2016 Peak Oil And Energy Crisis News Archive

2016

"After soaring for several years and touching off a historic drilling boom across Texas, oil prices peaked in June 2014 at $107 per barrel. The price fell after that, and the oil bust picked up momentum in 2015 as companies went into survival mode. The industry cut billions in spending and laid off tens of thousands of employees. In the Eagle Ford Shale, the 400-mile oil field that makes a lopsided smile across South Texas, oil production dipped from 1.7 million barrels daily in March 2015 to 978,000 in December. The Eagle Ford started 2016 with 71 working drilling rigs, fell to a low of 29 in May, and ended the year with 46, according to the oil field services company Baker Hughes. But drillers in South Texas spent much of 2016 on the sidelines while the drama played out in another part of the state - the Permian Basin in West Texas - and in Vienna, where the Organization of the Petroleum Exporting Countries holds its meetings. As prices headed toward $50 a barrel, companies focused on the productive Permian, where they could extract oil at a profit at that price. The immense oil field in West Texas and eastern New Mexico is now pumping around 2 million barrels daily. The Permian now accounts for 264 rigs, which equates to more than 50 percent of all the nation's operating oil rigs. The next most active area is the Eagle Ford Shale, according to Baker Hughes. An OPEC deal in November to trim oil production sent prices higher, boosting drillers in both South and West Texas. The deal would remove about 1.2 million barrels per day from the world market by January - the rough equivalent of taking the entire Eagle Ford off-line, or half of the Permian Basin. Much has been made about the showdown between OPEC, the world's traditional swing producer, and the upstart U.S. shale producers, who added 5 million daily barrels to world production in a handful of years. Both OPEC and U.S. producers have suffered during the bust in oil prices, which started in late 2014. Oil's ride down started in earnest around Thanksgiving 2014 when OPEC met and declined to cut production. Instead, member countries pumped more and started to compete with each other for market share. Since then, Saudi Arabia has been spending down its financial reserves. Venezuela has been on the verge of economic collapse, with food shortages and electricity blackouts. North Dakota lawmakers sliced 10 percent from their budget. Alaska's governor cut in half the annual oil dividend that goes to residents. In Texas, oil and gas companies slashed more than 100,000 jobs. But Houston energy investment bank Tudor, Pickering Holt & Co. expects to see rising oil prices in 2017. It forecast a price of about $55 per barrel in the first quarter of the year, rising to around $75 by year-end. Simon Flowers, chief analyst at consulting firm Wood Mackenzie, said the OPEC deal was a strong signal to the market, but his firm is less bullish. It forecasts a price of $55 to $60 per barrel in 2017. But those prices, Flowers added, "depend on OPEC being very careful to meet the terms of the agreement." ... Thomas Tunstall, an economic development research director at the University of Texas at San Antonio, said that if oil can reach $55 and stay in that range for more than a month, "The Eagle Ford, Permian, all of them will start ratcheting up." Tunstall still expects flat to slow growth in the oil fields in 2017. While producers are eager to return rigs to the fields, the risk is that adding too much to the oil supply could depress prices again."
A year of lows for oil, with hope of better days
Houston Chronicle, 30 December 2016

"International analyst firm Wood Mackenzie’ global corporate outlook for 2017 forecasts the oil and gas industry to turn cash flow positive for the first time since the downturn, if OPEC production cuts drive oil prices above $55 per barrel. Tom Ellacott, senior vice president of corporate analysis research at Wood Mackenzie, said: "Most oil and gas companies will start 2017 on a firmer footing, having halved cash flow break evens to survive the past two years. .... Wood Mackenzie forecasts production from the 60 companies covered in its corporate service to grow by an average of 2%, which is impressive given development spend was slashed by over 40% between 2014 and 2016."
Oil & Gas companies to turn cash flow positive in 2017
Economic Times, 19 December 2016

"Russian energy giant Gazprom will deliver a record volume of 180 billion cubic meters of natural gas to non-CIS states in 2016, Gazprom CEO Alexei Miller said Monday."
Sputnik, 19 December 2016

"The oil market’s chronic oversupply could come to an end next summer as demand for crude from the Organisation of Petroleum Exporting Countries continues to creep higher ahead of a global deal to limit exports from next year. Fresh data from the cartel’s Vienna headquarters shows that the ground-breaking cooperation deal to cut agreed between the world’s largest oil producers over the weekend could end the oversupply of oil in the global market by the second half of next year. Before the deal Opec had expected the demand for its crude in 2017 to reach 32.5m barrels a day but the latest report nudged the forecast higher to 32.6m, which combined with supply cuts of 2pc global supply could help restore balance to the struggling market. But the sunnier outlook came alongside a sobering warning that the recovery will not be possible if producers outside the cartel fail to keep to their pledges. Without the deal, the group predicts that the market could face a supply overhang of 1.24m barrels of oil a day, around 300,000 more than forecast a month ago, which would strangle the market’s hard-fought recovery....Under the terms of the deal Russia, the world’s second largest oil producer, will lead non-Opec supply cut efforts by removing 300,000 barrels a day of crude from the market. This will be matched by a further 300,000 barrel cut spread across 10 other non-Opec countries including Oman, Azerbaijan and financially hard-hit Venezuela."
Oil glut end in sight - but only if global oil deal sticks
Telegraph, 14 December 2016

"Eleven oil-producing countries, who are not members of the Opec oil cartel, have agreed to cut their output to boost prices. The group of states, which includes Russia, said on Saturday that they will cut supplies by 558,000 barrels per day. Opec announced last month that it would be slashing its own production to ease an oversaturated global market. It is the first time in 15 years that a global pact has been struck."
Non-Opec countries agree to cut oil output
BBC Online, 10 December 2016

"New data from Wood Mackenzie show after years of only single-digit returns, big oil and gas players such as Royal Dutch Shell, Eni and Total will generate an internal rate of return of more than 10 per cent in 2017 from exploration. This is the energy consultancy’s threshold of profitability. “Exploration costs have halved and development costs are also much reduced,” said Andrew Latham, vice-president of exploration at Wood Mackenzie. “Meanwhile, smaller budgets are focused on exploration plays with easier routes to commercialisation.” That has led to a dramatic fall in exploration spending, from $95bn in 2014 to $40bn this year, according to Wood Mackenzie. A further slide is expected in 2017, to $37bn — the lowest in 12 years. A push towards a smaller, more efficient industry has led to a big drop in exploration’s share of upstream capital expenditure, from 13 per cent in 2014 to 9 per cent this year. A new low of 8 per cent is forecast for 2017. Aside from an earnings boost, a return to profitability reduces reliance on alternative ways of securing supply, such as through mergers and acquisitions. But like other global energy groups, Wood Mackenzie believes a pullback in exploration and a drop in investment in future production is storing up problems, namely a supply shortage and a price spike from 2019 onwards. Fatih Birol, executive director of the International Energy Agency, said last month a third consecutive annual decline in capital expenditure by oil producers in 2017 would be the longest investment downturn in industry history. “We are entering a period of great oil price volatility,” Mr Birol said. The equivalent of Iraq’s annual oil production needs to be added to global supplies every two years simply to replace the decline in existing reserves."
Boost in exploration returns for oil majors predicted
Financial Times, 9 December 2016

"Oil's strong rally will run out of steam as US shale revives, warns the Energy Information Administration (EIA). According to its latest short-term market update, the US watchdog seems to believe Opec's members will honour its deal to cut 1.7 million barrels a day from its output, the agreement which sparked the recent upturn.... it expects the jump in the oil price to above $50 a barrel will trigger a rebound in US shale production, as well as other non-Opec output, and offset reductions elsewhere. The count of the number of drilling rigs active in the US has been growing for several months and the EIA says that for the first time since 2014, "publicly-traded international oil companies reported a collective profit in the third quarter of this year"..... Overall, it expects crude oil reserves to grow by an average of 800,000 barrels per day in the first six months of 2017. As a result, it says prices will be capped around current levels. Brent crude, the international oil price benchmark, is expected to average less than $52 a barrel and its US counterpart, West Texas Intermediate (WTI), will average around $50. A group of 29 oil industry experts polled by Reuters broadly agree that robust non-Opec production will prevent the Opec-inspired rally from going much further in the short term. They predict Brent and WTI will average more than the EIA expects next year, at $57 and $55 a barrel respectively, still well short of the $60 a barrel some had predicted."
US shale will 'kill' oil price rally, warns EIA
The Week, 9 December 2016

"In a big step forward for green energy, the government has said that low-carbon batteries will play a role in balancing the national grid for the first time. About 500MW of battery storage will come online by 2020-21, it said, helping to assure electricity supply at times of high demand. It follows a market-wide capacity auction that also saw agreements signed with gas and coal-power providers. Gareth Miller of energy research group Cornwall said the success of batteries in this year's auction was a "significant step"."
Batteries charged to play bigger role in UK energy grid
BBC Online, 9 December 2016

"Royal Dutch Shell Plc signed an agreement to assess three of Iran’s largest oil and gas fields as OPEC’s third-biggest producer looks to boost output with the help of international companies. Shell signed a memorandum of understanding to evaluate the Azadegan and Yadavaran oil fields near the Iraqi border, and the Kish gas deposit in the Persian Gulf, Gholam-Reza Manouchehri, deputy director of the National Iranian Oil Co., said at a signing ceremony in Tehran on Wednesday.... International oil companies have re-established contact with Iran since sanctions were lifted in January. However, no final contracts to develop oil fields have yet been signed. Total SA reached a non-binding $4.8 billion agreement to develop a natural gas field last month. The fields are some of Iran’s most attractive, Homayoun Falakshahi, an industry analyst at Wood Mackenzie Ltd., said by phone from London."
Shell Returns to Iran With Deal to Assess Oil and Gas Fields
Bloomberg, 7 December 2016

"Russia’s Nord Stream II gas pipeline is a threat to European security, a US diplomat has said, amid calls for the European Commission to intervene. Adam Shub, the deputy US ambassador to the EU, in Brussels on Tuesday (6 December), mentioned the Russian-German project amid other instruments he said Russia was using to “create division” in Europe and to erode “shared transatlantic values”. He said the armed conflict in Ukraine was “just the front line” in the “malign action”, which extended also to the EU and the Western Balkans. “There are [Russian] attempts to influence the policy debate, support for political parties, we know that, in the European Parliament, for NGOs … attempts to acquire assets on the energy front, Nord Stream - these are threats to Europe and to transatlantic security”, he said. Shub spoke at a conference organised by the Ceps think tank. The Nord Stream II pipeline is a Russian project to double gas supplies to Germany, bypassing Ukraine and central European states. Shub’s reference to Russian funding of political parties comes after revelations that France’s anti-EU National Front party, for one, received Russian loans, and amid Russia’s anti-EU propaganda campaign. His comments framed the gas pipeline as part of Russia’s bigger strategy to weaken the EU and to restore its former sphere of influence. Several EU states including the Baltic countries, Poland, and Slovakia have urged the EU commission to issue a legal assessment of whether Nord Stream II meets EU single market laws. The anti-Nord Stream II bloc believes that if the commission flagged up problems, for instance, on Russia’s monopoly of the infrastructure, it might discourage private investors from taking part."
Russia pipeline is security 'threat', US diplomat says
EUobserver, 6 December 2016

"EU countries are on track to meet their 2020 targets for renewable energy and emissions cuts but could fall short of ambitious longer-term goals, the European Environment Agency (EEA) said on Thursday. “The EU’s 2020 targets on energy and climate are now well within reach,” EEA executive director Hans Bruyninckx said. “But certain trends are alarming, in particular for transport. In that sector, renewable energy use remains insufficient and greenhouse gas emissions are rising again,” Bruyninckx added. The bloc’s 2020 target calls for 20% of gross final energy consumption to come from renewable sources, and that number rose to 16.4% in 2015 from 16% in 2014, according to preliminary estimates cited in the report. Energy consumption and greenhouse gas emissions grew slightly in 2015 but the increase came after “an exceptionally warm winter” the previous year, which led to lower energy demand for heating, the report said. The EU was also well on its way to meeting its target of reducing energy consumption by 13% compared to 2005 levels. Preliminary data showed that by 2015 consumption was 11% lower. Under the Paris climate deal struck almost a year ago, the bloc plans to make renewable energy account for 27% of energy use by 2030, and to cut greenhouse gas emissions by 40% compared to 1990 levels. By 2050, it hopes greenhouse gas emissions will be down by 80%."
EU on track to meet 2020 renewable energy target, report shows
AFP, 1 December 2016

"More than two thirds of oil and gas firms cut jobs last year - but there are signs the crisis may be approaching a turning point, a survey has found. The 25th Oil and Gas Survey found 67% of north east Scotland businesses had shed staff at a faster rate than at any time in the survey's history. But a similar proportion felt the sector had reached "rock bottom" and the rate of job cuts would now slow. More than 40% had cut pay or changed benefits to cope with low oil prices. The survey, conducted by Aberdeen & Grampian Chamber of Commerce in partnership with the Fraser of Allander Institute, canvassed the views of 130 businesses, employing more than 308,000 UK staff in total."
Oil and Gas Survey finds crisis 'nears turning point'
BBC Online, 29 November 2016

"Farmer representatives are warning of a drop in incomes and a loss of vital feed supplies if the EU Commission implements its plans to scale back conventional biofuels. The proposals are due to be released next week (30 November), though it is already known the commission wants to reduce the role played by bioethanol and biodiesel in reaching its renewable energy targets. According to reports circulating in Brussels, the commission is likely to set a new target of 3.8% of biofuels to be used in transport fuels by 2030, compared with the 7% target for 2021. This is despite an aim to increase the overall contribution of renewable energy from 16% in 2014 to 27% by 2030. The change is designed to encourage member states to move away from crop-based biofuels and replace them with so-called “advanced biofuels”, derived from municipal waste and agricultural residues. This is to meet concerns that growing crops such as maize and oilseed rape for fuel is contributing to greenhouse gas emissions, as rainforests are cleared to bring more land into food production elsewhere."
Brussels plans to cut role of biofuels in renewable energy
Farmers Weekly, 25 November 2016

"An oil supply crunch could hit as soon as 2019 as investment in new projects dries up following the price crash, leading analysts have warned. Delays and cancellations of projects by cash-strapped energy giants mean the volumes of new crude production coming onstream will not be enough to make up for the decline from existing fields and meet growing demand, Barclays analysts said in a research note. They forecast that 2019 would see the "the lowest year for new capacity" on their records, which stretch back to the Nineties, with just 1.2m barrels per day (bpd) of new supply. By contrast, decline from existing fields and growing demand would together equal 4m bpd, resulting in a gap of almost 3m bpd. "2019 marks a juncture where supply becomes a concern. With current volatility and oil price uncertainty, project sanction approval continues to be difficult," they wrote. The analysis comes after the International Energy Agency last week warned that the world was headed for another boom and bust cycle in the oil market, with supply shortages likely to cause rapid price increases by the early 2020s. The IEA said that if project approvals remained at current lows through 2017, it was "increasingly unlikely that supply will be able to meet the rising demand without rapid price increases". The Barclays analysis is even starker, suggesting that a supply crunch in 2019 may already be unavoidable. Given long lead times for many projects that it is monitoring "no decision now makes 2019-20 start-up an impossibility", the analysts warned."
Oil supply crunch 'to hit in 2019' as investment in new projects dries up
Telegraph, 22 November 2016

"Representatives from 47 of the world's most disadvantaged nations have pledged to generate all their future energy needs from renewables. Members of the Climate Vulnerable Forum issued their statement on the last day of the Marrakech climate conference. Bangladesh, Ethiopia, and Haiti, among others, say they will update their national plans on cutting carbon before 2020. Delegates here welcomed the move, saying it was "inspirational". These two weeks of negotiations have been overshadowed to an extent by reaction to the election of Donald Trump to the US presidency. But in an effort to show that even the world's poorest countries are committed to dealing with global warming, the Climate Vulnerable Forum (CVF) members have issued a promise to fully green their economies between 2030 and 2050. Termed the Marrakech Vision, the plan promises that the 47 members will: "strive to meet 100% domestic renewable energy production as rapidly as possible, while working to end energy poverty and protect water and food security, taking into consideration national circumstances"."
World's poorest countries to aim for 100% green energy
BBC Online, 18 November 2016

"The Paris accord to cut harmful emissions seeks to wean the world economy off fossil fuels in the second half of the century in an effort to limit the rise in average world temperatures to “well below” 2 degrees Celsius (3.6 Fahrenheit) above pre-industrial times. But while demand for oil to power passenger cars, for example, may drop, other sectors may offset this fall. “The difficulty of finding alternatives to oil in road freight, aviation and petrochemicals means that, up to 2040, the growth in these three sectors alone is greater than the growth in global oil demand,” the IEA said in its annual World Energy Outlook..... The IEA’s central scenario assumes demand will reach 103.5 million barrels per day by 2040 from 92.5 million bpd in 2015, for which India will be the leading source of demand growth and China will overtake the United States to become the single largest oil-consuming nation. Overall, under the New Policies scenario, the IEA said it sees non-OECD oil demand growth running at the slowest pace for more than 20 years, but this would still be enough to offset a continued fall in OECD country demand, which will be tempered by policies aimed at improving vehicle fuel efficiency. “In the New Policies Scenario, balancing supply and demand requires an oil price approaching $80 a barrel in 2020 and further gradual increases thereafter,” the IEA said, leaving its price forecast under this scenario unchanged from last year’s World Energy Outlook.... In the New Policies scenario, global oil output is expected to rise to around 100.5 million bpd by 2040, from 2015’s 92.5 million bpd, while under the 450 scenario, supply is expected to fall to around 71 million bpd. In its Current Policies outlook, the IEA estimates global supply will rise to 113.6 million bpd by 2040. “OPEC provides an increasing share, approaching 50% of global production by 2040—a level not seen since the 1970s—while unconventional production more than doubles between 2015 and 2040,” the agency said."
Oil Demand Won't Peak Before 2040
Reuters, 16 November 2016

"A new oil industry boom-and-bust cycle is likely if the current reduction in new investment is not reversed, says the International Energy Agency. The IEA says unless more money is spent exploring for, and developing, new oil fields, then demand may outstrip supply in the early years of the next decade. That could see prices surging again, says the IEA, which is an autonomous body with 29 member countries. Investment in new oil supplies last year was at its lowest since the 1950s. "We estimate that, if new project approvals remain low for a third year in a row in 2017, then it becomes increasingly unlikely that demand... and supply can be matched in the early 2020s without the start of a new boom/bust cycle for the industry," says the IEA's World Energy Outlook report. The IEA says world-wide investment must now rise to at least $700bn a year because it takes between three and six years for a new oil field to start producing. The Opec oil producers' cartel made a similar point last week."
Oil industry faces boom-and-bust, warns IEA energy group
BBC, 16 November 2016

