on this treadmill to add more oil production and the best they could was keep it flat, and that was at north of $US100 a barrel," he said. As a result, UBS expects prices to have to recover, but the softening in oil services costs means the price required was no longer as high. "The question we still continue to debate is how far can cost deflation bring that incentive price of oil down to. Is $US90 the right number? Could it be higher, could it be lower?""
UBS sees crude oil recovery despite bleak forward prices
Australian Financial Review, 24 July 2015

"Anyone who understood that U.S. drillers in shale plays had large inventories of drilled, but not yet completed wells, knew that production would probably rise for some time into 2015--even as the number of rigs operating plummeted. Shale drillers who are in debt--and most of the independents are heavily in debt--simply must get some revenue out of wells already drilled to maintain interest payments. Some oil production even at these low prices is better than none. Only large international oil companies--who don't have huge debt loads related to their tight oil wells--have the luxury of waiting for higher prices before completing those wells. The drop in overall U.S. oil production (defined as crude including lease condensate) is based on estimates made by the U.S. Energy Information Administration (EIA). Still months away are revised numbers based on more complete data. But, the EIA had already said that it expects U.S. production to decline in the second half of this year. What this first sighting of a decline suggests is that glowing analyses of how much costs have come down for tight oil drillers and how much more efficient the drillers have become with their rigs are off the mark. It was inevitable that oil service companies would be forced to discount their services to tight oil drillers in the wake of the price and drilling bust or simply go without work. And, it makes sense that the most inefficient uses of drilling rigs would be halted. But the idea that these changes would somehow allow tight oil drillers to continue without missing a beat were always promoted by an industry sinking into a mire of over indebtedness in the face of lower prices. In order to maintain the flow of capital to the industry--which has consistently spent more cash than it generates--the illusion of profitability had desperately to be maintained. A recent renewed slump in the oil price may finally pierce that illusion among investors. As Iranian oil exports start to ramp up in the wake of an agreement on nuclear weapons--the Iranians aren't allowed to have any--and the resulting end of economic sanctions, the oil price is likely to fall further, putting even more pressure on U.S. domestic drillers. OPEC, which has refused to reduce output in the face of slackening world oil demand growth, continues to say that others--such as U.S. tight oil drillers--will have to "balance the market," a euphemism for cutting production in order to push up prices. It looks as if U.S. drillers may finally be doing just that. Who knew that 45 years after abandoning the role of the world's swing producers--that is, producers who adjust production up or down to maintain stable world oil prices--U.S. oil companies would be forced into that role again entirely against their will?"
This Is Why A Serious Decline In U.S Shale Plays Is Not Far Away
Oil, 24 July 2015

'Russia is going to be in a very difficult fiscal situation by 2017,' said Lubomir Mitov from Unicredit. 'By the end of next year there won’t be any money left in the oil reserve fund and there is a humongous deficit in the pension fund. They are running a budget deficit of 3.7pc of GDP but without developed capital markets Russia can't really afford to run a deficit at all.'   A report by the Higher School of Economics in Moscow warned that a quarter of Russia’s 83 regions are effectively in default as they struggle to cope with salary increases and welfare costs dumped on them by President Vladimir Putin before his election in 2012. 'The regions in the far east are basically bankrupt,' said Mr Mitov. .... 'Frankly, I don’t think they can weather this crisis. There has been almost no investment in new oil production except in Western Siberia. They are still relying on old Soviet wells,' said Mr Mitov. The depletion rates in the traditional fields of Western Siberia are running at 8pc-11pc a year.  'They can’t keep up production without access to foreign imports and technology, so we think there could be a fall in output of 5pc to 10pc by 2018,' he said..... Russian producers have taken advantage of a new tax regime to raise output this year to 10.7m b/d, close to the post-Soviet peak. But they are relying on legacy investments and imported machinery that must be replaced sooner or later. Mr Putin’s long-term strategy depends on opening up the Arctic and the vast shale reserves of the Bazhenov basin and the Volga-Urals. Drilling in these regions is covered by sanctions, forcing Western firms to freeze joint ventures. Russia lacks the technology to make these projects viable. Average fracking costs in Russia are three times higher than those of cutting-edge drillers in the US."
Oil and gas crunch pushes Russia closer to fiscal crisis
Telegraph, 23 July 2015

"Imagine parking your $300 million boat for months out in the open sea, with well-paid mechanics hovering around it and the engine running. The Gulf of Mexico and the Caribbean Sea have become a garage for deepwater drillships -- at a cost of about $70,000 a day each. It’s either that or send your precious rig to a scrapyard. The dilemma underscores how an offshore industry that geared up for an oil boom is grappling with a bust. Rig owners are putting equipment aside at unprecedented numbers as customers including ConocoPhillips pull back from higher-cost deepwater exploration. That’s helped make Transocean Ltd. and Ensco Plc two of the three worst performers in the Standard & Poor’s 500 Index over the past year. 'Most contractors have never seen an environment like this, where demand is falling as quickly as it is,' David Smith, an analyst at Heikkinen Energy Advisors in Houston, said in a phone interview. 'It’s been a big headache, and the problem is that we’re not halfway through.' A growing glut of newly built exploration vessels looked worrisome enough before the oil rout. Now it’s beginning to look disastrous. Shipyards continue to roll out new units to meet orders made during the boom, but the rig providers may not need them anymore. As contracts expire, many producers may not renew them, and some are being canceled.... The number of idle drillships has more than tripled since the beginning of last year to 31, or about one in every four of such vessels floating around the globe, according to data in a Bloomberg Intelligence report. That’s the most since at least July 2008, the data show. About a third of those unused ships are in the Gulf of Mexico and the Caribbean. The numbers for idle deepwater platforms known as semi-submersibles aren’t reassuring either. Of the 190 around the world, 46 are idle, up from 39 in early 2014.... Deliveries of more than 60 new rigs booked through the end of 2018 will only worsen the outlook as crude oil trades at less than half its value in mid-2014, with no signs of a major recovery. About 50 deepwater rig contracts are due to expire this year, according to Bloomberg data. If a rig can’t get immediate work from a new deal, the owner must decide whether to idle the vessel or scrap it.... Few new contracts are being signed and even existing rig leases are in question. ConocoPhillips said July 16 it will cancel a three-year contract with Ensco for a drillship that would have cost about $550,000 a day to work in the Gulf of Mexico. The producer will still have to pay Ensco a penalty that amounts to two years of day rates, or about $400 million, Ensco said. The contractual penalties help offset the revenue loss. But they don’t change the fact that an idle rig is a big overhead.... As recently as last year, Transocean’s Deepwater Expedition, a ship that was capable of drilling in waters as deep as 8,500 feet (2,600 meters), was being leased for $650,000 a day, one of the highest day rates ever signed. After its contract ended in November, the rig was costing the world’s largest offshore rig owner close to $100,000 a day, Heikkinen’s Smith said. Transocean soon put it up for sale. 'You just didn’t have rigs coming off contract and being sent to the scrapyard,' Smith said. 'The fact they’re doing that now is an under-appreciated signal of how bad the contractors think things are going to be.'"
Oil Rigs Left Idling Turn Caribbean Into Expensive Parking Lot
Bloomberg, 23 July 2015

"Barack Obama has removed one of the last obstacles to oil drilling in Arctic waters, granting Shell permission to bore two new exploratory wells. However, the drilling permit granted by the Interior Department on Wednesday bans Shell from drilling into oil-bearing zones until critical spill-response equipment is in place – and that equipment is aboard a damaged icebreaker en route to Oregon for repairs. The restrictions could severely limit Shell’s operations during the brief Arctic season, which winds down in late September. The company has spent $7bn and seven years trying to open up the Arctic to oil and gas drilling."
Obama administration allows Shell's Arctic oil wells but drilling still restricted
Guardian, 22 July 2015

"Of the roughly two million barrels a day that Canada currently produces from its oil sands, about half is mined from the surface using giant excavators and the world’s tallest dump trucks. The rest is too deep to mine and must be recovered by newer technology such as injecting steam underground to leach out oil deposits. That accounts for about 80% of Canada’s reserves—the world’s third-largest source of untapped crude. The global downturn in oil prices is shining a harsh light on the high cost of extracting Canada’s oil sands, which are the biggest single source of U.S. crude imports. Some of the world’s biggest oil companies, including Royal Dutch Shell PLC and Exxon Mobil Corp. ’s Canadian unit, Imperial Oil Ltd. , are counting on those deeply buried oil sands deposits to increase cash flows and shore up their global production levels. Chronic cost overruns amid the pressure of lower oil prices are calling into question how much of those reserves can be recovered profitably. The most common technique for extracting the deepest deposits involves drilling a pair of horizontal tunnels that bracket an underground oil formation from above and below. Steam pumped into the top chamber melts solidified oil, which gradually drips into the lower well, where it is collected and pumped to the surface. In industry circles, it is known SAGD, or steam assisted gravity drainage and has no relation to hydraulic fracturing, which uses a single well and high-pressure injections of unheated water to release oil from shale formations. But this method is turning out to be more technologically complex and unpredictable than billed when first deployed commercially in the early 2000s. The key unforeseen challenge with the technology has been the lack in uniformity in reservoirs of heavy crude, or bitumen, in ancient river beds that now lie buried under the boreal forests in Canada’s western Alberta province. Operators are having to drill more wells, pump more steam underground and lay more pipe above ground to meet targets, thanks to varying thickness, impermeable rock formations and high water-saturation levels. The result is a lot of trial and error as kinks are worked out. 'The technology isn’t one-size-fits-all,' said Reynold Tetzlaff, PricewaterhouseCoopers’ Canada energy team leader, noting that the continuing capital requirements necessitate strong balance sheets. 'It’s getting harder and harder for smaller companies to make a go of SAGD.' Many of their projects were greenlighted when prices were higher, or believed to be heading higher. But what was tolerable a year ago at $100 a barrel has become less profitable—or unworkable—in today’s world of $50 a barrel crude. The break-even point for a brand-new SAGD project, including a 9% average return on investment, requires crude prices of at least $65 a barrel, which is among the highest extraction cost in the oil industry, according to the Bank of Nova Scotia.... Several once-promising Canadian junior oil-sands producers that bet on this form of extraction have suspended operations and sought protection from creditors, including Connacher Oil & Gas Ltd., Ivanhoe Energy Inc., Laricina Energy Ltd. and Southern Pacific Resource Corp. Most oil-sands startups and a few large producers—such as Cenovus—rely entirely on SAGD and most of the oil sands’ multinational players also use it for some of their current output or are counting on it for their future production plans. Cenovus, Canadian Natural Resources Ltd., Suncor Energy Inc. and Shell all announced plans earlier this year to shelve—but not abandon—plans for new or expanded subsurface oil sands projects until global oil prices rebound or costs can be reduced dramatically. Even before the tumble in oil prices, France’s Total SA and Statoil ASA of Norway indefinitely postponed a pair of underground oil sands projects last year, citing cost issues.... Cenovus talked boldly this time last year of introducing mass manufacturing to Canada’s remote oil patch by ramping up installation of 30,000 to 50,000 barrel-a-day well-site modules. But after the crude price slump, the company slashed its 2015 spending budget, deferred new SAGD expansion phases and, in late May, ushered out half its executive leadership, including the COO."
Falling Crude Prices Upend Canada’s Oil Sands Projects
Wall St Journal, 22 July 2015

"The United States is not alone in having massive shale gas resources: shale formations rich in gas can be found all over the world. But so far no other country has come close to replicating the U.S. boom that has led to relatively cheap natural gas and helped curb yearly carbon dioxide emissions. According to recent numbers from the U.S. Energy Information Administration, only two other countries—Canada and China—are now producing commercial volumes of gas from shale formations, a process made feasible relatively recently thanks to the development of hydraulic fracturing and horizontal drilling technology (see 'Natural Gas Changes the Energy Map'). Those countries lag far behind the United States in production, however. Though China, the world’s largest annual emitter of carbon dioxide, has nearly as much technically recoverable shale gas as the U.S. according to recent EIA estimates, challenging geology has been a major obstacle, and the country has had to scale back its near-term goals dramatically (see 'China’s Shale Gas Bust'). According to the EIA, recent developments indicate that China is on schedule to produce some 17 million cubic meters per day by the end of this year. By comparison, current U.S. production is roughly 1.3 billion cubic meters per day. Canada, the second-largest shale gas producer, produced roughly 113 million cubic meters per day last year. Mexico has begun to produce a very small amount of the gas, and Poland, Algeria, Australia, Colombia, and Russia are all exploring the potential for developing oil and gas resources from their own shale formations. But according to the EIA, the 'logistics and infrastructure' necessary to support production at the level seen in the United States does not yet exist in other countries besides Canada and China."
Where Is the Global Shale Gas Revolution?
MIT Technical Review, 20 July 2015

"Iran could restore oil production halted by sanctions faster than anyone anticipates if the history of previous shutdowns is any guide. The consensus among analysts and traders is that Tehran needs at least a year after sanctions are lifted to raise output to the level prevailing before restrictions were imposed in 2012. Similar pessimistic assessments for supply disruptions at OPEC members Libya and Venezuela were confounded by quicker-than-expected recoveries, according to data compiled by Bloomberg. .... 'There really isn’t any compelling reason to doubt that Iran could ramp up quite quickly in terms of technical capacity,' said Antoine Halff, head of oil markets at the IEA. The agency doesn’t agree with the 'skeptical' view that Iran’s oil fields have been degraded or damaged by the sanctions, he said. The consensus among most analysts including Wood Mackenzie Ltd. and Standard Chartered Plc is that Iran will need at least a year to return to its pre-sanctions level of production of 3.8 million barrels a day from 2.8 million barrels today."
History Shows Iran Could Surprise the Oil Market
Bloomberg, 20 July 2015

"Britain’s first low cost ‘energy positive’ house, which can generate more electricity than its occupants will use, opens on Thursday despite George Osborne axing plans to make housebuilders meet tough low carbon housing targets from next year. The modest three-bedroom house built in just 16 weeks on an industrial estate outside Bridgend in Wales cost just £125,000 to build and, said its Cardiff University designers, will let occupants use the sun to pay the rent. Using batteries to store the electricity which it generates from the solar panels that function as the roof, and having massive amounts of insulation to reduce energy use in winter months, it should be able to export electricity to the national grid for eight months of the year. For every £100 spent on electricity used, it should be able to generate £175 in electricity exports, said Professor Phil Jones, whose team from the Welsh School of Architecture designed the house specifically to meet the low carbon housing targets set by the Labour government in 2006....According to Jones, the building costs of the 100 square metre energy positive house could drop below £100,000 if several were built at the same time. 'We save money and space by making the photovoltaic panels the roof itself and by dispensing with radiators and making the air collector part of the wall,' he said."
Britain's first 'energy positive' house opens in Wales
Guardian, 16 July 2015

"For many, the Turkmenistan-Afghanistan-Pakistan-India (Tapi) gas pipeline is nothing but a pipe dream. Its starting point is in Turkmenistan, one of the most isolated and closed-for-business states in the world, before it goes through war-torn Afghanistan and then reaches two countries that are hard to describe as partners - Pakistan and India. However, Turkmenistan insists that the pipeline's construction will start by the end of 2015. The visit in May of Pakistani Prime Minister Nawaz Sharif to Ashgabat seemed to confirm this - both sides pledged to put fast track the project. Likewise the recent visit of Indian Prime Minister Narendra Modi to Turkmenistan is also being seen as a boost to the project. Pakistan and India will each get 42% of that volume - the rest will be purchased by Afghanistan. The US strongly supports the pipeline plan, calling it 'a transformative project for the entire region'. If implemented, it will help to attract much-needed investment to Afghanistan, increasing budget revenues through transit fees and contribute to the country's overall development. The project is also crucial for India and Pakistan who are both facing severe energy shortages. By 2020-21, demand for gas in India is expected to double and according to the Oxford Institute for Energy Studies, demand for gas in Pakistan over roughly the same timeframe will be three times higher than supply. Turkmenistan is keen to implement this project in order to diversify its export routes and decrease its dependency on China. At the moment Beijing is the main buyer of the Turkmen gas and by 2020 it will import two times more Turkmen gas than now. .... It is not clear who will finance the project that is estimated to cost $10bn. The Pakistani and Indian governments show no indication that they can pay for the pipeline. None of the four energy companies that formed the consortium has enough resources to fund the construction. They have debated from the very beginning about inviting a global energy giant to finance the project in the form of a private company with sufficient funds and expertise. Chevron, Exxon Mobil, Total and a few others have been mentioned as possible companies who could get involved. However, all these companies have demanded a share in developing the gas field if they are to take the risk of financing it. Construction of the pipeline is a costly and risky venture, and companies want to make sure that they will make enough money in order to return their investments and make a profit. 'You don't really make money from operating a pipeline,' energy specialist John Roberts said. 'You make money from developing a gas field and being able to export the gas.' The problem is that Turkmenistan refuses to let any foreign company have a stake in its gas fields....It seems there is no coherent mechanism in place to prevent participating states from using the pipeline as political leverage against neighbours, particularly if there is a dispute between Pakistan and India. Turkmenistan's approach is to sell its gas at its border and argue that it is not responsible for whatever happens afterwards, says John Roberts. So it is not clear who will ensure that Pakistan will not cut off the gas flow into India if there is a new wave of tension between the two countries.... Security issues are another major challenge for this project. More than 700km of the pipeline will cross through Afghanistan, including Helmand and Kandahar provinces that are traditionally considered to be Taliban strongholds. The Afghan government has promised to provide troops to protect the pipeline. However, with the end of Nato's operation, the security situation seems to be deteriorating. Recent reports about clashes near the Turkmen-Afghan border and the Taliban gaining strength in the north makes the project even less attractive for investors. The pipeline was expected to be operational from 2017 but has been pushed back to 2018. Recently, Afghan President Ashraf Ghani said that the pipeline would not be completed in the next five years, casting even more doubt on its future. So a combination of security issues and financial questions means that there is a long to go before the Tapi project gets off the ground."
Is Turkmenistan's gas line a pipe dream?
BBC Online, 16 July 2015

"Royal Dutch Shell expects oil prices to recover gradually over the next five years, with progress slowed by persistent global oversupply and receding Chinese demand growth. The Anglo-Dutch energy giant is betting on crude rising to $90 a barrel by 2020, a key assumption in its move to buy rival BG Group for $70 billion to help transform it into a leading player in the costly deepwater oil production and liquefied natural gas (LNG) markets. 'We are not banking on an oil price recovery overnight. It will take several years but we do believe fundamentals will return,' Andy Brown, Shell's upstream international director, who oversees the company's oil and gas production outside North America, told Reuters in an interview."
Shell expects oil price recovery to take several years
Financial Times, 16 July 2015

"The nuclear deal reached between Iran and the P5+1 could weaken oil prices, but not just yet. In a note to clients on Wednesday, Goldman Sachs analysts predicted that the lifting of sanctions on Iran will be bearish for oil, though the effects won’t be seen until 2016. ... Goldman added that oil supply is at risk of being too high in 2016, because previous estimates had 'conservatively assumed no increase in Iranian flows.' Plus, other OPEC members have already increased their production, exceeding Goldman’s initial 2016 forecast, and even bringing risk to 2H15 forecasts. Simply put, more oil production from OPEC countries, including Iran, — which attempt to collude to keep supply low and prices high — will bring prices down. A gradual increase in Iran’s oil exports would start with the drawn down of the Islamic Republic’s floating storage of c.20­-40 mb, once the EU import bans are lifted. This would be followed by a jump in production, which Goldman says could lead to a c.200-­400 kb/d increase in Iranian exports in 2016.... The full potential of Iranian oil exports is not expected within the next year, because the production infrastructure still needs to be brought back to life. And so Iraq's surging production is a more immediate threat to oil prices, which last week fell for a third straight week."
GOLDMAN: The Iran deal won't impact the oil market until 2016
Business Insider, 15 July 2015

"Households face higher energy bills this winter as power chiefs have been forced to spend £36million protecting against the risk of winter blackouts. So many power plants have closed recently that the grid will be dangerously close to full capacity during periods of peak demand in the winter months. National Grid has announced that it is spending millions putting mothballed plants on standby, and will pay companies to shut down their factories when the grid is overloaded. Without the new emergency measures, the grid would have had just 1.2 per cent of spare capacity during the coldest, darkest evenings in the coming winter. The company said that if the country were hit with unusually cold weather, the network would risk becoming overloaded, leading to widespread blackouts. The £36million insurance measures will secure an extra 2.56 gigawatts of power, boosting the capacity margin to 5.1 per cent, according to National Grid. However, the cost will be passed on to consumers, with an average rise of 50p for every household's energy bill."
Households must fork out an extra £36million to keep the lights on this winter as the risk of blackouts increases after power stations are closed
Mail, 15 July 2015

"Saudi Arabia has borrowed $4bn from local markets in the past year, selling its first bonds for eight years as part of efforts to sustain high levels of public spending as oil prices slump. Fahad al-Mubarak, the governor of the Saudi Arabian Monetary Agency, said the government would use a combination of bonds and reserves to maintain spending and cover a deficit that would be larger than expected."
Saudi Arabia borrows $4bn as oil price reality hits home
Saudi Arabia, 12 July 2015

"Despite lower oil prices and other challenges, growth in Canadian oil sands will continue and remain one of the top sources of global supply growth in coming years, according to a new report by IHS Inc. (NYSE: IHS), a leading global source of critical information and insight. Oil sands growth, which previously rose 1.2 million barrels per day (mbd) from 2005 to 2014, is expected to add an additional 800,000 barrels per day (b/d) of new production by 2020. This would keep Canada the third largest source of supply growth in the world through that period (a rank it has held since 2005). The report, entitled Why the Oil Sands: How a Remote, Complex Resource Became a Pillar of Global Supply Growth, is a research project of the IHS Oil Sands Dialogue. Drawing on previous IHS research into specific aspects of the oil sands, the report provides a historical context of oil sands growth over the past decade and a half and discusses the reasons that growth continues."
Canadian oil sands to remain viable
Commodities Now, 12 July 2015

"The US generated more of its electricity from gas than from coal for the first time ever in April — in a sign of how the shale boom is putting mounting pressure on the country’s mining industry. Plunging prices for natural gas, which have fallen alongside oil since last summer, led to it being used to generate 31 per cent of America’s electricity in April, while coal contributed 30 per cent. This was the first month in US history that gas-fired electricity generation surpassed coal-fired generation, according to SNL Energy, a research firm — although it came close in 2012 when gas prices were also very weak. In 2010, coal provided 45 per cent of US power. Since then, competition from cheap shale gas — unlocked by the rise of horizontal drilling and hydraulic fracturing — plus a growing regulatory burden on coal-fired power plants, has squeezed out coal use. That trend has accelerated in 2015."
Gas overtakes coal at US power stations
Financial Times, 12 July 2015

"The country's oil production hit an all-time high in June at 4.1 millions of barrels of oil per day, according to the International Energy Agency. Iraq's oil surge is remarkable considering the uphill battle it's fighting. 'Already in 2015, OPEC's second-biggest producer has made huge strides to expand output despite the twin challenge of low oil prices and a costly battle against' ISIS, the IEA noted....  The price of a barrel of oil has slid below $51 this week, matching lows last seen in April. "What they lost in price significantly exceeds the production growth," says Fadel Gheit, managing director of oil and gas research at Oppenheimer & Co. The Islamic State continues to commandeer many of Iraq's oil rigs, robbing the Iraqi government of much-needed oil money. ISIS controls about 10% of Iraq's oil fields. However, ISIS has to sell its oil at a discount because it must go to the black market for buyers.... "Despite all these obstacles, despite all these problems...we still have 4 million barrels a day of Iraqi production. If that was under normal circumstances, Iraq would've been close to 4.5 to 5 million barrels," says Gheit. But as Gheit and the IEA point out, Iraq's current production level won't be permanent. The government has already told major oil companies that run its southern oil fields, like ExxonMobil (XOM), that they need to slow production later this year. U.S. companies don't stand to win or lose much since they don't own the oil fields there -- they're only paid a service fee by the government, experts say. With ISIS claiming more and more oil fields, Iraqi officials are planning budget cuts, which will curtail oil production later this year.  "
At war with ISIS, Iraq is pumping more oil than ever before
CNN, 10 July 2015

"Oil prices are set to come under further pressure from easing global demand and an expanding glut of crude while a rebalancing of the markets may last well into next year, the International Energy Agency has said. The IEA said it expected global demand growth to slow next year to 1.2m per day (bpd) from 1.4m this year - far less than needed to balance stubbornly growing non-OPEC and OPEC supply. 'The bottom of the market may still be ahead,' the IEA said in its monthly report. 'The rebalancing that began when oil markets set off on an initial 60pc price drop a year ago has yet to run its course. Recent developments suggest that the process will extend well into 2016. The oil market was massively oversupplied in the second quarter of 2015, and remains so today. It is equally clear that the market's ability to absorb that oversupply is unlikely to last. Onshore storage space is limited. So is the tanker fleet ... Something has to give,' it said. The global glut arose from a steep spike in US oil supply on the back of the shale revolution and OPEC's decision not to reduce output but rather to fight for market share with rival producers. But the fall in prices to $50-$60 per barrel in recent months from as high as $115 a year ago has yet to depress North American supply. 'The expected timing of the rebalancing has shifted a bit, but the story line has not changed. The supply response to lower prices is on the way,' the IEA said, adding it may take another price drop for a full supply response to unfold. 'Cost savings, efficiency gains and producer hedging have let light tight oil producers defy expectations until now, but growth ground to a halt in May and will likely stay there through mid-2016,' it said. US supply grew by 1m bpd in the first five months of 2015, down from 1.8m in 2014, according to the IEA. 'Total US supply will keep growing through 2016, but much more slowly than in 2014, and thanks to natural gas liquids and new deepwater plays rather than onshore crude supply,' it said. Non-OPEC supply as a whole, after expanding by a massive 2.4m bpd in 2014, looks on track to slow to growth of 1m bpd in 2015 and stay flat in 2016, the IEA said. Among other bearish signals, the IEA said world oil demand growth appeared to have peaked in the first quarter of 2015 at 1.8m bpd and would continue to ease throughout the rest of this year and into next. That means the need for OPEC's oil will stand at 30.3m bpd next year, up 1m bpd on 2015, but still a whopping 1.4m bpd below current OPEC production. 'And the group is not slowing down,' the IEA said. 'On the contrary, its core Middle East producers are pumping at record rates and the outlook for Iraqi capacity growth - accounting for most projected OPEC expansions - keeps improving.'"
Oil price has further to fall, says IEA
Telegraph, 10 July 2015

"A handful of optimistic U.S. shale drillers are sticking with plans to deploy more rigs in the coming months even as oil prices take a sharp dive well below many producers' $60-a-barrel breakeven point.  On Wednesday, Pioneer Natural Resources Co. became the first big company to publicly confirm it was drilling more wells, saying it had already added two rigs in the Permian Basin of Texas this month and would keep on adding two a month as long as the oil price 'remains constructive.' Smaller shale oil producer WPX Energy Inc, whose operations are focused on North Dakota's Bakken shale, said this week that its decision to add two rigs later this year was unaffected by a nearly $8 drop in crude prices since June to toward $50 a barrel. While half a dozen or so other companies in the U.S. shale industry have indicated they may add rigs, none have publicly confirmed a move, although a few have quietly done so. Last week the U.S. oil drilling rig count rose for the first time since December, inching up by 12 to 640 across the country. The industry is now in a difficult bind. While executives were quick to slash rigs to a five-year low as oil prices halved through the first quarter, many were beginning to grow hopeful that a new equilibrium was settling in the market, as U.S. crude traded steady in May and June at around $60 a barrel. 'Based on recent discussions with operators, companies were planning on increasing activity at $60 to $65 a barrel,' analysts at Houston-based energy investment bank Simmons & Co said in a note on Tuesday."
As oil teeters at $50, a few shale producers still drilling more
Reuters, 9 July 2015

"Greece has admitted for the first time it is planning a €2bn gas pipeline with Russia. The move is likely to worry the US, which has stepped up its involvement in Greece's debt talks with international creditors over fears the cash-strapped country could drop out of the single currency and come under the influence of its Cold War rival. Panayotis Lafazanis, Greece's energy minister, said the move would be a key part of the country's "multi-faceted" foreign policy and would create 20,000 jobs, the Financial Times reported."
Greece finally admits €2bn gas pipeline deal with Russia
Telegraph, 9 July 2015

"Goldman Sachs says lower oil prices will probably disappoint the U.S. petroleum industry’s hope of a drilling recovery in the second half of the year. The U.S. oil price’s recent fall to around $52 a barrel will rule out the possibility that oil companies will send 100 to 150 drilling rigs to U.S. oil fields this year – a bullish market expectation born out of two months of stable $60 oil, which ended late last week. Goldman Sachs analysts wrote they project only 20 to 50 rigs will return to work by the end of the year. That $8-a-barrel difference could have big implications for the oil field job market: Each rig employs scores of workers, directly and indirectly. The nation’s land rig count has fallen 61 percent from its peak last October, and predictably, the oil field service industry’s workforce has shrunk dramatically since the beginning of the year, with the four biggest firms cutting a combined 49,500 jobs in the first half of the year. The decline comes just as oil companies were getting comfortable with $60 oil. They had added a dozen oil rigs to their active roster last week, according to Baker Hughes. That was evidence, Goldman said, that producers can increase drilling activity at $60 oil with oil field service costs coming down 30 percent. Goldman believes the price of U.S. crude will sink to $45 a barrel by October — a bearish forecast compare to most, including the U.S. Energy Information Administration, which expects light, sweet crude to average $55 a barrel this year."
Goldman: $50 oil crushes hopes for U.S. drilling recovery this year
Houston Chronicle, 8 July 2015

"The Financial Times identifies five key factors behind the falling oil price. The first is the Iran nuclear deal, which is expected to be completed by the end of the week. If it goes through, it is likely that sanctions limiting Tehran's ability to trade oil will be lifted, which could add up to 800,000 barrels a day to the market within a year. The second factor is China's economic slowdown, which will affect demand. "When China's economy wobbles, the oil market is quick to respond", the FT says. Carsten Menke, a commodities analyst at Julius Baer echoes the FT's analysis, noting that "commodity markets are signalling broad-based concerns about Chinese demand and the government's ability to stimulate growth". Another factor causing oil to re-enter a bear market is the ongoing turmoil in Greece. The country's No vote in last Sunday's referendum on whether to accept the latest bailout package has catapulted the country into a new period of uncertainty. While the country's difficulties are unlikely to have a direct impact on demand for oil, they have led to a gradual strengthening of the US dollar. As the FT notes, "commodities like oil that are priced in dollars tend to move inversely to the US currency". Fourth is the unexpected resilience of the US shale gas market which has proved itself to be more immune to lower oil prices than many analysts expected. Shale gas production in conjunction with oil coming from traditional sources has contributed to a global glut that has pushed energy prices down. Finally, Opec's refusal to curb its own output has contributed to oil inventory levels in Western Europe hitting their highest levels in two years. So can we expect to see the oil price rebound? Possibly, say analysts at consultancy Facts Global Energy, but not any time soon: "Low prices will eventually cure low prices. But we must not get too excited too quickly," they said in a note."
Oil price: five reasons why oil has re-entered a bear market
The Week, 8 July 2015

"There was more news last week concerning the Rosch Innovations Kinetic Power Plant generator....this device makes electricity by using the force of buoyancy. Floats in a column of water are filled with air at the bottom and are pushed to the top by buoyancy, which drives an electric generator that pressurizes the floats and produces excess energy. As compared with other possible sources of cheap power, this technology is simple to understand; cheap to make; requires no fuel; leaves behind no pollution, and operates 24 hours a day. Of course, 'too good to be true' is what many are saying. This is clearly a claim of 'perpetual motion' and as anyone who has been exposed to the laws of physics knows is impossible. The problem for the skeptics, however, is that in so far as numerous independent observers who have actually looked at the technology up close can tell – it works. The basics of the Rosch’s device are almost ludicrously simple for what it purports to do although the subtleties of the electronic control system are proprietary and patented. The company’s demonstration devices have been taken apart and thoroughly examined without any sign of fraud or trickery many times. One Rosch’s tech noted that he has had to drain and refill the large buoyancy tank containing the floats 20 times so that skeptical prospective purchasers could poke around inside looking for hidden wires or motors. Rosch’s technology now has been granted a German patent after it was examined by an independent testing laboratory and was certified to work.... The release of the outside technical report, used to convince the German patent office that the Kinetic Power Plant generator is a genuine discovery of a new phenomenon, was an important part of the conclusion that no fraud is taking place. According to company officials, plans to further develop the system are well underway. The parts for a 100 kilowatt generator are already on site and the device is supposed to be operational this month. For a technology that has yet to be mentioned in the mainstream US media and is being subjected to a stream of skepticism as a likely fraud in Europe, the company says the devices are selling well based on demonstrations for prospective buyers. Except for the small 5 kW devices that were offered for sale by GAIA last month, Rosch itself will sell only 200 kW or larger generators. One and five megawatt installations, based on 500 kW generators, are said to be under construction in Croatia and Slovenia. The secret of how this electricity-generating device works is in its proprietary circuitry, which controls the device’s operation by regulating the amount of air that is injected into each float before it begins its ascent to the top of the tank. As we can all recall from 7th grade science, buoyancy forces things upwards with a force equal to the weight of the water displaced. Although the mechanics of the system – an electrical generator, a water tank, bicycle chains, and an air compressor — have been around since late in the 19th century, it takes 21st century electronics to make the device work. The highly efficient generator and air compressor required to make the generator work are also of an advanced design and are proprietary."
The Buoyancy Solution
Falls Church News-Press, 30 June 2015

"Smart meters will cost as much as the Trident nuclear deterrent to implement, with the full cost of the scheme rising to £19bn, according to a government report. Total lifetime costs of the programme have now risen by £2bn since 2013, according to a report by the Major Projects Authority. In contrast, the Trident replacement programme has a cost estimated at between £17.5bn and £23.4bn. Surprisingly, the smart meter project has been flagged as "amber" — meaning "successful delivery appears feasible but significant issues already exist." This is despite a number of warnings that the programme is in danger of turning into a "costly failure". Earlier this year a report by the Energy and Climate Change Committee said it does "not believe" plans to install 53 million devices in homes and businesses by 2020 will be achieved."
Smart meters set to cost Blighty as much as replacing Trident
The Register, 29 June 2015

"Investors are beginning to bet on a sharp rebound in the oil price by the end of the year, on the back of rising demand and a slowdown in US production. Insch Capital Management, a Swiss hedge fund, is predicting that prices will be trading at about $82 per barrel by the beginning of next year, and already claims the market is oversold. The Lugano-based fund says it plans to ramp up investments in the sector in preparation for an expected 50pc uptick in the price of crude by 2016. Oil prices have recovered somewhat since falling sharply to below $50 a barrel after the Organisation of the Petroleum Exporting Countries (Opec) decided in November to maintain production levels, despite weaker demand. Brent crude is currently trading at $64 a barrel. However, consensus is forming among investors that the oil market could be poised to recover quickly, spurred by strong demand and an expected slowdown in US production, thanks to the high number of drilling rigs that are being closed."
Oil investors betting on crude hitting $82 per barrel
Telegraph, 22 June 2015

"Record oil production meeting a wave of surprisingly strong demand has reined in world oil prices, creating a delicate balance that could be tipped either way—and the most immediate catalyst may be the Iranian nuclear talks. The market has been awaiting the outcome of the negotiations ahead of a June 30 deadline, as an agreement could put 1 million barrels of Iranian crude back on the market eventually. U.S. crude futures have been locked between $57 and $62 per barrel—since late April. But an Iran agreement now appears elusive, and the market expects the talks to continue past the deadline, even as Secretary of State John Kerry headed back to Vienna on Friday for negotiations."
This could be the tipping point for oil prices
CNBC, 26 June 2015

"With crude oil prices down sharply from last year and the oil glut at risk of increasing, private security consultant Charles Clifton's phone has been ringing. His company, Knightsbridge Risk Management, a private security firm in Dallas that serves the oil and gas industry, is getting calls from companies that want to plan ahead in case they shut down drilling operations in North Dakota and the Bakken shale formation. The oil producers want to prevent theft and vandalism of the drilling sites—often a problem when operations have abruptly come to a halt in other states, said Clifton, manager for The Americas for Knightsbridge. Workers and subcontractors who have suddenly been left with no income have sometimes retaliated by stealing or damaging equipment, from well caps to bulldozers, he said....The ongoing pressure since oil prices dropped sharply last fall is squeezing drilling operations in North Dakota and the Bakken Formation. The number of active rigs in North Dakota was 77 as of June 12, down from 145 rigs the same day last year. American Eagle Energy, a Colorado firm drilling in the Bakken Formation, filed in May for Chapter 11 bankruptcy protection in Denver. Still, many players in the region have the strength to withstand the lower prices, according to Wayne Wilson, who specializes in calculating the value of oil and gas assets as managing director with HSSK, a business valuation and litigation consulting firm that has offices in Houston, Dallas and Austin. Shale oil producers that are currently producing should generally be able to survive the next 48 months unless they have an unfavorable debt structure, he said."
Is North Dakota's economy really oil-rigged?
CNBC, 24 June 2015

"Royal Dutch Shell executives have recently met with officials in Iran as international oil companies begin to explore the potential of re-entering the country should Western sanctions be lifted. A Shell spokesperson confirmed to The Telegraph that the talks had taken place in Tehran. 'They discussed Shell’s outstanding debt to NIOC (National Iranian Oil Company) for crude lifted but not paid for, and potential areas of business cooperation should sanctions be lifted,' said the spokesperson. The meeting, which was first reported by the Financial Times, comes ahead of talks on June 30 with world powers that may lead to the lifting of economic sanctions which prevent international oil companies (IOCs) such as Shell from dealing with the country. Iran is understood to be sweetening the terms of their contracts for IOCs to invest and develop the country’s oil fields. Despite concerns over the tough terms and the high level of political risk associated with the country, IOCs would be foolish to ignore the potential of one of the world’s last great conventional oil basins. ... At its peak before the Islamic revolution in the 1970s, Iran was producing between 5m and 6m barrels of oil a day, and has the potential to return to that level if it can be relieved from sanctions."
Shell holds talks with Iran over oil deal
Telegraph, 24 June 2015

"Energy bills have risen by a shocking 73% in the last decade according to exclusive analysis by consumer group Which? - an average increase in annual bills of around £580 per household.
With annual bills approaching £1,400, Which? is calling for the Competition and Markets Authority (CMA) to set out how it will shake up the energy market when it reports the findings of a year-long investigation later this month. Spending on energy rose from 2% of household budgets in 2004 to 4% a decade later."

Find out how much energy bills have risen
Which, 21 June 2015

"Russia and Saudi Arabia yesterday signed an agreement to cooperate in the development of nuclear energy for peaceful purposes. The document was signed by Rosatom director general Sergey Kirienko and the president of the King Abdullah City for Atomic and Renewable Energy (KA-CARE) Hashim Abdullah Yamani....Although Saudi Arabia's nuclear program is in its infancy, the kingdom has plans to construct 16 nuclear power reactors over the next 20 years. A 2010 royal decree identified nuclear power as essential to help meet growing energy demand for both electricity generation and water desalination while reducing reliance on depleting hydrocarbon resources."
Russia and Saudi Arabia agree to cooperate in nuclear energy
World Nuclear News, 19 June 2015

"Saudi Arabia is pumping oil at a record high as it focuses on keeping market share, while Russian output hit a post-Soviet high of 10.71 million barrels per day (bpd) in April. Despite ample supply, oil prices have rallied to almost $65 a barrel in 2015 after sliding toward $45 in January, supported by stronger-than-expected demand and signs the supply glut will ease."
Russia, Saudi Arabia to discuss broad oil cooperation agreement
Reuters, 18 June 2015

"Russian energy giant Gazprom has confirmed plans to expand its Nord Stream gas pipeline beneath the Baltic Sea and into Germany. The new pipeline would be built in cooperation with Eon, OMV and British-Dutch Shell. The key partners in the deal signed a memorandum on Thursday at the international economic forum currently taking place in St. Petersburg, Russia. 'The construction of additional transport infrastructure along the shortest route between gas fields in northern Russia and markets in Europe will contribute to increasing the safety and reliability of deliveries for new contracts,' said Gazprom CEO Alexei Miller. The two proposed new pipelines mark part of an effort by Gazprom to deliver an additional 55 billion cubic meters of gas to the European Union. 'The implementation of Nord Stream has demonstrated that transporting gas through the Baltic Sea is a reliable solution that helps to meet the energy demand,' Germany's largest gas supplier Eon said in a statement on Thursday. The expansion of the Nord Stream would also circumvent Ukraine for gas deliveries to western Europe as of the new pipeline's planned completion in 2020. The ongoing war in eastern Ukraine has also complicated economic issues between the Moscow and Kyiv. Russia considers Ukraine to be an unreliable transit partner and has complained in the past of illegal gas tapping. The two countries have also argued on several occasions over delivery prices and gas debt, with Moscow initially allowing the construction of the Nord Stream pipeline in order to reduce dependency on Kyiv. As well as extending the Nord Stream, Gazprom also intends to construct a new Turkish Stream through the Black Sea. The pipeline will have the capacity to annually deliver 63 billion cubic meters of gas to Turkey and Greece. In January, Gazprom had initially said it would not extend the Nord Stream. Demand for Russian gas has fallen in recent years, mainly due to milder temperatures in western Europe."
Gazprom inks plan for new gas pipeline to Germany
Deutsche Welle, 18 June 2015

"The new boss of the UK's oil and gas body has warned that the sector faces a future in which long term oil prices are about $60 a barrel. Deirdre Michie told a gathering in Aberdeen that the industry needed to adjust and find a fresh way forward. Oil prices have fallen from about $115 a barrel to $63 since last June. The annual oil and gas industry conference also heard from First Minister Nicola Sturgeon, who wants no new tax rises for the sector. .. North Sea exploration reached its lowest level in at least two decades in 2014, with 14 explorations wells drilled compared with 44 in 2008. Ms Michie said: 'We have paid more to the Treasury than most other industrial sectors, we generate hundreds of thousands of skilled jobs, we have a vibrant supply chain, at home and abroad, and make a key contribution to the UK's security of energy supply. It is an industry that has grown and evolved for 50 years. However, we now face real and present threats that are challenging our future. At $60 oil, 10% of our production is struggling to make money and there is a shortage of capital and a shortage of investors willing to place their money here. Therefore it is not unreasonable for the North Sea to set out its stall at being sustainable in a $60 world. As a target, it's one that we as a trade association can champion, government can align with and the regulator can pursue as an enabler, for example, to focus on key infrastructure.' She added that focusing on efficiencies would be a key factor for the industry's future.... When Oil and Gas UK, the trade body, convened this conference last year, the oil price was about to start its slide from $115 per barrel. By January, it hit $45. It's now in the mid-60s, with conflicting signs of its future direction of travel. Few think it will rise much above $70, because that's the point at which fracking starts again in North America, pushing up supply. Fracking is much more responsive to price than offshore producers can afford to be. That plunge in the value of this asset has focused attention on the problem of the high cost of operating in British waters. Along with some North American reserves of oil and gas, this is seen in a global context as among the most expensive places to operate. Costs per barrel have been rising very steeply; partly because fewer barrels are flowing from older, smaller and hard-to-reach reserves: as old equipment needs more and longer shutdowns for maintenance: and partly because the industry had become inefficient through recent years of booming investment."
Oil and gas chief says sector needs to adjust to $60 a barrel future
BBC Online, 17 June 2015

"As a battle for market share rages in the oil industry, Libya is struggling to stand its ground. The holder of Africa’s largest reserves is producing 432,000 barrels of oil a day, according to Mustafa Sanallah, chairman of Libya’s National Oil Corporation, more than 300,000 b/d of which is exported. Although an improvement from last year’s low of around 200,000 b/d, the Opec member’s output is still down more than 70 per cent from levels achieved before the 2011 revolution that ousted former ruler Muammer Gaddafi. Since the civil war, Libya’s oil industry has been hit by unrest. The state-run oil company has been caught in the middle of a conflict that has divided the country between an internationally recognised government and an Islamist militia that controls the capital of Tripoli. Attacks by radical group Isis, worker strikes and sabotage of facilities have also hampered the oil sector. Speaking to the Financial Times on the sidelines of an industry conference on Wednesday, Mr Sanallah said Libya was looking to raise output by 200,000 b/d in the next five weeks, through the repair of damaged fields and dialogue with the factions that have brought about blockages.  The Es Sider port, the country’s largest export terminal, has been under force majeure since December, when violence between rival groups led to a fire. Fighting damaged fields feeding into it in March.... Mr Sanallah said the National Oil Company was working to rebuild relations with factions that would enable El Sharara and El Feel oilfields to pump in excess of 400,000 b/d once more. 'Dialogue is improving day after day. Hopefully [we will be able] to open the valves very soon,' Mr Sanallah said. Although Libya still harbours ambitions to increase production this year to 1m b/d as demand from India, China, Japan and eurozone countries remains robust, analysts are not so optimistic. 'Libyan production has crept up from recent lows, but these gains are minimal. I don't think they will be able to get above 800,000 b/d,' said Richard Mallinson, geopolitical analyst at Energy Aspects. 'Even if all the political and security issues were to disappear overnight, it would struggle to get the 1m b/d target. Their ability to produce at these levels has gone, as the fields have not been properly maintained,' said Mr Mallinson.... Opec’s November decision not to cut production and focus on a market share battle accelerated a slide in oil prices to $45 a barrel in January. Although crude has rebounded to $60-65 a barrel, Libya is still cash constrained."
Libya struggles to raise oil output
Financial Times, 16 June 2015

"Project delays and spending cutbacks in the oil industry pose a risk to future supplies, according to the Organisation of the Petroleum Exporting Countries (Opec). Speaking at the conclusion of the group’s recent meeting in Vienna, acting group president Mohammed Saleh al-Sada said that the impact of cost cutting across the industry needed to be assessed to ensure that enough new production would come on stream to replace natural declines. 'The degree of investment cuts is substantial due to the oil price of today,' warned Al-Sada who is also the oil minister of Qatar. He said that countries in Opec that pump a third of the world’s oil had to invest heavily to replace an average 5pc-6pc natural decline in oil production from existing wells. His remarks were echoed by Abdalla Salem el-Badri, the group’s secretary general, who said: 'If we don’t have investment now will have problems in the future.' In Europe and the UK around £55bn-worth of oil and gas developments are under threat while prices remain at their current levels, according to estimates made by Wood MacKenzie. Most of these projects are centred around the North Sea, one of the world’s most expensive operating areas. Oil prices have recovered around 30pc this year to trade near $65 per barrel. According to Opec, the world will need to find and produce at least another 20m barrels per day (bpd) of crude by 2040 when global demand is expected to reach 111m bpd."
Oil investment cuts threaten new price spike
Telegraph, 13 June 2015

"The U.S. oil-rig count fell by seven to 635 in the latest week, according to Baker Hughes Inc., marking the 27th straight week of declines. The number of U.S. oil drilling rigs, which is a proxy for activity in the oil industry, has fallen sharply since oil prices headed south last year. There are now about 61% fewer rigs working since a peak of 1,609 in October. Crude oil futures were recently down by less than 1% to $60.22 a barrel. Last week, OPEC said it would keep its production ceiling unchanged, the second time in six months it decided to take no action amid the global glut. Oil prices have traded in a tight range recently, with U.S. prices pivoting around the psychologically key $60-a-barrel level. Forecasts that the global glut of crude oil will shrink, due to growing demand and a decline in drilling, have boosted prices from multiyear lows earlier this year. But some investors remain hesitant, especially because some U.S. companies say they can increase production if prices hold above $60."
U.S. Oil Rig Count Falls to 635 in Latest Week
The Wall St Journal, 12 June 2015

"The Mexican state oil company Pemex has announced one of its biggest discoveries in years, unveiling new shallow water oil fields in the southern Gulf of Mexico that it says could produce 200,000 barrels per day by mid-2018. The total proven, probable and possible reserves of the fields could be as high as 350m barrels of crude-oil equivalent, said Pemex’s chief executive officer, Emilio Lozoya. The new fields off the coast of Tabasco and Campeche states comprised three of light crude and one of heavy crude, and could start coming onstream in 16 months, Pemex said. 'It’s a recent achievement and one of great magnitude,' Lozoya said. The fields would take around three years to reach their full 200,000 barrel per day capacity, said Jose Antonio Escalera, director of exploration for Pemex. Pemex described the finds as its biggest exploration success in the last five years after the discoveries in Tsimin-Xux and Ayatsil, also in the southern Gulf.... Output at Pemex has fallen from a peak of 3.4m barrels per day in 2004 to less than 2.4m currently. Following a reform to end the company’s oil and gas monopoly, Pemex also faces the prospect of tough competition from oil majors and other private companies coming to Mexico."
Mexico's Pemex unveils large oil find
Guardian, 11 June 2015

"Confidence in the North Sea oil and gas industry has plummeted to a record low with two- thirds of operators being forced to cancel projects because of the fall in the price of oil, a new survey has revealed. The bleak picture is outlined in the 22nd Oil and Gas study conducted by Aberdeen and Grampian Chamber of Commerce, which claims the industry is in a 'mid-life crisis'. It shows that confidence in the UK Continental Shelf (UKCS) was now at its lowest ever point since the influential twice-yearly survey began in 2004.  The drastic fall in oil prices, it says, has been the major contributory factor to the reduction in activity levels within the sector.  James Bream, research and policy director at the Chamber of Commerce, said: 'Confidence levels are at an all-time low and we are now experiencing our first ‘recession of confidence’, and it looks gloomy in the year ahead, too....The oil price yesterday remained at around $60 a barrel, compared to well over $100 a year ago. Earnings for companies that have made record profits in recent years have fallen, forcing them to decommission rigs and sharply cut investments in exploration and production. Thousands of jobs have also been lost as a result. The price of a barrel of oil, which has been cut roughly in half since last June, has reached levels which were last seen during the depths of the 2009 recession. The Chamber of Commerce survey, carried out in partnership with law firm Bond Dickinsons, does however reveal an increase in decommissioning activity, which is described as a 'bittersweet positive'. The survey approached 700 operator, contractor and service companies in March and April. It asked about the consequence of the falling oil price on the behaviour of companies, with two-thirds of operators and one-third of contractors selecting the 'cancel projects' option."
Confidence in North Sea oil and gas at record low
Scotsman, 11 June 2015

"Royal Dutch Shell has notified Ukraine that it will pull out of a shale gas exploration project in the east of the country, where government forces are battling Russian-backed separatists. Shell’s decision is the latest example of how the conflict is exacting a heavy toll on Ukraine’s economy and dashes the cash-strapped government’s hopes of raising up to $10bn of investment and diversifying away from Russian gas imports."
Shell to withdraw from shale gas exploration in eastern Ukraine
Financial Times, 11 June 2015

"The growth in global demand for energy slowed to levels not seen since the late 1990s, a new report suggests. BP's Statistical Review of World Energy said global energy consumption 'slowed sharply' to an increase of just 0.9% in 2014. BP said slow growth for energy demand was largely due to China's economy moving away from 'energy-intensive sectors'. Separately, it said increased US shale supply was a 'continuing revolution'.... The growth in Chinese coal consumption slowed to 'unusually weak' levels, due to the slowing pace of industrialisation in the country. Globally, production increased for all fuels except coal. Meanwhile, worldwide demand for all other fuels increased the report said. Global growth in natural gas was weak, due to a mild European winter - which led to a sharp fall in the continent's gas consumption. But renewable energy continued to see the fastest growth in demand, now fulfilling 3% of the world's energy needs, the report said."
BP: Demand for energy 'slowing'
BBC Online, 10 June 2015

"Saudi Arabia increased its oil production to a record level in May in an attempt to win back more customers and meet demand for its crude. Output in May reached 10.33m barrels a day, according to numbers submitted by Riyadh to Opec, the oil cartel, confirming the widely held view that Saudi Arabia’s production is heading higher. The kingdom’s oil output had been 10.31m b/d in April, Riyadh told Opec. In its monthly oil market report Opec said world oil demand would stand at 92.5m b/d this year, up from 91.3m b/d in 2014, unchanged from the previous month’s report. 'The global economy recovery appears to have stabilised at a moderate level,' said the cartel on Wednesday. It expects non-Opec supply to decline in the second half of the year, compared with an increase in the first six months. A forecast of slower annual growth of 680,000 b/d was in line with previous predictions. 'The current oversupply in the market is likely to ease in the coming quarters,' the group said. Opec expects demand for its crude to stand at 29.3m b/d a day in 2015 but output from the producers’ group stands at almost 31m b/d, according to estimates by analysts and traders."
Saudi Arabian oil output hits record
Telegraph, 10 June 2015

"U.S. oil output will peak at a 43-year high in 2015 as producers work through a backlog of uncompleted wells before trailing off in the second half of the year.Production will increase to 9.43 million barrels a day this year, the most since 1972, the Energy Information Administration said Tuesday in its monthly Short-Term Energy Outlook. That’s 240,000 barrels higher than last month’s estimate. Monthly output will fall in June through early 2016. The U.S. is producing more oil this year even as the number of oil rigs slid to the least since August 2010 in response to last year’s price crash. Prices are still high enough to support drilling in key shale formations in North Dakota, Texas and other states. 'Production has increased as producers work through the backlog of uncompleted wells,' the EIA said in the report. 'Projected 2015 oil prices remain high enough to support continued development drilling in the core areas of the Bakken, Eagle Ford, Niobrara, and Permian basins.' The increase in this year’s production forecast reflects revisions to estimated output in the first quarter, the EIA said. Oil production in May reached 9.59 million barrels a day, also the highest level since 1972. 'U.S. oil production since mid-2014 has been more resilient to lower crude prices than many had expected,' EIA Administrator Adam Sieminski said in an e-mailed statement....Oil production will start to decline in the second half of this year, 'largely attributable to unattractive economic returns in some areas of both emerging and mature onshore oil production regions,' the EIA said. Output will rebound in the second half of 2016, returning to an average of 9.6 million barrels in December. Total output next year is forecast to reach 9.27 million barrels a day. Crude output from the prolific tight-rock formations will shrink 1.3 percent to 5.58 million barrels a day this month, based on EIA estimates from the monthly Drilling Productivity report released on Monday. It’ll drop further in July to 5.49 million, the lowest level since January."
U.S. Oil Production to Peak at 43-Year High Before Trailing Off
Bloomberg, 9 June 2015