"America's oil-field workers already took a hit last year. This year, they're taking another one, and worse. U.S.-based energy companies announced plans to send 103,000 workers packing in the first 10 months of 2016, compared with 90,000 in the same period last year, according to global outplacement firm Challenger, Gray & Christmas. Signs have emerged in the last few months that the worst may be over. Employment in the American oil and gas extraction sector appears to be bottoming out, and U.S. energy layoffs fell 75 percent last month from a year ago. But the industry has been shaken by the depth and length of the downturn in oil prices, and the job cuts that have followed this year. ... In the years following the financial crisis, total U.S. employment in the oil and gas extraction, drilling and support services more than doubled over a 10-year period to reach about 644,000 jobs at the end of 2014, according to a CNBC analysis of Bureau of Labor Statistics data. Through the first quarter of this year, those same sectors have shed more than 200,000 positions since OPEC's fateful policy meeting in November 2014. ... Around the world, the total number of announced layoffs has swelled to nearly 297,000 over roughly the last two years, according to a count kept by Airswift, a global recruiter for the energy, chemicals, mining and infrastructure industries."
Oil-field workers get no relief as the energy industry cuts deeper in 2016
CNBC, 15 November 2016

"In a historic first, the US in early November began seeing small net volumes of natural gas exports that recently climbed above 1 Bcf/d, an analysis of data from Platts Analytics' Bentek Energy showed Monday. The emergence and rapid acceleration in export volumes comes amid a recent decline in Canadian imports and a ramp up in feedgas volumes delivered to the Sabine Pass LNG export terminal. In November, imports of Canadian gas have averaged just 4.5 Bcf/d and are down 21% from imports that averaged 5.7 Bcf/d in October. Over the same period, feedgas deliveries to Sabine Pass have climbed to record highs, averaging 1.5 Bcf/d month to date, up from an average 249 MMcf/d in October. Article Continues below... In the year ahead, US gas exports are expected to briefly top 2.5 Bcf/d as growing pipeline exports to Mexico and waterborne exports to global consumers surpass imports of LNG and Canadian gas. Over the same period, forward markets currently have Henry Hub gas priced at an annual high of just $3.16/MMBtu in December 2017, Platts M2MS forward curve data showed."
US emerges as net exporter of natural gas
Platts, 15 November 2016

"An Australian company has won EU backing for a £60m project to build the first commercial wave energy project connected to the electricity grid in England. Carnegie Wave Energy will receive £9.6m of EU regional development funds for a project at Hayle on the north coast of Cornwall that is among the most ambitious attempts yet to harness the power of ocean swells to produce clean energy. The project shows how Britain is continuing to receive EU regional development funds — intended to “strengthen economic and social cohesion” across the EU — even after its vote to leave the bloc. Cornwall has long been among the biggest UK recipients of EU aid. Michael Ottaviano, Carnegie’s chief executive, said he was “surprised and disappointed” by the referendum result but was reassured by public commitments from the Treasury to continue funding EU-financed projects after Brexit takes place."
Brussels backs £60m Cornish wave energy project
Financial Times, 7 November 2016

"Royal Dutch Shell Plc, the world’s second-biggest energy company by market value, thinks demand for oil could peak in as little as five years, a rare statement in an industry that commonly forecasts decades of growth. “We’ve long been of the opinion that demand will peak before supply,” Chief Financial Officer Simon Henry said on a conference call on Tuesday. “And that peak may be somewhere between 5 and 15 years hence, and it will be driven by efficiency and substitution, more than offsetting the new demand for transport.” Shell’s view puts it at odds with some of its biggest competitors. Exxon Mobil Corp., the largest publicly traded oil company, said in its annual outlook that “global demand for oil and other liquids is projected to rise by about 20 percent from 2014 to 2040.” Saudi Arabia, the biggest producer, with enough reserves to last it 70 years, has said demand will continue to grow, boosted by consumption in emerging markets. If renewable energy and other disruptive technologies such as electric cars continue their rapid advance, petroleum use will reach its maximum level in 2030, the World Energy Council has forecast. Michael Liebreich, founder of Bloomberg New Energy Finance, predicts a peak in 2025 and decline in the 2030s."
Energy Giant Shell Says Oil Demand Could Peak in Just Five Years
Bloomberg, 2 November 2016

"The UK has fallen to its lowest position on an international league table of the best countries to invest in renewable energy following Brexit and Theresa May’s decision to scrap the Energy and Climate Change Department. Analysts EY, part of financial giant Ernst & Young Global, put Britain, normally a regular in the top 10, in 14th place on the Renewable Energy Country Attractiveness Index, just behind Morocco. The UK energy industry has complained that numerous and sudden changes in Government policy are putting off potential investors in any kind of electricity generation, threatening what could be a “golden age” of cheap and green power."
Brexit sees UK drop to new low in global renewable energy league table
Independent, 27 October 2016

"Sweden is on target to run entirely on renewable energy within the next 25 years, a regulatory official has said. Last year, 57 per cent of Sweden's power came from renewables such as hydropower and wind sources, with the remainder coming from nuclear power. The country now plans to tap into its "large potential" for onshore wind power, in order to make the country completely fossil-free by 2040 - a goal set by Sweden's prime minister at the UN General Assembley last year."
Sweden on target to run entirely on renewable energy by 2040
Independent, 26 October 2016

"Iraq's deputy oil minister Fayadh al-Nema said on Sunday total oil production, including output in the Kurdistan Regional Government (KRG) area, stood at 4.774 million barrels per day (bpd). Of the total 4.228 million bpd were produced from Baghdad-controlled fields and 546 million bpd were from the KRG-controlled fields, Nehma told reporters at a briefing in Baghdad. Total exports for September, including the KRG, were 3.871 million bpd, the head of Iraq's State Oil Marketing Company Falah al-Amri said, stressing that his country would not cut back on production. "We have surpassed the 4.7 million and there is no doubt about that we are not going back in any way, not by OPEC not by anybody else," Amri said."
Iraq says produced 4.774 million barrels per day of oil in September
Reuters, 23 October 2016

"In August, subsidiaries of several western companies — Eon, Engie, OMV, Shell and Wintershall — decided not to participate in Gazprom’s Nord Stream 2. The consortium, led by the Russian state-owned gas monopoly, was established to design, finance, build and operate two additional strings of the undersea gas pipeline between Russia and Germany."
Russia’s gas pipeline threatens European unity
Financial Times, 21 October 2016

"Although cheap oil has forced frackers to shut down drilling rigs across large swaths of the U.S. shale patch, from the Bakken fields of North Dakota to the Eagle Ford in South Texas, there’s one region where the profits are still flowing. The Permian Basin, a 75,000-square-mile patch of scrubby desert stretching across West Texas and into New Mexico, has emerged as the most resilient oil field in America. Overall crude production in the U.S. is down by about a million barrels a day over the past 12 months, but output from the Permian continues to grow. All signs indicate that the Permian will stay in the money in 2017, as drillers and investors flock to the region. Even with oil prices below $50 a barrel, frackers have been able to turn a profit drilling into the Permian’s dense layers of oil-soaked rocks. That’s because the underground geology makes it less costly to extract oil and gas there than in other shale patches. Drillers have added 67 rigs in the region since May, bringing the total in September to more than 200. Wells in the Permian are producing more oil at faster rates, enticing billions of dollars of fresh investment. Permian-related oil and natural gas companies have raised $9 billion in new equity this year. Explorers including Anadarko Petroleum, Pioneer Natural Resources, and EOG Resources have spent $14 billion buying up some of the most productive sites. The best land has gone for as much as $60,000 an acre, according to data compiled by Bloomberg. “Available capital has been magnetically pulled to the best economics, and the Permian has led the way,” says Robert Santangelo, Americas head of equity capital markets for Credit Suisse. In September, Houston-based Apache announced what amounts to a mega-discovery. Known as Alpine High, the site along the western edge of the Permian may hold at least 3 billion barrels of oil and 75 trillion cubic feet of natural gas, worth at least $8 billion by the company’s most conservative estimates. Production could begin by the second half of 2017. “I think we surprised a lot of folks to step out with a new play of this size and scope right under everybody’s nose,” says Chief Executive Officer John Christmann."
America’s Best Oil Field Is Thriving Despite Low Crude Prices
Bloomberg, 20 October 2016

"Scientists have accidentally discovered a way to reverse the combustion process, turning carbon dioxide back into a fuel. Researchers at the Oak Ridge National Laboratory in the US used complex nanotechnology techniques to turn the dissolved gas into ethanol. Because the materials used are relatively cheap, they believe the process could be used in industrial processes, for example to store excess electricity generated by wind and solar power. The researchers had hoped the technique would turn carbon dioxide into methanol, but ethanol came out instead."
Scientists accidentally turn pollution into renewable energy
Independent, 19 October 2016

"Green energy subsidies that will cost every household £110 a year by 2020 are poor value for money and £17 more expensive than planned after the Government bust its budget, according to a damning National Audit Office report. Ministers agreed in 2011 that the subsidies for projects such as wind and solar farms, which are funded by levies on consumer energy bills, should not exceed £7.6bn by 2020-21. However, they admitted last summer that they were on track to overshoot that and spend £9.1bn. An NAO report finds a series of failings in the way ministers handled the budget and says they didn’t spot the overspend until far too late because they were using out of date assumptions."
Green levies on energy bills to hit £110 after Government failings
Telegraph, 18 October 2016

"Fatih Birol, executive director of the International Energy Agency, the energy think-tank backed by industrialised countries, said there was “no escaping” the impact of climate change policies and green technologies for oil and gas companies. However, speaking at the Oil & Money energy conference in London on Tuesday, he added that uptake of electric vehicles would not cause a sudden shock because less than 10 per cent of growth in oil demand comes from cars. “Last year was a record for electric cars with 500,000 sold,” said Mr Birol. “When you put that in context it is less than one car out of every 100 sold. Even if you assumed that, as of tomorrow, every second car sold was electric, global oil demand would still increase.” One director at a state-controlled oil company who declined to be identified said unless there was a breakthrough in the pricing of electric cars that made them affordable in developing countries, such vehicles were not likely to have a big impact on demand for crude. He added a bigger threat to demand was the improving fuel efficiency of conventional cars."
Oil groups ‘threatened’ by electric cars
Financial Times, 18 October 2016

"Oil production from seven major U.S. shale plays is forecast to decline by 30,000 barrels a day to 4.429 million barrels a day in November from October, according to a monthly report from the Energy Information Administration released Monday. Oil output at the Eagle Ford shale play in South Texas is expected to see the largest decline, down 35,000 barrels. However, output from the Permian Basin, which covers parts of western Texas and southeastern New Mexico, is expected to climb by 30,000 barrels a day."
EIA: U.S. shale oil output forecast to edge down by 30,000 barrels a day in November
MarketWatch, 17 October 2016

"Energy giant SSE has sold a 16.7pc stake in Scotia Gas Networks (SGN) to Abu Dhabi's sovereign wealth fund for £621m. The deal is expected to be completed by the end of the month and will leave SSE with a 33.3pc stake in the networks, which distribute gas to almost 6m customers in Scotland and southern England. The buyers are wholly owned subsidiaries of the Abu Dhabi Investment Authority, which owns stakes in a series of other UK assets including Gatwick Airport and Thames Water. The price paid represents a premium of about 45pc to the regulated asset value of the stake, fetching more than the £500m to £600m that had been expected by the market."
SSE sells gas networks stake to Abu Dhabi for £621m
Telegraph, 17 October 2016

"A hard Brexit deal with the European Union could leave the UK vulnerable to a gas crisis, MPs have warned. In a report, the Commons’ Energy and Climate Change Committee said Britain was “heavily reliant on Europe” for imports of gas and electricity. The EU is expected to agree a “solidarity principle” between member states, which essentially means they would help one another in event of a shortage of supply or major price increases. The MPs warned that if the UK was excluded from this pact the Government “must urgently investigate alternative back-up arrangements”. The main energy industry body said it expected the issue to be “front and centre” of the Brexit talks. About 80 per cent of British homes are currently heated using natural gas. In their report, the MPs said there was concern among energy industry stakeholders that: “The UK’s departure from the EU could end its involvement with coordinated actions and processes, thereby undermining the security of fossil fuel supplies. “It could also result in the UK’s exclusion from the EU’s proposed ‘solidarity principle’, a policy designed to ensure that member states receive immediate assistance in the event of a gas supply crisis,” they added."
Hard Brexit deal could leave UK vulnerable to gas crisis, MPs warn
Independent, 15 October 2016

"Contracts worth £122m to keep coal and gas-fired power stations on standby will help Britain avoid electricity blackouts this winter, National Grid has forecast, highlighting the difficulties facing the UK as it attempts to wean its power sector off fossil fuels. The UK’s electricity system operator forecast that the margin between supply and demand over the course of the winter would be 6.6 per cent, an increase of almost 30 per cent on last year’s cushion and wider than a provisional forecast made in July. However, without measures to ensure the availability of back-up generating capacity when regular supplies run low, the margin this winter would be close to record lows at 1.1 per cent, according to National Grid’s annual Winter Outlook. National Grid will pay for 10 coal and gas-fired plants to keep spare capacity on standby, with further sums to be paid if they are called into action. These include coal plants at Eggborough in Yorkshire and Fiddlers Ferry in Cheshire that had previously been earmarked for closure. The dependence on fossil fuels to guarantee energy security during the winter months highlights the challenge facing the UK government as it seeks to phase out coal-fired power by 2025 in pursuit of aggressive carbon reduction goals. Britain experienced its first day without any coal-fired electricity production for 134 years in April and in the subsequent six months the UK got more power from solar than coal. However, solar power is far less effective in the gloomy British winter and, according to National Grid, wind power can be assumed to be available for only 21 per cent of the time. The supply challenge is set to become increasingly acute in coming years as decommissioning of ageing nuclear reactors adds to pressure from the closure of coal plants. About 60 per cent of UK generating capacity in 2010 is forecast to have disappeared by 2030. The simultaneous need to replace lost capacity while reducing carbon emissions led to the government’s decision last month to approve an £18bn nuclear plant at Hinkley Point in Somerset, despite widespread criticism of the project’s high cost. However, some analysts said National Grid’s success in maintaining a supply buffer during a period of transition in the energy sector demonstrated that scare stories about a looming supply crunch were overblown....National Grid says 2016-17 would be the last winter when temporary contracts are required to secuback-upkup power. From next year, it expects to rely on capacity procured through an auction process set up by the government to incentivise investment in new generation."
UK falls back on fossil fuels to secure winter energy supply
Financial Times, 14 October 2016

"In contrast to historic growth levels, per-capita global energy demand is expected to peak before 2030, according to a new report published by the World Energy Council. “Disruptive trends are emerging that will create a fundamentally new world for the energy industry,” wrote the authors of the new report, World Energy Scenarios 2016 — The Grand Transition, launched at the 23rd World Energy Congress being held in Istanbul. Specifically, the authors point to “lower population growth, radical new technologies, greater environmental challenges, and a shift in economic and geopolitical power” as those “disruptive trends” which they believe will “re-shape the economics of energy.” The new report is the result of three years worth of analysis into what they are describing as a “Grand Transition” from the energy economics we all grew up with to a more renewable and sustainable energy future. The report provides seven key conclusions, prime among them being the prediction that the world’s primary energy demand growth will slow, and per-capita energy demand will peak before 2030, “due to unprecedented efficiencies created by new technologies and more stringent energy policies.” “It is clear that we are undergoing a Grand Transition, which will create a fundamentally new world for the energy industry,” said Ged Davis, Executive Chair of Scenarios, World Energy Council, speaking at the launch of the report. “Historically people have talked about Peak Oil but now disruptive trends are leading energy experts to consider the implications of Peak Demand. Our research highlights seven key implications for the energy sector which will need to be carefully considered by leaders in boardrooms and staterooms.” The remaining key conclusions from the report include the prediction that demand for electricity will double to 2060, which will require us to meet this demand with cleaner energy sources; that solar and wind energy will continue to grow “at an unprecedented rate”; demand peaks for both coal and oil could end up creating “significant stress to the current global economic equilibrium”; one of the most difficult obstacles we will have to face is the diversification of transport fuels; limiting global warming to only a 2°C increase “will require an exceptional and enduring effort”; and “global cooperation, sustainable economic growth, and technology innovation are needed to balance the Energy Trilemma” of Energy Security, Energy Equity, and Environmental Stability."
Energy Demand To Peak Before 2030, Says World Energy Council
CleanTechnica, 11 October 2016

"The UK has fallen out of the top 10 of a respected international league table of countries’ energy sectors for the first time. The World Energy Council blamed the government’s lack of clarity and myriad changes which it said have left the country facing a potential gap in energy supply. The UK has previously been one of the top performers in the council’s “Trillema Index”, which has ranked countries on energy security, costs and decarbonisation efforts for the last six years. But the Brexit vote, cuts to renewable energy subsidies and planned changes on foreign ownership have created investment uncertainty and significant challenges for the UK, according to the latest edition of the index for the London-headquartered agency, whose members include energy companies across the world. The UK was also added to a watchlist of countries where negative changes are expected imminently, alongside the US, Germany and Japan. Denmark, Sweden and Switzerland took the top three positive slots in the ranking, with the UK now 11th. Despite the recent decision to go ahead with new nuclear reactors at Hinkley in Somerset, the UK had a “distinct lack of policy direction”, the council’s chief said."... The result of the EU referendum vote in July has also cast a cloud over the government’s pledge last year to phase out coal power by 2025, as leaving the single market as part of a hard Brexit “could significantly increase the cost of its energy imports”. Imports via interconnectors to the continent accounted for around 6% of the UK’s electricity supply last year. Planned changes to rules on foreign ownership of energy infrastructure, announced during May’s review of Hinkley Point C contract, added to the investment uncertainty, the report said. The council also highlighted government cuts to onshore wind and solar subsidies since it took power, which Office for National Statistics figures showed last week had led solar power installations to crash. The changes could hinder investments in those sectors, the council said."
UK loses top 10 spot in global energy ranking for the first time
Guardian, 11 October 2016

"Half of all the energy used in Scotland could be produced by renewable technology in less than 15 years, according to a new report. It painted a picture of a country that exports vast amounts of electricity to the rest of the UK by producing 40 per cent more than it needs, where half of the buses and a third of cars are electric – improving air quality and public health – and where fuel poverty is “eradicated”. However the report, called The Energy of Scotland, warned that while a low-carbon future was “achievable and desirable”, Scotland was currently on track to miss its climate targets, getting less than 30 per cent of energy from renewables by 2030."
Half of Scotland’s energy could be produced by wind and sunlight in less than 15 years, report says
Independent, 10 October 2016

"The Russian and Turkish leaders have agreed to intensify military and intelligence contacts after a meeting in Istanbul. President Vladimir Putin also said he and Recep Tayyip Erdogan had agreed on the need for aid to get to the northern Syrian city of Aleppo. The two countries have signed a deal to construct two pipelines to send Russian gas under the Black Sea to Turkey. Ties were strained after Turkey downed a Russian military jet last year. But speaking at a joint news conference with Mr Putin, Mr Erdogan said he was confident that the normalisation of relations would take place rapidly. Unlike Russia, Turkey is a member of Nato, but both countries currently have uneasy relations with the West and are also facing economic challenges.".... Turkey, though, remains a significant player in the Atlantic Alliance - more so since it sits on Nato's strategic eastern flank. So how close military and intelligence ties can really be between Ankara and Moscow is an interesting question.... Earlier on Monday, the Russian and Turkish energy ministers signed a deal for the TurkStream gas pipeline project at the World Energy Congress in Istanbul. One pipeline will be for Turkish domestic consumption, the other will supply southeastern Europe, bypassing Ukraine.... TurkStream replaces a previous project, South Stream, that was to have been built in co-operation with EU countries but was later scrapped. TurkStream had been announced by President Putin in 2014. Earlier Mr Putin told the gathering he supported moves by the oil producers' group Opec to cap production. Russia and the US are the biggest oil producers outside the group, which will attempt to adopt quotas in November."
Putin and Erdogan pledge deeper military contact after gas deal signed
BBC Online, 10 October 2016

"Global demand for energy per capita will peak in 2030 thanks to new technology and stricter government policies, the World Energy Council has predicted. In a report on a range of scenarios for global energy use, the group of academics, energy companies and public sector bodies outlined a “fundamentally new world for the energy industry” calling it the “grand transition”. The report, launched before the World Energy Congress in Istanbul, forecast demand per person for energy – including transport fuels, heating and electricity – would begin to fall after 2030. Ged Davis, executive chair of scenarios at the World Energy Council, said: “Historically people have talked about peak oil but now disruptive trends are leading energy experts to consider the implications of peak demand.” But while overall per capita energy demand would begin to fall, demand for electricity would double by 2060, the council said, requiring greater infrastructure investment in smart systems that promote energy efficiency. The “phenomenal” growth of solar and wind energy is predicted to continue, while coal and oil will fade from the energy mix. Solar and wind accounted for 4% of power generation in 2014 but could supply up to 39% by 2060, while hydroelectric power and nuclear are also expected to grow."
Global demand for energy will peak in 2030, says World Energy Council
Guardian, 10 October 2016

"WWF Scotland published analysis of WeatherEnergy’s wind and solar power data today (5 October) that revealed another record breaking month for Scottish wind and solar power output. According to the analysis, wind turbines generated more power than Scotland’s overall needs on Saturday 24 and Thursday 29 September - generating 127% and 107% of the country’s power needs on each day respectively. Scotland also managed to direct 766,116MWh of electricity generated from wind turbines to the national grid – enough to power 87% of Scottish households (2.1m homes). This represents a 36% increase from September last year. WWF Scotland’s director Lang Banks said: “September was an astonishing month for wind power, with output up more than a third compared to the same period last year. Even more amazing was that on two separate days, wind turbines alone provided output equivalent to more that Scotland’s total electricity needs on each day – the first time we’ve witnessed this twice in a single month."
September an 'astonishing' month for Scottish renewable energy
Edie.net, 5 October 2016

"Their introduction is set to cost consumers £11bn, but studies show they cut energy consumption by 3% or less – so why is the UK spending so much on rolling out “smart” electricity and gas meters? That is the question some commentators are asking after it emerged that a key element of the behind-the-scenes infrastructure has been delayed again. This week the government revealed that, so far, around 3.3m first-generation smart meters have been installed in UK homes. The plan, now looking increasingly ambitious, is that by the end of 2020 around 53m will be fitted in more than 30m homes and businesses. The predicted cost is around £200 for each meter replaced – ie, more than £400 for many households – a sum borne by consumers through increased bills. For those of you who have so far missed this revolution, smart meters are set to replace every conventional gas and electricity meter in the country. They use wireless technology to allow the energy company to read the meter remotely, and the government has a manifesto commitment to ensure that every home and business is offered one – although you don’t have to say yes. However, if you’ve already had a smart meter fitted, the bad news is that in many cases if you subsequently switch supplier it could lose all its “smartness” and become just like the perfectly good meter it replaced. This is just one of the conclusions of a House of Commons science and technology committee report issued last month that expressed reservations about the way the meters and the necessary infrastructure are being implemented. The report coincided with the Institute of Directors attacking the rollout for being too complex and costly. It called on the government to urgently review the benefits of going ahead with the roll-out, which looked “very unlikely” to meet its 2020 target."
Smart meters: an energy-saving revolution or just plain dumb?
Guardian, 1 October 2016

"Pressure on the North Sea oil industry is likely to persist, according to the Bank of England governor, as the sharp drop in prices takes its toll on the wider economy. Mark Carney suggested that there was no respite in sight for the oil and gas industry, where the downturn has led to the loss of thousands of jobs. “It is difficult. I don’t want to underplay it,” he said in an interview with the Herald newspaper in Scotland. “It is a challenging environment and, given global prices, that may persist for some time.” The price of Brent crude oil fell to a 12-year low of just below $30 (£23) a barrel in January, from a high of $115 in summer 2014. On Wednesday morning, it was trading at slightly above $46. Visiting Scotland for the first time since before the 2014 independence referendum, Carney acknowledged the effect of declining North Sea oil revenues on the broader Scottish economy. “It is having a multiplier impact,” he said. The Scottish government’s North Sea revenues collapsed in 2015-16 to £60m from £1.8bn a year earlier. It was a far cry from the rewards reaped by Scotland in 2008-09, when North Sea revenues were £11.6bn. Income from the oil industry is a key factor in debates over Scotland’s ability to fund its public finances as an independent nation."
North Sea oil difficulties unlikely to go away, says Mark Carney
Guardian, 28 September 2016

"North Sea oil and gas production is on course for its second annual increase but will plummet again within a few years unless investment rises from unsustainably low levels, the UK industry body has said. Oil and Gas UK said it expected last year’s 10.4pc increase in production – the first rise in 15 years – to be followed by another rise of about 6pc this year as the industry “lives off the fat” of huge investment in the years before the oil price crash. Major projects that have started up already this year include Total’s Laggan-Tormore gas field and Premier’s Solan oil field, both west of Shetland, with Engie and Centrica’s Cygnus gas field in the southern North Sea also expected on stream before the end of the year. But the long lead-times in the industry mean the current pick-up in production – which is forecast to continue until at least 2018 - masks the dire lack of investment in further projects needed to sustain output in coming years. Oil companies battered by the slump in prices have reined in their spending and focused their attentions on lower-cost areas elsewhere in the world. "The lack of new development projects must be urgently addressed if we are to avoid a repeat of the sharp production decline that dominated the early part of this decade,” Oil & Gas UK said in its annual economic report.... While operating costs in the traditionally high-cost North Sea have fallen 45pc over the last two years, to $16 a barrel, this has not been enough to stem the investment decline, with spending plunging to £9bn this year, from £14.8bn in 2014. The group estimates that 120,000 jobs will have been lost in the wider sector including supply chain by the end of this year, compared with two years ago. The rate of drilling new exploratory wells remains at a record low, while drilling of production wells is forecast to fall 30pc this year. Only one new field has been approved this year, with a capital cost of £100m, compared with five fields sanctioned last year with development costs of £4.3bn."
North Sea oil and gas output rises but investment dries up
Telegraph, 27 September 2016

"One of the mysteries of the oil market is the question of how much crude oil China has squirrelled away in commercial and strategic stockpiles. Now a satellite imaging firm called Orbital Insight claims to have an answer. It says that in May, Chinese inventories stood at 600 million barrels, substantially larger than commonly thought and nearly as big as the US Strategic Petroleum Reserve. Chinese storage capacity, which includes working inventory, is four times greater than widely used estimates, the firm says, adding that it has not only been able to count storage tanks, but it has also used imaging techniques to figure out how much oil is in the tanks. The issue could influence expectations in oil markets. If China has built larger reserves than previously estimated, that means much of what looked like oil demand over the past couple of years was not a result of higher consumption but of strategic planning. It would make OPEC's task of cutting output to drive up prices more difficult. And it could provide a buffer for China in the event of a sudden disruption in imported supplies.... Orbital Insight's estimate far exceeds the figure given in a rare glimpse of China's oil supplies by its government. On September 2, the Chinese state-owned news agency said that China had 287 million barrels of oil in strategic storage sites in eight cities as well as in commercial facilities at the beginning of the year. Started in 2004, the Chinese strategic stockpile would only be enough to cover 36 days of oil imports, said the Xinhua news agency quoting CNPC Economics & Technology Research Institute. The country's goal is to have large enough strategic stockpiles to cover 100 days of imports, a target the government's five-year plan said might not be complete by the 2020 goal. The US reserve is big enough to cover about 150 days of imports. However, with low prices, China has been on a buying spree, many analysts believe. The nation has been importing a record 7.5 million barrels a day."
China may be stockpiling more oil than anyone realised
Sydney Morning Herald, 30 September 2016

"A new energy storage technology currently under development by Siemens is set to see excess wind energy converted to heat rocks, allowing the energy to be stored using an insulated cover. The system consists of a fan that uses an electrically-heated air flow to heat the stones to high temperatures, with the thermal energy then converted back to electricity when needed using a steam turbine. The simple principle of the set-up promises to deliver a low-cost way of storing energy, Siemens said, with the only limit to the concept being the space required for the rock-filled insulated container. The project, which has received research funding from the German Federal Ministry for Economic Affairs and Energy, is now operating a test system named Future Energy Solution (FES) at Hamburg-Bergedorf in Germany. While the trial is currently only testing the thermal requirements for the storage process, Siemens said its researchers plan to test the complete energy conversion in spring of 2017 and are now establishing a large scale version of the technology on the Trimet aluminum smelter site in Hamburg-Altenwerder. This full-size FES will be able to store around 36MWh of energy in a container holding around 2,000 cubic metres of rock and be capable of generating up to 1.5MW of output for up to 24 hours a day, Siemens said. Researchers working on the pilot expect it to generate effectiveness of around 25 per cent even in this early development phase, while the concept has the potential for an effectiveness of around 50 per cent, the firm added."
Siemens unveils new hot rocks energy storage system
Businessgreen, 29 September 2016

"UK-based Camborne Energy Storage has installed a grid scale solar power storage facility in Somerset using US-based Tesla’s revolutionary battery technology. The first of its kind in Europe, the installation, which comprises of five 100 kWh Tesla powerpacks, will store energy produced from a nearby solar farm in Somerset. Providing an ancillary service to the National Grid, the installation has the capacity to provide power for over 500 homes. This new project will not only demonstrate the capabilities of Tesla’s technology in the renewable energy sector but, more importantly, showcase how the UK can viably reduce its reliance on fossil fuels and nuclear power."
A revolutionary new solar project could help solve the UK’s energy crisis, and the media’s silence is deafening
The Canary, 27 September 2016

"[North Sea] Companies have been re-classifying their reserves, removing billions of barrels from recoverable status.These are mostly in hydrocarbon reservoirs which are deemed too small to exploit commercially. At a lower price, lots more fields look that way. A significant amount of this is in high-cost geology, including heavy, viscous oil and those reserves trapped in high-pressure, high-temperature rock. So, remember the Scottish independence referendum campaign claim of 24 billion barrels of oil? That was the oft-cited figure for what remained to be extracted from the waters around an independent Scotland. Well, where does that stand now? The figure was the top end of the range, and the it has now dropped to 20 billion barrels. Within that figure, only 6.3 billion barrels has been found and has had its development approved. That's 8% down in a year. The next category is 'recoverable, within business plans, but not yet sanctioned'. That has fallen from 3.7 billion barrels to 2.5 billion over the past 12 months, as companies have reclassified into the next category; reserves with potential, but not within business plans. As that has happened, and as costs have fallen, the total capital cost of projects which are in business plans, but not yet approved, has fallen from £60 billion to £30 billion. The industry's guess at the amount that could yet be discovered is put somewhere, very vaguely, between two million and six million barrels. But if there isn't exploratory drilling, it's sure to remain both vague and under the seabed. Here's another striking statistic - developments coming on stream in the past decade have taken an average of 17 years from discovery to production. For an industry short on capital, that's a long time to wait for a return on some big drilling costs - a lot longer than waiting on single malt whisky to mature. So effort, while reduced, is shifting to developing the easier, faster prospects, usually by getting more out of existing fields. And quite successfully so, according to these latest numbers. There has been a significant rise in the proportion of operated reserves being recovered, and a drop in the annual decline of the average field's flow rate from 12% to only 4%. If the cost of developing these projects could be cut in half, which requires a lot of technical innovation, work commissioned by the OGA suggests nearly half of that - 1.5 billion more barrels - could be brought on-stream. For context, 43 billion barrels have been extracted in the past 41 years. For the UK industry, all this should set alarm bells ringing even louder. If it doesn't come out of this global cyclical downturn with renewed vigour, the speed of decline is likely to accelerate. Energy could still be sourced from imports, of course, at a cost to Britain's balance of payments. And some newly-developed fields will continue to produce for decades, notably the big ones around Shetland. But with a clear-out of less resilient firms (less of a clear-out than had been expected, so far), and a cutback in resources such as the number of exploration drilling rigs, the upswing of the cycle can be expected to see costs inflate again. That prospect comes with the need to pay down the increased level of debt being accrued to tide over oil producers and their suppliers - another reason for renewed capital flow being slowed at a time when the cycle eventually picks up. Just like some of that heavy, viscous oil that is now being extracted using new drilling techniques, the industry's future is going to require a big injection of innovative thinking if that 49-year old pipeline of oil, gas, spending, profits and jobs is to keep flowing."
North Sea oil: Falling off the cycle?
BBC News, 27 September 2016

"Renewable sources of power including hydroelectric and solar represent around 30 percent of the world's total capacity and 23 percent of total global electricity production, according to a new report from the World Energy Council (WEC). In a news release, WEC said that in the last 10 years wind and solar power had seen "explosive average annual growth" of 23 percent and 50 percent."
Wind and solar power enjoy a decade of massive growth: World Energy Council
CNBC, 20 September 2016

"Major oil explorers have changed the way they approach searching for new reserves, leading to improved returns, even at lower prices, according to a research from Wood Mackenzie. Andrew Latham, Vice President of exploration research at the company told CNBC Monday that exploration has a new philosophy: Less is more. He added that most of the oil discoveries that the major companies are making tend to be in deep water and the break even points are much higher. As a result, explorers are pulling away from the very high cost and high risk frontiers...He further explained that the shortages in exploration is challenging. He also added that last year the majors saw 3 billion barrels discovered around the world in conventionally new discoveries. "That was the lowest volume for 70 years. "One year doesn't change so much but if we stay at those levels for a number of years, which certainly is our view, we are going to be down sub 10 billion barrels of new oil discovered per year. And that is against 30 billion that the world is consuming.""
Oil explorers have a new philosophy: Less is more
CNBC, 19 September 2016

"Oil discoveries have slumped to the lowest level since 1952 and the global economy is becoming dangerously reliant on crude supply from political hotspots, the world’s energy watchdog has warned. Annual investment in oil and gas projects has fallen from $780bn to $450bn over the last two years in an unprecedented collapse, and there is no sign yet of a recovery next year. The International Energy Agency said wells are depleting at an average rate of 9pc annually. Drillers are not finding enough oil to replace these barrels, preparing the ground for an oil price spike in the future and raising serious questions about energy security. “There is evidence that cuts in exploration activities have already resulted in a dramatic decline in new oil discoveries, dropping to levels not seen in the last 60 years,” said the IEA’s World Energy Investment 2016 report. The drop is so drastic that the effects are likely to overwhelm slow gains from fuel efficiency and the switch to electric cars, at least for the rest of this decade. Much of the steepest fall in spending is in stable political areas. Britain’s North Sea investment has shrivelled to £1bn from an average of £8bn over the last five years. Spending in Canadian fields has plummeted by 62pc. This decline tightens the future stranglehold of the OPEC cartel and Russia on global oil supplies, although the consequences will not be obvious until it is too late. The big national oil companies in the Gulf have costs of $10 a barrel or less, and most have kept up investment. Saudi Arabia seems determined to keep raising output and push for market share, even though low prices caused by its own policy are playing havoc with its public finances. The budget deficit is 16pc of GDP. It is drawing down foreign exchange reserves and tapping the global bond markets to makes end meet, a high-risk strategy but one that can probably work for another two years. Russia’s oil industry has higher costs but it has been cushioned by a cheaper ruble. The Kremlin has an Achilles Heel, however. It is is burning through its Reserve Fund to cover a fiscal deficit, drawing down $6bn in August alone. There is only $32bn left. Russia can probably muddle through until mid-2017 but then it will face stark choices. The Saudis may calculate that they can outlast Russia in this grueling war of attrition. The IEA said global spare capacity is wafer-thin at just 1.7m barrels a day (b/d), stripping out idle capacity in the war-torn trio of Libya, Iraq, and Nigeria. This implies that the market will swing from glut to scarcity with lightning speed once the energy cycle turns. ... Growth in global demand slumped to a two-year low of 800,000 b/d in the third quarter, upsetting the fine calculus of supply and demand. The glut is now likely to persist until mid-2017, and this will be extremely painful for Nigeria, Algeria, Angola, Venezuela, and Iraq. OPEC is still adding supply into a depressed global market. Both Iran and Saudi Arabia and have added 1m b/d each over the last two years, more than offsetting the 1.4m b/d fall in other parts of the world. The Iranians have lifted exports more quickly than expected to their pre-sanctions level of 2.2m b/d, though output has leveled off over the last four months . It is clear that this one-off effect is largely exhausted...Saudi Arabia has largely given up trying to knock out the US shale industry, reluctantly accepting that it will have to live with this troublesome upstart. North America’s frackers are becoming low-cost producers and are tough opponents, able to survive and thrive at $40 to $50 a barrel due to leaps in technology. Although 90 companies have gone bankrupt since oil prices crashed, this has not stopped the juggernaut. Some have done deals with creditors, clearing debts. In other cases, private equity groups with deep pockets have scooped up the distressed assets. Frackers have added 98 new rigs since May. The epicentre of fresh output is in the Permian basin of West Texas, a region that could ultimately produce 6m b/d and surpass Saudi Arabia’s Ghawar field. The IEA said costs for shale drillers fell 30pc in 2015, and will fall a further 22pc this year. The price of completing a well has dropped by up to 65pc since 2014... The great question is how quickly the industry can crank up output once the market tightens. Shale drillers are nimble, but even they need one to two years to recruit expert staff, and reach full momentum, and they are not big enough to make up for cancelled mega-projects across the world."
Oil investment crashes to 60-year low, incubating next energy shock
Telegraph, 14 September 2016

"Part of Britain's main gas storage site has been permanently shut down due to old age, stoking fears about the future of the facility. Centrica, which owns the Rough storage facility in the North Sea, announced on Friday that it was closing one of two platforms used to extract gas from the field. Rough is the UK's only large seasonal gas storage site, injecting gas in summer when demand is lower and withdrawing it in winter, when it can provide about 10pc of the UK's peak daily demand. The platform that has been shut is the smaller and older of the two, at 40 years old, and had been closed for maintenance since last summer. Centrica said it had now concluded that "having regard to its age, condition and design-life", it was "no longer feasible" to operate it. The platform had six wells used for gas withdrawal, although only four had been used in recent years. Centrica said its closure would have a "minimal impact on Rough’s capabilities" and would not affect the storage capacity, though could slightly reduce the rate at which gas could be withdrawn. However, the closure raises further questions about how long the remainder of the facility, which at 30 years old is already five years beyond its original design life, can keep going. The remaining platform has 24 wells but has been temporarily shut down since June for safety checks. Although Centrica has said it expects 20 of those wells to be available to withdraw gas from the site from the start of November, the closure during the summer months mean less gas has been injected than usual and Rough is only about one-third full."
Part of Britain's main gas storage site permanently shut down
Telegraph, 9 September 2016