"The shale oil boom that turned the U.S. into the world’s largest fuel exporter and brought $3 gasoline back to America’s pumps is grinding to a halt. Crude output from the prolific tight-rock formations such as North Dakota’s Bakken and Texas’s Eagle Ford shale will shrink 1.3 percent to 5.58 million barrels a day this month, based on Energy Information Administration estimates. It’ll drop further in July to 5.49 million, the lowest level since January, the agency said Monday. With the Organization of Petroleum Exporting Countries maintaining its own oil production, U.S. shale is coming under pressure to rebalance a global supply glut. EOG Resources Inc., the country’s biggest shale-oil producer, hedge fund manager Andrew J. Hall and banks including Standard Chartered Plc have forecast declines in U.S. output following last year’s plunge in crude prices. The nation was still pumping the most in four decades in March. 'Production has to come down because rigs drilling for oil are down 57 percent this year,' James Williams, president of energy consultancy WTRG Economics, said by phone Monday from London, Arkansas. 'Countering that is the fact that the rigs we’re still using are more efficient and drilling in areas where you get higher production. So that has delayed the decline.'.... Despite the U.S. oil rig count falling for 26 straight weeks, domestic crude production surged 126,000 barrels a day, or 1.3 percent, to 9.53 million in March, the most since 1972, Energy Information Administration data show. 'We do not believe that the direction of U.S. oil output has changed,' Standard Chartered analysts including Nicholas Snowdon said in a research note June 1. 'In our view, U.S. oil supply is still falling, and it is likely to carry on falling for the rest of this year.' Shale oil output will decline by 105,000 barrels a day in July after dropping 86,000 barrels in June, according to the London-based bank. EOG Resources Chief Executive Officer Bill Thomas said at a conference last month that U.S. production would drop through the end of the year...Output from the Eagle Ford in Texas, the second-largest oil field in the U.S., will contract by 49,000 barrels a day in July to 1.59 million. Production in the Bakken shale region of North Dakota will slip by 29,000 to 1.24 million, the EIA said. Yield from the Permian Basin in West Texas and New Mexico, the largest U.S. oil field, will rise by 3,000 barrels a day to 2.06 million. The EIA’s oil-production forecasts are based on the number of rigs drilling in each play and estimates on how productive they are. U.S. drillers are retreating from oil fields as OPEC, which accounts for more than a third of the world’s oil, continues to resist calls to curb its own supply. The 12-nation group decided last week to instead maintain a combined daily crude-production target of 30 million barrels. Output from the group has exceeded that level for each of the past 12 months, according to data compiled by Bloomberg."
U.S. Shale Oil Boom Grinds to a Halt as OPEC Keeps Pumping
Bloomberg, 8 June 2015

"Since May 2005, global conventional crude oil + condensate production (C+C) has been constrained to a bumpy plateau of around 73.2 Mbpd. That limit was breached in December 2014 with a new high of 74.28 Mbpd (Figure 1, blue area is conventional C+C). This comes on the back of a prolonged period of record high oil price. It seems likely that the reason for the new high is OPEC abandoning constraint rather than an actual expansion of global conventional C+C production capacity.... A part of the Peak Oil story unfolded in the period 2002 to 2008 when the world ran short of easy to find and produce conventional cheap crude oil. This sent the price up to over $100 / barrel. The prolonged spell of high price has resulted in a greater number of men and machines and larger amounts of energy being expended on the quest for these highly prized C-H bonds. There are a number of variables that need to be factored into future analysis and forecasts of global oil production. Amongst these are 1) time lags between price signal and new production, 2) tolerance of global society to higher energy prices, 3) technology developments, 4) political interference (that may be positive or negative) and 5) last but not least reserves depletion."
Against Odds, Conventional Crude Oil Production Reaches New High, 8 June 2015

"Iraq is mobilising a 27,000 strong army of security personnel to protect its oil and energy facilities from attacks by Islamic State insurgents. Adel Abdel Mahdi, Iraq's oil minister, gave details of the new force at the end of the meetings of the Organisation of the Petroleum Exporting Countries (Opec). The onslaught of the Islamic State of Iraq and the Levant (Isil) has raised concern's that Baghdad's vast oil fields and complex network of refineries and pipelines are vulnerable to attack and sabotage. Mr Abdel Mahdi said that the security force, which essentially amounts to an oil army, would be drawn from an existing energy police corp that is under control of the country's Interior Ministry. He added that meetings will take place in the coming weeks to finalise the structure of the force, which will receive additional training and equipment. 'Their mission is to secure all oil and electricity facilities,' said Mr Abdel Mahdi. Although Iraq has asserted that its oil facilities are safe and secure from Isil its pipelines were frequently attacked by insurgents following the US occupation, which followed the 2003 invasion. Iraq is now producing close 4m barrels per day (bpd) of oil and now ranks as the second largest producer in Opec after Saudi Arabia. British oil majors Royal Dutch Shell and BP are both active in Iraq operating some of the country's largest fields in the Shia-Muslim dominated South. Iraqi troops have been fighting Isil forces dug in around the major Baiji oil refinery just over 100 miles North of Baghdad."
Iraq to form special 'oil army' to fend off Isil threat
Telegraph, 8 June 2015

"Crude oil prices fell on Monday as China's oil imports dropped sharply and markets were expected to be increasingly oversupplied following OPEC's decision to keep its production targets unchanged. China, the world's biggest net oil importer, bought nearly a quarter less crude in May than it did in the previous month, according to data from China's General Administration of Customs. Its imports of oil products also fell just over six percent while product exports fell 10 percent. China's report of a fall in import demand came after the Organization of the Petroleum Exporting Countries (OPEC) agreed on Friday to stick to its policy of not limiting its output, which currently stands above 30 million barrels per day. Both exacerbate worries about a glut in a market where millions of barrels of crude are stored in tankers without a buyer. 'The world's crude demand/supply remains in excess of supplies,' said Yasushi Kimura, president of the Petroleum Association of Japan (PAJ) after OPEC's decision."
Oil prices fall as China's crude imports tumble, OPEC keeps production high
Reuters, 8 June 2015

"Drax was once Britain’s biggest coal-fired power station. It now burns millions of tons of wood pellets each year, and is reputed to be the UK’s biggest single contributor towards meeting stringent EU green energy targets. But astonishingly, a new study shows that the switch by Drax from coal to wood is actually increasing carbon emissions. It says they are four times as high as the maximum level the Government sets for plants that use biomass – which is defined as fuel made from plant material that will grow back again, therefore re-absorbing the CO2 emitted when it is burnt. At £80 per MW/hr, Drax’s biomass energy is two-and-a-half times more expensive than coal – a cost passed on to customers. Last year Drax soaked up £340 million in ‘green’ subsidies that were added to British consumers’ power bills – a sum set to rocket still further. Without these subsidies, its biomass operation would collapse. Perhaps most damningly of all, its hunger for wood fuel is devastating hardwood forests in America, to the fury of US environmentalists, who say that far from saving the planet, companies like Drax are destroying it. Drax denies this, saying it only uses dust and residues from sawmills, as well as wood left over when others log trees for purposes such as construction. Inquiries by The Mail on Sunday investigation suggests this claim is highly questionable. In 2013, Drax’s first year of biomass operation, only one of its six units – which each have a capacity of 650MW – was burning pellets. Its total green subsidy then was £62.5 million."
How world's biggest green power plant is actually INCREASING greenhouse gas emissions and Britain's energy bill
Mail, 7 June 2015

"Weak global economic growth momentum and a supply glut will cap oil prices at around $60 for the rest of 2015 and into 2016, analysts say. 'WTI oil futures will remain range bound at around $60 for the rest of 2015 and will only start trending up towards $70 a barrel heading into the end of 2016,' Mizuho Research Institute senior economist Jun Inoue told CNBC in a phone interview. 'Global economic growth looks soft, but there are no signs that oil supplies will fall,' he said. After falling to six-year lows earlier this year, oil prices have stabilized over the past two months. WTI futures have hovered in a $50-$60 a barrel range since early April. Ahead of Friday's Organization of Petroleum Exporting Countries (OPEC) meeting, ministers from oil-producing countries such as Iraq, Venezuela and Angola, have been touting a higher target of around $75—$80 range, Reuters reports. But analysts don't see much scope for upside to those levels. 'Oil prices appear to be settling in a range of $60 to $70 per barrel,' said Capital Economics in a note on Wednesday. 'We think that prices are more likely to fall than to rise over the remainder of this year.' Capital Economics is forecasting Brent at $60 by the end of the year. Brent futures were trading at $63.38 a barrel at mid-day Asia Thursday."
Is $60 the new normal for oil?
CNBC, 4 June 2015

"India’s already voracious appetite for oil is growing. Never mind that Asia’s third largest economy imports almost two-thirds of its total oil requirement—or that a ballooning oil import bill will do nothing to help its fiscal deficit problem. Since last year, India has been locked in a see-sawing battle with Japan to lay claim as the world’s third largest consumer of oil, after the United States and China. This quarter, according to data from the International Energy Agency (IEA), India’s just about to trounce Japan, although the latter is expected to win back its place by the end of the year. From being millions of barrels behind Japan in 2012, India has built up a steady appetite for oil, backed by an expanding economy and a robust demand driven by factories and the automobile sector. In particular, the Indian oil demand has been supported by a thirst for diesel and gasoline (petrol), said Rhidoy Rashid, an analyst with Energy Aspects, a London-based consultancy. 'Diesel demand is being driven higher by a marked shift towards more manufacturing activity, away from the service sector, under the current government,' Rashid told Quartz in an e-mail response. IEA further estimates that India’s oil demand will rise to 4.7 million barrels per day in 2020, at a compounded annual growth rate (CAGR) of 3.4%. In its 2015 Medium Term Oil Market report, the agency said that 'despite the Indian economy’s persistent reliance on still much less energy-intensive services for the majority of its economic growth, expectations of lower oil prices should stimulate additional transport fuel demand.' Most of the increase in demand would be driven by transportation fuels: Car sales in India increased 18.14% in April, the highest in around three years driven by a strong urban and semi-urban markets. Japan, on the other hand, has come out of a recession and is relying heavily on nuclear power. In fact, the country’s oil use is estimated to drop 33% by 2030 to around 2.5 million barrels per day, as the government pushes for more nuclear power."
India is battling Japan to become the world’s third largest oil consumer
Qartz, 4 June 2015

"The world's second-largest economy become the top oil importer in April. The key reason? China is taking advantage of cheap oil to boost its strategic reserves. 'They've been building out strategic storage. The goal is to build out to about 500 million barrels, compared to the U.S. capacity of 700 million to 800 million barrels,' said Jeff Brown of Singapore-based energy consultants FGE. Brown said that while the numbers are a little murky, China has already built out about 150 million barrels of extra storage, with more capacity planned through the end of the year. 'They take a lot of pride in buying oil when it's cheap,' he said. Despite the massive capacity boom, China is still buying more oil than it can store -- and all that crude has to go somewhere. The solution lies in the Strait of Malacca. At anchor just a few kilometers off the coast of Malaysia lies the TI Europe, brimming with about 3 million barrels of oil destined for China. This 440,000 tonne monster is the world's biggest tanker. She has been leased by the China's state owned oil company at an estimated cost of $40,000 a day, to store oil until it can be shipped to China in smaller vessels. And she's not the only one. Oil tanker analyst Richard Matthews of Gibson Shipbroking in the U.K. says there has been a surge in the number of supertankers being leased for storage.  'Normally, excluding Iranian ships, you might see only two or three ships storing, and they could be supporting offshore projects,' he said. 'Now there are up to 17 or 18 non-Iranian tankers.' Supertankers can also be used to store oil in a market where the future price of crude is expected to be significantly higher than the current price. Speculators buy cheap, bear the huge cost of storage and finance, and still make a profit when they sell a few months later. But analysts say that, for now, the difference between the current and future price is not wide enough to rake in speculative profits, which points to China filling its boats. China could also turn to land facilities for storage, mainly in South Africa. But the Strait of Malacca has an advantageous location, situated halfway between the big oil producers and the Chinese mainland. Even as China builds out and fills it strategic oil reserves, consumers continue to gobble up fuel. Much of the demand comes from motorists, who are in the middle of a love affair with gas-guzzling SUVs. In the first three months of the year, sales of SUVs soared an eye-watering 48% in China over last year. Neil Beveridge, senior oil analyst at Sanford C. Bernstein in Hong Kong, said that oil consumption in China has remained steady at around 10 million barrels a day over the past few months, despite slower economic growth of nearly 7%."
China is hoarding cheap oil in a fleet of supertankers
CNN, 4 June 2015

"Oilman T. Boone Pickens said Thursday that Saudi production is topping out at about 10 million barrels per day and oil prices will return to $70 per barrel by the end of the year. OPEC is 'all in at 31 million barrels a day. That's about all they can do,' Pickens said on CNBC's 'Squawk Box.' 'They talk a lot about it, what they can do, and the Saudis say 12 and half. Well show me. I'm ready to see 12 and a half. They're making 10.3, and they struggle at 10, I think. I think 10 is about all the Saudis can do.' Oil Minister Ali al-Naimi said Saudi Arabia produced some 10.3 million bpd of crude in March, eclipsing a previous high of 10.2 million in August 2013. The Organization of the Petroleum Exporting Countries is expected at a meeting on Friday to keep a group output target of 30 million bpd, a ceiling it has been exceeding for most of the last two years, weakening prices. The cartel is now pumping about 2 million bpd more than needed, analyst say, feeding a glut that has left millions of barrels stored on tankers without a buyer and kept prices at close to half their peak levels last year. Production declines in the United States will also support prices, Pickens said, noting that output has dropped off in North Dakota's Bakken formation and Texas's Eagle Ford play as drillers have taken about 1,000 rigs out of oilfields since December.  'Now, you shut down 1,000 rigs, we're dealing with decline curve,' said Pickens, chairman of BP Capital Management. 'If you're trying to grow production, you've first got to maintain production.' Oil wells—whether conventional or unconventional—reach peak production soon after they yield the first drop of crude. The U.S. industry is dominated by unconventional wells. Conventional wells go through a long period of steady, flat production between peak and decline. In contrast, production falls rapidly in the first three years of unconventional wells—those in shale, sandstone and carbonates. They then enter a long phase of very low production. 'Just as soon as you get an oil well, put it on production, it starts to decline,' Pickens said. 'Now how fast is it going to decline is very important.'"
Pickens: Saudis bluffing on oil production
CNBC, 4 June 2015

"There will be no US-style shale gas revolution in Europe, the president of the International Gas Union (IGU) has told the BBC. 'You cannot duplicate [the US experience] in Europe,' said Jerome Ferrier. 'Politicians are hesitating to accept shale development.' Abundant shale gas in the US has helped domestic energy prices fall. As a result some European governments, not least the UK, are keen to develop their own shale resources. Mr Ferrier's comments come a day after a number of major energy firms called for a working price of carbon. The IGU president, talking to the BBC at the World Gas Conference in Paris (WGC), said there was resistance to shale development in the UK and Poland, while there was 'no way' it would take place in France. Other countries, including Germany, Romania and Bulgaria, have placed moratoriums on fracking. He added that it was 'a pity' not to explore the possibility of shale development, but said 'the future of gas does not depend on shale gas - there is enough conventional gas [to meet demand] for more than a century'."
'No shale gas revolution in Europe'
BBC Online, 3 June 2015

"...recent falls in the price of natural gas have played havoc with developers' plans. With US gas prices, known as Henry Hub, hovering around the $3 mark, the economics of gas liquefaction and export depend entirely on getting a higher LNG price in the export market. Last year, with gas prices in Asia, for instance, up above $15, exporting LNG was a no-brainer. Now the price is about $7.5, as most gas contracts are linked to the price of oil that has plummeted more than 40% in the past year. Take the basic cost of the gas at $3, add in a small mark up, liquefaction costs of $3 and transport costs of $2, and suddenly, as Luis Barallet at Boston Consulting Group says, 'the economics don't work that well'. A similar story is true for Europe, where cheaper transport costs are offset by a lower gas price of about $6.5. For this simple reason, export projections have had to be scaled back significantly. There are currently five licensed export terminals under construction in Texas, Louisiana and Maryland, and with long-term supply contracts signed, they will export huge quantities of LNG in the coming years. Even if the numbers do not seem to add up, companies buying the gas, such as BG or Gas Natural, may still decide to export - selling the gas in Europe at a $1 loss can represent a better deal than spending $3 on liquefaction and just sitting on the LNG. Of the remaining proposed terminals, some have customers but no regulatory approval, while the rest have neither. For now, most of these are unlikely to go ahead. As Anastasios Giamouridis at Poyry Managing Consultants says: 'Without long-term contracts signed with buyers, there is no guarantee of revenue stream, so it's very difficult to get financing.'...What US LNG will do is introduce a major new supply of gas that is far more resilient to fluctuations in the oil price. More importantly, it will boost overall supply significantly, and this will inevitably push prices lower. But the impact is likely to be short lived, for the very simple reason that demand for LNG is set to rise to meet supply. 'There will be a glut [of LNG] for a while, as demand cannot pick up so fast, but prices will eventually rise,' says Mr Giamouridis. Demand for LNG in Europe is currently half what is was just five years ago, and falling prices would see it pick up quickly. There are also a number of new markets buying LNG for the first time, such as Poland, Lithuania, Egypt and Jordan. But the biggest surge will come from China, where demand for energy is expected to triple by 2050, and where pollution is forcing the government to reduce its reliance on dirty coal. Despite the deluge of new supply, then, global gas prices are unlikely to be affected in the long-term by the US exporting its abundant gas. The American shale revolution may have seen gas prices tumble at home, but exporting its spoils will have nothing like as dramatic an impact on the rest of the world."
Will US shale gas bring global energy prices tumbling down?
BBC Online, 3 June 2015

"Those who assess oil borrowers have started to sound warnings as well. Credit rating agency Fitch has said defaults start to appear about nine to 12 months after price declines begin. Moody’s last month predicted default rates for exploration and production companies (responsible for a third of the debt total) will rise from 3 per cent in March to 7 per cent next year. UBS thinks defaults could be twice that rate, in which case the spread between energy debt and the high yield index might be expected to double, from about 150bp to about 300bp. Still, few sold their 2016 production two years early and they are now having to talk to lenders about their rolling credit facilities, which are part of the $1.2tn of outstanding oil industry loans identified by credit strategists at UBS. Such 'bank revolvers' tend to be agreed every 6 months, in April and October. Early this year, a price of $100 a barrel did not seem so distant, but banks have been cutting exposure to the industry and the autumn conversations are likely to be tougher. ... Most companies that suck oil out of the ground agree a price for their product well in advance, so it is sold today at last year’s prices, giving indebted companies some time to adjust."
Warnings over oil debt are getting louder
Financial Times, 2 June 2015

"Thick black smoke rising from the Baiji oil refinery could be seen as a dirty smudge on the horizon as far away as Baghdad after fighters from the Islamic State of Iraq and the Levant (Isil) set fire to the enormous processing plant just over 100 miles north of the capital last week. The decision to torch the refinery, which once produced around a third of Iraq’s domestic fuel supplies, was made as the insurgents prepared to pull out of Baiji, which they captured last June in a victory that sent shock waves across world oil markets. A year on from the start of the siege and a shaky alliance of the Middle East’s major Arab powers, with the limited support of the reluctant US government, has failed to contain the expansion of Isil. The problem for the US and the rest of the industrialised world is that the Middle East controls 60pc of proven oil reserves and with it the keys to the global economy. Should Isil capture a major oil field in Iraq, or overwhelming the government, the consequences for energy markets and the financial system would be potentially catastrophic. Many of the countries most threatened by the onslaught of the extremist group, which has grown out of the chaos of Syria but was initially dismissed as a wider threat to regional stability, will gather at the end of this week in Vienna for the meetings of the Organisation of the Petroleum Exporting Countries (Opec). According to Daniel Yergin, the energy expert and vice-chairman of IHS, the business information provider, the biggest threat to oil prices is the political chaos that threatens to engulf the Middle East, combined with the West’s reluctance to intervene. Speaking to The Sunday Telegraph, Mr Yergin argued that the price of a barrel of oil could skyrocket to levels above $100 per barrel if Isil is allowed to press deeper into Iraq, the second-largest producer in the cartel after Saudi Arabia. 'Isil presents a whole new reality for the region, which just isn’t reflected in the oil market at the moment,' said Mr Yergin. 'It’s an increasingly grave situation for most of Opec and the Middle East. At some point the security issues will start to come back into the price of oil.'  Up to this point, oil markets have shrugged off the risk of a major supply disruption caused by the worsening security situation. Traders have remained focused on the market fundamentals that almost 2m barrels per day (bpd) of excess oil capacity will be more than enough to absorb any supply-driven shock. A rally in the price of Brent crude – a global benchmark – which began in January and saw prices push close to $70 per barrel has lost momentum amid signs that higher prices could revive drilling in the US."
Opec under siege as Isil threatens world's oil lifeline
Telegraph, 30 May 2015

"Oil explorers idled rigs in US fields for the 25th straight week, drawing out an unprecedented retreat in drilling that has curbed the country’s shale oil boom and helped crude prices rally.Rigs targeting oil in the US declined by 13 to 646, the lowest since August 2010, field services company Baker Hughes Inc. said on its website Friday. Most of the losses were outside of major basins, with drilling subsiding in states including California and Louisiana. US energy producers sidelined more than half of the rigs drilling for oil after crude prices collapsed in the second half of last year. The retreat brought production growth from the nation’s biggest shale formations to a halt, suspending a boom that turned the country into the world’s biggest fuel exporter. 'The major basins aren’t bleeding as much as they were, so we’re near the bottom,' James Williams, president of energy consultant WTRG Economics, said by phone from London, Arkansas, on Friday. 'We should see a moderate upward move in rigs sometime next month.'.... Texas’s Eagle Ford formation, one of the most productive US shale plays, gained an oil rig this week. The Permian Basin of Texas and New Mexico, the country’s biggest oil field, and the Williston Basin, home of North Dakota’s prolific Bakken shale, each lost one. 'Most service companies we speak with feel that ‘the bottom is in’ for US drilling,' Raymond James Ltd. energy analysts including Andrew Bradford said in an e-mailed research note Thursday. 'Our estimates had forecast a bottoming in mid-June followed by a painstakingly slow recovery until mid- to late fall, at which point the recovery pace picks up modestly.'"
US oil drilling retreat drags on for 25th straight week
Bloomberg, 30 May 2015

"The European nuclear industry, led by France, seems to be in terminal decline as a result of the cancellation of a new Finnish reactor, technical faults in stations already under construction, and severe financial problems. The French government owns 85% of both of the country’s two premier nuclear companies – Areva, which designs the reactors, and Électricité de France (EDF), which builds and manages them. Now it is amalgamating the two giants in a bid to rescue the industry. Even if the vast financial losses involved in building new nuclear stations can be stemmed, there is still a big question mark over whether either company can win any new orders. Their flagship project, the European Pressurised Reactor (EPR), billed as the most powerful reactor in the world, has two prototypes under construction - one in Finland and the second in France. Both of the 1,650 megawatt reactors are years late and billions of  Euros over budget, with no sign of either being completed.... The French government is keen to rescue the industry, but had already decided against ordering any more reactors after the fiasco in building Flamanville, which was years late and over budget even before the latest hiccup. All this leaves the UK as the last country in the world anxious to buy a French reactor. With a new Conservative government in power for less than a month, its energy policy is already in disarray. Plans to build four 1,650 megawatt EPRs in Britain to produce 14% of the country’s electricity - announced before this month’s general election - look ever more unlikely. Even with the first two at Hinkley Point in the west of England - where site preparations have been made, and a final agreement was expected with EDF this summer - nothing is likely to happen for months. The most likely course must now be cancellation. Plans have been put on hold while EDF and Areva sort out the problems at Flamanville, and then try to find a way of financing the project. Four hundred workers on the Hinkley Point project have already been laid off. The new British government is already facing legal challenges from Austria and Luxembourg and from various renewable energy groups for unfair state aid for this nuclear project. Even if ministers see these threats off, it seems unlikely that anyone will commit to building new EPRs in the UK until at least one of the four reactors under construction in China, Finland and France is actually shown to work. There is no guarantee that will happen in the next three years, so the chances of Britain getting any new nuclear power stations before 2030 are close to zero. Currently, the UK is closing coal-fired stations to comply with European Union directives to combat climate change, but it has not developed renewables as fast as Germany and other European neighbours - claiming that new nuclear build would fill the gap. It now looks as though the government will urgently need to rethink its energy policy."
New energy policy needed as nuclear giants take a hit
Climate News Network, 28 May 2015

"Just two years ago, Gazprom spent a reported $1bn on its 20th birthday celebrations, with Sting and the Bolshoi ballet entertaining President Putin and company executives in a lavish gala dinner hosted at the Kremlin. And there was much to celebrate. Russia was the undisputed king of gas - the world's biggest producer with the biggest reserves and the biggest exports. But the party has since fallen rather flat. Weaker demand in Europe and plunging natural gas prices have hit revenues, while US and EU sanctions over the country's actions in Ukraine are targeting Russia's energy sector. Add an EU charge of monopoly abuse, increased competition from Qatar and a potential glut of US liquefied natural gas (LNG) flooding the market next year - not to mention the possible unleashing of Iran's vast gas resources if sanctions are lifted following a nuclear deal with Tehran - and the threats are both numerous and real. With state-controlled Gazprom, which dominates Russia's gas industry, one of Moscow's primary foreign policy levers, the stakes could not be higher. As the biggest single supplier of gas into Europe, will Russia's influence on the continent begin to wane, and will she flirt ever more with China to compensate? Most gas contracts are indexed to the price of oil, which has slumped more than 40% since last summer, dragging natural gas prices down with it. Mild weather and cutting off supply to Ukraine following a contract dispute compounded the problem - Gazprom saw profits plunge almost 90% last year, from more than $20bn to $3bn. And with the oil price likely to remain relatively weak for the foreseeable future, revenues will remain under pressure. As Michael Moynihan at energy consultants Wood Mackenzie says, 'the gas price is low and it's not going back to the highs of two years ago'. But low prices are hitting all gas producers. In fact, Mr Moynihan says, a weak rouble is helping to make Russian gas companies, which also include big producers such as Rosneft and Novatek, more competitive - allowing them to make the same profit margins despite falling prices. The question for Gazprom now is whether to cut exports to combat oversupply, thereby supporting prices, or to keep volumes high to protect its market share. Rather like Saudi Arabia in the oil market, the company is perfectly able to withstand a prolonged period of low prices....Russia's gas fields are running well below capacity, according to Irina Gaida from Boston Consulting Group. 'Russia's gas industry has better production potential [than its oil industry] as the gas fields are much younger and are in the early stages of development'.... The US and EU sanctions are primarily targeted at the country's oil industry, for very obvious reasons. Russia provides about 30% of Europe's gas, so it's simply not in the EU's interests to compromise Gazprom's ability to produce and export gas. This month's deal with the UK's Centrica to increase gas supplies by 70% to more than 4 billion cubic metres (bcm) a year provides ample proof of this. Equally, the sanctions are designed to hamper financing and stop Russian companies importing new technologies. But Russia's vast resources of conventional natural gas mean it doesn't need to develop new techniques to frack shale rocks, and it already knows well enough how to extract gas and build pipelines. If sanctions remain in place over the long term, raising finance may become an issue, but right now they are having little impact on Russian gas producers. But while Europe's actions are having little direct impact on Russia's gas industry, their indirect repercussions are profound, not least pushing Moscow towards closer ties with Beijing. 'Russia has been talking to China for 10 years about exporting gas, but for various reasons they couldn't find alignment,' says Mr Lough. 'It has not been prepared to go the last mile, but the pressure to sidle up to China has now increased.' Feeling ever more isolated in Europe and suffering from wider economic sanctions, Russia signed two significant gas deals with China last year. The first, worth $400bn at the time, provides for 38bcm a year from 2018. Construction of the pipeline to transport the gas from East Siberia began in September. A provisional deal for a further 30bcm was signed a month later, with gas potentially being delivered from West Siberia through the Altai region in southern Russia. Some of this gas could, Mr Moynihan says, come from fields that currently export to Europe. The combined 68bcm is half the 140bcm Russia currently delivers to Europe, but when the pipelines are in place, that number could grow significantly. China's demand for energy to satisfy its rapidly expanding economy and increasingly wealthy population is growing fast, while environmental concerns - mainly pollution and water shortages - mean the country needs to reduce its dependency on coal. As Ms Gaida says: 'The share of gas in China's overall fuel mix will rise rapidly. The potential of China far exceeds that of Europe'. And Russia's resources are such that it would have no problem supplying both. There is also the tantalising possibility of a deal with India, another potentially gargantuan market for Russian gas. Any such agreement, however, appears a long way off with no easy route for a pipeline between the two countries.... With serious questions about whether Europe can develop a viable shale gas industry at all, let alone in the foreseeable future, and the slow adoption of genuinely clean, renewable energy technologies in many countries, Gazprom, and by proxy Moscow, will continue to hold the trump cards in any negotiations with the EU. US and Iranian gas may offer another way out, but until European countries are able to wean themselves off Russian gas, this will remain the case."
Russian gas industry looks east to strengthen position
BBC Online, 28 May 2015