"The global oil market should brace itself for a looming supply crunch as early as next year, which could lead to price shocks and a growing dependence on exports from the Middle East. HSBC analysts have warned that demand for oil will help to balance the oversupplied market by the year’s end. But as demand continues to climb against a backdrop of low investment in new reserves the global market runs the risk of supply shocks and rocketing prices within the next two years.... The bank notes that the market is increasingly relying on small oil fields, which have quicker depletion rates, and said that discoveries of new reserves is falling. The step-change improvements in production and drilling efficiency in response to the downturn “have masked underlying decline rates at many companies”, HSBC said, but the extent to which efficiencies can be relied upon is now limited."
Oil market faces supply crunch within a year, warns HSBC
Telegraph, 7 September 2016

"In the current climate, the vast majority of worry in the oil markets surrounds the huge imbalance in supply and demand in the industry. This is understandable, given that the enormous glut of oil in the markets has pushed prices down from more than $100 around two years ago, to less than $50 right now. However, in a major new research note, HSBC argues that soon we won't be worrying about there being too much supply and not enough demand, but rather, things will be the other way round soon enough, and that is going to cause huge problems. In the report from HSBC staff Kim Fustier, Gordon Gray, Christoffer Gundersen, and Thomas Himboldt argue that given the finite nature of the physical amount of oil in the world, people should really be paying more attention to falling supply in the future, rather than oversupply right now. Here is the extract from Fustier et al (emphasis ours): 'Given the backdrop of the past two years’ severe oversupply in the global oil market, it’s not surprising that few are discussing the possibility of a future supply squeeze. Indeed, most of the current debate on the long-term outlook for oil seems focused on risks to demand from progress on both the policy and technology fronts. Meanwhile, we expect the past two years’ severe crude price weakness to result in a return to balance in the global oil market in 2017. At that stage, we expect global effective spare capacity to fall to as little as 1% of demand. Supply disruptions have had only limited impact on price in 2015-16 due to the global oversupply, but the market will be much more susceptible to interruptions post-2017. In addition, given the almost unprecedented fall in industry investment since 2014, we expect the focus to return to the availability of adequate supply.' HSBC's note is more than 50 pages of detailed, thoughtful research on the state of the markets and how the dwindling availability of oil, along with jumping demand over the coming decades will change the world. But included within the report is a helpful, ten-point summary of the key arguments the bank makes, and what is going on right now.... HSBC sees between 3 and 4.5 million barrels per day of supply disappearing once peak oil production is reached. 'In our view a sensible range for average decline rate on post-peak production is 5-7%, equivalent to around 3-4.5mbd of lost production every year.'... There is potential for growth in US shale oil, but it currently represents less than 5% of global supply, meaning that it will not be able, single-handedly at least, to address the tumbling global supply HSBC expects."
People are almost completely ignoring a looming crisis for oil
Business Insider, 7 September 2016

"Europe has met a landmark goal of slashing its energy consumption six years ahead of time, cutting greenhouse gas emissions equivalent to switching off about 400 power stations. In 2014, the EU’s 28 member countries consumed 72m tonnes of oil equivalent less than had been projected for 2020, according to a report by the EU’s science arm, the Joint Research Centre (JRC). The figure matches Finland’s annual energy use. Environmental campaigners described the achievement as “remarkable”. and “incredible” but the European commission was restrained. “Final energy consumption is currently below the 2020 target,” a spokeswoman for the commission said. “The EU-28 are are also on a good pathway to achieving the primary energy consumption target for 2020 if current efforts are maintained.” Major energy savings were reported across all sectors in the study, with EU legislation driving efficiency gains in electrical products, industry installations, fuel economy and the housing sector. Energy use in residential buildings fell by 9.5% between 2000 and 2014, second only to the industrial sector, where there was an energy drop of 17.6% over the same period."
EU hits energy reduction target six years early
Guardian, 6 September 2016

"There's a lot of confusion when it comes to energy markets and the idea of peak oil, according to Art Berman, a well-known geological consultant, director of Labyrinth Consulting Services and also director of the Association for the Study of Peak Oil and Gas in the US. This time on Financial Sense, we spoke to Berman about his take on oil markets and how we need to be thinking about the most traded commodity in the world. "Peak oil" is an unfortunate term we're unlikely to escape, Berman said, but is also entirely inaccurate. "It has nothing to do with running out of oil," he said. "That's the first misconception. Peak oil is about running out of affordable oil." By the end of the 20th century, Berman explained we had gone through most of the easily accessible, cheap oil available around the world. As a result, production has been driven to explore for, more difficult to extract deposits. "Those are all perfectly legitimate sources of oil, but because of the environment, the depth, the risk of the cost, all of a sudden oil got a lot more expensive," he said. This is the heart of the issue, as oil prices are the determining factor when it comes to peak oil. In the 1990s, in terms of 2016 dollars, oil was around a third to a quarter the price it costs today to find and produce, Berman stated. As a result, the cost of everything that comes from oil is three or four times higher than it was just a couple of decades ago. "From my perspective, the economy runs on energy, and money is nothing more than a call on energy," Berman said. Oil is the master resource right now, he explained. The current weak economic growth we see around the world is a direct result of this, Berman added. Between higher energy costs and unsustainable levels of debt in the world, Berman isn't surprised we're observing slow growth."
Art Berman: Central Bankers Don't Understand - The Economy Runs On Energy, Not Money
Seeking Alpha, 6 September 2016

"Despite the drop in crude prices, huge spending cuts and thousands of job losses – the world’s top oil and gas companies are set to produce more than for some time. While top oil companies struggle with slumping revenues following a more than halving of prices since mid-2014 after years of spectacular growth, their production has persistently grown as projects sanctioned earlier in the decade come on line. Overall production at the world’s seven biggest oil and gas companies is set to rise by about 9 per cent between 2015 and 2018, according to analysts’ estimates. With an expected recovery in prices, the increased production should boost cash flow and secure generous dividend payouts, which had forced companies to double borrowing throughout the downturn. "There are a lot of projects coming on stream over the next three years that will support cash flow and ultimately dividend," said the Barclays analyst Lydia Rainforth. And despite a drop in new project approvals, companies have throughout the downturn cleared a number of mammoth undertakings such as Statoil’s Johan Sverdrup oilfield off Norway and Eni’s Zohr gas development off the Egyptian coast.... Production is unlikely to drop after 2020, and could post modest growth as companies continue to bring projects onstream, albeit at a slower pace, said the BMO analyst Brendan Warn. The French oil major Total, for example, plans to clear three major projects by 2018 – the Libra offshore oilfield in Brazil, the Uganda onshore project and the Papua LNG project – that will begin production after 2020. "We won’t see 5 to 10 per cent growth that we’ve seen from companies in recent years. It will be closer to 1 or 2 per cent," Mr Warn said. Capital spending, or capex, for the sector is set to drop from a record $220bn in 2013 to around $140bn in 2017 before modestly recovering, according to Barclays. But companies have learnt to do more with the money after slashing expenditure and tens of thousands of jobs, while the cost of services such as rig hiring dropped sharply throughout the downturn."
Oil and gas production to rise as huge new projects come online
Reuters, 5 September 2016

"Explorers in 2015 discovered only about a tenth as much oil as they have annually on average since 1960. This year, they’ll probably find even less, spurring new fears about their ability to meet future demand. With oil prices down by more than half since the price collapse two years ago, drillers have cut their exploration budgets to the bone. The result: Just 2.7 billion barrels of new supply was discovered in 2015, the smallest amount since 1947, according to figures from Edinburgh-based consulting firm Wood Mackenzie Ltd. This year, drillers found just 736 million barrels of conventional crude as of the end of last month. That’s a concern for the industry at a time when the U.S. Energy Information Administration estimates that global oil demand will grow from 94.8 million barrels a day this year to 105.3 million barrels in 2026. While the U.S. shale boom could potentially make up the difference, prices locked in below $50 a barrel have undercut any substantial growth there. New discoveries from conventional drilling, meanwhile, are “at rock bottom,” said Nils-Henrik Bjurstroem, a senior project manager at Oslo-based consultants Rystad Energy AS. “There will definitely be a strong impact on oil and gas supply, and especially oil.” Global inventories have been buoyed by full-throttle output from Russia and OPEC, which have flooded the world with oil despite depressed prices as they defend market share. But years of under-investment will be felt as soon as 2025, Bjurstroem said. Producers will replace little more than one in 20 of the barrels consumed this year, he said. Global spending on exploration, from seismic studies to actual drilling, has been cut to $40 billion this year from about $100 billion in 2014, said Andrew Latham, Wood Mackenzie’s vice president for global exploration. Moving ahead, spending is likely to remain at the same level through 2018, he said. Exploration is easier to scratch than development investments because of shorter supplier-contract commitments. This year, it will make up about 13 percent of the industry’s spending, down from as much as 18 percent historically, Latham said. The result is less drilling, even as the market downturn has driven down the cost of operations. There were 209 wells drilled through August this year, down from 680 in 2015 and 1,167 in 2014, according to Wood Mackenzie. That compares with an annual average of 1,500 in data going back to 1960. Ten years down the line, when the low exploration data being seen now begins to hinder production, it will have a “significant potential to push oil prices up," Bjurstroem said.... Oil prices at about $50 a barrel remain at less than half their 2014 peak, as a glut caused by the U.S. shale boom sent prices crashing. When the Organization of Petroleum Exporting Countries decided to continue pumping without limits in a Saudi-led strategy designed to increase its share of the market, U.S. production retreated to a two-year low."
Oil Discoveries at 70-Year Low Signal Supply Shortfall Ahead
Bloomberg, 30 August 2016

"“Green” biofuels such as ethanol and biodiesel are in fact worse for the environment that petrol, a landmark new study has found. The alternative energy source has long been praised for being carbon-neutral because the plants it is made from absorb carbon dioxide, which causes global warming, from the atmosphere while they are growing. But new research in the US has found that the crops used for biofuel absorb only 37 per cent of the CO2 that is later released into the atmosphere when the plants are burnt, meaning the process actually increases the amount of greenhouse gas in the air. The scientists behind the study have called on governments to rethink their carbon policies in light of the findings. The use of biofuels is controversial because it means crops and farm space that could otherwise be devoted to food production are in fact used for energy. They currently make up just under 3 per cent of global energy consumption, and use in the US grew from 4.2 billion gallons a year in 2005 to 14.6 billion gallons a year in 2013. In the UK the Renewable Transport Fuel Obligation now means that 4.75 per cent of any suppliers’ fuel comes from a renewable source, which is usually ethanol derived from crops.... Professor John DeCicco, from the University of Michigan, said his research was the first to carefully examine the carbon on farmland where biofuels are grown.... Professor DeCicco said the study, which is published in the journal Climatic Change, reset the assumptions, that biofuels, as renewable alternatives to fossil fuels, are inherently carbon neutral simply because the CO2 released when burned was originally absorbed from the atmosphere through photosynthesis. The carbon footprint policies of many advanced countries assume that crop-based biofuels offer at the very least modest net greenhouse gas reductions relative to petroleum fuels. However, the scientists from Michigan ignored the prevailing models and analysed real data on crop production, biofuel production, fossil fuel production and vehicle emissions."
Biofuels 'worse than petrol' for the environment, new study finds
Telegraph, 25 August 2016

"The UK is in the midst of an energy revolution. Since the late 1990s the Government has committed to using cleaner energy, and using less of it. Billions of pounds have been invested in renewable energy sources that generate electricity from the wind, waves and plant waste. At the same time the UK has managed to cut its energy use by almost a fifth as households and businesses have steadily replaced old, inefficient appliances and machinery with products that use far less energy to run. Energy demand has also fallen due to the decline of the UK’s energy-intensive industries, such manufacturing and steel-making. But Government data shows that the UK’s reliance on energy imports is at its highest since the energy crisis of the late 1970s, raising serious questions over where the UK sources its energy and what a growing dependence on foreign energy means for bills and for security. In a leaner, greener energy system, why is the UK more dependent on foreign energy sources than it has been in more than 30 years? Imports accounted for just under 40 per cent of UK energy supplies last year. The country's largest energy imports are crude oil, natural gas and petroleum products such as petrol and diesel. The last time the UK exported more electricity than it imported was the winter of 2009/10 - since then it has consistently been a net importer of power through giant sub-sea cables to France and the Netherlands. It's a far cry from three decades ago, when Britain’s North Sea reserves made it a major energy player. The discovery of North Sea oil and gas in the late 1960s ignited a fossil fuel bonanza for the UK, which roared through the oil market boom years of the 1970s and continued to bring billions in revenue in the decades since. But with the North Sea now running dry, the UK’s dependence on imports is on the up, according to the Office for National Statistics. “The UK is consuming less energy than it did in 1998 and more of the energy we are consuming is coming from renewable sources. However, at the same time, the decline in North Sea oil and gas production has meant the UK has become increasingly dependent on imports of energy,” the ONS says. Norway has typically played a key role as an oil import partner but in recent years the proportion of crude imports has begun to lean towards imports from the Organisation of Petroleum Exporting Countries, ruled by de facto leader Saudi Arabia. In 2015 50 per cent of the Britain’s crude imports came from Norway and 35 per cent came from Opec, with less than 10 per cent of crude imported from Russia, which is the world’s largest non-Opec oil producer. The UK may be increasing its use of renewables, but far from securing British-made energy, the strategy coincides with our declining energy independence. The country's bet on renewable energy began in earnest at the turn of the century as climate change concerns rose up the political agenda under Tony Blair’s government. In 2003 renewable energy made up less than 2 per cent of the UK’s total energy use. Since then the country has seen an explosion of wind turbines and solar panels dotting the country and coastal waters, but the ONS says they still contribute less than 10 per cent of total energy and 25 per cent of electricity. Government’s official target is to meet 20 per cent of the UK’s total energy demand from renewable energy sources by 2020, which translates into a 30 per cent target for electricity generation. Although the rise of renewables has been considerable the gains have not been enough to keep the UK’s electricity system from becoming worryingly tight when demand is high; the number of older, larger power plants closing down has far outstripped the amount of renewable projects being built. With so little slack in the system, the threat of a power shortfall is increasing, raising the risk of blackouts while making electricity more expensive on the wholesale power markets... all 28 EU countries imported more energy than they exported in 2014 with the UK coming in as the 12th most dependent on foreign sources of energy. The ONS says that in 2014 the UK’s import dependency was below the EU average and it was the least dependent on foreign sources of energy out of the top five EU countries by energy use: Germany, France, Italy, Spain and the UK."
Why the UK is using less energy, but importing more - and why it matters
Telegraph, 18 August 2016

"Exports of Norwegian gas to Britain will not be affected by Britain's vote to leave the European Union, Norway's oil and energy minister told Reuters. The Nordic country is Britain's top foreign gas supplier, accounting for some 40 percent of all supplies in 2015. Norway's EU affairs minister said this week the country wants to maintain a good relationship with Britain after it leaves the EU. While Norway is not a member, it pays for access to the European single market and may have to negotiate a new trade agreement with London after Brexit."
No impact from Brexit on Norway gas exports to Britain - minister
Reuters, 26 August 2016

"Gas accounted for just over half of UK power production in 2Q 2016, as coal fell to a record low share, according to latest national statistics released by the government's new Department for Business, Energy and Industrial Strategy on August 25. Gas provided 50.9% of 2Q electricity generation by major power producers, with nuclear at 24.2%, renewables 18.1% and coal only 6.8%. Electricity generation by the same producers was down 0.9% year on year, which meant their coal use fell by 71%, whereas their gas use rose by 52% – with gas use by generators in April 2016 the highest of any month since October 2011. This was due to reduced coal-fired capacity, with coal use in May 2016 its lowest of any month in the past 21 years, as more plants were definitively closed or switched to biomass-burning. It was also helped by cheap gas, currently available on the UK spot market at just under $4/mn Btu for prompt supplies. And uniquely in Europe, the UK has set a carbon price floor, which improves the economics of gas over coal burn. Overall UK primary energy consumption in 2Q 2016 fell by 0.3% year on year, with indigenous natural gas production down by 3.2%. Whereas UK 1Q 2016 gas production increased by 5%, owing to first flows from the Total-operated Laggan-Tormore field west of the Shetland Isles in February 2015, the 2Q 2016 figure (down 3.2%) is in comparison with the first full quarter of production from that field. Overall UK gas demand in April-June 2016 was 20% higher than in 2Q 2015 – with a notable increase in April of one-third – largely thanks to the power sector. Gross gas imports into the UK in 2Q were up by 21%, while gross exports were down by 28% (those to the Republic of Ireland falling by half, thanks to the start-up of its Corrib gasfield). Norway supplied 63% of the UK's 2Q gross gas imports, while LNG provided 32%."
Gas Provides Half of UK Power
Natural Gas World, 25 August 2016

"The state of Victoria plans to ban shale and coal seam gas fracking in what would be Australia's first permanent ban on unconventional gas drilling, citing the concerns of farmers and potential health and environment risks. However the government left the door open to allowing onshore conventional gas drilling after 2020. The decision was made despite the fact that most of eastern Australia's gas supply is produced from coal seam gas and comes as a blow to manufacturers who have been clamoring for more gas supply to help keep prices down."
Australian state to permanently ban onshore gas fracking
Reuters, 30 August 2016

"The collapse in global prices has resulted in a 96pc plunge in Scotland’s North Sea oil revenue, new data has shown. Oil revenues tumbled from £1.8bn in the 2014-15 financial year to just £60m in 2015-16, according to Government figures. At its peak in 2008, the industry brought in £11.5bn in revenue. Scotland's fiscal deficit now stands at £15bn, almost three times the £4.5bn reported in 2008-09 when historic oil price highs of $140 a barrel protected the country from the global financial crisis. At 9.5pc of GDP the Scottish deficit is more than twice the figure for the UK as a whole which is at 4pc or £75.3bn. Scotland’s public sector revenue was estimated as £53.7bn, or 7.9pc of the UK’s total revenue...The heavy financial toll of the oil price crash is compounded by dwindling reserves in the North Sea and rising competition from younger oil basins where costs are lower and profits higher... In addition to cutting revenue the oil crash has wiped out a quarter of North Sea jobs and threatens the survival of heavily indebted independent oil explorers and the oilfield services firms that support them. This week Aberdeen-based services company CIE fell into administration, blaming a fall in client orders as oil and gas operators cut costs. Advisory firm EY warned that a third of oilfield service firms could be wiped out by the end of the year as oil producers pull back from uneconomic ventures. Last year the number of jobs supported by the UK’s oil and gas industry fell by an estimated 84,000 to around 370,000. They are forecast to fall by a further 40,000 in 2016. Trade group Oil and Gas UK believes the sector stands to lose a total of 120,000 jobs by the end of this year as a result of the downturn."
Scotland's North Sea oil revenues plunge 96pc in a year
Telegraph, 24 August 2016

"The UK is in the midst of an energy revolution. Since the late 1990s the Government has committed to using cleaner energy, and using less of it. Billions of pounds have been invested in renewable energy sources that generate electricity from the wind, waves and plant waste. At the same time the UK has managed to cut its energy use by almost a fifth as households and businesses have steadily replaced old, inefficient appliances and machinery with products that use far less energy to run. Energy demand has also fallen due to the decline of the UK’s energy-intensive industries, such manufacturing and steel-making. But Government data shows that the UK’s reliance on energy imports is at its highest since the energy crisis of the late 1970s, raising serious questions over where the UK sources its energy and what a growing dependence on foreign energy means for bills and for security. In a leaner, greener energy system, why is the UK more dependent on foreign energy sources than it has been in more than 30 years? Imports accounted for just under 40 per cent of UK energy supplies last year. The country's largest energy imports are crude oil, natural gas and petroleum products such as petrol and diesel. The last time the UK exported more electricity than it imported was the winter of 2009/10 - since then it has consistently been a net importer of power through giant sub-sea cables to France and the Netherlands. It's a far cry from three decades ago, when Britain’s North Sea reserves made it a major energy player. The discovery of North Sea oil and gas in the late 1960s ignited a fossil fuel bonanza for the UK, which roared through the oil market boom years of the 1970s and continued to bring billions in revenue in the decades since. But with the North Sea now running dry, the UK’s dependence on imports is on the up, according to the Office for National Statistics. “The UK is consuming less energy than it did in 1998 and more of the energy we are consuming is coming from renewable sources. However, at the same time, the decline in North Sea oil and gas production has meant the UK has become increasingly dependent on imports of energy,” the ONS says. Norway has typically played a key role as an oil import partner but in recent years the proportion of crude imports has begun to lean towards imports from the Organisation of Petroleum Exporting Countries, ruled by de facto leader Saudi Arabia. In 2015 50 per cent of the Britain’s crude imports came from Norway and 35 per cent came from Opec, with less than 10 per cent of crude imported from Russia, which is the world’s largest non-Opec oil producer.... Government’s official target is to meet 20 per cent of the UK’s total energy demand from renewable energy sources by 2020, which translates into a 30 per cent target for electricity generation. Although the rise of renewables has been considerable the gains have not been enough to keep the UK’s electricity system from becoming worryingly tight when demand is high; the number of older, larger power plants closing down has far outstripped the amount of renewable projects being built. With so little slack in the system, the threat of a power shortfall is increasing, raising the risk of blackouts while making electricity more expensive on the wholesale power markets.... Ofgem has warned that the UK’s growing import dependence means that our gas market is increasingly affected by geopolitical events and the fluctuations of global demand. This affects both our security of supply and the cost of wholesale gas coming to us. The Government argues that a diverse range of import options across the energy spectrum means that the country is protected if one source fails to deliver. For example, the UK sources its oil and gas mostly via pipelines from Norway and shipping tankers from the Middle East, but we also import European gas and Algerian oil as part of the total portfolio."
Why the UK is using less energy, but importing more - and why it matters
Telegraph, 18 August 2016

"So far, electric cars that offer enough range for consumers to consider it as their only car are expensive. The price of the battery alone can be the equivalent of a medium-sized car. For Tesla's flagship model S, analysts estimate the battery's cost is around 27 percent of the car's total price tag. This means that for electric cars to compete against petrol vehicles, battery costs still need to be cut significantly. The current cost per kilowatt-hour is $300 (equating to roughly $7,000 for the Tesla S battery). According to industry estimates, the cost will be halved within the next five to seven years, based on economies of scale as more cars are produced, as well as efficiency gains within the production process. This will make the cost of owning an electric vehicle much more competitive relative to internal combustion cars. This calculation assumes some moderate government subsidies of the kind we are seeing already in some countries. Currently, almost two-thirds of global oil demand is used for transport, of which 85 percent is road transportation. This means electric cars will have a major impact on oil demand once their number grows. But this is still a long way off: Only around half a million electric cars were sold in 2015. The global fleet of electric cars is around one million, less than 0.1 percent of cars on the road. Long-term estimates for electric car penetration vary widely, and are basically anyone's guess. Even looking forward to just 2025, forecasts for global electric car sales vary between 5 percent and 15 percent of total sales. If we accept an optimistic estimate of 40 percent annual growth rate of electric car sales, then by 2020 this would result in an electric car fleet of 8.5 million vehicles or 0.6 percent of global car stock. Further out, these extrapolations become ever more inaccurate, but if we stick to the same growth rate until 2025, then the cumulative electric car fleet would result in 50 million vehicles or 3.3 percent of the total number of cars. These calculations show that even on the more optimistic assumptions, the share of electric cars on our streets will remain comparatively low for at least another decade. By 2020, it would mean a reduction of 0.3 percent of global oil demand, by 2025 the reduction would be 1.7 percent or 1.7 million barrels per day. In a nutshell, compared with other forces that impact the supply and demand of oil, electric cars will be a small factor for the foreseeable future. Over the next three to four years, the impact of electric vehicles can be ignored. Over this time horizon, for which we can predict developments with some degree of confidence, we expect the crude oil market to remain tight as a result of the massive investment cutbacks of the oil exploration and production industry. Looking further out, we would anticipate peak demand for oil to occur sometime after 2025, but probably not before 2030, at which point electric vehicles are likely to become a more significant driver of the demand trajectory."
Will Tesla kill off the demand for oil? Not quite yet
CNBC, 15 August 2016

"Deutsche Post, known globally as DHL, is one of the world’s largest parcel delivery services. As part of its long term business plan, it has developed three zero emissions vehicles — an electric delivery van, an electric trike, and an electric bicycle — tailored to what is called the “last mile” sector of the distribution network. That’s the distance that remains after goods are manufactured, shipped across the ocean, transported from the port of entry to distribution centers, hauled cross country, and finally to local wholesaler distributors. Getting those products from the distributor to retail facilities is what DHL specializes in doing. Now DHL is getting ready to market its electric delivery van, called the Streetscooter, to other businesses that want to lower their carbon footprint. On Friday, a spokesman for the company announced that deliveries would begin in 2017. “We want to start sales to third parties from next year,” he told German news magazine Der Spiegel. The Streetscooter has a range of 120 kilometers or about 70 miles. While that may not seem like a lot, it is enough for the short stop and start urban delivery routes such trucks are asked to do most. The company says its electric delivery van slashes maintenance costs by 50% and repair costs by up to 80%. Those are the sorts of numbers that make fleet managers smile. Diesel engines may have good fuel economy, but repair and maintenance costs often wipe out any advantage gained in lower fuel costs. Plus, electricity is still cheaper than diesel fuel, even with today’s low oil prices."
Deutsche Post Will Sell Electric Delivery Van Starting In 2017
Gas2, 14 August 2016

"Gazprom said higher gas sales to Europe boosted its first-quarter revenue and it may export more to the region than expected this year because of lower Dutch gas output and limited shipments of liquefied natural gas from the United States. Russia's Gazprom, the world's top gas producer, covers around a third of Europe's gas needs and planned to ship between 165-170 billion cubic metres (bcm) to Europe this year, up from about 159 bcm in 2015. The EU has been trying to reduce its reliance on Russian gas amid tensions with Moscow over the Ukraine crisis. Gazprom on Wednesday posted a 5 percent increase in first-quarter revenue to 1.74 trillion roubles ($26.9 billion) year-on-year, due to higher gas sales to Europe in absolute terms and despite a fall in the gas price. Since the U.S. Sabine Pass LNG terminal started exporting gas this year, only 2 of 20 ships have departed for Europe - heading to Portugal and Spain - while the others have sailed to South America, the Middle East and Asia."
Russia's Gazprom says may export more gas to Europe than f'cast
Reuters, 12 August 2016

"The head of Libya’s national oil company has lashed out at the United Nations, suggesting the head of the international organisation’s mission to his country, Michael Kobler, had set a dangerous precedent by seeking a deal with one of the militias blocking Libya’s oil ports. Mustafa Sanalla, the head of the Libyan National Oil Corporation, said the UN’s reputation had been tarnished by Kobler’s meeting with the so-called Petroleum Facilities Guard, a group that has kept the country’s ports closed for nearly three years. The Libyan press reported that the militia’s leader, Ibrahim Jodran, had been offered millions of dinars by the UN-backed government to resume oil exportations – which Sanalla described as a bribe. Sanalla, a politically neutral technocrat, was highly critical of Kobler’s decision to meet the militiaman, who he said had been responsible for the loss of $100bn (£77.1bn) in revenue which has brought the once prosperous country to its knees. “[Kobler] goes to speak to this man and regards him like a hero,” Sanalla said. “This is a big mistake. He is listening to the criminal and not the victims. If he is paying money to this man, it is an even bigger mistake because they are rewarding him, since it will encourage others to try blackmail. It is a very dangerous precedent. It will encourage others to do the same.” Jodran agreed at the end of January to reopen the oil terminals after his meeting with Kobler, who was the mediator of the deal.... Before the country descended into chaos, Libya was producing 1.6m barrels a day and Sanalla had planned to produce 2.1m barrels a day by 2017. Storage capacity at the ports should be 6m barrels but violence has seen that figure fall to only 750,000. The oil chief’s revived plans, dependent on the restoration of security, the reopening of closed oil fields in the west and government investment, could see production rise from 216,000 barrels per day (bpd) to 500,000 per day by the end of the month and then 900,000 by the end of the year. Without a minimum of 800,000 bpd, Libya is unlikely to be able to pay salaries, invest in much-needed infrastructure or maintain its economy. Sanalla warned that the apparent fall of Sirte may mean displaced Islamic State forces would seek to sabotage thinly guarded oil installations in the rest of the country. “We do not know where they will go but they have attacked the oil fields before. It is a concern.” He is equally concerned that the PFG and their Libyan National Army rivals may fight for control of the Zueitina oil terminal, one of the three central ports controlled by the PFG."
UN has set dangerous precedent, says Libya's oil boss
Guardian, 11 August 2016

"For the first time on record, wind turbines have generated more electricity than was used in the whole of Scotland on a single day. An analysis by conservation group WWF Scotland found unseasonably stormy weather saw turbines create about 106 per cent of the total amount of electricity used by every home and business in the country on 7 August. Gale-force winds lashed much of the country with a speed of 115mph recorded at the top of Cairngorm mountain."
Scotland just produced enough wind energy to power it for an entire day
Independent, 10 August 2016

"The UK's oil and gas sector was the least profitable quarter for two decades at the start of the year, figures out this morning have revealed.The Office for National Statistics (ONS), said profitability among the UK's "continental shelf" companies - mainly off-shore exploration firms - plunged to 0.2 per cent in the first quarter. This is the lowest since the ONS started calculations in 1997, and well off the highs of more than 50 per cent recorded as recently as 2011."
Profitability hits record low for UK's offshore oil and gas industry
City AM, 5 August 2016

"Britain's energy industry is dying. While the US is striving for self-sufficiency in fuel and power as a primary goal of strategic security in a dangerous world, this country has acted with strange insouciance. We have let matters drift for so long that half of our nuclear reactors will be phased out over the next nine years with nothing ready to replace them. North Sea oil and gas is a spent reserve. Britain's dependency on imported fuels and electricity has jumped from 17pc to 46pc since 2000. Energy is becoming a corrosive element in Britain's current account deficit, now 6.9pc of GDP, and the scale of vulnerability has been masked by the slump in world energy prices. When the global fossil cycle turns - inevitable, given the $400 investment freeze in oil and gas projects over the last two years - Britain will face a national energy 'margin call'. The confluence of Brexit, a new government, and the review of the Hinkley Point nuclear plant have suddenly thrown open the debate on how the UK should power its economy. It is a dangerous moment, but also giddily fluid....Bob Gatliff from the British Geological Survey (BGS) says nobody knows how much recoverable shale there really is in the key fields: the giant Bowland gas basin in Lancashire and Yorkshire, the Weald oil basin in Sussex, and Midland Valley in Scotland. "We haven't got a clue, and we won't know until they have have drilled hundreds of wells," he said. Tectonic shocks over the last 300 million years may have caused the gas to lose pressure. The BGS thinks there are 1,300 trillion cubic feet (TCF) of gas resource in the Bowland, enough in theory to replace the North Sea and profoundly change British fortunes. "Four or five years ago the recovery rate in the US was 10pc and now they are moving towards 20pc. I don't see why we can't do that in the Bowland," Stephen Bowler, the chief executive of IGas. Anything like that would be enough to meet Britain's entire annual consumption of 2.7 TCF through the 21st Century.... Those on the cutting edge are exasperated by the static critiques of the hydraulic fracturing, typically five years out of date. The gains in technology, seismic imaging, computer data, and smart drills are moving at lightning speed. New methods allow for three, six, or even ten wells to be drilled from the same pad, greatly reducing disruption. Walking rigs move on the next spot without the need for the vast fleets of vehicles that bedevilled the early years of shale. Fracking remains 'dirty', but less than a decade ago. The BGS says that most early stories of water contamination have been false alarms.... Whether drilling in the Bowland will ever be viable depends on flow rates and on whether LNG prices rise above $5 (per MMBtu). The spot price of natural gas in the US is $2.70, but the February 2017 contracts are $3.35. The cost of shipping to Europe - the 'Atlantic spread' - adds another $1 to $2. "we think there should be comfortable margins," said Mr Bowler.... As a rule of thumb, it costs twice as much to drill a well in the UK as in the US, due to higher land prices and environmental rules. Yet the cost curve is coming down fast for everybody. The 'decline rate' of production in the US over the first four months of each well was 90pc a decade ago. It is now 18pc. Britain lacks the acquired know-how but enjoys a 'late-comer advantage' in technology. Its geology may be just be as rich. UKOOG's chief Ken Cronin said shale layers in England are four to six times thicker and should yield more gas. Oil is another story, though the 'Gatwick Gusher' at Horse Hill has already produced flows comparable to the North Sea. The British Geological Survey estimates that total resource of the Weald's Jurassic marine shale is 4.4bn barrels. There could be far more but the basin could equally prove be a total flop, with no 'free oil' flowing at all."
Britain faces a nasty shock when the global energy cycle turns
Telegraph, 3 August 2016

"Opec's worst fears are coming true. Twenty months after Saudi Arabia took the fateful decision to flood world markets with oil, it has still failed to break the back of the US shale industry. The Saudi-led Gulf states have certainly succeeded in killing off a string of global mega-projects in deep waters. Investment in upstream exploration from 2014 to 2020 will be $1.8 trillion less than previously assumed, according to consultants IHS. But this is a bitter victory at best. North America's hydraulic frackers are cutting costs so fast that most can now produce at prices far below levels needed to fund the Saudi welfare state and its military machine, or to cover Opec budget deficits.... The 'decline rate' of production over the first four months of each well was 90pc a decade ago for US frackers. This dropped to 31pc in 2012. It is now 18pc. Drillers have learned how to extract more. Mr Sheffield said the Permian is as bountiful as the giant Ghawar field in Saudi Arabia and can expand from 2m to 5m barrels a day even if the price of oil never rises above $55. His company has cut production costs by 26pc over the last year alone. Pioneer is now so efficient that it is already adding five new rigs despite today's depressed prices in the low $40s. It is not alone... Consultants Wood Mackenzie estimated in a recent report that full-cycle break-even costs have fallen to $37 at Wolfcamp and Bone Spring in the Permian, and to $35 in the South Central Oklahoma Oil Province. The majority of US shale fields are now viable at $60. .... The crucial mid-tier drillers have weathered the downturn. Many are still able to raise funds at low cost. Total output in the US has fallen by 1.2m barrels a day to 8.5m since the peak in April 2015 but production has been bottoming out. Today's frackers can just about cope with oil prices in the $40 to $50 range.... Forest fires in Canada, rebel attacks in Nigeria, and other global upsets took 4m barrels a day off the global market at one stage over the May-June period, masking the continued world glut. These disruptions are subsiding. Lost output has dropped to nearer 2m barrels a day. That is a key reason why US crude prices have fallen 20pc to $41 over the last six weeks. Morgan Stanley says the long-awaited rebalancing of the global markets has been delayed for yet another year until mid-2017. Worse yet for Opec, consultants Rystad Energy say that 90pc of the 3,900 drilled but uncompleted wells - so-called 'DUCs' - are profitable at $50. This implies an overhang of easy supply waiting to hit the market. Citigroup expects an extra 1m barrels a day in late 2016. Once that is cleared, shale drillers will have to build new rigs. Mr Sheffield said Pioneer can do this is 135 days flat, a dramatic contrast to deep-water mega-projects that can take seven to 10 years. This agility has changed the nature of the oil cycle. It means that Opec faces an unprecedented headwind from mid-cost producers. Stalwarts Anadarko and Hess say they will wait for $60 before investing heavily, but they are already preparing the ground. The losers are high-cost projects elsewhere: off the coast of Nigeria and Angola, in the Arctic, or the oil sands of Canada and Venezuela's Orinoco basin. Roughly 4m to 5m barrels a day of future supply has been shelved around the world. This sets the stage for an oil shortage and a price spike later this decade. Whether Opec can survive that long is an open question. Most of the cartel need prices of $100 to fund their regimes. Venezuela is already in the grip of hyperinflation and food riots. Nigeria's currency peg was smashed last month, and the naira has fallen 60pc. Angola has turned to the International Monetary Fund, Azerbaijan to the World Bank."
Texas shale oil has fought Saudi Arabia to a standstill
Telegraph, 31 July 2016

"Scientists have found a way to create a renewable fuel source that could trump solar panels, new research suggests. A scientific breakthrough that uses 'artificial leaves' to create a fuel similar to oil has been named a new 'super fuel'. Researchers used the same method of photosynthesis to create the fuel, by adding carbon dioxide to the water to make a hydrocarbon. Compared to photosynthesis, where glucose is produced by the sun turning carbon dioxide into glucose, this process uses artificial leaves and energy from the sun to turn water and carbon dioxide into hydrocarbon fuels similar to those we take from oil. The energy created is then stored immediately, something that does not occur with conventional solar panels. Conventional solar panels take energy directly from the sun and covert it into electricity but only with an efficiency rate of 20 per cent. Now, a team at the University of Illinois announced that they have found a way to make the artificial leaves more efficient. Plants convert only about 1 per cent of sunlight into fuel, but the introduction of the artificial leaf converts ten per cent. Daniel Nocera, from Harvard, from his paper published in the journal Science, said: 'I can definitely see a path forward now...Amin Salehi, from the University of Illinois, found a different approach to the research. Using sunlight to split water into hydrogen and oxygen, his team has developed a catalyst called 'nanoflake tungsten diselenide' that simultaneously converts carbon monoxide in the leaf - at greatly improved efficiency compared with conventional metal catalysts. When combined with the hydrogen the carbon monoxide produces a fuel called syngas that can then be used as the basis of hydrocarbons. ... Professor Nocera said that whichever technique proved best the research was now at a level that no serious technical impediments remained and all that was needed was the investment to scale it up into a useable product. 'Science is doing its job. People don't realise that while they are sleeping at night in their beds, scientists are making the discoveries needed to deliver renewable energy to the planet. He added: 'If there was more of a sense of urgency, this would happen.'"
'Super fuel' from artificial leaves could replace oil
Mail, 29 July 2016

"For U.S. oil drillers, $60 is the new $50. Earlier this year, oil and natural gas companies facing the worst slump in a generation said they’d need crude to reach $50 a barrel before resuming drilling. This week, despite higher prices and lower costs, the industry has raised the bar, signaling it will take $60 or better before meaningful production can resume. “The industry doesn’t want to ramp things up until they are fairly confident prices will hold up,” said Brian Youngberg, an energy analyst at Edward Jones in St. Louis, in a telephone interview. “I think the industry has learned that it needs to get away from this boom-bust scenario.”"
$60 Is the New $50 for U.S. Oil Drillers Waiting for Rebound
Bloomberg, 28 July 2016