"A groundbreaking and ground-based technology dreamed up by a 29-year-old industrial design engineer uses the simple power of the footstep to create electricity. Laurence Kemball-Cook's design, called Pavegen, which harnesses the kinetic energy of footsteps, was tested today in the capital's Canary Wharf finance hub. The system turns each step on one of its special tiles into around three joules of energy, increasing with the weight of each footprint. Mr Kemball-Cook developed the concept while investigating kinetic energy solutions in environments where renewable energies, like solar and wind power, were not possible. With a daily footfall of around 100,000 commuters passing through Canary Wharf, the revolutionary system could potentially keep street lights on and power other electricity-using installations in the financial district's square. Mr Kemball-Cook hopes to get Pavegen introduced to many high footfall areas across the globe. And world-famous Professor Stephen Hawking is convinced it could be a world-changing design. He said: 'This technology has the potential to radically change the way we source power in the future.'"
Could the humble human FOOT be the solution to our global energy crisis?
Express, 27 May 2015

"As the United States raced over the past five years toward becoming a global petroleum powerhouse, the world's biggest oil exporter Saudi Arabia quietly seized a market milestone from America: the largest source of peak summer demand. From June through August, when temperatures in Riyadh routinely rise above 100 degrees Fahrenheit (38 degrees Celsius), Saudi Arabia diverts as much as a tenth of its crude output to fuel power plants that run full tilt to meet surging demand from air conditioners. The result is that Saudi Arabia's winter-to-summer 'swing' in oil consumption has eclipsed that of the United States, where gasoline consumption jumps by as much as 10 percent every summer as millions of families take advantage of school holidays and warm weather to embark on the classic American road trip. This May 23-25 Memorial Day weekend, however, that trend may begin to reverse as the most Americans in a decade will fill up their gas tanks and rev up their engines for highway holidays, taking advantage of lower gasoline prices and a growing economy. The American Automobile Association predicts a 5.3 percent rise in Memorial Day car travel to the highest level in 10 years. The boost at the pumps will add to already strong demand for gasoline after years of diminishing use because of a switch to more fuel-efficient cars. 'The fall in prices is trumping the efficiency gains for the summer,' says Amrita Sen, chief oil analyst at Energy Aspects. Saudi Arabia is likely to maintain or even extend its use of domestic crude and fuel in power plants this summer, according to Sen and other analysts. Yet the country appears to be making some progress toward slowing its dependence on one of the most costly forms of electricity. There is growing debate in Saudi Arabia over higher power tariffs that might curb wasteful use, and a younger generation of Saudis are coming of age in an era of conservation, says Professor Paul Stevens, a Senior Research Fellow for Energy at Chatham House who co-authored a 2011 report on the issue. Saudi use of oil for power will be 'continually growing, but not at the sort of growth rates of the past 10 years,' Stevens said. The surge in summer demand this year will have an even greater significance for global oil prices than usual, as bullish traders are counting on it to help drain inventories that swelled at a rate of more than 1.5 million barrels per day in the first half of this year."
U.S. drivers yield 'swing' oil demand crown to Saudis
Reuters, 22 May 2015

"In the past year yet another technology that seems to produce cheap, pollution-free energy has emerged. If this technology proves viable, it could join with cold fusion and hydrinos as an alternative to the combustion of fossil fuels. For several years now, I have been reporting on the progress in the development of cold fusion, or if you prefer Low Energy Nuclear Reactions, and a second technology developed by Blacklight Power, which is a method of compressing hydrogen atoms while releasing large amounts of energy. I realize that many of you have trouble accepting the validity of these technologies as they appear on the surface to be in violation of some key principles of currently accepted science; however, progress in these technologies keeps being made and so far there is no definitive evidence that they are not valid. At first glance, this third new technology sounds ridiculous for it seems to be a form of perpetual motion, which we all learned in 7th grade science is impossible. Production of energy from nothing but gravity seems to violate a fundamental law of physics which says that energy can neither be created nor destroyed, only transferred into another form. The people developing this technology, however, say that its basis 'is the use of the laws of buoyancy in conjunction with a special generator. This is not a perpetual motion machine, but simply the use of energy differences between two systems.' This of course needs further explanation from scientific theorists once it is solidly established that the technology actually works. This new technology, which was demonstrated last year in Central Europe, is based on buoyancy that as we all learned at the age of two in the bathtub forces objects lighter than water to the surface and lets them float. This technology is so simple that it makes one wonder why somebody did not figure it out 100 years ago for with the exception of a modern efficient electric generator it is mostly late 19th century – floats, gears, bicycle chains and compressed air. The developer says that all one needs to produce electricity is a relatively tall tank of water containing a series of floats attached to a chain that allows the floats to move from the bottom of the water tank to the top, and when emptied of air, go down again in an endless circular motion. While dropping to the bottom of the tank the floats are filled with water, when they get there, the water is blown out of the floats by compressed air so that air-filled floats are constantly being buoyed up pulling the chain along with them. Upon arriving at the top, the floats are filled with water again, and then dragged to the bottom by the attached chain. There are detailed descriptions, pictures, and videos of the system in operation on the Rosch Innovations AG web site for those interested in better understanding how this technology works. The constantly moving chain is geared to an electric generator, which drives the air compressor to force the water out of the floats and also produces excess electricity for any purpose without using any type of fuel or producing waste products. The discoverer of this new technology seems to be a 'club' in central Europe with the interesting name of the 'Global Association for Independent Energy and Altruism' (GAIA). This group, which has put on numerous demonstrations of prototype devices during the past year, has partnered with a Swiss-based manufacturing company, Rosch Innovations AG with offices in Germany and Serbia, to build and sell these devices."
The Peak Oil Crisis: Energy from Buoyancy – A new Disruptive Technology?
Falls Church News-Press, 22 May 2015

"Norway has overtaken Russia as western Europe's top gas supplier, data from state firms shows, indicating the European Union's drive to reduce its dependence on Russian energy is bearing fruit. The sharp drop in oil prices has been another factor, as Norway offers more flexible pricing and big buyers held off buying from Russia in the hope the fall in crude price levels would eventually filter through to Russian gas. Norway exported 29.2 billion cubic metres (bcm) to western Europe in the first quarter of this year, figures from Norwegian state operator Gassco show, while Russia sold 20.29 bcm, according to data from Gazprom's regulatory filing and Gazprom officials. The data showed the trend began in the final quarter of 2014 when western Europe bought 29.5 billion bcm from Norway and 19.8 bcm from Russia, according to Gassco and Gazprom respectively. Exports to EU members in eastern Europe are not included in the data. It was the first time Norwegian exports have convincingly overtaken Russia's since a brief period in 2012. The European Union has been striving to reduce its dependence on Russian imports and buy more from Norway and other gas producers, mindful of Russia's dispute with Ukraine, the biggest transit route for Russian exports to the EU."
Norway overtakes Russia as western Europe's top gas supplier
Reuters, 22 May 2015

"The reason behind developments in Macedonia is a desire to influence the government of Nikola Gruevski in connection with its refusal to join anti-Russian sanctions, Russian Foreign Minister Sergey Lavrov said on Wednesday, speaking at the Federation Council. While pointing to the need to rule out support for coups patterned after events in Ukraine and Yemen, Lavrov noted that 'there were attempts to organize something similar in Macedonia using the Albanian factor in an unconstructive fashion.' 'The Macedonian events are blatantly controlled from the outside,' he said. 'They are trying to accuse Gruevski’s government of not fulfilling its obligations to the population. However, the reason behind this is a desire to influence it in connection with its refusal to join anti-Russian sanctions, support of the South Stream and willingness to be involved in the implementation of other options of fuel delivery, including the so-called Turkish Stream.' 'It is very sad and dangerous that they are trying to use the Albanian factor for that,' the minister added. 'Many years ago there were serious contradictions, and then the Ohrid Agreement was signed [in 2001]. And now they are talking about Macedonia’s further federalization and even suggest dividing the country, giving part of it to Albania and another part to Bulgaria.'"
Developments in Macedonia directed from outside — Lavrov
Tass, 20 May 2015

"China’s industrial output numbers for the first four months of 2015 shows the size of the shift from high-CO2 to cleaner forms of industrial production. While industrial value added actually grew 6% from January to April, coal output fell by 6.1% and power generation from coal, gas and other thermal plants fell by 3.5%. Cement output fell by 4.8% and crude steel output by 1.3%, while higher value industries such as electronics and chemicals maintained high growth. The data suggests China’s industrial and economic structure is undergoing not just a temporary slowdown but a rapid overhaul, profoundly changing the outlook for CO2 emissions (and the coal industry). At the same time as industrial output is becoming less carbon intensive, energy production from low-carbon sources is increasing. Most of the added generation continues to come from hydropower. China’s massive hydro projects – including the Three Gorges Dam, the world’s largest – have come under fire for poor environmental oversight that may have caused droughts and geologic disasters. It has also been alleged that the Chinese state has displaced millions of residents to make room for these projects. But the significant growth rates of wind, solar, bioenergy and gas suggest that these energy sources could pick up much of the slack once hydropower’s potential is exhausted. A recent projection by a Chinese government think tank sees the country getting half of its electricity from renewable energy in 15 years, and almost phasing out fossil fuels in power generation by mid-century. Under these projections China in 2050 would produce half of the current electricity consumption of the entire world from wind and solar alone, or more than twice as much as as China currently does from coal. Most of the reduction in coal consumption in 2014 took place in the power sector and we already have a pretty detailed picture of what happened there, a break between GDP and electricity generation and a switch from fossil generation to gas and non-fossil fuel power, along with ongoing improvements in power plant efficiency... Over the past decade, until 2013, China’s skyrocketing coal consumption dominated global CO2 emission trends, being responsible for more than half of total growth. The trend only accentuated in 2010-2013, pushing global CO2 emissions and CO2 levels already in the atmosphere to ever more dangerous levels and making the task of peaking and declining global emissions very urgent. With the prospect of very slow growth or even continued reductions in China’s CO2 emissions, the chances of achieving a peak have changed from near-impossible to achievable with some determination."
China coal use falls: How the world’s largest polluter reduced its emissions
Energy Desk, Greenpeace, 19 May 2015

"By 2040, the Organisation of the Petroleum Exporting Countries (Opec) predicts the world will need to produce 111m bpd of crude to meet world demand. That represents another 20m bpd on top of existing output which means the world needs to find and develop and additional 800,000 bpd of oil a year on average to keep up with supply. To put that challenge into perspective, this figure represents repeating the US shale oil boom all over again, or finding a developing a new North Sea 20 times over. Although, Mr Simmons was perhaps wrong in focusing on a potential collapse in Saudi Arabia’s oil production he was right in warning about the dangers of 'Peak Oil' but too early in predicting its onset. That time is now upon us. Despite, oil prices being forced lower over the last six months the world is entering into a 'peak oil' scenario whereby the cost of a barrel could feasibly quadruple to around $200 per barrel over the next 10 years. Even though the current weakness in oil prices below $100 per barrel has been caused by a glut in global supply this will be short lived. Most of the new oil has come from three sources, US shale, Iraq and Africa. Each has its own problems going forward that will limit its potential to deliver the incremental increases in supply that will be required to meet even the most pessimistic forecasts for demand by 2040. In the case of US shale this oil already represents the bottom of the barrel. Lower prices mean that US output will plateau this year at around 9.3m bpd as oil companies shut down rigs at a record rate. However, even when these rigs eventually return once prices recover, as they have since March, it is unlikely that America’s oil output will ever repeat the staggering growth seen over the last decade. The country’s shale oil wells will be fracked to oblivion long before demand peaks in 2040 creating a potential energy shock in the world’s largest economy. Then there is Iraq, which is now exporting crude at a record level. The war-torn country is now Opec’s second-largest producer pumping around 3.3m bpd of crude but with big ambitions to potentially double this over the next five years. This is sadly a pipe dream. Boosting Iraq’s production long term would require billions of dollars of investment and a stable secure government. However, the former cannot exist without the latter especially with the Islamic State (Isis) now controlling Anbar province, one of the country’s biggest regions. The fact that so much of the incremental increase in net production from the Middle East is forecast to come from Iraq shows the precarious state of the world’s oil supply. Can any oil economist who is currently predicting that low oil prices will last really say with confidence that the government in Baghdad will be able to drive Isis out of the country, or even survive? After Iraq the next great hope for increasing oil production in the Middle East is Iran. Tehran believes that it can boost oil production to 5m bpd if sanctions are fully lifted. Although a framework agreement with the West over its nuclear programme is in place this is a long way short of a binding deal. Boosting Iranian oil production could take years and would require the investment of international oil majors. It’s still unclear whether Iran is willing to offer the right terms to attract this investment, or indeed whether oil companies are willing to take the risk while the Shiite Mullahs still hold the balance of power in Tehran. Finally there is Africa, Russia and Latin America. All three regions hold vast oil resources but lack either the political stability or credible leadership. In Russia, the recent actions of President Vladimir Putin have called into question whether it can be relied upon as a mainstay of global energy supply. In Africa, major producers such as Nigeria are hamstrung by corruption, while Libya barely exists as a country. Latin American states such as Brazil hold potential but they won’t be enough to head off 'Peak Oil'. In the UK, the North Sea is in terminal decline and will cease to be productive in 25 years when we need the oil most. Although, the UK has shale oil in places such as the Weald Basin even based on this most optimistic forecasts this won’t be enough. This brings us to Royal Dutch Shell and its persistence in gaining a foothold in the Arctic despite the environmental challenges this presents. The Anglo-Dutch company, which is the most cautious of the major international oil companies, is prepared to soak up the bad publicity of hundreds of activists taking to the water in Seattle to confront the arrival of its Arctic drilling rigs over the weekend. It knows that the Chukchi Sea is one of the last remaining regions that contain world-scale oil reserves that can be reached without taking a major geo-political risk. More companies will follow Shell into the Arctic and it is absolutely vital to the global economy that they do. Shell believes it can eventually produce around 400,000 bpd from the region, which is about half of what the world needs to find and develop ever year for the next 25 years to avoid running out of oil. Therefore, Shell’s Arctic rigs literally represent the real beginning of the era of 'peak oil' that Mr Simmons originally predicted which will eventually lead to the $200 barrel."
Shell’s Arctic voyage marks beginning of peak oil era
Telegraph, 17 May 2015

"It used to be that nothing could compare to crude oil for transportation use. And yet that is changing now. Electric vehicles (EVs) are already cheaper to run than internal combustion engine (ICE) automobiles. The U.S. Department of Energy, using data from the Idaho National Laboratory, estimates that the cost to run an ICE car is just under 16 cents/mile whereas the cost to run an EV is about 3 cents/mile. And EVs are not anywhere near scale so we can reasonably assume that these costs could fall further. Now suppose that wind and solar continue to gain market share and costs continue to plunge. Those cost savings will be translated into cheaper electricity costs which in turn makes running an EV that much cheaper. And yet EVs are already about five times cheaper than a traditional car. You begin to get the picture. Simple economics tell us that it is in our best interest to buy an EV rather than an ICE automobile. Hence we do not need crude oil to the extent that we have in the past. And crude oil is overwhelmingly used only for transportation. Automakers like BMW have grasped this reality and have announced that they will no longer make a stand alone ICE automobile by 2022, a mere seven years away. All of their vehicles will be either pure EVs or hybrids."
US Crude Oil Consumption Peaked a Decade Ago
Energy Policy Forum, 15 May 2015

"After slashing the number of drilling rigs for months, U.S. shale-oil companies say they are ready to bring rigs back into service, setting up the first big test of their ability to quickly react to rising crude prices. Last week, EOG Resources Inc. said it would ramp up output if U.S. prices hold at recent levels, while Occidental Petroleum Corp. boosted planned production for the year. Other drillers said they would open the taps if U.S. benchmark West Texas Intermediate reaches $70 a barrel. WTI settled at $60.50 Wednesday, while global benchmark Brent settled at $66.81. An increase in U.S. production, coupled with rising output by suppliers such as Russia and Brazil, could put a cap on the 40% rally in crude prices since March and even push them lower later in the year, some analysts say....As prices fell last year, shale companies began furiously decommissioning rigs. Twenty-two consecutive weeks of aggressive cuts have left the industry with 930 fewer rigs, a 58% cut from their 1,609 peak in October, according to Baker Hughes, which tracks drilling activity. In a report on Wednesday, the International Energy Agency, a Paris-based watchdog of the world’s biggest oil consumers, said it expects U.S. shale-oil output growth to slow by 80,000 barrels a day this month.... Goldman Sachs said that if U.S. benchmark West Texas Intermediate oil prices settle above $60 a barrel, U.S. producers will eventually ramp up activity, spurred by improved returns, as costs have fallen due to efficiency gains. A slowdown in the rig-count decline suggests that producers are increasingly comfortable at current prices, Goldman says. Last week, the rig count fell by 11 to 668 rigs, the smallest drop since early April, after declining by 24 and 31 rigs in the previous two weeks and after shedding close to 100 rigs a week earlier this year. Shale producers’ agility isn’t a given. OPEC has enjoyed its position as a swing producer because several key member governments, especially Saudi Arabia, have invested billions of dollars in developing spare capacity—wells they can quickly turn on and off in a crisis. Shale producers, by contrast, are typically much smaller, independent actors, who react to prices—not to the whims of their governments. It is still unclear whether the flood of money that helped start and propel the shale boom can be turned on and off as quickly as the oil. In past oil cycles, companies have also struggled to quickly turn on the taps after throttling back—amid logistical hurdles like securing equipment and enticing recently let-go workers back to the oil fields. The IEA said Wednesday U.S. shale producers have already learned to shave costs. The recent price rebound 'is giving [shale] producers a new lease on life,' the agency said. 'Several large [shale] producers have been boasting of achieving large reductions in production costs in recent weeks.'"
Shale-Oil Producers Ready to Raise Output
Wall St Journal, 13 May 2015

"China is now the largest importer of crude oil in the world. In April, it surpassed the U.S., which has traditionally held the slot, with imports of 7.4 million barrels per day (bpd) or 200,000 more than the U.S., according to the Financial Times. The news comes as a surprise because the Chinese economy has been slowing and just this weekend, in an effort to stimulate growth, the People’s Bank of China cut interest rates for the third time in 6 months. Over the next few months, the U.S. and China may be in and out of the top spot, but because American imports dropped by about 3 million bpd in the last decade (thanks in large part to shale extractions) and because China’s purchases have boosted seven-fold, the Chinese should be the top crude oil importer on a long term basis.China overtook the United States as the world’s top energy consumer in 2010 and is already the number one purchaser of many commodities, such as coal, iron ore and most metals."
China Has Become the World’s Biggest Crude Oil Importer for the First Time
TIME, 11 May 2015

"The Conservative election victory has dealt a severe blow to Britain’s green energy industry, campaigners have warned, as the new majority government prepares to scrap crucial subsidies for renewable power; champion the development of polluting shale gas; and make significant cuts to spending. The renewable industry is most worried about the future of onshore wind farm developments, which the Tories have repeatedly dismissed as an unwanted eyesore despite being cheaper than other forms of green energy. The party’s manifesto pledges 'to halt the spread of onshore wind farms' – and although it is not clear exactly when subsidies for new land-based turbines will be scrapped, an announcement is expected soon. But the Government’s axe is likely to fall across much of the renewable energy industry, campaigners say. They point to David Cameron’s plan to remove what he in 2013 reportedly called the 'green crap' that subsidises renewable power from Britain’s energy bills as evidence of his dislike for alternative energy sources."
Tory victory a huge blow to UK green energy industry, campaigners warn
Independent, 10 May 2015

"Avoiding a power blackout will be one of the first priorities for whoever forms the next government, a leading consultant has suggested. Ahead of the results of one of the closest elections in decades, Simon Virley, UK chair of energy and natural resources at KPMG, has warned of tight energy capacity in 2015 and 2016. 'The next couple of winters are expected to be among the tightest this decade in terms of electricity capacity margins due to announced plant closures; while Britain’s overall dependence on imported energy is soaring as North Sea production declines,' he said. According to KPMG, the margin for power generation this winter could be even lower than the 4.1pc winter outlook provided by National Grid last year following the potential closure of plants at Killingholme and Longannet...Meanwhile, plans for Britain's first new nuclear plant in a generation at Hinkley Point still depend on receiving final investment approval from French utility EDF. The company said last year it wanted to decide on the £24.5bn project in Somerset by the end of March but that deadline has now slipped. Some critics argue that a focus on renewables has left Britain’s power network now dangerously short of spare capacity. Official figures show that renewables generated 19.2pc of UK supplies in 2014, with solar contributing 1.2pc."
New government faces potential energy crisis, warns expert
Telegraph, 8 May 2015

"There are currently four reactors under construction in the U.S., and one new reactor—conceived in the 1970s and taking decades to complete—will open soon at the Tennessee Valley Authority's Watts Bar power plant in Tennessee. But that will not be enough to replace all the reactors retiring for economic or age-related reasons, including the Oyster Creek station in New Jersey—the nation's oldest operating power reactor—which will cease fission in 2019. As a result, the amount of electricity produced by nuclear power plants in the U.S. continues to drop, replaced in many cases by burning natural gas, which results in more air pollution. Now, the nation's reactors produce only a little more than 60 percent of low-carbon electricity in the U.S., a percentage that looks set to dwindle."
Nuclear Power Seems Doomed to Dwindle in the U.S.
Scientific American, 13 May 2015

"For the first time in five months, a rig in the Williston Basin, where North Dakota’s Bakken shale formation lies, sputtered back to life and started drilling for crude once again. And then one returned to the Permian Basin, the nation’s biggest oil play, field services contractor Baker Hughes Inc. said Friday. Shale explorers including EOG Resources Inc. and Pioneer Natural Resources Co. say they’re preparing to bounce back from the deepest and most prolonged slowdown in U.S. oil drilling on record. The country has lost more than half its rigs since October, casualties of a 49 percent slide in crude prices during the last half of 2014. Futures rallied above $60 a barrel earlier this week, and a sudden return to oil fields would threaten to end this fragile recovery. 'You’re inviting a lot of pent-up supply to come back into the market — not only do you have people drilling again, but you have this fracklog of over 4,000 uncompleted wells,' Harry Tchilinguirian, the head of commodity markets strategy at BNP Paribas SA in London, said by phone. 'And then we’re in a situation where the market could easily go back into the mid- $50’s.' While rigs are returning to some fields, the total U.S. count has continued to decline, losing 11 this week to reaching a four-year low on Friday. The drilling slowdown won’t reach a real bottom for about another month, James Williams, president of energy consultant WTRG Economics, said by phone from London, Arkansas....The U.S. rig count may recover to 1,200 to 1,300 should prices rally past $70 a barrel, Allen Gilmer, chief executive officer of the Austin-based energy data provider Drillinginfo, said by phone on May 1."
U.S. oil boom sputters back to life one rig at a time
Calgary, 9 May 2015

"Energy group IGas yesterday announced plans to cut more than 25 per cent of its 200-strong workforce and close its office in Stirling to reduce costs in the wake of the fall in oil prices. The news came just a day after the onshore explorer completed the sale of its shale gas exploration licence around Grangemouth to chemicals group Ineos."
Shale gas firm IGas to close base in Scotland
The Scotsman, 9 May 2015

"Blackouts have been a persistent concern for UK business. Last year National Grid was forced to unveil a series of measures to keep more power generation in reserve in an effort to boost spare capacity to 6pc, a level perceived to be a safe threshold. National Grid’s forecasts show that without the emergency measures an exceptionally cold winter last year could have cut the margin to 2.8pc, assuming full imports of power from the continent, and eaten into reserve margins if imports were unavailable..... plans for Britain's first new nuclear plant in a generation at Hinkley Point still depend on receiving final investment approval from French utility EDF. The company said last year it wanted to decide on the £24.5bn project in Somerset by the end of March but that deadline has now slipped. Some critics argue that a focus on renewables has left Britain’s power network now dangerously short of spare capacity. Official figures show that renewables generated 19.2pc of UK supplies in 2014, with solar contributing 1.2pc."
New government faces potential energy crisis, warns expert
Telegraph, 8 May 2015

"Take a look around most American homes and you'll see plenty of appliances, smartphones, chargers, computers and other electronic devices plugged in - all the time. Most people don't give the practice a second thought. But a new study from the Natural Resources Defense Council suggests the powering of so many devices around the clock is using huge amounts of energy - $19 billion worth of electricity on an annual basis, equivalent to the output of 50 large power plants. In California alone, the study found that these inactive devices account for nearly 23 percent, on average, of the electricity consumption of homes. 'One reason for such high idle energy levels is that many previously purely mechanical devices have gone digital: Appliances like washers, dryers, and fridges now have displays, electronic controls, and increasingly even Internet connectivity, for example,' Pierre Delforge, the report's author and NRDC's director of high-tech sector energy efficiency, said. "In many cases, they are using far more electricity than necessary."
Always-on devices are using huge amounts of energy
CBS News, 8 May 2015

"Europe will remain dependent on Russian gas for years to come, energy giant Centrica has warned, dismissing suggestions the EU can replace it with other sources as 'unrealistic'. European leaders have scrambled to try to cut reliance on imports from Vladimir Putin's Russia since the Ukraine crisis escalated last year, with Ed Davey, the energy secretary, suggesting loft insulation and wind farms were needed to 'take on the Kremlin'.  But Rick Haythornthwaite, Centrica chairman, told shareholders on Monday: 'Whatever we might want as Europe, we need to be very careful about being pragmatic about the realities of it... I think it's unrealistic to think that Russian gas is going to be replaced in the near-term.' Iain Conn, Centrica chief executive, added: 'Russia supplies... about a third of Europe's gas. You can't switch that off easily without huge consequence. There is no way the United States can supply that volume of LNG to replace it.' If sanctions were imposed on Russian gas companies would have to comply, he said, but it would have 'a very significant impact on Europe's ability to balance its natural gas sources and uses', particularly in Eastern Europe which was 'not plumbed in to many alternatives'. But he added that Russia had been a 'a reliable supplier of gas all the way through the Cold War' and that it needed European demand. Russia realises that plays a very important part in Russia's own future and there's as much value in this co-dependency as there is potential threat,' he said. Both men were speaking at Centrica's Annual General Meeting, where 33 per cent of shareholders voted against the energy giant's executive pay report and investors complained the board was 'paying itself large sums of money for cutting our dividend". "
We'll need Russian gas for years to come, says Centrica
Telegraph, 27 April 2015

"The Internet is heading towards a ‘capacity crunch’ and could reach its limit in just eight years, say scientists. The cables and fibre optics that relay information to our laptops, smartphones and tablets will have reached their limit within eight years, and fibre optics can take no more data from a single optical fibre, scientists warned. 'At the current usage rate, all of Britain’s power supply could be consumed by Internet use in just 20 years,' scientists said. Leading engineers, physicists and telecoms firms have been summoned to a meeting at London’s Royal Society later this month, to discuss what can be done to avert a web crisis, Daily Mail reported. 'We are starting to reach the point in the research lab where we can’t get any more data into a single optical fibre,' professor Andrew Ellis, who has co-organised the Royal Society meeting on May 11, was quoted as saying by Daily Mail. 'Demand is increasingly catching up. It is growing again and again, and it is harder and harder to keep ahead. We have done very well for many years to keep ahead. But we are getting to that point where we can’t keep going for ever,' he added. The boom of Internet television, streaming services and ever-more powerful computers has increased the strain on our communications infrastructure. The Internet companies could always put down additional cables – but that will mean higher bills. Experts said users could be faced with paying double or will have to put up with an Internet that switches off intermittently. In 2005, broadband Internet had a maximum speed of 2 Megabits per second. Today 100Mb-per-second download speeds are available in many parts of the world."
Internet might collapse within 8 years: Scientists
Indo-Asian News Service, 4 May 2015

"Russian President Vladimir Putin on Saturday ratified a gas supply agreement with China via the so- called Eastern route. 'The agreement is aimed at strengthening the Russian-Chinese energy cooperation, and defines the main terms of the natural gas supply from Russia to China through the East-Route, including the cross-border section of the gas pipeline across the Amur River ( the Heilongjiang River in China) near Blagoveshchensk (capital of the Amur region in the Russian Far East) and China's border city of Heihe,' an online official statement said. The agreement was passed on April 24 by parliament's lower house, or the State Duma, and approved by the upper chamber namely the Federation Council five days later. During Putin's official visit to China last May, the two sides signed a 30-year gas supply contract that will see the East-Route Pipeline start providing China with 38 billion cubic meters of natural gas annually from 2018."
Putin ratifies east-route gas pipeline agreement with China
Xinhua, 3 May 2015

"The European Union, keen to lessen its dependence on Russia for energy supplies, expects to start receiving natural gas from Turkmenistan by 2019, European Commission Vice President Maros Sefcovic said in an interview. Russia currently supplies around a third of Europe's gas needs, but Moscow's annexation of Crimea and its involvement in the military conflict in eastern Ukraine has added urgency to the EU's search for gas from alternative sources.... The project, designed to bring Turkmen gas to Europe across the Caspian Sea via the so-called 'southern gas corridor' which includes Azerbaijan and Turkey, has been stuck for years due to political, ecological and financial uncertainties. 'Now there is a political decision that Turkmenistan will become part of this project and will feed the European direction,' Sefcovic said. Last year, Turkmenistan and Turkey signed a framework agreement to supply gas to the proposed Trans-Anatolian natural gas pipeline project (TANAP), which will take gas from Azerbaijan's Shah Deniz II field in the Caspian Sea. To connect to TANAP, Turkmenistan needs to build its own, 300-km (187-mile) link under the Caspian Sea, a disputed area between Russia, Kazakhstan, Turkmenistan, Iran and Azerbaijan. TANAP will be built from the Turkish-Georgian border to Turkey's frontier with Bulgaria and Greece. Its construction is expected to be completed by the end of 2018 in order to start deliveries of gas from Shah Deniz II in 2019....Turkmen officials said in March that 'active' negotiations were under way to supply Europe with 10 to 30 bcm of gas per year. This compares to around 30-35 bcm which Turkmenistan annually exports to China."
European Union sees supplies of natural gas from Turkmenistan by 2019
Reuters, 2 May 2015

"In 2014 oil prices crashed. Americans jumped for joy. Small wonder: each year the average American consumes more energy than a Briton and a Japanese person put together. The oil-price drop pleased economists, too. Many were sure that it would give the economy a nice boost. However, the oil bust was followed not by a boom but a slowdown (see chart). Figures released on April 29th showed that growth in the first quarter of this year was just 0.2%. All this leads wonks to wonder: are lower oil prices such a good thing? Gross domestic product (GDP), the total annual output of an economy, is made up of four things: government spending, net exports, consumer spending and investment. The oil price does not much affect government spending, but has a big impact on the other three..... low oil prices have helped in one important way (besides the obvious one of easing motorists’ pain at the pump). They have pushed down inflation. The headline rate is now hovering around zero—well below the Federal Reserve’s target of 2%. When prices are rising so slowly, the Fed can keep policy very loose. Indeed, at a meeting on April 29th it decided to keep interest rates at rock bottom, as it has done since late 2008. Such ultra-low rates stimulate growth without the threat of inflation. In the past few weeks, however, the oil price has stopped falling, so this deflationary effect is wearing off. Economists are left wondering how what seemed like such a big bonus for the American economy could have had so little effect."
Oil be damned
The Economist, 2 May 2015

"Saudi Arabia's state oil company is to be separated from the oil ministry as part of a wider restructuring. The move was approved by the Supreme Economic Council, which was set up by King Salman this year to replace the Supreme Petroleum Council. The new 10-member council is headed by the King's son, Prince Mohammed bin Salman. He was appointed this week as the new deputy crown prince and is regarded as second in line to the throne. On Wednesday, King Salman appointed Saudi Aramco's chief executive Khalid al-Falih as chairman of the company and health minister as part of a major political reshuffle. He has been replaced by Aramco senior vice-president Amin al-Nasser. The main facets of Saudi oil policy - including maintaining the ability to stabilise markets by holding extensive reserves and a reluctance to interfere in the market for political reasons - are set by the top members of the ruling royal family. There are no signs that the move will lead to any significant changes in the way that the world's top oil exporter and de facto Opec leader makes its decisions. However, separating Aramco from the oil ministry is likely to be just the first step in a shake-up of the Saudi oil sector, according to analysts."
Saudi Arabia shakes up state oil firm Aramco
BBC Online, 1 May 2015

"The EIA has said that US energy consumption has slowed recently and is not anticipated to return to growth levels seen in the second half of the 20th century. Reference case projections in the Annual Energy Outlook 2015 (AEO2015) show that domestic consumption is expected to grow at a modest 0.3%/y through 2040, less than half the rate of population growth. Energy used in homes is essentially flat, and transportation consumption will decline slightly, meaning that energy consumption growth will be concentrated in US businesses and industries."
US energy demand slowing
Energy Global, 30 April 2015

"The U.S. oil production decline has begun. It is not because of decreased rig count. It is because cash flow at current oil prices is too low to complete most wells being drilled. The implications are profound. Production will decline by several hundred thousand of barrels per day before the effect of reduced rig count is fully seen. Unless oil prices rebound above $75 or $85 per barrel, the rig count won’t matter because there will not be enough money to complete more wells than are being completed today....The decrease in well completions provides additional evidence that the true break-even price for tight oil plays is between $75 and $85 per barrel. The Eagle Ford Shale is the most attractive play with a break-even price of about $75 per barrel. Well completions averaged 312 per month from January through September 2014 when WTI averaged $100 per barrel (Figure 2). When oil prices dropped below $90 per barrel in October, November well completions fell to 214. As prices fell further, 169 new producing wells were added in December and only 118 in January. Bakken break-even prices are higher at about $85 per barrel. Well completions averaged 189 per month from January through September 2014. In November, only 80 new producing wells were added. In December and January, 123 and 114 new wells were added, respectively. Orders for rail cars used to transport oil decreased by 70% in the first quarter of 2015 compared with the fourth quarter of 2014. Permian 'shale' play break-even prices are also about $85 per barrel based on declining well completion data. Well completions averaged 175 per month from January through September 2014. In January 2015, only 35 new producing wells were added. Much of the commentary about the backlog of deferred completions is exaggerated and irrelevant unless oil prices increase to $75 or $85 per barrel. The assumption underlying most industry chatter these days is that oil prices will return to normal. The world oil market is undergoing a fundamental structural change in response to expensive oil. Producers are trying to survive by limiting expenditures. While analysts have been focused on rig counts, deferred completions have emerged as the initial path to lower U.S. oil production. This unanticipated outcome suggests that others may follow."
Art Berman - The U.S. Production Decline Has Begun
Petroleum Truth Report, 29 April 2015

"A study has found that many people in the UK are worried about having smart meters in their homes because they fear that data about their personal energy use will be shared. The UK government says it wants all homes to have smart meters within five years. These will allow users to set equipment that only needs energy intermittently – such as washing machines and freezers – to switch on at times when the grid has spare capacity and power is cheap. The meters will save people money, as well as making it easier for the grid to incorporate fluctuating sources of renewable energy such as wind and solar power – thus helping to cut greenhouse-gas emissions. But in an online survey of more than 2400 people in the UK, Alexa Spence of Nottingham University found that a fifth would be "uncomfortable" with the data sharing needed to do that. Strangely, she says, people who were worried about their energy bills were the most fearful, whereas those who were more concerned about climate change tended to be more amenable to data sharing."
UK people happy to cut energy use, but wary of smart meters
New Scientist, 27 April 2015

"Vitol Group, the world's biggest independent oil trader, said crude prices won't drop below $50 a barrel for sustained periods - because that's a level some producers need in order to invest in new supply. 'We still subscribe to the likelihood that over time prices still have to go back up again because you still need to invest,' said Vitol CEO Ian Taylor last week. 'People won't invest unless they can make the upstream business work - and it's not just US shale; at $50 a barrel it doesn't work.' Oil prices collapsed almost 50pc last year as OPEC kept its output ceiling at about 30 million barrels a day, insisting producers outside the 12-nation group help tackle a surplus. While the US pumped 9.38m barrels a day last week - the highest output for this time of year in at least three decades - its output slid 0.4pc in the past month. Prices will trade from $50 to $70 a barrel in the second half of this year, Taylor said. Brent, the global benchmark, ended at $62.08 on the ICE Futures Europe exchange last week. West Texas Intermediate (the US benchmark), was at $55.26. 'US production growth is beginning to slow down and demand is looking quite good for the year, so the combination of all of that means that probably price, if anything, moves up a little bit,' Taylor said.... Prices need to rise to about $80 a barrel in order to attract investment and replace lost production, said Marco Dunand, CEO of Mercuria. Field depletion means markets are losing as much as five million barrels a day from supply that needs to be replaced each year, he said."
World's biggest oil trader sees $50 floor
Bloomberg, 26 April 2015

"Oil needs to recover to $65 a barrel for U.S. drillers to tap a pent-up supply locked in shale wells and unleash more crude on markets than is produced by Libya. Dipping into this 'fracklog' would add an extra 500,000 barrels a day of oil into the market by the end of next year, Bloomberg Intelligence said in an analysis on Thursday. Producers in oil and gas fields from Texas to Pennsylvania have 4,731 idled wells at their disposal. Prices are rebounding from a six-year low after drillers idled half the nation’s oil rigs, slowing the shale boom that boosted production to the highest in four decades. The number of wells waiting to be hydraulically fractured, known as the fracklog, has ballooned as companies wait for costs to drop. That could slow the recovery as firms quickly finish wells at the first sign of higher prices....U.S. oil futures tumbled by more than $50 a barrel in the second half of last year amid a worldwide glut of crude. West Texas Intermediate for June delivery fell $1.16 to $56.58 a barrel at 11 a.m. on the New York Mercantile Exchange. Oil production in the lower 48 states would rise to 7.67 million barrels a day in the fourth quarter of 2016 if drillers start shrinking their fracklogs by 125 wells a month in October and put some rigs back to work, Bloomberg Intelligence models show. The U.S. fracklog has more than tripled in the past year, with oil wells making up more than 80 percent of the total. 'One of the big reasons why production is finally falling is because of these fracklogs,' Phil Flynn, senior market analyst at the Price Futures Group in Chicago, said by phone on Thursday. 'That’s an overhanging bearish fundamental.' The Permian Basin, which covers parts of Texas and New Mexico, had the biggest collection of unfracked wells as of February, with 1,540 waiting to be completed. The count totaled 1,250 in Texas’s Eagle Ford formation and 632 in North Dakota’s Bakken shale. Last week, Raoul LeBlanc, an oil analyst with Englewood, Colorado-based consultant IHS Inc., pegged the U.S. fracklog at around 3,000 wells. Halliburton Co., the world’s second-biggest provider of oilfield services, estimated there are about 4,000 uncompleted wells, citing 'third party estimates.' Fracklogs are growing faster in the fringe areas of plays where the wells are less productive, according to the Bloomberg Intelligence analysis. In the Eagle Ford, for example, counties at the edge, such as Lee and Lavaca, saw companies go from completing more than 60 percent of their wells in November to less than 20 percent in February. Large independent producers from ConocoPhillips to EOG Resources Inc. hold a significant portion of the uncompleted wells. Those companies are already seeing more incentive to start eating into their backlog as crude has risen by a third since mid-March. After-tax returns would be 5 to 10 percent higher than they were just two months ago when oil was at $45, Cosgrove said."
Oil at $65 Could Free 500,000 Barrels From Shale ’Fracklog’
Bloomberg, 24 April 2015

"The US is scrambling to head off a Greek pipeline deal with Russia, fearing a disastrous change in the strategic balance of the Eastern Mediterranean as Greece’s radical-Left government drifts into the Kremlin’s orbit. Ernest Moniz, the US Energy Secretary, said his country is pushing for an alternative gas pipeline from Azerbaijan that would help break the stranglehold that Russian state-controlled firm Gazprom has on European markets. 'Diversified supplies are important and we strongly support the ‘Southern Corridor’ to bring Caspian gas to Europe,' he told a group of reporters on the margins of CERAWeek oil and gas forum in Houston. He insisted that it was vital to uphold 'collective energy security' in Europe. Greece’s foreign minister, Nikos Kotzias, said Gazprom made a 'very good offer', with guaranteed gas supplies for 10 years at good prices. He asked how his Syriza government could justify turning down such an opportunity unless the Western powers could come up with something better. The once-unlikely 'Turkish Stream' deal with Russia has suddenly become a stark reality as President Vladimir Putin seizes an opportunity created by the eurozone’s inept handling of the Greek crisis. Under the terms of the offer, Russia would supply 47bn cubic metres (BCM) of gas to Greece, generate much-needed revenue for the Greek authorities, create 2,000 jobs and turn the country into an energy hub. Sources in Athens have confirmed to The Telegraph that it could also bring €3bn (£2.2bn) to €5bn in advance payments, greatly alleviating Syriza’s budget strain as it raids local authority funds in a last, desperate attempt to put off default. The deal was due to be signed on Tuesday, but overtures from Washington caused a delay, much to the irritation of the Russians. The talks were complicated by Greek complaints over Gazprom’s tough line on 'take-or-pay' violations by the Greek natural gas company DEPA, whereby it was required to pay for unused gas. It is now clear that Greece is playing every possible card in an escalating form of four-way brinkmanship, in this case trying to play off Washington against Moscow. This is a high-risk strategy as it risks irritating Syriza’s increasingly exasperated friends in the White House, all the more so as tensions between Russia and the West flare up again over Ukraine. It also risks pushing Moscow too far. Mr Kotzias said after a trip to Washington this week that the US is preparing a 'counter-offer' and will send an emergency mission to Athens in coming days, led by the State Department’s energy troubleshooter, Amos Hochstein."
US alarmed by Greek energy alliance with Russia
Telegraph, 23 April 2015

"Tony Hayward, the former BP chief executive who runs Iraqi Kurdistan-focused Genel Energy, on Wednesday said oil prices are set to soar as Opec has taken just six months to stop the US shale oil boom in its tracks. Speaking at the FT Commodities Global Summit in Lausanne, Switzerland, Mr Hayward said Opec had shown itself to be 'the most successful cartel in history', predicting oil prices would soon return to near $80 a barrel.  'The supply base is shrinking, they [Opec] are maintaining their market share. It seems like it’s been a big success,' said Mr Hayward, who left BP after the 2010 Deepwater Horizon oil spill. Opec’s decision in November to hold production steady in the face of fast-growing US shale output helped accelerate the oil price collapse. But an increasing number of big oil executives and traders argued this week that the worst of the oil rout is over, having forced a quick response from the market. The drop in oil prices from above $110 in June to near $45 in January has led to a marked reduction in the number of rigs drilling for oil in the US. Many energy majors and national oil companies have also slashed investments in production worldwide. On Wednesday, Ice June Brent was trading up 53 cents at $62.60 a barrel. The heads of Vitol and Gunvor, two of the world’s largest independent oil traders, said on Tuesday that oil prices had probably bottomed. 'The low price is behind us,' Gunvor chief executive Torbjorn Tornqvist told a panel at the FT Summit. Mr Hayward, who said he will take a less active role in the day-to-day running of Genel by the end of this year, said US oil output will soon slow or fall."
Former BP chief says oil prices set to soar
Financial Times, 22 April 2015
"Industry leaders at the World Economic Forum on East Asia have said they expect oil prices to rise further. The leaders, meeting in the Indonesian capital, Jakarta, said the long-term view was that demand for oil is growing. Oil prices are around their highest levels for the year. The price of Brent crude was at $63 a barrel on Tuesday, up 40% from its January low of $45 a barrel and near its high for the year of $65.  Oil prices more than halved in the second half of last year, as falling demand and high levels of output caused a glut in supply. Melody Boone Meyer, president of Asia-Pacific exploration and production at US energy giant Chevron, said that dramatic falls were not an uncommon feature of the oil market."
Oil prices 'will hit optimum level' as demand grows
BBC Online, 21 April 2015

"Renewables are finally becoming a globally significant source of power, according to a United Nations Environment Programme report released in March by Frankfurt School UNEP Centre and Bloomberg New Energy Finance. Driven by rapid expansion in developing countries, new installations of carbon-free renewable power plants in 2014 surpassed 100,000 megawatts of capacity for the first time, according to the Global Trends in Renewable Energy Investment report. It appears that renewable energy is now entering the market at a scale that is relevant in energy industry terms – and at a price that is competitive with fossil fuels. The numbers are compelling. Renewables such as wind, solar and biomass generated an estimated 9.1% of the world’s electricity in 2014, up from 8.5% in 2013, according to the report. These sources made up the majority of new power capacity in Europe, and also brought electricity to new markets. They also caught the eyes of investors: in 2014, energy investment in rose 17% over the previous year, surging to $270bn, according to the report. Some experts still predict that fossil fuels will supply the majority of our energy for decades to come, but the evidence strongly points in another direction. As the Global Trends report points out, the clean energy investment that funded almost half of all new power plants in 2014 came at what would, seemingly, be a very bad time for renewables. While oil prices were rapidly falling and China’s coal consumption was decreasing, both commodities were, if anything, more economically viable. But at the same time, renewables appear to be increasing rather than decreasing in competitiveness. For example, a large-scale solar plant in Dubai has recently bid to provide electricity at less than $0.06 per kilowatt-hour. To put this in context, this is less than what the vast majority of consumers around the world pay to keep the lights on. It’s a third of the cost of electricity in Africa. Grid parity for solar is already available in many countries; in others, it’s just around the corner."
'The world is finally producing renewable energy at an industrial scale'
Guardian, 20 April 2015

"Shale drillers will see production drop sooner than expected under a U.S. government forecast, a momentum change that hints at an eventual price rally. Just five months after Saudi Arabia put the market into a tailspin by refusing to cut supply despite a global glut, the shale oil industry will record its first monthly dip since U.S. officials began weighing output in 2013. The projected production drop is small, just 1 percent. Yet investors took note, pushing oilfield stocks to the top five spots in the Standard & Poor’s 500 Index on Tuesday, led by rig operators Ensco Plc and Diamond Offshore Drilling Inc. The decline lags the idling of rigs because of a backlog of already-drilled wells that have gradually been coming online. 'OPEC’s plan is playing out and price is correcting the oversupply,' said Michael Scialla, an analyst at Stifel Nicolaus & Co. in Denver, in a telephone interview. West Texas Intermediate crude, the U.S. benchmark, climbed 3 percent to $53.47 a barrel at 2:03 p.m. in New York, extending the rising streak to a fourth trading session. Shale fields make up about half of total U.S. production, which will continue growing this year and next, rising to 10.3 million barrels a day in 2025, according to a new longterm forecast by the Energy Department Tuesday. Crude lost almost 60 percent of its value since late June, making some shale fields unprofitable to develop and forcing companies to cut back exploration prospects. Oil explorers were forced to shut down more than half the rigs drilling for crude in the U.S. since the Saudi statement in November, and canceled expansion plans to conserve cash."
Shale Output Is Falling Faster Than Expected
Bloomberg, 15 April 2015

"A respected oil and gas expert has slammed claims made by entrepreneur David Lenigas that 100bn of oil lies under the South of England within a few miles of Gatwick Airport as "wildly optimistic" and "misleading". Last week UK Oil & Gas Investments - a company controlled by Mr Lenigas - claimed that it had discovered the UK's largest onshore oil find at its site at Horse Hill on the edge of the Mole Valley. According to the company, 100bn barrels of oil exist under the Sussex Weald, equivalent to the proven reserves of Iran. Shares in the AIM-listed oil explorer surged more than 200pc following the announcement last week, which promised a "Dallas" style oil-rush across large areas of Green Belt countryside. "Estimates for 100bn barrels of oil are very misleading," said Matthew Jurecky, GlobalData’s head of oil & gas research and consulting. "Rarely are formations that homologous where a single discovery can be extrapolated over a very wide area." Last week, UK Oil & Gas Investments Chief Executive Stephen Sanderson said: "We think we've found a very significant discovery here, probably the largest onshore in the UK in the last 30 years, and we think it has national significance."  However, Mr Jurecky has dismissed such claims based on limited results produced by a single well. He argues that just 15m barrels of oil may actually be recoverable from the Horse Hill site based on conventional understanding of the geology and restrictions in the local area. Mr Jurecky said: "The play pinches out and is too thin, or lacks certain characteristics across the wider formation that are present in producing areas.' Producing commercial quantities of oil from the area are also unlikely given the current slump in the price of crude, which is expected to trade well below $100 per barrel for the foreseeable future amid a glut of supply."
Gatwick oil gusher claims 'wildly optimistic' warns expert
Telegraph, 14 April 2015

"Chinese diesel demand, after rising an average of 8 percent a year for a decade, actually fell in 2013 and 2014. The International Energy Agency attributes this partly to the country’s rapidly expanding fleet of natural gas vehicles. Chinese demand for oil this year is expected to rise to 10.6 million barrels a day, an increase of 2.6 percent, or half the average annual growth of the past decade and one-sixth the rate in 2004. China’s oil use is still climbing twice as fast as global consumption, but the IEA has in the past year shaved 500,000 barrels from its 2019 China demand forecast. More efficient autos and factories reduced the overall oil intensity of China’s economy—oil burned per unit of GDP—by 18 percent from 2008 to 2014."
Saudi Arabia’s Plan to Extend the Age of Oil
Bloomberg, 12 April 2015

"Just when you thought the US oil-drilling retreat was slowing, explorers dropped 42 rigs in a single week.  Those actively drilling for oil slid to 760 this week, the lowest since December 2010, the Houston-based field services company Baker Hughes Inc. said on its website Friday. The slide followed two weeks of modest declines that appeared to show the pace of an unprecedented retrenchment in drilling was easing. Producers instead pulled 20 rigs this week out of the Permian Basin of New Mexico and Texas alone....The steep decline in the rig count this week 'a little bit surprising,' James Williams, president of energy consultant WTRG Economics, said by phone on Friday. 'What is clear is that US oil production will, if it hasn’t already, peak by next month, and by the second half of this year, we will be seeing measurable declines.' Evercore ISI analysts including James West said in a research note on Thursday that the 'impending supply drop' will coincide with increased US refinery runs heading into the peak summer driving season and work to correct 'the global supply-demand imbalance.' The slowdown in drilling has yet to make a real dent in US oil production, which reached a weekly record in March because of bigger and higher-yielding shale wells. Output climbed 18,000 barrels a day last week to 9.4 million, Energy Information Administration data show. 'It takes a while for the production to moderate,' Janelle Nelson, a Minneapolis-based portfolio analyst with RBC Wealth Management’s portfolio advisory group, said by phone on April 8. 'There may be fewer rigs drilling, but they’re drilling the best wells with the best productivity with the best operators.'"
Just when the rout seemed almost over, drillers idle 42 oil rigs
Gulf News, 11 April 2015

"Exploration firm UK Oil & Gas Investments (UKOG) says it has made "a very significant discovery" of oil in southern England that could amount to 100 billion barrels. But is it really there, and how easy will it be to get at it?The find is - in theory - a huge one. Even so, UKOG have said that out of 100 billion barrels potentially underground, only an absolute maximum of 15 billion barrels could be extracted from the field. Nonetheless, this would be 10 times bigger than the biggest oil field found in the last 20 years in the North Sea. .... There's a lot more to be done first, and the numbers are still pretty vague. David Aron, managing director of Petroleum Development Consultants, says: 'It's much too premature to predict when we can start extracting from this. "First, they need to do further testing to get some idea of the area of it, then test to see if the wells are productive. "Previous cases where oil production was not as big as was thought include Regal Petroleum in Romania. It said they had trillions of cubic metres of gas, but after testing the well, it produced at a low rate and it was a small area.'... Last year, the British Geological Survey (BGS) produced a report suggesting there were 4.4 billion barrels of oil trapped in shale rock under southern England - which would need fracking to get it out. This latest discovery, if accurate, would be easier and cheaper to exploit. But the oil is sitting under wealthy residential suburbs and protected environmental areas."
UK's new oil find: How big is it?
BBC Online, 9 April 2015

"China will build a pipeline to bring natural gas from Iran to Pakistan to help address Pakistan’s acute energy shortage, under a deal to be signed during the Chinese president’s visit to Islamabad this month, Pakistani officials said. The arrival of President Xi Jinping is expected to showcase China’s commitment to infrastructure development in ally Pakistan, at a time when few other countries are willing to make major... "
China to Build Pipeline From Iran to Pakistan
Wall St Journal, 9 April 2015

"U.S. crude production will peak this month, according to revised forecasts published by the country's Energy Information Administration (EIA). Output will average 9.37 million barrels per day (bpd) in April and the same in May before falling to 9.33 million bpd in June and 9.04 million bpd by September, the EIA predicted in the April edition of its Short-Term Energy Outlook (STEO). Production is expected to peak a month earlier and 10,000 bpd lower than the EIA forecast in the January STEO, reflecting continued low wellhead prices and a sharper-than-expected slowdown in new well drilling. Production is forecast not to exceed this month's level for another 18 months. The EIA has cut its forecast for the end of 2016 by 230,000 bpd compared with three months ago. While the EIA's Brent price forecast is largely unchanged, prices for West Texas Intermediate crude have been marked down through the rest of 2015 and 2016, reflecting the build-up of crude stocks and persistent weakness of U.S. grades. The number of rigs drilling for oil has fallen further and faster than was anticipated last year. Baker Hughes reported there were 802 rigs drilling for oil last week, down exactly 50 percent since early October. It is unlikely a halving of the rig count can be completely offset by greater target selectivity and other efficiency improvements such as employing only the most powerful rigs, drilling longer laterals and reaching target depth faster. Drilling data points to a strong probability that production from new wells will soon start to fall - if it is not falling already. Given the rapid declines in output from wells drilled in 2013 and 2014, total output from new and legacy wells should start to fall soon. The most common question I am asked at the moment is: if the rig count has fallen by 50 percent, why is output still rising? The simple answer: there is a delay of six months or more between changes in the number of new wells being drilled and reported changes in production. It can take 20-30 days for a rig to drill a new well and then another 60 days or more for the well to be fractured and all the above-ground equipment put in place before the well flows its first oil. Most major oil-producing states require well operators to submit a monthly report on the amount of oil and gas produced, but the first report is not usually due for up to two or three months after a new well has begun flowing. Even then, the first report may not be representative of a full month's production because the well may have started flowing part way through the month in question. Once production reports are submitted they have to be compiled and published by state regulators, adding a further delay. Then there are late filings ('delinquent wells') from operators submitting after the formal legal deadline has passed, which means the initial production totals can be revised, sometimes substantially, especially in Texas where there are lots of small owners and operators.... Trying to predict future production based on current production reports is like attempting to drive by looking in the rear-view mirror. Even if production peaks this month or next, it will not be visible in the statistics until at least July or August, and maybe later. But by the time the production peak becomes visible, output will likely have been falling for several months."
John Kemp: US Oil Production Is Probably Peaking Right Now
Reuters, 8 April 2015

"A group of British exploration companies have discovered oil and gas in an offshore area north of the Falkland Islands, which could raise tensions with Argentina over their disputed ownership. Falkland Oil and Gas, which shares the exploration area with Rockhopper and Premier Oil, said the 'Zebedee' exploration well was 'better than expected'. The London-listed oil explorers found an oil reservoir 25 metres thick and a gas deposit 17.5m thick sandwiched between sands. The well was drilled on a licence area that is 40pc owned by Falkland Oil and Gas, 36pc Premier Oil, and 24pc Rockhopper Exploration."
Oil and gas discovered off Falkland Islands
Telegraph, 2 April 2015