"Almost half the UK’s electricity came from clean energy sources such as wind and nuclear power last year, official figures have revealed. Renewables accounted for a quarter of the country’s power supplies in 2015, outstripping coal power for the first time, the data published by the government revealed. In total, low-carbon power sources, which produce little in the way of greenhouse gas emissions, supplied a record 46% of the UK’s electricity in 2015, as the amount of renewables grew and nuclear generation rose after outages in late 2014. Coal supplied just over a fifth (22%) of power in 2015, down from 30% in 2014, while gas continued to provide around 30% of the UK’s electricity. Nuclear power’s contribution rose slightly from 19% in 2014 to 21% last year, the figures from the Department for Business, Energy and Industrial Strategy showed."
Record 46% of UK's electricity generated by clean energy sources in 2015
Press Association, 28 July 2016

"The delegations of Russia and Turkey discussed on Tuesday the resumption of the TurkStream project aiming to build a natural gas pipeline from Russia to Turkey, but no decision was reached yet, Russia's Deputy Energy Minister Yury Sentyurin said. Russian Deputy Prime Minister Arkady Dvorkovich and his Turkish counterpart Mehmet Simsek met in Moscow earlier on Tuesday, expressing willingness to restore relations in trade and economy between the two nations which were soured by Turkey's downing of a Russian war plane last November."
Russia, Turkey discuss renewal of TurkStream project, no decision yet
Reuters, 26 July 2016

"By the end of this year, the number of oil and gas jobs in the UK is forecast to have fallen by 8,000 from a peak of 41,700 in 2014, according to the industry group Oil & Gas UK. When support jobs are included the number is expected to have fallen from 453,800 to 330,400 — a loss of over 120,000. The brunt of the losses has been felt in Aberdeen, capital of the UK oil industry, where the number of people claiming unemployment benefits has more than doubled since the end of 2014. People still in work have also faced sacrifices. Figures from oilandgaspeople.com, a recruitment site, show that average pay for an offshore worker has fallen from about £80,000 a year in 2014 to £62,000 now."
North Sea oil and gas sector faces first big strike in a generation
Financial Times, 22 July 2016

"The vast wetlands of the Niger Delta region are home to Nigeria's vast oil resources, but are once again at the centre of a security crisis. The militants or the "boys" are back in the creeks, destroying pipelines, attacking oil installations, and kidnapping workers. The violence has slashed Nigeria's oil production by a third. As we snake our way through the mangrove swamps in a speedboat we are entering a world where outsiders are no longer welcome. With pipelines and a huge oil export terminal on the horizon, every so often we flash by a fishing community with its wooden huts clustered close to rickety, wooden pier. The chaos here is dealing a serious blow to the Nigerian government who are dependent upon oil sales for most of its revenues. It has also helped push up the global oil price to almost $50 (£38) a barrel. The renewed militancy was triggered late last year by the cash-strapped government's decision to cancel lucrative security contracts and reduce the budget to pay former militants by 70% ."
Why Nigeria's 'Avengers' are crippling the oil sector
BBC Online, 22 July 2016

"The Treasury’s decision to scrap a £1bn carbon capture and storage (CCS) competition because of high subsidy costs could backfire and actually raise energy costs for consumers in the long term, the National Audit Office has warned.The Department of Energy and Climate Change (DECC) was on the verge of awarding funding to companies to develop the embryonic technology, which would capture harmful emissions from power plants, when then-Chancellor George Osborne pulled the plug on the competition in last year’s spending review. Both proposed projects competing for funding – Shell’s at Peterhead, and White Rose in Yorkshire – were scrapped as a result. A report from the NAO reveals that the Treasury concluded that the plans' cost to consumers would be “high and regressive” because, as well as the upfront cost, the two projects would also need ongoing subsidy support to be funded through levies on energy bills. The Treasury estimated that the plants would need subsidies of £170 per megawatt-hour, almost twice the level required by the proposed Hinkley Point nuclear plant, with a “significant impact on consumer bills in the 2020s”.... The depleted North Sea oil well that would have been used to store the carbon from one of the projects may now be decommissioned, making it unavailable and forcing developers to find a new site at added cost if CCS is revived at a later date, the NAO said. It also warned that the late-stage and unexpected cancellation of the competition, which was launched in 2012 following the scrapping of another CCS competition the previous year, increased the risk that “investors will be deterred from dealing with the government or require a higher return to do so, which would increase the cost of a future CCS policy”."
Scrapping UK carbon capture plan could raise energy costs, says NAO
Telegraph, 20 July 2016

"The UK faces a looming winter gas supply crunch after Centrica said it has been forced to shut down a key gas storage facility until next spring.Centrica’s Rough site accounts for more than 70pc of the UK’s total gas storage capacity, and can provide about 10pc of peak winter gas demand. The facility, which was converted from a partially depleted gas field off the Yorkshire coast in the 1980s, has suffered ongoing issues and outages in recent months and will now close entirely for further tests. A spokesman said Centrica is working to see whether it will be possible to return around a third of the capacity to operation by November, in time for colder months when gas demand by energy companies climbs. Cecile Langevin, a senior analyst with Thomson Reuters, said that even if companies are able to draw from the storage site before next March or April, Rough will only be 34pc full because the injections of gas usually made during the summer will not be possible."
UK faces winter gas crunch following storage shutdown
Telegraph, 15 July 2016

"US shale reserves are the lowest-cost option for future oil production and are likely to attract more investment than competing projects such as deepwater fields, according to a leading industry adviser. About 60 per cent of the oil production that is economically viable at a crude price of $60 a barrel is in US shale, and only about 20 per cent is in deep water, said Wood Mackenzie, the consultancy. Companies with US shale assets are likely to be at a competitive advantage over the next few years. Producers that rely on oilfields in higher-cost regions such as the North Sea and the deep waters off west Africa will have to cut costs or face shrinking output. After the oil price plunge that began two years ago, production costs have been cut across the industry, but far more so in US shale. Average costs per barrel have dropped by 30 to 40 per cent for US shale wells, but just 10 to 12 per cent for other oil projects, said Simon Flowers of Wood Mackenzie. US shale regions that two years ago were in the middle of the cost curve for future oil supplies are now down towards the lower end. Investments in the Eagle Ford shale of south Texas on average need a Brent crude price of $48 a barrel to break even, on Wood Mackenzie’s calculations, while projects in the Wolfcamp formation in the Permian Basin in west Texas need $39. “There are more opportunities to invest in the US, and that’s where the investment will take place,” said Mr Flowers. US companies that have shale oil reserves, including Chevron and ExxonMobil, have stressed the flexibility of those assets, which are developed with many wells costing a few million dollars each, rather than the multibillion-dollar projects often required for offshore production. On Wood Mackenzie’s calculations, Brazil’s deepwater oilfields are so large that some will be commercially viable, but higher-cost regions could struggle to attract investment. The number of large projects being given the go-ahead by oil and gas companies averaged 40 a year between 2007 and 2013 but dropped to just eight last year, according to Angus Rodger, also of Wood Mackenzie....While the economics of US shale are generally more attractive, Mr Flowers said the time taken to mobilise finance and workers to increase drilling and production meant that global demand could outstrip supply in a few years. That could drive oil prices to $80 to $85 per barrel in 2019-20, he added."
US shale is lowest-cost oil prospect
Financial Times, 13 July 2016

"The world risks becoming ever more reliant on Middle Eastern oil as lower prices derail efforts by governments to curb demand, the west’s leading energy body has warned. The head of the International Energy Agency told the Financial Times that Middle Eastern producers, such as Saudi Arabia and Iraq, now have the biggest share of world oil markets since the Arab fuel embargo of the 1970s. Demand for their crude has surged amid a collapse in oil prices over the past two years that has cut output from higher-cost producers such as the US, Canada and Brazil. Fatih Birol, executive director of IEA, said policymakers risk becoming complacent as rhetoric surrounding a rise in North American energy supplies has overshadowed the world’s growing reliance on Middle Eastern crude. “The Middle East is the first source of imports,” said Mr Birol. “The higher the demand growth the more we [consumer countries] will need to import.” Middle Eastern producers now make up 34 per cent of global output, pumping 31m barrels a day, according to IEA data. This is the highest proportion since 1975 when it hit 36 per cent. In 1985, when North Sea production accelerated, their share fell to as little as 19 per cent. Fast-growing supplies from US shale fields triggered the oil price plunge in mid-2014. Unlike in the 1980s, however, Opec producers — led by Saudi Arabia and its Gulf allies — decided to maintain output to defend market share for the 13-member group, rather than cutting output to bolster prices. Demand has since surged as prices more than halved following years of trading above $100 a barrel. Mr Birol said efforts to improve energy efficiency and reduce emissions were being thwarted as motorists returned to buying fuel-guzzling cars. In the US, more than two-and-a-half times as many sport utility vehicles were being bought compared with standard cars, Mr Birol said. Even more concerning for policymakers is China, where more than four times as many SUVs were bought, suggesting the country’s rapidly growing car culture has adopted America’s taste for larger more fuel-hungry cars. “Lower oil prices are proving to be bad news for efficiency improvements,” said Mr Birol. China has been the centre of oil demand growth for the past decade, becoming the second-largest oil consumer — behind the US — and surpassing it as the world’s biggest importer last year. Hundreds of billions of dollars in energy investments have been cut since 2014 as oil companies have embarked on the biggest cost-saving measures in 30 years, Mr Birol said. That is cutting supplies outside Opec, with US and other countries’ production expected to decline this year. Higher output from Iraq, Saudi Arabia and Iran has filled the gap. “The Middle East is reminding us that they are the largest source of low-cost oil,” said Mr Birol. He said the region was expected to meet three-quarters of demand growth over the next two decades. Higher US output had prompted some lawmakers to suggest the country can reduce its engagement in the Middle East. But Mr Birol warned politicians to keep in mind the importance of the region when creating economic and foreign policy. US oil imports are now rising as demand has grown faster than supplies. Mr Birol said policymakers needed to impose stricter fuel efficiency targets to reduce demand, arguing it was not feasible in a world market to completely sever reliance on Middle Eastern oil."
IEA warns of ever-growing reliance on Middle Eastern oil supplies
Financial Times, 7 July 2016

"American oil exports surged in May to their highest level since at least 1920 after a self-imposed ban was lifted at the start of the year, according to figures released yesterday. The US exported 662,000 barrels of crude a day during the month, up from 591,000 in April, according to figures from the US Census Bureau. The biggest single destination for exports, which were banned in response to the oil crisis in the 1970s, was Canada with 308,000 barrels per day, followed by the Netherlands at 110,000 barrels a day."
US oil exports at highest since 1920 as taps turned on again
Times, 7 July 2016

"The long-awaited report of John Chilcot, a senior UK civil servant, on the Iraqi War and the events that led to it has revealed that the UK energy business had a pretty solid vested interest in the conflict. Documents revealed as part of the huge, 12-volume report, show that British government officials involved in the events that led up to the war, the war itself and the following restoration period pursued as a main objective the corporate interests of energy giants BP and Shell. This was not, however, mentioned in the 150-page summary of the impressively extensive report: 2.6 million words in all. Secret meetings between government officials and BP and Shell to discuss how they would proceed once Saddam was been toppled are revealed in the document. Iraq, the minutes of one such a meeting read, is “special for the oil companies” and “BP are desperate to get in there.” In other words, what Chilcot’s report has revealed, albeit reluctantly and seemingly unwillingly, is that energy, not weapons for mass destruction (non-existent as it turned out) was the main motive for the Iraq invasion and the bloody conflict that ensued. Energy concerns continued to top the agenda in the aftermath of the war as well. According to Open Democracy, a theme repeatedly appearing in the documents that were analysed by Chilcot and his team was “to transfer Iraq’s oil industry from public ownership to the hands of multinational companies, and to make sure BP and Shell get a large piece of that.”BP operates the huge Rumaila oilfield in Iraq, while Shell operates the equally giant Majnoon field. From 2010, when BP stepped in as operator, Rumaila produced 2.2 billion barrels of crude to 2015 and at the moment accounts for a third of Iraq’s overall oil output. Production at the Majnoon field, on the other hand, only started around three years ago, with the firs crude flowing in 2014. Since then, production had reached 210,000 barrels by 29015, but as oil prices began sliding, Shell moved to revise future production targets, as exploitation of the field under those price circumstances became much less lucrative."
Chilcot Report: UK Oil Interests Were Lead Motive For Iraq War
Oilprice.com, 7 July 2016

"The United States has surpassed Saudi Arabia and Russia as the global leader in oil reserves, according to a report by a Norwegian consultancy firm. “We have done this benchmarking every year, and this is the first year we’ve seen that the US is above Saudi Arabia and Russia,” Per Magnus Nysveen, head of analysis at Rystad Energy, said. He credited the rise to a sharp increase in the number of discoveries in the Permian basin in Texas over the past two years. The report found that many, especially members of the Organization of Petroleum Exporting Countries, exaggerated the size of their reserves in self-reported surveys. Rystad Energy came to the conclusion by only recording each country’s economically viable reserves. Rystad found that the US had 264bn barrels of oil in reserve, ahead of Russia at 256bn barrels and Saudi Arabia at 212bin barrels. The study also painted a grim picture for the future of oil globally. A press release accompanying the findings said, at the current rate of production oil supplies will only last 70 more years, while the number of cars will double in the next 30 years. With this in mind, the release added, “it becomes very clear oil alone cannot satisfy the growing need for individual transport”. Electric cars currently make up a small portion of global car sales. Nysveen predicts that in 30 years, that portion will grow in Western countries but it will remain unfeasible in places where access to electricity is difficult. American oil reserves have grown dramatically in the past two years due to improvements in technology for extracting shale. Increased productivity has cut the cost of extracting oil in half in the past two years, when compared to the price per barrel.... Nysveen is forecasting the price of the barrel to bottom out soon as supply is beginning to rebalance. “At the end of the year, we will see increases again in US oil production,” he said. The US lifted its 40-year ban on exporting oil in December last year. Despite oil and gas companies getting routed by low oil prices, some states, such as Panama, are hoping to capitalize on its new status."
Report: US is now world’s largest oil reserve but global supply still small
Guardian, 6 July 2016

"Britain could be forced to rely on other countries for 93 percent of its gas supplies by 2040 if there is weak economic growth and not enough money made available to support domestic gas production, National Grid said on Tuesday. Britain currently imports about half of its gas but this figure is already expected to rise as production from domestic reserves dwindles. Gas imports come from Norway, continental Europe, and Qatar in the form of LNG. The highest import forecast comes under the British grid operator's "Slow Progression" scenario, one of four potential outcomes detailed on Tuesday."
Britain could import as much as 93 percent of its gas by 2040 – National Grid
Reuters, 5 July 2016

"The UK is almost certain to miss its EU 2020 targets for renewable energy, the National Grid has said. The firm has produced UK future energy scenarios covering four different approaches in policy. Even in the most environmentally minded scenario, the UK is projected to fail in its target of producing 15% of total energy from renewables. The government no longer claims the 2020 target will be hit but a spokesman said the UK was making good progress. The National Grid also says the UK will not achieve its own independently set long-term CO2 reduction plans unless tougher policies are imposed very soon."
Renewable energy: UK expected to miss 2020 targets
BBC Online, 5 July 2016

"Since the beginning of the U.S. fracking revolution, oil producers have struggled with a vexing problem: after an initial burst, crude output from new shale wells falls much faster than from conventional wells. However, those well decline rates have been slowing across the United States over the past few years, according to data analysis provided exclusively to Reuters. The trend, if sustained, would help ameliorate the industry’s most glaring weakness and cement its importance for worldwide production in years to come. It also helps explain shale drillers' resilience throughout the oil market's two-year slump. While shale oil production revolutionized the oil industry over the past decade, bringing abundance of global oil supplies, high costs and rapid production declines have been its Achilles heel. That is beginning to change thanks to technological innovation and producers' focusing less on maximizing output and more on improving efficiency and productivity. According to data compiled and analyzed by oilfield analytics firm NavPort for Reuters, output from the average new well in the Permian Basin of West Texas, the top U.S. oilfield, declined 18 percent from peak production through the fourth month of its life in 2015. That is much slower than the 31 percent drop seen for the same time frame in 2012 and the 28 percent decline in 2013, when the oil price crash started. The change was even more dramatic in North Dakota's Bakken shale, where four-month decline rates for new wells fell to 16 percent in 2015 from almost 31 percent in 2012. A slower decline means producers need to drill fewer new wells to sustain output, said Mukul Sharma, professor of petroleum engineering at the University of Texas at Austin. "You can have cash flow without having to expend a lot of capital." The recent decline rates mark a dramatic improvement from first-year 90 percent declines in the early years of the shale boom that made some investors question the sector's long-run viability. There are no 2016 figures yet, but oil executives expect the trend to continue this year and beyond. Scott Sheffield, chief executive of Pioneer Natural Resources Co (PXD.N), a top Permian producer, credited improved fracking techniques for helping stabilize production, which shareholders rewarded by lifting Pioneer's shares up about 9 percent over the past year. "We're exposing more of the reservoir and breaking it up so we don't get as sharp a decline," Sheffield told a recent energy conference. Slower declines also reflect producers' more conservative approach to operating wells. In the early years of the hydraulic fracturing boom, high crude prices encouraged operators to boost initial production as much as possible. To do this, they would let wells flow fast by keeping pressure low on the ground's surface. About seven years ago, however, some shale operators in Louisiana found this ultimately hurt production later on by causing rock fractures to shut. Now, many operators maintain surface pressures higher, which limits initial flow rates and slows a well's decline rate. "Conventional wisdom has shifted," said John Lee, a professor of petroleum engineering at Texas A&M University. Sharma of the University of Texas said that while shale well decline rates remained far above a 10 percent first-year decline a conventional well might experience, they marked a radical improvement compared with early years of hydraulic fracturing. Harold Hamm's Continental Resources Inc (CLR.N), for example, has told investors its new wells in Oklahoma's SCOOP region are now producing 40 percent more oil six months into their lives than as recently as last year. Today's production techniques use larger volumes of sand and pressurized fluids to frack more spots along longer well bores, to extract more oil from the wells. Pioneer fracks its wells every 15 feet today compared to every 60 feet in 2013. It costs extra $500,000 per well to do so, but its wells produce two-thirds more oil than just three years ago, boosting profitability, Pioneer said. To be sure, not all producers are seeing slower decline rates and the newer, more stable shale wells make up only a fraction of all producing U.S. oil wells, so their impact on overall domestic output is for now limited. The Eagle Ford shale in southern Texas has seen decline rates slightly increase, for example, according to NavPort data."
U.S. shale oil's Achilles heel shows signs of mending
Reuters, 1 July 2016

"Saudi Arabia’s new oil minister has signalled an end to the worst of the oil glut and indicated the Opec kingpin is preparing to reassert a degree of control over the market after two years of letting prices fall. During a visit to the US, Khalid al Falih said that the kingdom would be “expected” to start balancing supply and demand as the market recovers, with the world’s largest oil exporter once again assuming its role as the global swing producer. “We are out of it. The oversupply has disappeared,” he said in an interview with the Houston Chronicle. “We just have to carry the overhang of inventory for a while until the system works it out.” .... Saudi Arabia raised oil production from 9.6m barrels a day in late 2014 to an all-time high near 10.6m b/d last June. But since then it has maintained production at a steady 10.2m b/d, according to data provided to JODI. Mr Falih has indicated Saudi does not intend to flood the market, dampening fears it could raise production to 11m b/d or higher as regional rival Iran tries to regain market share. Iran’s output has more than doubled exports to around 2.3m b/d since sanctions related to its nuclear programme were largely lifted in January."
New Saudi oil minister signals end to glut
Financial Times, 22 June 2016