"China’s biggest oil refiner is signaling the nation is headed to its peak in diesel and gasoline consumption far sooner than most Western energy companies and analysts are forecasting. If correct, the projections by China Petroleum & Chemical Corp., or Sinopec, a state-controlled enterprise with public shareholders in Hong Kong, pose a big challenge to the world’s largest oil companies. They’re counting on demand from China and other developing countries to keep their businesses growing as energy consumption falls in more advanced economies. 'Plenty of people are talking about the peak in Chinese coal, but not many are talking about the peak in Chinese diesel demand, or Chinese oil generally,' said Mark C. Lewis, an analyst at Kepler Cheuvreux in Paris who has written on how oil companies should broaden their activities to produce all forms of energy. 'It is shocking.' Sinopec has offered a view of the country that should serve as a reality check to any oil bull. For diesel, the fuel that most closely tracks economic growth, the peak in China’s demand is just two years away, in 2017, according to Sinopec Chairman Fu Chengyu, who gave his outlook on a little reported March 23 conference call. The high point in gasoline sales is likely to come in about a decade, he said, and the company is already preparing for the day when selling fuel is what he called a 'non-core' activity. That forecast, from a company whose 30,000 gas stations and 23,000 convenience stores arguably give it a better view on the market than anyone else, runs counter to the narrative heard regularly from oil drillers from the U.S. and Europe that Chinese demand for their product will increase for decades to come. 'From 2010 to 2040, transportation energy needs in OECD32 countries are projected to fall about 10 percent while in the rest of the world these needs are expected to double,' Exxon Mobil Corp. said in a December report on its view of the future. 'China and India will together account for about half of the global increase.' Exxon expects most of that growth to be driven by commercial transportation for heavy-duty vehicles, specifically ships, trucks, planes and trains that run on diesel and similar fuels. BP Plc’s latest public projection for China, released in February, sounds a similar note. 'Energy consumed in transport grows by 98 percent. Oil remains the dominant fuel but loses market share, dropping from 90 percent to 83 percent in 2035.' The oil companies aren’t alone in their view. The International Energy Agency in Paris, the adviser to 29 governments including the U.S., forecasts China’s oil demand is most likely to increase at least through 2040. But signs of China’s energy slowdown are already evident. Diesel demand declined last year, and growth in crude oil consumption has shriveled. Crude use is projected to rise about 3 percent this year, less than half the rate of the total economy. Also, China’s political leadership is trying to wean the economy off debt-fueled property investment and old-line smokestack industries, shifting toward services and domestic-consumption led growth. Sinopec itself is already planning for the time when its primary business isn’t selling fuels but consumer goods at its shops and filling stations that blanket the nation."
China’s Fuel Demand to Peak Sooner Than Oil Giants Expect
Bloomberg, 1 April 2015

"UK gas suppliers could be forced to pay higher prices this winter after Centrica announced that capacity at Britain’s biggest storage site would be cut sharply for six months, raising the possibility of higher consumer bills. The energy group said that the Rough site, Britain’s only so-called long-range storage facility and lying beneath the North Sea, would have to impose limits on the pressure in its wells due to doubts over their 'integrity'. The decision means that the amount of gas that can be held in Rough will be cut from a maximum of 41.1 terawatt hours to between 29 TWh and 32 TWh, up to 29 per cent less than current levels. Centrica said in a statement on Friday that, given the age of the field and installation, it had taken 'the prudent step to test and verify the operating parameters of the Rough wells'. It declined to elaborate further."
Fears gas prices will rise as UK storage cut
Financial Times, 27 March 2015

"The fifth anniversary of the Deepwater Horizon disaster is approaching, but in the intervening years since the well blowout deep offshore, oil and gas drillers have pushed even deeper and even farther afield. Oil exploration companies are hitting the pause button in 2015 due to the bust in prices and the supply glut, and may not take on massive new projects. But over the long-term, in order to boost flagging production, the oil majors’ directive is pretty clear. A lot of the 'giant' oil fields are mature and declining while fewer and fewer are being discovered each year to replace depleting output. As easy oil runs out, drillers are forced to look in difficult places for new sources of oil."
The Most Challenging Oil and Gas Projects in the World
TIME, 26 March 2015
"Canada’s oil industry may have hit peak investment. In a grim report on the state of the oil industry, the Conference Board of Canada forecast that capital spending will decline by 20 per cent this year and may never recover to the high-water mark of $56-billion hit last year. The industry can expect further cuts to capital spending well into next year and more layoffs, Mike Shaw, a Calgary-based economist with the not-for-profit research group, said in the report. He forecast the industry will post $3-billion in pretax losses in 2015, with much of the damage coming in the first three months as prices average below $50 (U.S.) a barrel and companies are booking restructuring cost related to layoffs.... The sector is currently proceeding with expansions that will add 600,000 barrels a day of oil sands production within three years, and have spent too much money already to rein in those projects. With the new projects and ongoing improvements in existing facilities, the oil sands will see production grow to three million barrels a day by 2019, from 2.2 million last year. Canadian companies will have to work to reduce their break-even thresholds in order to prosper at those price levels. The conference board notes that break-even costs for steam-assisted, gravity-drainage (SAGD) projects range from $60 a barrel to $80, while integrated mines requires prices above $90 to break even."
Oil-sector investment in Canada may never again hit 2014 peak, report says
Globe & Mail, 25 March 2015

"Libya’s state-owned National Oil Co. has issued a declaration of independence. The company said on its website Thursday it was neutral in the conflict between an internationally recognized government based in the country’s eastern city of Baida and Libya Dawn, a group of Islamist militias that control the capital of Tripoli. The company said it'receives no directives from either the Tripoli- or Baida-based governments and operates in complete independence from both sets of authorities.'As the keeper of the country’s most valuable natural resource, the National Oil Co. has been increasingly caught in the cross hairs of a violent struggle to rule Libya since longtime dictator Moammar Gadhafi was overthrown and killed in a 2011 uprising. Its oil fields and pipelines have been crippled in recent weeks as saboteurs, a faction of Islamic State and militias have attacked its facilities, forcing production down to 500,000 barrels of crude a day—a third of its capacity. A United Nations panel is trying to broker an agreement to form a unity government, but the talks haven’t been successful. Because of its offices in Tripoli and the presence of some major pipelines and fields in its vicinity, the National Oil Co. had been seen as closer to the government aligned to Libya Dawn, which controls much of the country’s west. The company denies being allied with Dawn."
Libya’s State Oil Company Declares Independence
Wall St Journal, 20 March 2015

"Oil has plummeted 60 percent since late June, falling to a six-year low of $42.75 a barrel Thursday amid sluggish demand and bountiful supply.  But legendary energy entrepreneur T. Boone Pickens doesn't think the bad times will last for black gold. In an interview with CNBC, he predicted a price of $70 by year-end and $80 to $90 within 18 months. Given that U.S. oil output and inventories are at more than 30-year highs, what's behind Pickens' forecast? A plunging rig count in the United States will help spark the rebound, putting supply and demand in better balance, Pickens explained. The rig count totaled 866 last Friday, down 41 percent from a year earlier and 6 percent from a week earlier, according to Baker Hughes. 'We produced too much oil, and now supply is greater than demand,' Pickens said. But with the rig count dropping, 'we are getting ready to balance the market.'"
Pickens: Oil Will Rebound to $70 by Year-End
Newsmax, 19 March 2015

"Nicola Sturgeon has been forced to admit for the first time that the SNP had got its independence predictions for North Sea oil wrong as it emerged the growing shortfall in Scotland’s finances is the equivalent of a 17p hike in income tax. The First Minister bowed to opposition pressure and promised to produce revised estimates after the Telegraph disclosed official figures predicting oil will generate more than 90 per cent less than she claimed during the referendum. She argued that the UK Government had also got its estimates wrong, but the SNP figures were far more inflated and only a Yes vote would have made Scottish public spending dependent on oil revenues. Her admission came as the impartial Institute for Fiscal Studies published updated figures showing the drop in oil revenues would mean a separate or fiscally autonomous Scotland would be £7.6 billion deeper in the red than at present. The respected economic think tank said Scotland’s position had got worse by £1 billion taking into account the latest estimates for oil revenues, published alongside the Budget. Scotland’s deficit is predicted to be 8.6 per cent of GDP in the coming financial year, more than twice the UK figure of four per cent. Closing the gap would be the equivalent of adding almost 17p on every band of income tax. This newspaper reported yesterday how the independent Office for Budget Responsibility (OBR) has dramatically revised down its predictions for how much oil and gas will generate for the rest of the decade, projecting tax revenues of only £600 million in 2016/17, the year the SNP said Scotland would become independent. But the Scottish Government’s White Paper on independence predicted that up to 13 times as much – between £6.8 billion and £7.9 billion – would flow into the public purse in that year. Ms Sturgeon also promised referendum voters that another'oil boom'was on the horizon but the OBR said revenues will fall to 0.05 per cent of national wealth in 2015/16, the lowest level in 40 years. Two years ago, the OBR predicted that oil would generate £4.4 billion in 2017/18 but the Scottish Government insisted revenues would be as high as £11.8 billion. According to the latest estimate, the actual figure will be £700 million."
Nicola Sturgeon admits independence oil figures were wrong
Telegraph, 19 March 2015

"World powers have offered to suspend U.S. and European restrictions on Iranian oil exports, but only if the Islamic Republic accepts strict limits on its nuclear program for at least a decade, according to American and European officials. The offer to begin lifting some sanctions within months of a deal comes amid the effort in Lausanne, Switzerland to reach the framework of an agreement by the end of the month, with the outcome still in doubt.... Amid a worldwide glut of crude, a deal permitting more Iranian exports to Asia and Europe could drive prices even lower. If Iranian oil returned to the market, two officials said, the price of crude would drop another $10 a barrel. Brent crude, the international benchmark, has fallen 12 percent this month to $54.43 a barrel on the London-based ICE Futures Europe exchange as of 4:00 p.m. Thursday in New York. Any increase after an agreement would take time.'Iran will have to disconnect pipes, decontaminate machines, physically haul them out of tight, confined spaces, and then submit them to verification'so there’s accountability that designated centrifuges aren’t operating, said Richard Nephew, the former lead sanctions negotiator on the U.S. team, who is now a fellow at the Center for Global Energy Policy at Columbia University in New York.  Once allowed to do so, Iran could export some additional oil quickly because it has millions of barrels stored in tankers. It might be able to reach its pre-sanctions exports within a year of signing a deal, officials said, though exceeding that level quickly would be difficult because of limits on its infrastructure. Iran produced 2.8 million barrels of oil a day last month compared with 3.6 million at the end of 2011, according to data compiled by Bloomberg. The second-biggest producer in OPEC before oil sanctions were imposed almost three years ago, Iran has dropped to fifth place."
More Iran Oil May Flow Within Months of Deal, Officials Say
Bloomberg, 19 March 2015

"Green levies on energy bills will treble by 2020 because of renewable targets, official figures suggest.  The cost of environmental levies to support projects such as wind farms, solar panels and biomass plants will rise from £3.1billion last year to £9.4billion by the end of the decade, according tothe Office for Budget Responsibility. Separate figures published last year show that the policies account for 5 per cent of energy bills at present - equivalent to £68 a year - to 15 per cent of an annual energy bill by 2020, equivalent to £226.  The rise is being driven by renewable energy targets, which require 30 per cent of Britain's electricity to come from renewable sources by 2020.   It comes despite growing concern among senior Conservatives that subsidies for renewable energy are pushing up people's gas and electricity bills. David Cameron has reportedly said that the government needs to get rid of 'this green crap' amid concerns about renewable energy subsidies. He vowed last year to 'roll back' green taxes which add an average of £100 a year to average fuel bills. In an appearance before MPs earlier this month he also said that people are 'fed up' with onshore wind farms being built and that 'enough is enough'."
Green levies on energy bills to treble by 2020 because of renewable targets, official figures suggest
Telegraph, 19 March 2015

"The true cost of wind farms and other green power projects is far higher than ministers have admitted, a new Centre for Policy Studies report claims, claiming renewable energy will be 'the most expensive policy disaster in modern British history'. Scrapping the UK's green energy targets in favour of gas-fired power plants would save consumers £214 a year by 2020, the report suggests – despite ministers’ insistence that the total impact of the policies will be only £141 per household by then. Wind and solar farms rely on subsidies to be economically viable and the costs of the subsidies are charged to consumers through so-called ‘green levies’ on energy bills.'The costs of intermittent renewables are massively understated,' the CPS argues, accusing ministers of an unstated policy objective to deliberately' hide the full cost and operational implications'of green power. As well as subsidies for the wind and solar farms, the CPS report points to the need for dozens of backup power plants to keep the lights on when the wind doesn't blow and the sun doesn't shine."
Green energy costs 'far higher than ministers admit'
Telegraph, 18 March 2015
"Citigroup Inc., Goldman Sachs Group Inc., UBS AG and other large banks face tens of millions of dollars in losses on loans they made to energy companies last year, a sign of investor jitters in a sector battered by the oil slump. The banks intended to sell the loans to investors but have struggled to unload them even after cutting prices, thanks to a nine-month-long plunge that has taken Nymex crude futures to their lowest level...."
Banks Struggle to Unload Oil Loans
Wall St Journal, 18 March 2015

"Canadian heavy oil prices fell below $30 for the first time in more than six years as Bank of Montreal warned that oil sands producers must cut costs. Western Canadian Select fell 59 cents to $29.85 at 12:28 p.m. Mountain time, the lowest since Feb. 18, 2009, according to data compiled by Bloomberg. The grade’s discount to U.S. benchmark West Texas Intermediate narrowed 80 cents to $13.60 a barrel. Crude futures settled at a six-year low of $43.88 in New York on concern record supply may strain storage capacity. The cash costs of oil sands producers must shrink to remain competitive in the'new normal of lower oil prices for longer,'BMO analyst Randy Ollenberger said in a note today. The majority of Canada’s crude comes from oil sands in Northern Alberta and is among the most expensive to produce. Companies including Royal Dutch Shell Plc and Cenovus Energy Inc. have cut costs and suspended projects as prices plunged.... Canadian Oil Sands Ltd., among the largest five producers, needs a WTI price of about $50 a barrel to sustain business with no production declines, Chief Financial Officer Robert Dawson said March 11. Smaller companies are facing financial troubles. Southern Pacific Resource Corp. has defaulted on debt and Connacher Oil and Gas Ltd. says it’s in danger of not being able to pay creditors. Canada’s oil sands production will grow 8.3 percent this year, the country’s National Energy Board said Feb. 10. Projects to extract bitumen require billions of dollars of up-front investment. Most producers will continue producing from existing operations and complete projects under construction, Jackie Forrest, vice president of Calgary-based ARC Financial Corp., said in a Jan. 29 e-mail. WTI crude would have to stay between $30 and $35 a barrel for at least six months before wells and mines are shut, Dinara Millington, a vice president at Canadian Energy Research Institute, said Feb. 19."
Canada Crude Falls Below $30; BMO Seeks Oil Sands Cost Cuts
Bloomberg, 16 March 2015

"The supply glut which has led to a 50pc slide in oil prices over the past year will begin to grip the other major hydrocarbon product vital to global economies, liquefied natural gas (LNG). This year will see a 'wave'of new LNG production flooding on to international markets as several major projects in Australia finally come on stream after years of development and hundreds of billions of pounds invested. LNG – natural gas chilled for transportation by giant tankers – has grown in popularity over the past decade through a mixture of higher demand from booming Asian economies and the need to cut carbon emissions. The US Department of Energy estimates that natural gas burned in power plants produces about half as much carbon dioxide as coal and fewer nitrogen oxides, too. According to BG Group, supply has remained stalled at levels recorded in 2011. The UK energy company estimates that last year shipments grew by only 1.5pc to around 243m tonnes. However, by 2025, the company is forecasting that the LNG supply will reach 400m tonnes, requiring more infrastructure and giant tankers. This would represent a 5pc annual increase in demand over the next decade and almost twice the rate of growth expected to occur in consumption over the same period. Experts are now concerned that the market will be unable to keep pace with supply, leaving some LNG projects redundant. Andrew Walker, BG Group vice-president of global LNG, said: 'After four years of flat supply, we are entering a period of supply growth. 2014 marked the start of a new wave of supply from Australia. This will be joined by the first volumes from the US Gulf of Mexico around the end of 2015."
After oil, a glut of natural gas may be next to flood energy markets
Telegraph, 15 March 2015

"French oil major Total is auctioning a stake in one of the UK’s most promising natural gasfields, sounding out possible buyers in what could be the first of a wave of deals in the North Sea. Total is looking to sell a 20 per cent stake in Laggan-Tormore, a deepwater project 125km west of the Shetlands and considered a prime asset in the energy group’s portfolio. The decision highlights accelerating industry-wide moves to pare back exposure to high-cost regions where falling oil and gas prices have hit profitability. Total is one of the UK continental shelf’s biggest operators. The planned disposal would reduce its holding in the project from 80 per cent to 60 per cent. The move comes amid industry hopes that George Osborne, UK chancellor, will make a headline cut to the so-called supplementary rate of tax paid by North Sea producers in this week’s Budget and announce an investment allowance designed to encourage new exploration and production."
Total puts North Sea gas stake on block
Financial Times, 15 March 2015

"The U.S. has so much crude that it is running out of places to put it, and that could drive oil and gasoline prices even lower in the coming months. For the past seven weeks, the United States has been producing and importing an average of 1 million more barrels of oil every day than it is consuming. That extra crude is flowing into storage tanks, especially at the country’s main trading hub in Cushing, Oklahoma, pushing U.S. supplies to their highest point in at least 80 years, the Energy Department reported last month. If this keeps up, storage tanks could approach their operational limits, known in the industry as'tank tops,'by mid-April and send the price of crude — and probably gasoline, too — plummeting.'The fact of the matter is we are running out of storage capacity in the U.S.,'Ed Morse, head of commodities research at Citibank, said at a recent symposium at the Council on Foreign Relations in New York. Morse has suggested oil could fall all the way to $20 (U.S.) a barrel from the current $50. At that rock-bottom price, oil companies, faced with mounting losses, would stop pumping oil until the glut eased. Gasoline prices would fall along with crude, though lower refinery production, because of seasonal factors and unexpected outages, could prevent a sharp decline."
U.S. running out of room to store crude
Associated Press, 12 March 2015

"The political upheaval in Yemen has dealt a powerful blow to the country’s oil industry, forcing companies to abandon productive oil patches and evacuate staff as a rebel group consolidates power. Houston-based Occidental Petroleum Corp. , which has been operating in Yemen for nearly three decades, flew its staff out of the country in January, executives and local officials said, after gunmen stormed its compound in the capital, San’a, where Houthi militants have tightened their grip on power. Since then, executives and local officials said, Norway’s DNO AS A, Dove Energy Group of Dubai and Nexen Inc., which is owned by China’s Cnooc Ltd. , are all moving to relinquish their rights to blocks that produce thousands of barrels of crude a day."
Oil Companies Begin to Give Up on Yemen
Wall St Journal, 4 March 2015

"The U.S. Securities and Exchange Commission requires drillers to calculate the value of their oil reserves every year using average prices from the first trading days in each of the previous 12 months. Because oil didn’t start its freefall to about $45 till after the OPEC meeting in late November, companies in their latest regulatory filings used $95 a barrel to figure out how much oil they could profitably produce and what it’s worth. Of the 12 days that went into the fourth-quarter average, crude was above $90 a barrel on 10 of them. So Continental Resources Inc., led by billionaire Harold Hamm, reported last month that the present value of its oil and gas operations increased 13 percent last year to $22.8 billion. For Devon Energy Corp., a pioneer of hydraulic fracturing, it jumped 31 percent to $27.9 billion. This year tells a different story. The average price on the first trading days of January, February and March was $51.28 a barrel. That means a lot of pain -- and writedowns -- are in store when drillers’ first-quarter numbers are announced in April and May. 'It has postponed the reckoning,'said Julie Hilt Hannink, head of energy research at New York-based CFRA, an accounting adviser."
The Price of Oil Is About to Blow a Hole in U.S. Corporate Accounting
Bloomberg, 4 March 2015

"Russian oil output is expected to fall 8 percent in the next two years, the steepest fall since President Vladimir Putin took power at the end of 1990s, as low prices force companies to cut back on drilling in Siberia, a top Russian oil executive said. Leonid Fedun, vice-president and a large shareholder in Russia's top private oil firm Lukoil, said the drop could amount to as much as 800,000 barrels per day (bpd) by the end of 2016. His forecast is one of the most pessimistic yet by a Russian oil executive since the country was hit by sanctions and a steep drop in oil prices. By contrast, the energy ministry expects Russian output to be steady this year at around 10.56-10.60 million bpd. Oil and gas sales account for half of Russia's budget revenue. Russian oil output halved in the 1990s following the collapse of the Soviet Union but has recovered by more than 70 percent on the back of high oil prices since Putin took over as president in 1999. Russia is the world's largest oil producer. Sanctions imposed on the country over its role in the Ukraine crisis have drastically limited Russian firms' access to Western capital and technology over the past year while low oil prices are forcing them to slash exploration budgets. 'Everyone will reduce production because everyone is reducing drilling,' Fedun said. He said he expected drilling in Siberia to drop by as much as 15-20 percent. Fedun said Lukoil's output was likely to stay flat or drop slightly in 2015 as the company was drilling fewer wells in Siberia. In 2016, it could recover as it brings new fields in Russia on-stream, he said."
Lukoil predicts 8 pct Russian oil output decline in next two years
Reuters, 3 March 2015

"The United States will not develop into the 'next Saudi Arabia' of the energy market despite its position as one of the biggest new producers in the world, warned the head of the International Energy Agency. Speaking at the Telegraph's Middle East Congress, Fatih Birol, the newly selected executive director of the IEA, said traditional energy exporters in the Gulf would continue to dominate global production in years to come. The shale gas revolution in the United States was 'excellent news' for America's economy, but would not see the country meet the world's global energy needs, said Mr Birol. 'The United States will never be a major oil exporter. Their import needs are getting less but the US is not becoming Saudi Arabia,' said Mr Birol. 'Their production growth is good to diversify the market but it will not solve the world's oil problems.' Energy production outside of the Organisation of Petroleum Exporting Countries (Opec) reached its highest level in 30 years last year, contributing to a glut in the world's oil supply. But Mr Birol said Opec members, who include the likes of Saudi Arabia and Iraq, would remain well placed to meet global demand over the next decade.  'Only the Middle East can fill the gap in oil production when new players, such as the US, Canada and Brazil see their production slow down,' added Mr Birol. ... Last year, the Middle East enjoyed oil revenues of $1 trillion. The IEA now estimate that the new lower price will see revenues more than halve to $400bn.   For all the region's potential, the Middle East still requires $90bn in investment to tap new energy resources in the region, said Mr Birol, who warned that political instability in the region such as the rise of Islamic State (Isil) meant 'appetite for investment in many countries is close to zero.' Despite falling prices, global demand is not expected to increase substantially in 2015, calculate the IEA. China's reduced appetite for the commodity, which comes from move towards less oil intensive growth, will be the main depressant of global demand, said Mr Birol."
United States will not become the 'new Saudi Arabia' of global energy
Telegraph, 26 February 2015

"Investment in the oil and gas industry slumped in the final three months of last year, amid a dramatic collapse in the price of oil. Business investment fell by £0.6bn in the final quarter of 2014, down 1.4pc on the previous three months, the Office for National Statistics (ONS) said. The unexpected drop marked a second quarterly fall in investment. The Bank of England had pencilled in growth of 2.5pc for the period."
Oil industry investment plunges after commodity price tumble
Telegraph, 26 Febrary 2015

"The EU is stepping up a charm offensive in Azerbaijan and Turkmenistan as relations with Russia worsen, in a drive to put the gas-rich but politically sensitive countries at the heart of the bloc’s energy strategy. Brussels will unveil its long-term energy blueprint on Wednesday. Early drafts of the plan seen by the Financial Times show the EU will pledge to'use all its foreign policy instruments to establish strategic energy partnerships'with alternative suppliers such as Azerbaijan, Turkmenistan and Algeria....Since taking on his portfolio late last year, Mr Sefcovic has prioritised the $45bn'southern corridor'pipelines that will bring gas into southeastern Europe from the Caspian Sea region and potentially the Middle East. The final section of this network will be the Trans-Adriatic Pipeline, partly owned by BP, which will run to Italy and is due to provide Europe with 10bn cubic metres of Azeri gas by 2020. Mr Sefcovic said the EU would throw all its political weight behind TAP to ensure work was completed by the end of 2019. Brussels has already designated the pipeline as a 'project of common interest', allowing it to bypass EU competition restrictions. But Mr Sefcovic said there was far more to be done to ensure the scheme ran smoothly, adding that he had held talks with Ilham Aliyev, the Azeri president, about ways to cut red tape....The focus on southeastern Europe has been amplified by Russia’s cancellation of its $50bn South Stream pipeline, which was intended to supply Europe with 63bn cubic metres of gas. While the TAP project will only supply roughly 2 per cent of European demand, the project’s executives say capacity can be lifted to 20bn cm after 2020. To secure those increased volumes, Mr Sefcovic has embarked on a courtship of Turkmenistan, a reclusive and repressive state that holds the world’s fourth-biggest gas reserves. He met the Turkmen ambassador to Brussels on Monday with a view to signing a preliminary agreement soon, with the environmental and legal groundwork for a deal already laid.  The biggest obstacle to any deals from the Caspian is Russia, which insists that countries can only export from the region if all the other littoral states agree, effectively giving Moscow a veto. Mr Sefcovic said he believed it would still be possible to find a'technical and legal'framework for Turkmen exports to the EU. The EU’s race against China to secure Turkmen gas gathered pace this month when Gazprom announced that it was slashing its imports from Turkmenistan, forcing Ashgabat to find new export markets. With unusual candour, a state oil institute in Turkmenistan criticised Russia as an'unreliable partner'."
EU courts Azerbaijan and Turkmenistan gas as Russian links sour
Financial Times, 25 February 2015

"The UK offshore oil and gas industry has reported its worst annual performance for four decades. Industry body Oil & Gas UK said falling oil prices and rising costs meant the sector spent and invested £5.3bn more than it earned from sales during 2014. That outflow of cash was the biggest since massive investment in platforms in the 1970s preceded the flow of oil. The body's annual survey also indicated that investment in the industry is set to fall this year, as well as drilling. Oil & Gas UK said the 'bleak' findings emphasised the urgency of government action to secure the industry's long-term future.... The cost per barrel extracted has risen to a record high of £18.50. That is expected to fall as the industry cuts back on its costs, including a controversial move to change rota patterns for offshore workers. It is claimed that cost and efficiency measures need to improve by up to 40% per barrel of oil if there is to be a sustainable future for the UK's offshore sector. Oil & Gas UK chief executive Malcolm Webb said: 'Even at $110 per barrel, the ability of the industry to realise the full potential of the UK's oil and gas resource was hamstrung by escalating costs, an unsustainably heavy tax burden and inappropriate regulation.'"
Oil and gas industry in 'bleak' 2014, finds survey
BBC Online, 24 February 2015

"Shell has shelved plans for a major new tar sands mine in Canada, the largest project yet to fall victim to low oil prices. The company has withdrawn its application for the 200,000-barrel-per-day (bpd) Pierre River project and will instead concentrate on boosting the profitability of its existing 255,000-bpd oil sands operations."
Shell shelves plan for tar sands project in face of low oil prices
Guardian, 24 February 2015

"The U.S.’s role as a so-called world swing oil producer won’t last long as its petroleum growth will peak sometime in the next decade and then go into decline, BHP Billiton PLC’s chief for oil and gas production said Tuesday. 'U.S. liquid growth is relatively short lived…I expect to see it peak within the next decade,' said Tim Cutt, president of the petroleum and potash division of the Anglo-Australian company..."
U.S. Oil Growth to Peak in Next Decade, Says BHP Executive
Wall St Jourrnal, 24 February 2015

"The deluge of Canadian oil that’s adding to a global glut and driving prices lower is showing few signs of slowing. Even with crude down 52 percent since June, output will grow 3.5 percent this year from the world’s fifth-biggest producer. The Canadian dollar is near a six-year low and materials cost less, helping oil sands producers cut costs and keep pumping. Oil would have to stay between $30 and $35 a barrel for at least six months, down from about $50 now, before wells and mines are shut, according to the Canadian Energy Research Institute. Surging North American production has contributed to a global glut, pushing U.S. supply to the highest in three decades. OPEC opted in November to maintain output to hold on to market share. Oil sands supply is growing even as the number of rigs drilling for oil in the U.S. has fallen to the lowest in almost four years. RBC Dominion Securities estimates that oil companies have cut $86 billion from spending plans. ... While it can take years for a new oil sands operation to ramp up to full production, a total of 423,000 barrels a day of new capacity is under construction and scheduled to be in operation this year, up from 116,000 barrels added last year, according to data published in Alberta’s winter 2015 Oil Sands Industry Quarterly update.  Most of the oil sands companies are 'global players' and 'they can afford to operate at a loss within the oil sands area,' Dinara Millington, a vice president at CERI, said by phone yesterday. Oil sands miners would have to spend billions of dollars on reclamation of tailing ponds if they shut, she said. 'It’s not as simple as turning off a truck or shutting in a well.' "
Canadian Oil Sands Output Growth Defies Plunge in Prices: Energy
Bloomberg, 20 February 2015

"It may be difficult to look beyond the current pricing environment for oil, but the depletion of low-cost reserves and the increasing inability to find major new discoveries ensures a future of expensive oil. While analyzing the short-term trajectory of oil prices is certainly important, it obscures the fact that over the long-term, oil exploration companies may struggle to bring new sources of supply online. Ed Crooks over at the FT persuasively summarizes the predicament. Crooks says that 2014 is shaping up to be the worst year in the last six decades in terms of new oil discoveries (based on preliminary data). Worse still, last year marked the fourth year in a row in which new oil discoveries declined, the longest streak of decline since 1950. The industry did not log a single 'giant' oil field. In other words, oil companies are finding it more and more difficult to make new oil discoveries as the easy stuff runs out and the harder-to-reach oil becomes tougher to develop. The inability to make new discoveries is not due to a lack of effort. Total global investment in oil and gas exploration grew rapidly over the last 15 years. Capital expenditures increased by almost threefold to $700 billion between 2000 and 2013, while output only increased 17 percent (see IEA chart). Despite record levels of spending, the largest oil companies are struggling to replace their depleted reserves. BP reported a reserve replacement ratio – the volume of new reserves added to a company’s portfolio relative to the amount extracted that year – of 62 percent. Chevron reported 89 percent and Shell posted just a 26 percent reserve replacement figure. ExxonMobil and ConocoPhillips fared better, each posting more than 100 percent. Still, unless the oil majors significantly step up spending they will not only be unable to make new discoveries, but their production levels will start to fall (some of them area already seeing this begin to happen). The IEA predicts that the oil industry will need to spend $850 billion annually by the 2030s to increase production. An estimated $680 billion each year – or 80 percent of the total spending – will be necessary just to keep today’s production levels flat. However, now that oil prices are so low, oil companies have no room to boost spending. All have plans to reduce expenditures in order to stem financial losses. But that only increases the chances of a supply crunch at some point in the future. Put another way, if the oil majors have been unable to make new oil discoveries in years when spending was on the rise, they almost certainly won’t be able to find new oil with exploration budgets slashed. Long lead times on new oil projects mean that the dearth of discoveries in 2014 don’t have much of an effect on current oil prices, but could lead to a price spike in the 2020’s. All of this comes despite the onslaught of shale production that U.S. companies have brought online in recent years. U.S. oil production may have increased by 60 to 70 percent since 2009, but the new shale output still only amounts to around 5 percent of global production. Not only that, but shale production is much more expensive than conventional drilling. As conventional wells decline and are replaced by shale, the average cost per barrel of oil produced will continue to rise, pushing up prices. Moreover, with rapid decline rates, the shale revolution is expected to fade away in the 2020’s, leaving the world ever more dependent on the Middle East for oil supplies. The problem with that scenario is that the Middle East will not be able to keep up. Middle Eastern countries 'need to invest today, if not yesterday' in order to meet global demand a decade from now, the International Energy Agency’s Chief Economist Fatih Birol said on the release of a report in June 2014. In fact, half of the additional supply needed from the Middle East will have to come from a single country: Iraq. Birol reiterated those comments on February 17 at a conference in Japan, only his warnings have grown more ominous as the security situation in Iraq has deteriorated markedly since last June. 'The security problems caused by Daesh (IS) and others are creating a major challenge for the new investments in the Middle East and if those investments are not made today we will not see that badly needed production growth around the 2020s,' Birol said, according to Reuters. If Iraq fails to deliver, the world could see oil prices surge at some point in the coming decade. Despite the urgency, 'the appetite for investments in the Middle East is close to zero, mainly as a result of the unpredictability of the region,' he added."
Why Oil Prices Must Go Up
24/7 Wall St, 19 February 2015

"Discoveries of new oil and gas reserves dropped to their lowest level in at least two decades last year, pointing to tighter world supplies as energy demand increases in the future. Preliminary figures suggest the volume of oil and gas found last year, excluding shale and other reserves onshore in North America, was the lowest since at least 1995, according to previously unpublished data from IHS, the research company. Preliminary figures suggest the volume of oil and gas found last year, excluding shale and other reserves onshore in North America, was the lowest since at least 1995, according to previously unpublished data from IHS, the research company. Depending on later revisions, 2014 may turn out to have been the worst year for finding oil and gas since 1952. The slowdown in discoveries has been particularly pronounced for oil, suggesting that production from shales in the US and elsewhere, and from Opec, will play an increasingly important role in meeting growing global demand in the next decade. New finds of oil and gas are likely to have been about 16bn barrels of oil equivalent in 2014, IHS estimates, making it the fourth consecutive year of falling volumes. That is the longest sustained decline since 1950. Because new oilfields generally take many years to develop, recent discoveries make no immediate difference to the crude market, but give an indication of supply potential in the 2020s. Peter Jackson of IHS said: 'The number of discoveries and the size of the discoveries has been declining at quite an alarming rate... you look at supply in 2020-25, it might make the outlook more challenging.' So far there has not been a single new 'giant' field — one with reserves of more than 500m barrels of oil equivalent — reported to have been found last year, although subsequent revisions may change that. The figures for declining discoveries are particularly striking because exploration activity in 2014 showed little impact from the sharp fall in oil prices in the second half of the year. The last time oil and gas discoveries were around 2014’s level was in the mid-1990s, when exploration activity was hit by a period of weak prices. Last year, the number of exploration and appraisal wells drilled worldwide was only 1 per cent lower than in 2013. This year, exploration budgets are being cut back across the industry and the number of wells drilled is likely to fall further. New discoveries are not the only sources of future oil supply. Companies can also add to their production potential with extensions of existing fields, and there are large known reserves — both 'unconventional', including shale in North America and heavy oil in Canada and Venezuela, and 'conventional' in countries including Saudi Arabia, Iran, Iraq and the United Arab Emirates. The weakness of new discoveries increases the need for production from those sources to rise if, as expected, global demand for oil continues to increase. The shale boom has transformed the outlook for oil in the US, and played a critical role in creating the oversupply that led to the collapse in prices, but it is still relatively small on a global scale, Mr Jackson said, accounting for about 5 per cent of world oil production. There are also very large shale oil reserves in countries including Russia, China, Argentina and Libya, but the industries there are still in their infancy. Shale is also a relatively high cost source of oil compared with reserves in the Middle East, and requires higher crude prices to be commercially viable. Mr Jackson said that with crude prices around their present levels, it would be 'very difficult' to start up new shale production projects."
Discoveries of new oil and gas reserves drop to 20-year low
Financial Times, 15 February 2015

"Energy consumption in the European Union has fallen to levels last seen more than two decades ago, statistics published on Monday showed. The dramatic drop in annual consumption – in 2013, the year to which the new research applies, it was down by more than 9% from its 2006 peak – reflects in part the continuing economic troubles in the eurozone, but also efforts taken by member states and businesses to cut energy use and improve efficiency. Despite the plunge, Europe remains heavily dependent on fuel imports, with more than half of energy needs supplied by production from abroad, including the Middle East and Norway. Under oil prices at the time, that amounted to a cost of more than €400bn (£297bn) in imports in the year in question, but that figure is now volatile owing to the effects of a sharply lower oil price and the exchange rate of the Euro. The UK was one of the least dependent on imports of the biggest member states, buoyed by its offshore fossil fuel supplies, with 46.4% of primary energy coming from overseas. That relative independence is likely to be eroded further in future years, however, as the North Sea supplies of oil and gas are dwindling fast. France, where nuclear reactors supply the vast majority of electricity needs, was also less dependent than the average, at 48% of supplies imported. By contrast, about 63% of Germany’s energy came from outside, and 77% of Italy’s. Nuclear power accounted for the biggest slice of the EU’s own generation of electricity, with 29% of production. Just behind came renewable sources of energy, which in total generated just under a quarter of homegrown power."
EU energy consumption level falls to 20-year low
Guardian, 9 February 2015

"Claims that nuclear power is a 'low carbon' energy source fall apart under scrutiny, writes Keith Barnham. Far from coming in at six grams of CO2 per unit of electricity for Hinkley C, as the Climate Change Committee believes, the true figure is probably well above 50 grams - breaching the CCC's recommended limit for new sources of power generation beyond 2030.... When comparing the carbon footprints of electricity-generating technologies, we need to take into account carbon dioxide emitted in all stages in the life of the generator and its fuel. Such a study is called a life cycle analysis (LCA). There are other gases such as methane that are more dangerous greenhouse gases than carbon dioxide. The most reliable LCAs take all greenhouse gases into account and present equivalent carbon dioxide emissions. In a recent paper in Energy Policy, Daniel Nugent and Benjamin Sovacool critically reviewed the published LCAs of renewable electricity generators. All the renewable technologies came in below the 50 gCO2/kWh limit. The lowest was large-scale hydropower with a carbon footprint one fifth of the CCC limit (10 gCO2/kWh). A close second was biogas electricity from anaerobic digestion (11 gCO2/kWh). The mean figure for wind energy is 34 gCO2/kWh, and solar PV comes in a shade under the 50g limit, at 49.9 gCO2/kWh. Bear in mind that rapidly evolving PV technology means that this last figure is contantly falling..... I have reviewed the LCAs of all the light water reactors and pressurised water reactors that passed the selection procedures of either the Sovacool or the Warner-Heath meta-analyses. I have further refined their selection by excluding any LCA that does not estimate a carbon footprint for all five stages of the life cycle. Only eight LCAs survive. The figure shows the carbon footprints of the eight LCAs that pass this more rigorous test. All eight LCAs considered different assumptions that resulted in a range of estimates for the carbon footprints indicated by the vertical error bars. The circles show the average carbon footprint in the range of estimates. The most important point to notice in the figure is that four of the circles fall below the horizontal broken line at 50 gCO2/kWh and four above. Half the most rigorous of the published LCAs are below the CCC limit and half are above. The conclusion from the eight most rigorous LCAs is therefore that it is as likely that the carbon footprint of nuclear is above 50 gCO2/kWh as it is below. The evidence so far in the scientific literature cannot clarify whether the carbon footprint of nuclear power is below the limit which all electricity generation should respect by 2030 according to the CCC.... Nuclear fuel preparation begins with the mining of uranium containing ores, followed by the crushing of the ore then extraction of the uranium from the powdered ore chemically. All three stages take a lot of energy, most of which comes from fossil fuels. The inescapable fact is that the lower the concentration of uranium in the ore, the higher the fossil fuel energy required to extract uranium. Table 12 in the Berteen paper confirms the van Leeuwen result that for ore with uranium concentration around 0.01% the carbon footprint of nuclear electricity could be as high as that of electricity generation from natural gas. This remarkable observation has been further confirmed in a report from the Austrian Institute of Ecology by Andrea Wallner and co-workers. They also point out that using ore with uranium concentration around 0.01% could result in more energy being input to prepare the fuel, build the reactor and so on, than will be generated by the reactor in its lifetime. According to figures van Leeuwen has compiled from the WISE Uranium Project around 37% of the identified uranium reserves have an ore grade below 0.05%. A conservative estimate for the future LCA of nuclear power for power stations intended to continue operating into the 2090s and beyond would assume the lowest uranium concentration currently in proven sources, which is 0.005%. On the basis that the high concentration ores are the easiest to find and exploit, this low concentration is likely to be more typical of yet to be discovered deposits. Using 0.005% concentration uranium ores, the van Leeuwen, Berteen and Wallner analyses agree a nuclear reactor will have a carbon footprint larger than a natural gas electricity generator. Also, it is unlikely to produce any net electricity over its lifecycle."
False solution: Nuclear power is not 'low carbon'
Ecologist, 5 February 2015

"In the past week drillers idled 98 rigs, marking the 10th consecutive decline. The total U.S. rig count is down 30 percent since October, an unprecedented retreat. The theory goes that when oil rigs decline, fewer wells are drilled, less new oil is discovered, and oil production slows. But production isn't slowing yet. In fact, last week the U.S. pumped more crude than at any time since the 1970s. 'The headline U.S. oil rig count offers little insight into the outlook for U.S. oil production growth,' Goldman Sachs analyst Damien Courvalin wrote in a Feb. 10 report. ... Why is this happening? For one thing, both the rigs and the oil wells are becoming more productive. Producers are getting better at blasting oil and gas out of the ground. The rigs that are being idled tend to be the older machines, and the most effective rigs are being concentrated on the most-productive oil fields. 'The relationship between rigs and energy production disconnected in 2008,' Eric Kuhle, a Wood Mackenzie analyst covering oil and gas in North America, told Bloomberg News reporter Lynn Doan. 'We see oil production growth slowing, but not declining.'"
This Chart Shows Why the Number of Oil Rigs May Not Matter Anymore
Bloomberg, 13 February 2015

"New U.S. oil production capacity for February is down 9 percent from last month, even though the number of new wells was down 20 percent, according to Drillinginfo data released this week. For example, in West Texas' Permian Basin, the number of new wells in February fell 26 percent compared to the month before, while new production capacity only declined 10 percent. The reason? The drop in new wells 'came almost entirely from vertical wells, which are much less productive than horizontal wells.'  Advances in horizontal drilling, along with hydraulic fracturing, are credited with the boom in U.S. production from dense shale formations. Lipow said that while producers are cutting back on onshore drilling this year, measures over the past few years to reduce costs and increase efficiencies will mean 'the decline in the growth rate of oil is less than the market expects.' North Dakota's oil production broke records in December, growing to nearly 1.2 million barrels a day, even though rigs in the region continued to go silent and crude prices fell, according to North Dakota's Department of Mineral Resources."
Rig count drops again; oil output likely won't
Houston Chronicle,13 February 2015

"BP and Royal Dutch Shell are in danger of making a strategic error should they decide to walk away from a historic oil deal with Abu Dhabi, which has provided the commercial foundations for Britain’s broader relationship with the sheikhdom. Negotiations have dragged on for more than a year and now appear to have reached an impasse over the emirate’s demands for upfront payments. The money amounts to about $7bn (£4.5bn) for rights to operate some of the world’s biggest onshore oilfields including Bu Hasa, Bab and Asab. At stake is rare upstream access to the deserts of Abu Dhabi, which hold close to 6pc of the world’s proven oil reserves, and Britain’s overall political and business influence in one of the region’s most potent sheikhdoms. To complicate the already fraught talks, the outlook for oil prices remains at best volatile over the short term and potentially bleak further ahead. Although the price of a barrel of Brent crude rallied back above $60 per barrel this week, oil majors such as Shell and BP remain profoundly sceptical that this represents the early shoots of any kind of spring recovery.... Britain’s entire relationship with Abu Dhabi has arguably been built on access to oil. As early as the 1930s, the Foreign Office was determined to ensure that British companies would have a virtual monopoly to explore and develop oilfields thought to exist in the strip of Arabia known then as the Trucial States. Abu Dhabi granted its first oil concession in 1939 to the British-controlled Trucial Coast Development Company. In 1953, D’Arcy Exploration, a forerunner of the conglomeration of companies that would eventually morph into today’s Shell, was granted the first contract to search for oil offshore in its coastal waters. It would eventually see rig platforms replace pearl fishing 'dhows' which had been the mainstay of the Bedouin economy."
Britain's ties with Abu Dhabi threatened by oil deal deadlock
Telegraph, 13 February 2015

"One of Norway’s biggest-ever oil projects edged closer to production Friday, a field of rare size and potential that officials said could be profitable even if crude prices fall further. The Johan Sverdrup field in the North Sea will start pumping oil by 2019 under a plan presented by Statoil AS A and its partners to the Norwegian government on Friday. The field is among a handful of 'elephants'—fields exceeding one billion barrels of recoverable resources—found globally each year. It is estimated to hold between 1.7 billion and 3 billion barrels. 'This is a monster,' C. Ashley Heppenstall, chief executive of Lundin Petroleum AB, one of the project’s partners, told The Wall Street Journal. 'In a $50 oil price environment, Johan Sverdrup is probably one of the very few projects which will go ahead, globally.' Even as oil companies including Statoil slash their capital spending as crude prices flounder near 5½-year lows, Johan Sverdrup has demonstrated potential for big profits, analysts said. Statoil has said Johan Sverdrup would be the only major project to get the go-ahead this year because of lower oil prices and spending cutbacks. 'This plan represents the most extensive development of any oil field on the Norwegian continental shelf since the big giants in the 1980s,' Statoil Chief Executive Eldar Sætre told an Oslo news conference Friday. 'The field has robust economics with a break-even price at below $40 per barrel.'.... Statoil said the field’s crude could be profitable even if the oil price were to fall to $40 a barrel. The Brent crude benchmark was trading at about $61 on Friday afternoon, up about 3.1% on the day. Norwegian oil projects usually require prices at between $40 and $70 a barrel to make a profit. Statoil last week said 14 other planned projects, including assets in Norway, Tanzania and the U.S., risk delays at current oil prices. Johan Sverdrup’s potential stems from the high quality of its oil and its location in shallow waters near existing infrastructure, as well as its sheer size. Discovered in 2010, Johan Sverdrup will be a cornerstone of Norway’s oil production, contributing about 40% of the country’s total crude output in the 2020s, Statoil said.'
Giant Oil Field Spells Promise for Statoil
Wall St Journal, 13 February 2015

"Experts point to two major factors helping the [Russian] companies in a low-price environment: Moscow's tax rate on producers shifts lower as the price of oil falls (meaning the cost is mostly borne by the state), and most of the oil companies' expenses are denominated in rubles. Together, those factors largely offset any negative impact from oil prices, Goldman Sachs energy analyst Geydar Mamedov wrote in a recent note. 'The currency point is key: Russian energy companies' expenditures are largely conducted in rubles because there is a strong local oilfield services sector, and their revenues are dollar-denominated. So as the Russian currency has fallen against the dollar, the firms have been nearly totally insulated from oil's price decline."
Falling oil prices don't scare Russian energy firms
CNBC, 13 February 2015

"In recent weeks, the market has shifted its attention from cratering crude prices to the falling number of rigs operating in American oilfields. But in the coming months, the very life cycle of many of those wells may have many market watchers concerned about output and price stability, experts told CNBC. Oil wells whether conventional or unconventional reach peak production soon after they yield the first drop of crude. The difference is how quickly they enter decline.  Conventional wells go through a long period of steady, flat production between peak and decline. In contrast, production falls rapidly in the first three years of unconventional wells those in shale, sandstone and carbonates. They then enter a long phase of very low production.   In order to even keep production steady across an unconventional oilfield, producers must constantly drill new, high-producing wells. Now they're cutting back on exploration, and many investors and energy companies do not fully appreciate how many new wells producers will have to drill in order to get production back to where they were, said Michael Rowe, vice president of exploration and production research at Tudor Pickering Holt. On Tuesday, the International Energy Agency projected that oil supplies will continue to increase throughout this year. But in fact, oil supplies and prices may be much more volatile over the coming couple years, said Murray Olson, a former geological engineer and co-founder of Calgary-based Northern Blizzard Resources. 'These rapid changes in the price of oil will be a feast-and-famine set of economic consequences for the next few years, with much instability,' Olson said. For the last nine years, American oil production has only climbed, growing steadily from 5 million barrels per day in 2005 to 8.6 million last year. Drillers in the top seven U.S. shale plays get 43 to 64 percent of the oil out of their wells in the first three years of pumping, according to research by David Hughes, a fellow at the Post Carbon Institute. In reports published in 2013 and 2014, Hughes has said that the U.S. Energy Information Administration's long-term oil output projections are overly optimistic. The problem at present is that so-called 'tight oil' drillers are cutting capital expenditure budgets, and creating new wells is a front-loaded investment. Nearly all of the costs come in the first two phases: drilling for exploration and hydrofracking, the process of pumping a mixture of water and chemicals into the ground to break up rock formations and release oil and gas. The number of rigs drilling new oil and gas wells in the United States has fallen 25 percent from the highs in September. The slide has accelerated in the last two weeks, with another 177 rig reductions, bringing the total number of operating rigs to 1,456. To be sure, some new wells have been drilled, but producers have delayed fracking them. In its most recent report, the North Dakota Industrial Commission pointed out that 775 drilled wells in the state's Bakken Shale were waiting to be completed at the end of November. While some of the wells were not being completed due to a backlog of work for fracking crews, some companies have made the strategic decision to put off the investment in the second phase, Hughes told CNBC. However, they've already drilled many of the most economic wells. Currently, exploration and production companies are 'high-grading,' or moving rigs from marginal parts of their portfolios to areas with more economical wells. In the medium term, they will have to start drilling the less economical wells, Hughes said. That means their break-even prices will only get higher over time.  'The wells don't get any cheaper when you drill in a poor location,' Hughes said. 'As the sweet spots become saturated, the amount of money you have to spend to keep the production rate flat goes up.'  Hughes estimates that drillers have worked their way through only about a quarter of the Bakken but said they have tapped about three-quarters of its sweet spots. The Energy Information Administration projects that average production will continue to grow in 2015, reaching 9.3 million barrels per day and then slow to 9.5 million barrels per day in 2016. Hughes thinks U.S. producers could come close to the estimate this year, but average production in 2016 will fall short and come in below 2015 output.  Cutbacks in the U.S. oil patch show that Saudi Arabia's poker game will be successful in the next few quarters, Olson said. In November, the world's top oil exporter declined to agree to output cuts that other OPEC members sought in order to put a floor under oil prices.  Instead, the Saudis have resolved to let crude prices remain low, which squeezes high-cost production in the United States.  'Their production is more convention, so they have lesser declines to deal with and more ability to put low-cost production on quickly,' Olson said. 'They are holding the cards.'"
The looming threat to American oil output
CNBC, 12 February 2015

"A well in the Eagle Ford shale formation of south Texas last year took on average less than nine days to drill for EOG Resources, and 13 days for Marathon Oil. A deepwater well in the Gulf of Mexico, by contrast, will take months. Shale wells also typically deliver most of their output in their first year of production, so short-term prices are more important than for conventional fields that decline much more slowly. That has meant the oil industry has reacted to low prices faster in the US onshore than in any other region. From their peaks in October, the numbers of rigs drilling for oil in Eagle Ford and the Permian basin in west Texas have dropped 27 per cent, while the number in the Williston basin in North Dakota has dropped 32 per cent. Over the same period, the number drilling for oil in the US Gulf of Mexico has dropped just 14 per cent. But while drilling has dropped off faster in shale than anywhere else, it does not necessarily follow that it will also rebound more quickly.... One theoretical obstacle to a bounce back in shale, the exhaustion of all the most productive locations, appears not be a real issue, at least for the time being. The drilling productivity data published by the US Energy Information Administration show that oil production per rig from new wells has continued to rise steadily in the three main shale oil areas: the Bakken of North Dakota, the Eagle Ford and the Permian basin. There is a more significant threat, though, in the shale industry’s need for financing. Even with crude at $100-plus, the US exploration and production sector overall was running a substantial cash deficit. Companies funded their drilling programmes with a steady inflow of capital. As Philip Verleger has pointed out, financial markets were as critical to the US shale boom as the industry’s knowledge base, the ownership of mineral rights, the installed infrastructure or supportive government regulation. In the eight years 2007-14, the US exploration and production sector raised $95bn in equity, $206bn in bonds and $574bn in syndicated loans, according to Dealogic. If that flow of capital were to dry up, then the shale industry would quickly run out of fuel. While some investors have clearly taken fright at the slump in crude prices, as reflected in share and bond prices, others such as private equity have not. Even so, there must be a real possibility that once burnt, investors will be wary of putting their hands back into the fire. If they are, the rebound in US crude production will be slower, and future oil markets will be tighter, than many people currently expect."
Reasons to doubt US shale oil rebound
Financial Times, 12 February 2015

"The surge in US shale oil production over the past five years has been truly phenomenal, but the notion that it was ushering in a new age of global oil abundance was always overdone and is looking more exaggerated by the day. One need only look at the trend in the number of rigs drilling for oil in the US as published weekly in the benchmark Baker Hughes survey to see that the shale oil industry is now in severe crisis. The rig count is a leading indicator of US supply, and given the dramatic cutbacks in capital expenditure announced by shale oil operators in the past couple of months in response to tanking oil prices, it is one of the most closely watched indicators in world oil markets at the moment.... The reason this matters is that US shale oil has been the main driver of global supply growth in the past few years. It has increased by 4.1m barrels per day in the past six years to reach 4.7m b/d in 2014 from only 0.6m b/d in 2008. Indeed, without US shale oil, global crude oil output would have been lower in 2014 than it was in 2005. ... Based on the preliminary 2014 supply data provided by the US Energy Information Administration in its most recent Short Term Energy Outlook, the total world crude oil supply increased by 3.5m b/d over 2005-14, rising to 77.3m b/d from 73.8m b/d. However, if we strip out the impact of rising production from US shale oil, the global crude oil supply actually declined by around 1m b/d over this period, to 72.6m b/d from 73.5m b/d. In turn, this means the outlook for continuing growth in global crude oil output in the next few years depends crucially on the outlook for continuing growth in US shale oil production. And that is a problem as the decline rates of shale oil wells are much higher than for conventional oil wells, which means a large number of new wells must be drilled every year simply to offset natural decline. This drilling treadmill gives rise to a capex treadmill, whereby constant infusions of new capital are required to enable the drilling to continue.  The implications of shale oil’s treadmill dynamics have until now been largely overlooked by the market, but are well understood by Saudi Arabia. Ultimately it is the Saudi policy to maintain production in the face of a supply glut estimated at 1.5m-2m b/d that has caused the 50 per cent drop in oil prices in recent months and thereby prompted the sharp drop in the US rig count. The Saudis and their Gulf Opec allies realise that the high cost nature of shale oil production requires high prices to keep the drilling treadmill in motion. They calculate that a period of much lower prices will expose the fundamental vulnerability of the shale oil model, thereby prompting a reappraisal. And that is arguably what is now beginning to happen, with Brent, the international benchmark, up 20 per cent since the catalyst provided by the rig-count data of January 30. After such a rapid bounce there is probably not much further price upside in the short term, as the current oversupply remains large and US shale oil production will probably continue to grow for the next three to four months given the price hedges in place and the backlog of wells still waiting to be completed. However, once the impact of a dramatically lower rig count starts feeding through into shale oil supply from the middle of the year, prices should start to rally on a more sustained basis, with Brent likely to be back at $75 a barrel by year-end. The shale model simply does not work without high prices, and the market is starting to understand that."
US shale oil boom masks declining global supply
Financial Times, 11 February 2015