""Peak oil demand" has become a fashionable concept among climate campaigners but the evidence suggests oil consumption is growing at the fastest rate for a decade and shows no sign of letting up. Global oil consumption increased by nearly 1.9 million barrels per day (bpd) in 2015, the largest annual increase since 2004, apart from the post-crisis bounce recorded in 2010. Most forecasters predict consumption will grow by another 1.5 million bpd in 2016 and a similar amount in 2017, which would make it the strongest sustained period of growth since 2004-2006. Oil consumption in the advanced industrial economies that are members of the Organisation for Economic Cooperation and Development (OECD) peaked at 50 million bpd as far back as 2005. Between 2006 and 2014, OECD consumption declined in seven out of nine years. By 2014, OECD oil consumption had fallen by around 5 million bpd, or 10 percent ("BP Statistical Review of World Energy," 2016). In the OECD countries, consumption does indeed seem to have "peaked" thanks to a combination of high and rising oil prices, energy efficiency mandates and prolonged economic weakness. But in the rest of the world, consumption has continued growing rapidly. Non-OECD oil use grew by more than 13 million bpd between 2005 and 2014, an average of almost 1.5 million bpd per year. In 2015, spurred by a combination of economic expansion and much lower fuel prices, even the OECD returned to growth with the first consumption increase since 2005 (again excepting the unusual 2010 post-recession bounce). Over the entire 2005-2015 period, global consumption increased by more than 10 million bpd, as the growing thirst for oil in emerging markets more than offset lower OECD demand. With the global economy still expanding and oil prices at the lowest level for 10 years, consumption is set to continue growing strongly for the foreseeable future. In 2013, non-OECD countries consumed more oil than the advanced economies for the first time and there is no sign that consumption growth is slowing, let alone peaking, in the non-OECD economies. OECD countries that have reported steep declines in consumption over the last decade include the United States (-1.4 million bpd), Japan (-1.2 million bpd), Germany (-0.3 million bpd), France (-0.3 million bpd) and Britain (-0.3 million bpd). But this has been more than offset by rapid growth from non-OECD countries including China (+5.1 million bpd), India (+1.6 million bpd), Saudi Arabia (+1.7 million bpd) and Brazil (+1.0 million bpd). As a result, 10 of the 20 oil-consuming countries in the world are now outside the OECD. Non-OECD countries have become central to the outlook for oil consumption over all time horizons from the short term (one to two years) to the very long term (one to two decades). The rapidly expanding middle class in emerging markets shows a strong aspiration for car ownership and more air travel. Vehicle registrations in emerging markets such as China and India are growing rapidly, from a low base, which means there is enormous potential for further rises. Major road-building programmes designed to connect urban centres with fast highways are both responding to and will likely stimulate more car ownership and driving. Demand for regional as well as long-haul air travel is also increasing rapidly, with passenger-kilometres up by 6.8 percent in Latin America last year and 8.7 percent in the Asia-Pacific region ("Market Developments," IATA, 2016)."
Kemp: Global Oil Demand Shows No Sign of Peaking
Reuters, 21 June 2016

"Wells that are Drilled but Uncompleted are holes in rock waiting for the steel tubing and hydraulic fracturing needed to bring them into production. From early in oil’s two-year downturn they have been seen as a readily available source of supply that will start producing as the market tightens. In recent weeks there have been signs that is happening. Several shale producers — including Continental Resources, EOG Resources and Oasis Petroleum — have started to complete some of their DUCs. Others, including Whiting Petroleum, have said they can follow suit if oil stays near $50. Some believe this “fracklog” of uncompleted wells could put a ceiling on oil prices, which have already rallied almost 80 per cent from their January lows. On Tuesday, West Texas Intermediate, the US oil benchmark, was down 0.9 per cent at $50.18. Citigroup reckons DUCs could add up to 1m barrels per day to the market in the second half of the year, “putting the brakes on oil’s march higher”. “DUCs represent the low hanging fruit for US oil producers,” says Citi. As crude prices fell, many US shale companies drilled wells that they either could not afford to or did not want to complete. Often they had contracts with rig operators that meant they had to pay up whether or not the wells were drilled, and made a virtue out of necessity by arguing they were deliberately building up an inventory of DUCs to tap when prices rose. Rystad Energy, the consultancy, estimates that about 90 per cent of all the oil DUCs in the US can be profitable with oil at $50. There have been signs in derivatives markets of increased hedging by producers, suggesting they are moving to lock in these prices and take the risk out of completing their wells. But while wells are coming on stream and swelling US production, it is worth keeping the size of the DUCs in proportion. No one knows exactly how many there are. Analysts make educated guesses based on state records and company statements, and estimates vary widely. Rystad thinks there are now about 3,900 in the US, down from 4,000 at the end of last year. It expects about 6,000 shale oil wells to be drilled in the US this year, so those 3,900 DUCs would give a noticeable boost to production if they came on line quickly. Wood Mackenzie, however, argues that just because a well looks like a DUC and fracks like a DUC, that is no reason to jump to conclusions. Some delay between drilling and completing a well is inevitable, it points out: the fracking crews and other workers and equipment need to be brought to the site to do their jobs, and the logistics are never frictionless....Wood Mac expects about 250,000 barrels per day from completed DUCs in December, while Rystad expects about 300,000 b/d. To put that into context, that would represent about 4-5 per cent of total onshore crude production from the “lower 48” states of the US. While DUCs can slow the decline in US oil output that has been under way since April 2015, they cannot prevent it. For that to happen, the US oil industry will have to start drilling again and putting rigs back to work. The Baker Hughes count of rigs drilling onshore oil wells in the US has now risen for three weeks in succession, but is still only back to its level in April. “The main problem with seeing DUCs as a large potential flow is that it ignores an even larger flow that DUCs alone cannot offset, ie, the decline from existing wells,” says Paul Horsnell, analyst at Standard Chartered. Uncompleted wells could delay the rebalancing of the global oil market, pushing it further back into 2017. The belief that they can carry a recovery in US oil production, however, looks like a dead duck."
Uncompleted wells could hold back oil price rebound
Financial Times, 21 June 2016

"EU policies have done real damage to our security of supply. They have forced the premature closure of coal and oil-fired power stations before their replacements are ready. This issue is the main reason for Britain’s looming energy crunch. To date, the EU’s various power station directives have forced the UK to close a staggering 16,000 MW of capacity. These coal and oil fired power stations had generated reliable electricity since the 1960s and 70s. The closures represent nearly a third of baseload UK electricity generating capacity. The EU’s Industrial Emissions Directive will force the shutdown of remaining coal plants before new and cleaner gas-fired power stations (known as CCGTs) are ready. In a Commons Written Answer last month, the Government admitted only one new gas-fired plant was under construction near Manchester – this plant will generate just 900MW of electricity when it is finished. These statistics illustrate the gravity of the situation: the EU has forced us to close power plants early and not enough replacements are ready or forthcoming. More expensive, weather-dependent wind turbines, solar panels and undersea cables to import foreign electricity aren’t the answer. We need new policies in the national interest and fast. The Government has had to resort to spending tens of millions of pounds of taxpayers’ money to subsidise under-sentence coal plants so that they will stay on and generate electricity this winter. National Grid has admitted that its plans to avoid blackouts, known as “black start” payments, have spiralled from £35m to £150m. This is money to ageing coal plants and small diesel powered back-up generators. The coal plants had already decided to close, but their owners are now understandably happy to take public money to stay on. All these panic subsidies do is depress the investment case to build urgently-needed new gas plants, which the Government accepts are long overdue."
Why Europe is to blame for the UK's acute energy policy failures
Telegraph, 20 June 2016

"Europe will rely on Russia for record imports of natural gas this year as domestic production plunges following the crash in oil and gas prices, said Gazprom boss Alexei Miller. Russian state-backed Gazprom, Europe’s largest supplier of gas, was responsible for almost a third of European gas demand last year, and Mr Miller said the gas giant will export even more to European buyers in 2016 as North Sea production dwindles. Gazprom’s largest European customers are in Germany and the Netherlands, countries closely connected to the UK gas grid through two major pipelines. “We expect that 2016 will be a record year for us,” said Mr Miller. “Gazprom is aware of the alternative gas sources and other projects, but we are certain that Russian gas will be in demand in Europe for a long time,” he added. Speaking at the at the St Petersburg International Economic Forum on Thursday Mr Miller defended Gazprom’s plans to build a second gas pipeline alongside the Nord Stream line to export gas from Russia to Europe, bypassing transit routes in Ukraine. Critics of the Nord Stream project accuse Russia of using the new route to cut off a key source of national revenue for Ukraine, weakening its economy as well as its political leverage. But Mr Miller said the project will be a “highly effective” and profitable route to meet Europe’s rising Russian gas demand. The Nord Stream 2 project will double the capacity that Russia can export without the risk that Ukraine could use its transit network as a political tool against its larger neighbour. The tensions between the two nations have been known to reignite during the colder winter months, when both have opted to withhold gas or payments in retaliation against the other."
Europe’s reliance on Russian gas to hit record highs this year, says Gazprom chief
Telegraph, 16 June 2016

"Oil and gas companies will spend $1tn less on finding and developing reserves between 2015-2020 because of the crude price crash, a leading consultancy says, stoking fears about potentially tight supplies towards the end of the decade. Wood Mackenzie, the consultancy, said it expected “upstream” oil and gas spending to be 22 per cent lower than it projected two years ago, before prices started to slide. The US onshore industry, including shale producers, is suffering some of the deepest cuts, with Russia also expected to see sharp falls, although in some parts of the Middle East, including Saudi Arabia, spending is holding up. The slowdown in investment is expected to cut next year’s global oil and gas production by 4 per cent. That will help to temper the oversupply that has driven crude prices down, but potentially lay the foundations for tighter markets and rising prices in subsequent years. The squeeze on oil companies’ cash flows created by lower prices has forced many to cut spending. ExxonMobil, for example, has trimmed its capital spending from $42.5bn in 2013 to a planned $23bn this year, while Chevron is cutting from $41.9bn to $25bn over the same period. Expectations that oil prices could stay at about $50 a barrel for years to come imply that many possible oil and gas projects will not be economically viable. Goldman Sachs has calculated that potential projects worth $550bn might be scrapped if oil hovers around $55 per barrel. So far investment has fallen fastest in North America, where the shale industry is led by small- and midsized companies that face more immediate financial constraints. The relatively short time needed to drill wells and bring them into production also means that activity is more flexible in the US than in the mega-projects used to develop reserves in other parts of the world. Wood Mackenzie has halved its estimate of expected capital spending onshore in the “lower 48” states of the US excluding Alaska. Global spending on exploration to find new oil and gas reserves has also halved since 2014, dropping to an expected $42bn per year in 2016-17.... Malcolm Dickson, a principal analyst at Wood Mackenzie, said kick-starting a new wave of projects to provide the supply to meet future demand for oil and gas would require further cost reductions and efficiency gains, as well as “confidence in higher prices and arguably fiscal incentives”. Gas is likely to be abundant in world markets for a few years at least, as new liquefied natural gas export projects in Australia and the US come on stream and ramp up production. Oil, however, could be in tighter supply, depending on factors including security-related production outages in countries such as Nigeria, and the strength of global demand growth. The International Energy Agency, the watchdog backed by developed countries’ governments, said this week that world oil demand had been growing faster than it had previously expected, with consumption up 1.6m barrels per day in the first quarter of 2016."
Oil industry’s $1tn spending cut raises fears over future supply
Financial Times, 15 June 2016

"The oil market will not find a sustained balance until well into next year, even as strong demand growth and production disruptions are helping to shrink excess supplies, the world’s leading energy body has said in its first forecast for 2017. In its closely watched monthly oil market report, the International Energy Agency said although it expected supply and demand to even out in the latter half of 2016, it forecast a small surplus early next year.... Opec supplies are forecast to increase “modestly”, while production outside of the group, including in the US, resumes its growth trajectory. This will make way for a slight increase in global stocks in the first half of 2017, before they begin to fall again.... But the IEA said supply growth from outside of the cartel was likely to return in 2017 by about 200,000 b/d, after a 900,000 b/d decline in 2016. “Following the recovery in oil price,,,,,,,and a tighter market balance next year, we expect a slight uptick in completion activity through 2016 and into 2017,” the IEA said. US shale oil production is expected to slip by 500,000 b/d this year and a further 190,000 b/d in 2017, despite an expected return to growth by mid-2017, the IEA said. The IEA warned if supply shut-ins alleviate and demand growth is not maintained it may be more difficult to clear the still “enormous” inventory overhang. “This is likely to dampen prospects of a significant increase in oil prices,” the IEA said."
IEA: Oil market will not find sustained balance until 2017
Financial Times, 14 June 2016

"Uranium analyst David Talbot of Dundee Capital Markets is forecasting 6 percent compound annual demand growth through 2020, which is enough, he says, to “kick-start” uranium prices up to and beyond 2007 levels. Morningstar analyst David Wang predicts prices will double within the next two years. Mining Weekly expects “the period from 2017-2020 to be a landmark period for the nuclear sector and uranium stocks, as the global operating nuclear reactor fleet expands.”...The negative sentiment on uranium was largely made in Japan. The 2011 disaster at Fukushima created an irrational disconnect between sentiment and uranium fundamentals....First and foremost, the world is building more nuclear reactors right now than ever before, despite Fukushima. A total of 65 new reactors are already going up, another 165 are planned and yet another 331 proposed. Powering all of these developments will require an impressive amount of uranium. Right now, existing nuclear reactors use 174 million pounds of uranium every year. That will increase by a dramatic one-fifth with the new reactors under construction. But in the meantime, uranium producers have reduced output due to market prices and put caps on expansion. As a result, supplies are dwindling....Up to 20 percent of the uranium supply needed to operate the world’s existing 437 nuclear reactors for the rest of this year and next is not covered, according to uranium market analyst David Talbot."
Uranium Prices Set To Double By 2018
Oilprice.com, 14 June 2016

"“While most of the oil-price decline in 2014 could be explained by the significant increase in the supply of oil, more recently the lower price has reflected weaker global demand,” the ECB said on Monday in an article from its Economic Bulletin. “Although the low oil price may still support domestic demand through rising real incomes in net oil-importing countries, it would not necessarily offset the broader effects of weaker global demand.”"
ECB Says Oil-Price Slump Not the Global Boon It Might Have Been
Bloomberg, 13 June 2016

"Bloomberg New Energy Finance (BNEF) projects that in most countries, solar PV will be the cheapest form of new electricity generating capacity by 2030. It predicts several major shifts in power markets. The world is about a decade away from reaching the point of "peak fossil fuels" in the electricity-generation sector, after which less will be burned each subsequent year. That's according to BNEF New Energy Outlook (NEO) for 2016, released to subscribers on Monday. NEO is a comprehensive annual look-ahead focused on the development of global clean energy markets and technologies. The turnabout is happening "not because we're running out of coal and gas, but because we're finding cheaper alternatives," Bloomberg.com writer Tom Randall wrote in a summary of NEO 2016's main findings. There are several major shifts coming to power markets. First, as Randall puts it, "there will be no golden age of gas," despite the huge ramp-up of fracked gas in the US since 2008, which displaced a lot of coal-generated power. Nuclear power won't play a major role either. The reason: Wind and solar power costs are falling too quickly for gas to ever dominate on a global scale. Even with rock-bottom coal and gas prices, a global transition toward renewable energy will occur. NEO 2016 estimates that utility-scale solar PV will drop in price per MWh by 60 percent by 2040, to a global average of about $40 (35 euros) per MWh. "You can't fight the future," said Seb Henbest, NEO 2016's lead author. "The economics are increasingly locked in." The report pegged the peak year for coal, gas and oil in the global electricity generation sector at 2025. Second, renewable energy investment will absorb the majority of financial investment in the power sector through 2040. NEO 2016 projects that up to $2.1 trillion will be spent on new fossil-fueled generating capacity over the next 25 years globally. That's a lot of money. However, wind, solar and hydropower projects will together absorb about $7.8 trillion over the same time-frame. By 2027, building new wind farms and solar fields will often be cheaper than running existing coal and gas generators, according to NEO 2016: "This is a tipping point that results in rapid and widespread renewables development." By 2028, affordable batteries will be ubiquitous, eliminating concerns over the intermittency of wind and solar power. NEO estimates that for every doubling in the global installed capacity of solar PV panels, costs per unit of new panels drops by about 26 percent - a very high "learning rate." Wind power prices are also dropping fast, with a learning rate of 19 percent. This means, according to NEO, that wind and solar PV will be the cheapest ways of generating electricity in most of the world by the early 2030s. Another factor favoring the shift to renewables is that the total numbers of installed wind turbines and solar PV plants are growing faster than total electricity demand. The result is that coal and gas-fired power plants are idle more and more of the time - because they have to pay for fuel, whereas wind turbine or solar PV plant operators don't. Whenever the wind is blowing or the sun is shining, cheap wind or solar electricity displaces fossil electricity. The financial economics: Coal and gas power plants are getting progressively worse as a result. Power companies are aware of this trend, which is why they're increasingly reluctant to invest in new fossil-fueled generating capacity. The foregoing refers to electricity generation, not fuel for transportation. Peak oil demand will take longer to arrive, because most cars will still burn diesel or gasoline for years to come. But electric vehicles (EVs) are on the verge of disrupting oil markets nevertheless - and EV penetration has major implications for electricity markets. NEO 2016 projects that EVs will make up about one in four cars on the road in 2040, adding 8 percent to total global electricity demand by that year." NEO 2016 points to India as a key emerging threat to climate stability, because its electricity demand is expected to increase fourfold by 2040, and "the country sits atop a mountain of coal. It intends to use it," Randall wrote. That's in contrast to China, which is engaged in a massive shift from coal to renewables that will see it reduce its carbon emissions over the next 25 years. India is the main reason that global coal use will remain flat between now and 2040, rather than declining, according to NEO."
Cheapest power in 2030: solar PV
Deutsche Welle, 13 June 2016

"....the list of complaints, warnings and proposals from the anonymously-interviewed 47 oil industry figures behind the new PwC report Sea Change is genuinely astonishing. It can hardly be a comprehensive list of industry figures, but it ought to be an illuminating guide to thinking at senior levels. They warn there are only around two years to save the industry from a rapid decline, giving it a new lease of life for a decade or two. To get there, they suggest that resources should be pooled in a gigantic joint venture between offshore operators. By having one humongous offshore operator, they would effectively get rid of the competition which is their life blood. They suggest the same for finance, saying the lack of lender confidence is the biggest blockage they face. Effectively, big firms would provide funding for small ones, to do what small ones do better, and maybe the banks would be attracted by de-risking."
The oil barons' revolution
BBC Online, 13 June 2016