"Britain’s growing dependence on foreign oil and gas has been laid bare in damning new EU figures. In just over 10 years, the UK has gone from exporting oil and gas to being dependent for almost half its energy. The rapid increase in energy dependence is the worst across the whole of the European Union. In 2002 the UK produced 112.3 per cent of the energy homes and businesses used. But by 2013, the latest figures published by the EU, Britain was only meeting 53.6 per cent of its energy needs. Two thirds of the other countries in the EU, including rival economies like France and the Netherlands, have managed to cut their reliance on imported energy. Only Denmark has seen a similar spike in oil and gas imports to Britain.... Dan Lewis, Senior Infrastructure Adviser at the Institute of Directors, attacked the Government's failure to replace failing North Sea oil and gas reserves. He said: 'These figures show the cost of refusing to be realistic about our energy policy. 'Years of dithering and indecision mean that we’re way behind with replacing our nuclear plants, renewables are intermittent and have been able to meet about one sixth of our electricity needs at best, so all that's left is fossil fuels. That means prioritising the cleanest, gas. 'Luckily, we have significant shale gas resources in the UK. If we don’t embrace fracking we will be throwing away jobs, tax revenues and a source of raw material for our manufacturing industries.'"
How Britain is now dependent on foreign regimes for HALF its energy needs just 10 years after exporting oil and gas
Mail, 10 February 2015

"U.S. oil rigs continued to get crushed this week despite record levels of production. Drillers idled 83 rigs, following a decline of 94 rigs in the prior week, Baker Hughes reported Friday. The total U.S. rig count is down 25 percent since October, an unprecedented four-month retreat. The collapse in oil prices is wiping out more than 30,000 oil jobs, according to a tally of announced layoffs by Bloomberg News. Cowen & Co. estimates that spending on exploration and production are declining more than $116 billion, a 17 percent decline. The oil crash hasn’t yet shown up in U.S. jobs numbers, and American oil production is at the highest level for this time of year since at least 1983. Still, there’s mounting anecdotal evidence of an industry in distress, and the rig counts appear to be in free fall."
Cheap Oil Continues to Hammer U.S. Oil Rigs
Bloomberg, 6 February 2015

"Crude oil will likely continue falling before posting only a mild recovery in the second half of this year, a Reuters survey of analysts showed on Friday, with prices set to average even less in 2015 than during the global financial crisis. The survey of 33 economists and analysts forecast North Sea Brent crude would average $58.30 a barrel in 2015, down $15.70 from last month's poll, in the biggest month-on-month forecast revision since prices last collapsed in 2008-2009."
Oil price will average less in 2015 than during financial crisis, survey finds
Reuters, 31 January 2015

"Oil prices roared back from six-year lows on Friday, rocketing more than 8 percent as a record weekly decline in U.S. oil drilling fueled a frenzy of short-covering. In a rally that may spur speculation that a seven-month price collapse has ended, global benchmark Brent crude shot up to more than $53 per barrel, its highest in more than three weeks in its biggest one-day gain since 2009. The late-session surge was primed by Baker Hughes data showing the number of rigs drilling for oil in the United States fell by 94 - or 7 percent - this week. Earlier gains were fueled by reports of Islamic State militants striking at Kurdish forces southwest of the oil-rich city of Kirkuk.... According to Baker Hughes, the decline in oil drilling rigs was the most since it began keeping records in 1987. With drillers having idled about 24 percent of their oil drilling rigs since the summer, some traders may be betting that an anticipated slowdown in U.S. oil production is nearer than expected."
Oil surges 8 pct as U.S. rig count plunges, shorts scramble
Reuters, 30 January 2015

"Ethanol was supposed to do a lot for the US. It was supposed to help reduce our dependence on foreign oil. It was supposed to combat climate change. It was supposed to be a gateway for more renewable fuels technology. It was supposed to reduce gasoline prices because it was cheaper. So when Congress mandated in 2005 that 10% of the nation’s fuel supply had to be blended with ethanol, which is derived from corn, there were some idealistic hopes that renewable fuels would wean us off fossil fuels. It hasn’t worked that way. The US is reducing its dependence on foreign oil, but not because of ethanol. It’s because we’re pumping more of our own oil here, thanks to fracking. It hasn’t led to more research and development of advanced biofuels. Instead, we’re putting nearly 40% of the US corn crop in our gas tanks, which some argue pushes up food prices.  And lately ethanol is not even a cheaper alternative to gasoline. Since mid-December, ethanol prices have risen above reformulated gasoline prices because of the sharp drop in crude-oil and gas prices, along with a rise in corn prices."
Energy hypocrisy: Ethanol isn't a good fuel, but it's not going away anytime soon
Guardian, 28 January 2015

"According to academics from the Universities of Portsmouth, Warwick and Essex, foreign intervention in a civil war is 100 times more likely when the afflicted country has high oil reserves than if it has none. The research is the first to confirm the role of oil as a dominant motivating factor in conflict, suggesting hydrocarbons were a major reason for the military intervention in Libya, by a coalition which included the UK, and the current US campaign against Isis in northern Iraq. It suggests we are set for a period of low intervention because the falling oil price makes it a less valuable asset to protect. 'We found clear evidence that countries with potential for oil production are more likely to be targeted by foreign intervention if civil wars erupt,' said one of the report authors, Dr Petros Sekeris, of the University of Portsmouth. 'Military intervention is expensive and risky. No country joins another country’s civil war without balancing the cost against their own strategic interests.' The report’s starkest finding is that a third party is 100 times more likely to intervene when the country at war is a big producer and exporter of oil than when it has no reserves. 'After a rigorous and systematic analysis, we found that the role of economic incentives emerges as a key factor in intervention,' said co-author Dr Vincenzo Bove, of the University of Warwick. 'Before the Isis forces approached the oil-rich Kurdish north of Iraq, Isis was barely mentioned in the news. But once Isis got near oil fields, the siege of Kobani in Syria became a headline and the US sent drones to strike Isis targets,' he added. The study, published in the Journal of Conflict Resolution, analysed 69 civil wars between 1945 and 1999, but did not examine foreign invasions. It noted that civil wars have made up more than 90 per cent of all armed conflicts since the Second World War and that two-thirds of these have seen a third-party intervention." The researchers drew their conclusions after modelling the decision-making process of the third-parties’ interventions. This assessed a wide range of factors such as their military power and the strength of the rebel army, as well as their demand for oil and the level of supplies in the target country. It found that the decision to intervene was dominated by the third-party’s need for oil, far more than historical, geographic or ethnic ties. The US maintains troops in Persian Gulf oil producers and has a history of supporting conservative autocratic states in spite of the emphasis on democratic reform elsewhere, the report says. However, the recent surge in US oil production suggests the country will be intervening less in the future – with China potentially taking up the role as lead intervener, the report suggests." Britain intervened in the Nigerian Civil War, also known as the Biafran War, between 1967 and 1970. During this period the UK was one of the biggest importers of oil in the world, with North Sea oil production only starting in 1975. BP’s presence in the oil-rich eastern region of the country meant stability in the area was of critical importance. The invasion of Iraq in 2003, led by the US and the UK, wasn’t covered in the research because it wasn’t a civil war. However, the report notes previous claims that a thirst for oil was 'the alleged ‘true’ motivation of the US invasion of Iraq'. David Cameron was instrumental in setting up the coalition that intervened in Muammar Gaddafi’s Libya in 2011, a country with sizeable oil reserves.  Britain watched on as Sierra Leone’s Revolutionary United Front, with support from Charles Taylor’s National Patriotic Front of Liberia, attempted to overthrow Joseph Momoh’s government. The resulting civil war lasted 11 years (1991 to 2002) and enveloped the country, leaving more than 50,000 dead. The UK also opted not to intervene in the Rhodesian Bush War between 1964 and 1979 – a three-way battle between the Rhodesian   government, the military wing of Robert Mugabe’s Zimbabwe African National Union and the Zimbabwe People’s Revolutionary Army. More recently, the UK failed to take action in Syria, another country suffering at the hands of a dictator – but with little in the way of oil reserves."
Intervention in civil wars ‘far more likely in oil-rich nations’
Independent, 28 January 2015

"For the first time this century China’s coal consumption has fallen, according to preliminary data from both the Chinese Coal Industry Association and the National Energy Administration. The amount by which coal use declined last year remains an open question, with the Coal Industry Association reporting a reduction of around 3.5% but NEA data showing a fall of only 0.4%."
China’s coal consumption fell in 2014
Greenpeace, 26 January 2015

"OPEC’s secretary-general said oil prices as high as $200 a barrel is possible if there’s a lack of investment in new supply. 'If you don’t invest in oil and gas, you will see more than $200,' Abdullah Al-Badri said in an interview in London Monday. Brent, the global benchmark, erased an earlier 2.5 percent decline, trading as high as $48.94 in London. Crude oil prices collapsed almost 50 percent last year as Saudi Arabia and other members of the Organization of Petroleum Exporting Countries said they won’t curb output in response to a surplus. That excess is 1.5 million barrels a day, Al-Badri said. Oil prices turned positive on Monday, erasing early losses after the Secretary-General of the OPEC producer group said he expected the market to bottom out around current levels. March Brent crude LCOc1 was trading at $49.13 per barrel by 1317 GMT, up 34 cents, bouncing from an early low of $47.57. "Now the prices are around $45-$55 and I think maybe they reached the bottom and will see some rebound very soon," Al-Badri said."
OPEC chief: Oil at $200 possible with lack of investment
Saudi Gazette, 26 January 2015

"British banks including Royal Bank of Scotland and Barclays may be sitting on billions in losses from the collapse in oil prices after a surge in junk loans to the industry. UK banks have been behind more than $50bn of leveraged loans — high-yield, non-investment grade debt — to the oil and gas industry in the past four years, according to data from Dealogic. Although British lenders are not the most exposed to the oil collapse, with most debt issuance arranged by US and Canadian institutions, leveraged loans arranged by UK lenders have more than doubled since 2011 amid the North American shale boom. The price of Brent crude has slumped from $110 a barrel last summer to $48.91 on Friday, amid a glut in supply and falling global demand. While low prices are likely to give a shot in the arm to consumers and manufacturers, many oil producers, particularly in America’s shale gas fields, are likely to be driven out of business. A lengthy period of cheap crude is likely to trigger widespread defaults and many oil and gas loans are now changing hands for well below their face value as investors fear they will not get their money back. Banks will offload many of the loans and hedge their losses, and some will have stricter lending standards for high-yield loans than others. Losses will also depend on how long the oil price stays low, so it is unclear precisely how exposed the banks are to the energy industry’s woes. Some lenders have privately indicated that they consider the oil price fall to have a positive impact, with the wider economic benefits offsetting the loans they are writing off. However, significant losses are seen as inevitable if prices fail to rebound."
Oil collapse could trigger billions in bank losses
Telegraph, 24 January 2015

"When Russia canceled a planned pipeline to deliver natural gas to Europe across the Black Sea last month and said it would redirect the project to Turkey, some thought it was a bluff, others a sign of financial weakness and still others a rebuke to the West over Ukraine as President Vladimir Putin turned elsewhere to look for new partners. In reality, the change made good commercial sense and should have happened years ago, according to a new report by some of the most knowledgeable people on Russia's gas industry. The shift also means that Gazprom, Russia's state-controlled gas company, won't be able to completely cut Ukraine out of the transit business, as the original South Stream pipeline had sought to do, for years to come. And, the authors might have added, the new arrangement is healthier for Europe, too. The cancellation of South Stream is part of a broader change of strategy for Gazprom that plays to the company's strengths, say Jonathan Stern, Simon Pirani and Katja Yafimava at the Oxford Institute for Energy Studies. The previous strategy to acquire distribution networks deep in EU markets. And while the report's authors are more cautious, this was also in part politically motivated. It was meant to exert Russian political power as much as to make profits for Gazprom, which is one reason the European Union drew up regulations to obstruct it. South Stream was expensive -- conservatively priced at about $20 billion and by some estimates as much as $65 billion. It never made commercial sense, even when EU demand for gas was projected to soar and Gazprom controlled prices by negotiating separate long-term contracts with individual buyers. Today, Gazprom faces new price competition from spot markets at gas hubs around the EU. Plus, new EU rules -- some still being written -- would force Gazprom to open up its European pipelines to other suppliers and distributors. The Ukraine crisis prompted EU officials to move aggressively against South Stream for not complying with the new rules. And collapsing oil prices (to which long-term gas contracts are tied) made the economics of South Stream look even worse. Eventually, Gazprom pulled the plug. The company then proposed redirecting the pipeline project to Turkey, its second-largest customer in Europe and the only European market projected to grow strongly. The gas Turkey now gets via Ukraine would come direct from Russia. And any additional amounts could be taken to a hub at Turkey's EU border and sold. Nevertheless, Gazprom would still need to send substantial amounts of gas to Europe through Ukraine until at the very least 2020, according to the Oxford report. It's by now clear that Gazprom's pivot to Turkey was not a bluff, even if negotiations on price and the pipeline's route continue. Gazprom has already allocated resources to the Turkish project. Nor was the South Stream decision based only on cost. That couldn't explain why Gazprom hired two barges and 200 personnel to start laying pipes on the seabed, Stern and his team said."
Putin's New Gas Strategy Actually Makes Sense
Bloomberg, 22 January 2015

"Oil drillers will begin collapsing under the weight of lower crude prices during the second quarter and energy explorers who employ them will shortly follow, according to Conway Mackenzie Inc., the largest U.S. restructuring firm. Companies that drill wells and manage fields on behalf of oil producers will be the first to fall after the benchmark American crude, West Texas Intermediate, lost 57 percent of its value in seven months, said John T. Young, whose firm led the city of Detroit through its 2013 bankruptcy. Oil companies have slashed thousands of jobs, delayed billions of dollars in projects and dropped or scaled back expansion plans in response to the prolonged rout in crude prices. For oilfield service providers that test wells and line the holes with steel and cement, the impact of price reductions forced upon them by explorers will start to pinch hard during the second quarter, Young said Thursday.... Young, who has restructured more than a dozen energy companies and advised Kirk Kerkorian’s Delta Petroleum Corp. through its 2011 bankruptcy, is warning drillers to monitor whether the oil producers they work for have protected future cash flows with hedging instruments like swaps and collars. The amount of projected 2015 oil and natural gas output a company has hedged is a strong indicator of whether they’ll be able to pay their bills, he said. Another important metric is how much is drawn on revolver loans, Young said. 'I’m telling them they really have to keep an eye on this stuff and you’ve got to be the squeaky wheel,' he said. 'You’ve got to start filing liens if you see a company starting to go down.' In the U.S., a lien is a legal claim against a debtor’s property to force payment of a delinquent bill. West Texas Intermediate, or WTI in oil-patch parlance, fell 3.1 percent to $46.31 a barrel Thursday in New York. The price has been below $70 since the beginning of December and touched a 5 1/2-year low of $44.20 on Jan. 13. 'When I saw WTI hit $65, I thought we’re going to be really busy with restructurings,' Young said. 'When it hit the $40s, I knew we were looking at outright liquidations.'"
Oil Drillers ‘Going to Die’ in 2Q on Crude Price Swoon
Bloomberg, 22 January 2015

"U.S. drillers have taken a record number of oil rigs out of service in the past six weeks as OPEC sustains its production, sending prices below $50 a barrel. The oil rig count has fallen by 209 since Dec. 5, the steepest six-week decline since Baker Hughes Inc. (BHI) began tracking the data in July 1987. The count was down 55 this week to 1,366. Horizontal rigs used in U.S. shale formations that account for virtually all of the nation’s oil production growth fell by 48, the biggest single-week drop. Analysts including HSBC Holdings Plc say the decline shows that the Organization of Petroleum Exporting Countries is winning its fight for market share and slowing the growth that’s propelled U.S. production to the highest in at least three decades. OPEC’s decision not to curb its output amid increasing supplies from the U.S. and other countries has driven global oil prices down 58 percent since June.    'OPEC’s strategy is working, and it will be obvious in U.S. production by midyear when growth from shale plays will come to a halt,' James Williams, president of energy consulting company WTRG Economics in London, Arkansas, said by telephone Friday. 'You can imagine the impact on any industry from a 50 percent impact on sales.'"
Shale Is Losing to OPEC, to Judge by Mothballed Drilling Rigs
Bloomberg, 17 January 2015

"Royal Dutch Shell and its partner Qatar Petroleum have ditched a $6.5bn (£4.3bn) project in the latest sign of the broadening impact of falling oil and gas prices on the hydrocarbons industry. In a statement on Wednesday, Shell said the decision to abandon the Al-Karaana petrochemicals project "came after a careful and thorough evaluation of commercial quotations from EPC (engineering, procurement and construction) bidders, which showed high capital costs rendering it commercially unfeasible, particularly in the current economic climate prevailing in the energy industry." International oil companies are cutting back on spending aggressively amid a brutal slump in oil prices. Brent has fallen 50pc since July to trade around $46 per barrel as Saudi Arabia and its close allies in the Organisation of the Petroleum Exporting Countries (Opec) seek to win back market share from producers outside the cartel."
Shell ditches $6.5bn Qatar project as oil price slump deepens
Telegraph, 14 January 2015

"For now, the only sign that U.S. crude oil production may shrink is the falling number of operational oil rigs in the U.S. It was down to 1750 last week, 61 less than the week before and four less than a year ago. Oil output, however, is still at a record level. In the week that ended on Jan. 2, when the number of rigs also dropped, it reached 9.13 million barrels a day, a 44-year high. Oil companies are only stopping production at their worst wells, which only produce a few barrels a day -- at current prices, those wells aren’t worth the lease payments on the equipment.  Since nobody is cutting production, the price keeps going down; today, Brent was at $48.27 per barrel and trends are still heading downward. All this will eventually have an impact. According to a fresh analysis by Wood Mackenzie, "a Brent price of $40 a barrel or below would see producers shutting-in production at a level where there is a significant reduction in global oil supply. At $40 Brent, 1.5 million barrels per day is cash negative with the largest contribution coming from several oil sands projects in Canada, followed by the U.S.A. and then Colombia." That doesn't mean that once Brent hits $40 -- and that is the level Goldman Sachs now expects, after giving up on its forecast that OPEC would blink -- shale production will automatically drop by 1.5 million barrels per day. Many U.S. frackers will keep pumping at a loss because they have debts to service: about $200 billion in total debt, comparable to the financing needs of Russia's state energy companies. The problem for U.S. frackers is that it's impossible to refinance those debts if you're bleeding cash. At some point, if prices stay low, the most leveraged of the companies will go belly up, and the more successful ones won't be able to take them over because they will have neither the cash nor the investor confidence that would help them secure debt financing. The insolvencies and lack of expansion will finally lead to output cuts. The U.S. Energy Information Administration still predicts that U.S. crude production will average 9.3 million barrels a day, 700,000 barrels a day more than in 2014. But if Brent goes to $40, that forecast goes out the window. It's probably overoptimistic even now."
America's Going to Lose the Oil Price War
Bloomberg, 12 January 2015

"North Sea oil and gas companies are to be offered tax concessions by the Chancellor in an effort to avoid production and investment cutbacks and an exodus of explorers. George Osborne has drawn up a set of tax reform plans, following warnings that the industry’s future of the industry is at risk without substantial tax cuts. But the industry fears he will not go far enough. Oil & Gas UK, the industry body, is urging a tax cut of as much as 30pc and an overhaul of what it says is a complex, unfriendly and outdated tax structure. Mr Osborne asked Treasury officials to work on a new, more wide-ranging package than the 2pc tax cuts he promised in the Autumn Statement last month. The basic tax levy is currently 60pc but can run to 80pc for established oil fields. He plans to open talks with industry leaders this week on new options for the pre-election March Budget.... Industry leaders have presented the Chancellor with a bleak picture of the North Sea outlook after the big falls in the price of crude since the summer, and particularly the impact on the Scottish economy. Mike Tholen, the economics director at Oil and Gas UK, dramatically summed up the situation. 'If we don’t get an immediate 10pc cut, then that will be the death knell for the industry,' he said. The industry sees the 10pc cut as a 'down payment' to be followed by a further 20pc reduction to provide an investment incentive. The speed and scale of the collapse in oil prices, down almost 60pc to below $50 a barrel over the past five months, has forced North Sea operators in a high-cost oil basin to take emergency action. A modest recovery in exploration is almost at a standstill, some projects have been mothballed and cost-cutting programmes accelerated. Oil contract workers’ pay has been slashed by 15pc and redundancy programmes are under review. The industry’s 'rescue' programme is simple, but costly. Allowances, supplementary taxes and other additions have made North Sea taxation one of the most complex in the business."
UK oil firms warn Osborne: Without big tax cuts we are doomed
Telegraph, 11 January 2015

"Three of the UK’s most closely watched junior oil and gas exploration and production companies are due to provide the first snapshot of how the industry is struggling to adjust to a 50pc slump in the price of crude over the past year. Premier Oil, Cairn Energy and Tullow Oil will update the market on trading this week. Amid an operating environment in which Brent crude would be trading at about $50 (£33) per barrel, with no sign of a rebound, the three firms have seen about £4.2bn wiped off their market value since the slide began, prompting downgrades and speculation of potential takeover bids. 'If the sector wasn’t able to sustainably outperform in a high-price environment then the next two years could be a struggle,' said UBS analysts in a recent note on to investors on the European oil and gas sector."
UK oil explorers to reveal plight of falling price on industry
Telegraph, 10 January 2015

"Citing the collapse in global oil prices, U.S. Steel Corp. will idle its plant in Lorain, Ohio, laying off 614 workers, a company spokeswoman said Tuesday. The plant makes steel pipe and tube for oil-and-gas exploration and drilling. With oil prices currently around $50 a barrel, their lowest level since 2009, energy companies have far less incentive to drill for new supply, reducing demand for the plant’s products."
U.S. Steel lays off 614 workers, citing low oil prices
Market Watch, 6 January 2015

"The Government is relying on 'luck' to deliver Britain’s gas supplies and must safeguard national security by building more storage facilities, Charles Hendry, the former energy minister, has warned. Recent low oil and gas prices will hasten the demise of North Sea fields and deter investment in fracking for new shale resources, making the UK more dependent on gas imports even sooner than had been feared, he said. Mr Hendry, the Conservative MP, served as energy minister until 2012. A year later, one of his successors, fellow Conservative Michael Fallon, ruled out intervention to encourage new gas storage, despite Government-commissioned analysis showing it could save consumers £1bn. Britain can hold only about 15 days of gas supplies in long-term storage, compared with about 100 days for European counterparts – a situation the Conservatives pledged in opposition to address. Writing in Monday's The Daily Telegraph, Mr Hendry says that in four of the last nine winters, UK gas storage reserves fell to "disturbingly low" levels – including in 2013 when cold weather pushed the country to 'within hours of running out of gas'. ... Hope that the North Sea could benefit the UK for decades to come 'now looks optimistic' as lower prices make investment the area uneconomic, risking the closure of some fields. 'That in turn would threaten other fields, which rely on a shared pipeline infrastructure,' he said. ... Mr Hendry said: 'This is so central to our national security that we now need to go further and require more capacity to be built. It is an insurance programme, with little downside, and many benefits.'"
UK gas supplies 'relying on luck', former energy minister Charles Hendry warns
Telegraph, 4 January 2015

"Oil supplies in Iraq and Russia surged to the highest level in decades, signaling no respite in early 2015 from the glut that has pushed crude prices to their lowest in five years. Russian oil production rose 0.3 percent in December to a post-Soviet record of 10.667 million barrels a day, according to preliminary data e-mailed today by CDU-TEK, part of the Energy Ministry. Iraq exported 2.94 million barrels a day in December, the most since the 1980s, said Oil Ministry spokesman Asim Jihad. The countries provided 15 percent of the world’s oil in November, according to the International Energy Agency.... Iraq, OPEC’s second-biggest producer, reached a deal with its semi-autonomous Kurdish region last month over the Kurds’ oil exports through Turkey, after years of disagreement on the territory’s right to independently develop its energy resources. The agreement 'looks to have had a positive effect on exports to the north,' analysts at consultants JBC Energy GmbH in Vienna said in a report today. The agreement allows the shipment of as much as 550,000 barrels a day of oil from northern Iraq to the port of Ceyhan on the Mediterranean, along a pipeline to the Turkish border operated by the Kurdistan Regional Government. This includes 300,000 barrels a day from the Kirkuk oilfields in northern Iraq, under the control of Kurdish forces since they moved to repel an offensive by militants from the Islamic State in June. Iraq exported 5.579 million barrels of Kirkuk oil in December, equivalent to about 180,000 barrels a day, Oil Ministry spokesman Jihad said by text message today. That’s more than a six-fold increase from 836,000 barrels in November, according to the Oil Ministry. The Russian production figure is for crude and condensates, an ultralight oil that yields a greater proportion of high-value fuels. Production averaged 10.58 million barrels a day for 2014, also a post-Soviet record. Preliminary data, which didn’t reflect shipments by Gazprom Neft and may be revised, showed a decline in exports. The previous post-Soviet oil production record was 10.64 million barrels a day in October, CDU-TEK data show. It rose above 11.4 million barrels a day in 1987, the Soviet-era peak, data from BP Plc show."
Russia and Iraq Supply Most Oil In Decades Amid 2015 Glut
Bloomberg, 2 January 2015

"Falling world oil prices will hurt countries across the Middle East unless Saudi Arabia, the world's biggest crude exporter, takes action to reverse the slump, Iran's deputy foreign minister told Reuters. Hossein Amir Abdollahian described Saudi Arabia's inaction in the face of a six-month slide in oil prices as a strategic mistake and said he still hoped the kingdom, Tehran's main rival in the Gulf, would respond. Oil prices closed on Wednesday at a 5-1/2 year low, registering their second-biggest ever annual decline after OPEC oil exporters, led by Saudi Arabia, chose to maintain oil output despite a global glut and calls from some of the cartel's members - including Iran and Venezuela - to cut production. 'There are several reasons for the drop of the price of oil but Saudi Arabia can take a step to have a productive role in this situation,' Abdollahian said. 'If Saudi does not help prevent the decrease in oil price ... this is a serious mistake that will have a negative result on all countries in the region,' Abdollahian said in an exclusive interview on Wednesday evening. His comments highlight continued tensions between the Shi'ite Muslim republic and Sunni Muslim kingdom, locked in a battle for regional power and influence despite hopes of rapprochement since the inauguration of Iran's President Hassan Rouhani in August 2013. Abdollahian said Iran would have more discussions with Saudi Arabia about the oil price, both through oil officials at OPEC and through the foreign ministry. He did not give specific details on when any meeting might take place. Saudi Arabia said last month that it would not cut output to prop up oil markets even if non-OPEC nations did so. The Iranian deputy minister also criticized Saudi military involvement in Bahrain, which has been gripped by tension since 2011 protests led by majority Shi'ite Muslims demanding reforms and a bigger role in running the Sunni-ruled country. Abdollahian said Bahraini authorities' continued detention of Shi'ite opposition leader Sheikh Ali Salman would have 'serious consequences' for the government there. Tehran and Riyadh accuse each other of interfering in the pro-Western Gulf island kingdom, one of several countries where their power struggle has played out. They also support opposing sides in wars and disputes in Iraq, Syria, Lebanon and Yemen. Abdollahian dismissed United States efforts to fight Islamic State, also known by its Arabic acronym Daesh, as a ploy to advance U.S. policies in the region.  'The reality is that the United States is not acting to eliminate Daesh. They are not even interested in weakening Daesh, they are only interested in managing it,' he said. The United States and its allies have carried out hundreds of air strikes against Islamic State in Iraq and Syria. Washington has also sent military support to Baghdad's Shi'ite-led government but its role in Syria - where it has called for President Bashar al-Assad to step down - is more limited. Iran has sent Revolutionary Guard commanders to help its Shi'ite and Alawite allies in Baghdad and Damascus battle Islamic State and other Sunni fighters. But Abdollahian denied that Iran conducted aerial attacks on Iraqi sites. 'On the ground, where the U.S. should take serious action, there are no serious actions taking place. The US is not doing anything,' he said, accusing Washington of pursing a contradictory policy towards Islamist militants. 'One day they support Daesh, another day they are against terrorism,' he said. Abdollahian reaffirmed Iran's commitment to Assad, saying the Syrian president must be involved in any political transition aimed at ending more than three years of conflict."
Iran says Saudi Arabia should move to curb oil price fall
Reuters, 1 January 2015


".... 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