"Global consumption of coal fell by a record amount last year thanks to waning Chinese demand and increasing use of cheaper gas and oil, according to data from BP. The energy giant said that demand for oil, gas and renewable energy all increased last year despite sluggish economic growth but that there was a distinct shift away from coal, the most polluting of energy sources. Oil increased its market share of global primary energy consumption for the first time since 1999, to 33pc, as low prices spurred demand. Coal retained its position as the second largest source but was the only energy type to lose market share last year, according to BP's annual review of the energy markets. The energy company said global coal demand fell by 1.8pc, the most substantial annual drop since the company began its annual energy review in 1980. This was in large part a result of China’s lower demand for coal which fell 1.5pc. “The two trillion tonne question is whether we have now seen the peak in Chinese coal consumption. There are clearly powerful structural factors pushing in this direction,” said BP economist Spencer Dale, pointing to China’s “clear determination” to switch to cleaner, lower-carbon fuels and a lower reliance on heavy industry for economic growth. The US also turned its back on coal in favour of cheaper domestic shale gas resources causing coal demand to tumble almost 13pc in there. Tightening environmental rules in the US have spurred the move to cleaner electricity generation. However, BP said the shift was mostly market-driven."
Record fall in global coal consumption driven by low oil price
Financial Times, 8 June 2016

"The number of jobs lost as a result of the downturn in the UK oil and gas sector could top 120,000 by the end of this year, according to a report. Oil & Gas UK estimated 84,000 jobs linked to the industry went in 2015, with 40,000 losses expected this year. It said the offshore industry supported 453,000 jobs at its 2014 peak - either directly, in its supply chain or in trades such as hotels and taxis. The new figures suggest 330,000 jobs would be supported by the end of 2016."
Oil sector job losses 'to reach 120,000 by end of year'
BBC Online, 10 June 2016

"Oil prices likely need to recover to roughly $70 a barrel — and stay there — before U.S. shale drillers start investing in new production, Tom Petrie said Thursday. The chairman of investment banking firm Petrie Partners made the call on CNBC's "Squawk on the Street" after being asked to assess the view of Chesapeake Energy co-founder Tom Ward that capital markets would not open to most U.S. drillers until crude prices rebound to $75. Drillers need access to debt and equity markets in order to invest in new production, Ward told "Squawk on the Street" last month. Oil and gas companies have slashed capital spending because crude prices have been too low to support new investment. ... Petrie said the cost of bringing on substantial new production requires that drillers earn more than $50 a barrel. Ward's target is probably closer to the mark, he added. "I'd probably say the high $60s to the low to mid-$70s is the range for a significant change," Petrie said. ... More importantly, the institutions that allocate capital need to believe the price rebound is sustainable, he said. And Petrie expects setbacks along the road to recovery. ... To be sure, drillers have built up a large inventory of wells that have been drilled but are not yet fracked, a strategy that allows them to start new production relatively quickly. But Petrie said drillers are already working through the best assets that produce a return at today's low prices. Still, he said a pattern of tail winds had emerged in oil markets, setting up a good second half of 2016 for crude prices. Oil demand in China and India is holding up better than expected, he said, and some output has fallen due to supply disruptions.... Earlier Thursday, Continental Resources Chairman and CEO Harold Hamm told CNBC's "Squawk Box" supply had fallen 90 to 120 days ahead of expectations due to output disruptions in Canada, Nigeria and elsewhere, and as production continues to drop in the U.S. oil patch. Petrie said he agreed with that assessment. Hamm said he now sees oil prices rebounding to $69 to $72 by year's end. That is well above most estimates."
$50 oil won’t make US frackers turn on the tap: Expert
CNBC, 9 June 2016

"Global oil demand could peak by the end of the next decade even as global economic growth climbs. The latest downward revision to forecasts, from consulting firm McKinsey, could leave major new investments uneconomic if demand for energy fails to meet expectations. McKinsey said it has cut its forecast for growth in demand to 0.8pc a year to 2040, “well below mainstream base case perspectives”, including its own estimate of 1.1pc made last year. Demand for oil is expected to grow even more slowly beyond 2025, with the research pointing to a possible peak of 100m barrels a day by 2030, from current levels of 94m...McKinsey’s Occo Roelofsen said despite an expected increase in global population of around 36pc, and a doubling in global gross domestic product (GDP), shifting energy sector dynamics are set to depress energy demand. “ This change is driven by three factors: first, overall GDP growth is structurally lower as the population ages; second, the global economy is shifting away from energy-intense industry towards services; and third, energy efficiency continues to improve significantly,” he said. “Peak oil demand could be reached around 2030.... Meanwhile growth in electricity demand will outstrip other sources of energy by more than two to one, due to the steady “electrification” of building and industry in China and India. Almost 80pc of the capacity needed to meet this increase will be from solar and wind power, McKinsey predicts. "
Oil demand to peak in 2030 as energy experts slash forecasts
Telegraph, 6 June 2016

"Farmers are leading a backlash against the Government’s latest cut to green energy subsidies, warning it will deprive the struggling agricultural sector of a valuable source of income. In a consultation quietly published late last month, the Department of Energy and Climate Change (DECC) proposed slashing subsidies for anaerobic digestion (AD) plants. Anaerobic digesters take organic materials, such as crops or agricultural waste, and break them down using bacteria to produce “biogas” and fertiliser. The gas can then be burnt to produce electricity, or processed and sold into the mains gas grid. DECC plans to remove subsidies for big new AD plants and cut support for smaller new plants. Farmers’ union the NFU has warned the changes could sound the “death knell” for new biogas on farms. It estimates that farmers own about 200 AD plants, about two-thirds of all such plants in the UK, while up to 1,000 farms may have an interest in AD, for example by supplying them with crops. The technology has proved popular in the agricultural sector at a time when half of farmers can no longer make a living just from farming. One farmer told recently how the combination of AD subsidies and low dairy prices meant “muck is worth more than milk”."
Farmers lead backlash against green energy subsidy cut
Telegraph, 5 June 2016

"The future of the planned new nuclear power plant at Hinkley Point remains in doubt as key French unions still oppose the project, BBC Newsnight has learned. EDF, which would build the plant, had delayed a decision on the project in Somerset until the summer while it consulted French union representatives. The company, which is 85% French state-owned, had hoped to win support from a committee of workplace representatives. But the committee said staff had not been reassured about the plant's costs. Trade union representatives hold six of the 18 seats on EDF's board.... EDF chief executive Vincent de Rivaz also told MPs on the committee that he did not know when a final decision on the project would be made. Earlier this month, French President Francois Hollande said he would like the project to go ahead. Hinkley Point C, which would provide 7% of the UK's total energy requirements, had originally been meant to open in 2017. But it has been hit in recent months by concerns about EDF's financial capacity to handle the project. While one third of the £18bn capital costs of the project are being met by Chinese investors, Hinkley Point would remain an enormous undertaking for the stressed French company. In March, Thomas Piquemal, EDF's chief financial officer, quit after his proposal to delay the project by three years was rejected by colleagues. In April, French Energy Minister Ségolène Royale also suggested the project should be delayed. Much of this scepticism is the consequence of problems in constructing nuclear power stations to similar designs elsewhere. A plant being built by EDF at Flamanville in Normandy, northern France, has been hit by years of delays and spiralling costs."
Hinkley Point: French unions puts nuclear plant's future in doubt
BBC Online, 27 May 2016

"North Sea oil has posted a loss for the taxpayer for the first year in its history, according to new official figures. The Treasury put £24 million more into investment and decommissioning than it got back in petroleum revenue tax (PRT) in 2015/16, the first time the oil balance sheet has been in the red since records began in 1968/69. David Mundell, the Scottish Secretary, admitted the figures were “particularly concerning” and insisted the UK Government was doing “everything it can” to support the struggling industry. He argued that the UK’s “broad shoulders” means the Government can help support the industry and the thousands of workers and families who depend on it “at this very difficult time.” Tens of thousands of jobs have been lost in the North Sea since the oil price collapsed, with Shell announcing this week that a further 475 posts are to go in the North East."
North Sea oil posts its first annual loss for the taxpayer
Telegraph, 26 May 2016

"Dominic Haywood, an oil analyst at Energy Aspects, told CNBC on Thursday that "there will be a lot of guys (U.S. shale oil producers) that don't come back into the market. I think we've already lost around 35 to 40 independent shale oil or shale oil and gas producers and those producers won't come back," Haywood said. "They would need about a $70-$80 barrel of oil to cover drilling, extraction and capex costs," he said. There were high hopes for shale at one time, with widespread expectations that the decline in oil prices could enable the U.S. to be energy independent by 2020, but that is looking more of a pipe dream for now. The U.S. produces around 9.2 million barrels a day of oil, according to the latest available government data from February, 320,000 barrels less than the same month a year before. Remarking on the data, the International Energy Agency (IEA) said it was in "stark contrast to just one year earlier, when output was growing by 1.3 million barrels a day. Preliminary indications for March and April suggest output continued to fall, as producers removed another 72 oil rigs from service over the past 10 weeks." In the meantime, U.S. net imports totaled 7.3 million barrels in February showing that the dream of energy independence is far off. One analyst told CNBC that he doubted the very foundation of the U.S. shale oil industry which he said had been founded and expanded on cheap money and had effectively been a "Ponzi scheme" – an investment operation that generates returns for older investors by acquiring new investors. "I think in ten years' time someone is going to write a great book and make a great movie about the shale industry in the U.S. because I think it is, quite frankly, one of the biggest Ponzi schemes known to mankind," Gavin Wendt, founding director & senior resource analyst at MineLife, told CNBC on Thursday. "You had an industry that evolved there that put forward a huge amount of extra oil production that was pretty much financed by cheap Fed (U.S. Federal Reserve) money, brokers pumping money into the industry, drilling contractors and companies that were, in many instances, not even necessarily producing a lot of oil but were real estate players; for the first time you had companies with enormous valuations that weren't producing oil but were valued on the basis of their acreage," he noted. "That industry sustained itself for a while until a few people started having a good close look and the key (turning point) was the drop in oil prices which has made 80 percent of the industry un-economic at a price level below $50-$60 a barrel." Energy Aspects' Haywood said it was a bit "outlandish" to call the shale oil industry a "Ponzi scheme" but noted that at one point "everyone wanted a piece of the shale oil industry" and that shale production companies' strong acreage positions when oil prices were high had meant that their assets were indeed "very valuable.""
Shale oil industry a 'Ponzi scheme' or can it boom again?
CNBC, 26 May 2016

"As oil hovers near $50 per barrel, Pioneer Natural Resources has become more optimistic and is planning for the return of five to 10 rigs, once it is confident the upturn in oil is more sustainable. "I think it is fair to say we're more optimistic than we were last month and even the month before that. We're cautiously optimistic that we're going to see improvement here in the second half of the year," said Frank Hopkins, senior vice president of investment relations at Pioneer. Pioneer said in its earnings release last month that it is "expecting to add five to 10 horizontal drilling rigs when the price of oil recovers to approximately $50 per barrel and the outlook for oil supply/demand fundamentals is positive. Hopkins said Pioneer, viewed by analysts as among the stronger of the U.S. drillers, was running a total of 24 rigs at the end of last year. "We'll be down to 12 by the end of June. We shut down our Eagle Ford operations, and we shut down our joint venture area in the Permian Basin. The rigs we put back would go to our most prolific area," he said. Analysts say some companies should resume drilling activities with WTI at $50, but that does not affect much of U.S. production. Francisco Blanch, head of commodities and derivatives research at Bank of America/Merrill Lynch, said $60 is a level where much more activity would come in. "As the oil price recovers, people pay down their debt and they're going to repair their balance sheets. In the $60s, I think things change a lot," he said, noting $50 will be an option for a few companies that are better capitalized and on the right acreage. U.S. oil rig count is 332, about half of last year's count, and well below the peak above 1,600 in 2014."
With $50 oil, this U.S. shale company plans return to drilling
CNBC, 26 May 2016

"Clean power supplied almost all of Germany’s power demand for the first time on Sunday, marking a milestone for Chancellor Angela Merkel’s “Energiewende” policy to boost renewables while phasing out nuclear and fossil fuels. Solar and wind power peaked at 2 p.m. local time on Sunday, allowing renewables to supply 45.5 gigawatts as demand was 45.8 gigawatts, according to provisional data by Agora Energiewende, a research institute in Berlin. Power prices turned negative during several 15-minute periods yesterday, dropping as low as minus 50 euros ($57) a megawatt-hour, according to data from Epex Spot.....“If Germany was an island, with no export cables, this would be technically impossible because you always need to have some thermal generation running as a back up supply for when the wind or solar drops off,” Depraetere said. “Germany consumed 100 percent renewable energy yesterday, but we’re unlikely to see clean energy supply 100 percent of generation anytime soon,” he said."
Renewable energy just provided Germany with almost all of its power
Bloomberg, 19 May 2016

"When the WTI index (the regional equivalent to Brent) sank under 40 $/b late last year, Arthur Berman produced a most elucidating set of maps spatially portraying well profitability. At those prices only a small fraction of the wells extracting petroleum in the Permian formation were profitable. And this is the remarkable achievement engendered by the marriage of America's petroleum and finance industries. Petroleum extraction became effectively insulated from prices; bankrupt or not, the wells on the Permian, Bakken and Eagle Ford formations will keep pumping - because the dumb money keeps burning. For the rest of the world, this is like inserting a sliver of 4 Mb/d at 0 $ at the far left of the supply curve, pushing all other resources rightwards. For an international industry already in contraction, this is like adding gasoline to the fire."
This is Peak Oil
At The Edge of Time, 19 May 2016

"Crude output in Iraq, OPEC’s second-largest producer, has probably peaked and is likely to fall short of the country’s target over the next two years, according to an official with Lukoil PJSC, operator of one of the country’s biggest fields. Iraq needs more investment to maintain production at current levels, according to the official, who asked not to be identified when discussing company matters. Yet output can’t keep up because the government is requiring companies to reduce spending, the person said. The oil ministry has reached agreements in principle with most international oil companies to reduce their 2016 budgets by about 50 percent, and final accords may be reached in about two months, the person said. The Persian Gulf nation has boosted oil output as companies such as BP Plc, Royal Dutch Shell Plc and Lukoil are developing some of the largest deposits in its oil-rich southern region. They’ve been physically insulated from fighting against Islamic State militants in the country’s north, though the war effort and lower oil prices have strained the government’s finances and diverted its attention from developing new projects the companies are seeking to implement. Lukoil may spend about $1.3 billion on the West Qurna 2 field, the company official said, down from about $3 billion the year earlier. Lukoil is pumping about 400,000 barrels a day at West Qurna 2 and plans to raise capacity to 1.2 million barrels daily in the next decade. Iraq pumped a record 4.51 million barrels a day in January and 4.31 million in April, according to data compiled by Bloomberg. Its total production capacity is 4.8 million barrels a day, and increasing that to a target of 5 million will depend on oil prices, Deputy Oil Minister Fayyad Al-Nima said in a May 12 interview. The government is negotiating with oil companies on production targets after asking them to reduce 2016 spending because of lower oil prices and cuts in government revenue, Falah Al-Amri, chairman of Iraq’s state Oil Marketing Organization, said in February. The talks may affect Iraq’s target to have crude production capacity of 6 million barrels a day by 2020, Al-Amri said. Iraq needs Brent crude at about $55 a barrel to break even on government spending, the Lukoil official estimated."
Iraq’s Oil Output Seen by Lukoil at Peak as Government Cuts Back
Bloomberg, 19 May 2016

"While energy companies have put the brakes on capital spending thanks to low crude prices, in a few short years there won't even be enough oil to meet demand, former Shell Oil CEO John Hofmeister predicted Thursday. "We cannot ever produce enough oil, in my opinion, to satisfy global demand five or 10 years out. We have to start using natural gas and more biofuels as a source of transportation fuel," he said in an interview with CNBC's "Power Lunch." Capex estimates for global bigwigs Shell, Exxon Mobile, Chevron, Total, BP, Statoil and Eni total $144.8 billion for 2016, down from $211.5 billion in 2013, according to data collected by Reuters. Hofmeister, now CEO of Citizens for Affordable Energy, believes those cutbacks will primarily affect the industry for the next two to three years and may extend further if oil prices stay low. "In reality, three to five years from now we should be seeing the industry coming back at a higher capital spending rate because, I believe, the oil price will sustain it," he said. In the meantime, he expects an equilibrium to be established within the industry, as well as somewhat higher prices, in six to 12 months. "The consumers are wanting 94 to 95 million barrels of oil a day. And at these low prices, they want even more," said Hofmeister. "What has to happen is an equilibrium has to be established which gets an oil price high enough that companies can invest and can grow their supply, because without the supply growth we're going to see even more tighter demand and even higher prices.""
Oil production won't meet demand in 5 years: Fmr. Shell CEO
CNBC, 19 May 2016

"Saudi Arabia is considering using IOUs to pay outstanding bills with contractors and conserve cash, according to people briefed on the discussions. As payment from the state, contractors would receive bond-like instruments which they could hold until maturity or sell on to banks, the people said, asking not to be identified because the information is private. Companies have received some payments in cash and the rest could come in the "I-owe-you" notes, the people said, adding that no decisions have been made on the measures. Saudi Arabia has slowed payments to contractors and suppliers, tapped foreign reserves and borrowed from local and international banks in response to the decline in crude oil, which accounts for the bulk of its revenue. The country will probably post a budget deficit of about 13.5 percent of economic output this year, according to International Monetary Fund estimates, pushing the government to borrow an estimated 120 billion riyals ($32 billion). The Saudi government owes approximately $40 billion to the country’s contractors, estimated Jaap Meijer, managing director of research at Dubai-based Arqaam. Companies such as the Saudi Binladin Group are cutting thousands of jobs amid a slowdown in the construction industry, according to media reports.... Saudi Arabia used a similar policy of repaying contractors in the 1990s, said Raza Agha, chief economist for the Middle East and Africa at VTB Capital."
Saudi Arabia Considers Paying Contractors With IOUs
Bloomberg, 18 May 2016

"China’s tumbling crude production amid record-high demand from its oil refineries is helping tighten a global market recovering from a glut. Output in April from the world’s second-biggest consumer fell by the most since November 2011 to the lowest in 14 months. Meanwhile, the country’s refineries processed a record 10.93 million barrels a day of oil. The production declines “will help rebalance the market and will be positive for prices,” according to Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein & Co." .... High costs, reduced capital expenditure and declining rates in mature fields that have supported China’s production for decades are conspiring to pull output down, Standard Chartered Plc said in a report earlier this month. PetroChina Co., the country’s biggest producer, sees oil and gas output falling for the first time in 17 years as it shuts fields that have “no hope” of profits, President Wang Dongjin said in March. China’s production decline is mostly driven by PetroChina Co.’s flagship Daqing field and China Petrochemical Corp.’s mature oil fields such as Shengli, Kwan said. Output from Daqing will fall 1.5 million metric tons this year, Su Jun, general manager at the production and operations department, said in March. That’s equivalent to about 30,000 barrels a day, or roughly a 4 percent decline from the field’s 756,000 barrels a day of output in 2015, which the company said in regulatory a filing accounted for about 28 percent of its global output last year. “China has been over-investing in oil fields which are either mature or marginal,” Beveridge said."
China Helps Balance Oil as Aging Fields Lag Rising Refiners
Bloomberg, 16 May 2015

"The wave of U.S. oil and gas bankruptcies surged past 60 this week, an ominous sign that the recovery of crude prices to near $50 a barrel is too little, too late for small companies that are running out of money. On Friday, Exco Resources, a Dallas-based company with a star-studded board, said it will evaluate alternatives, including a restructuring in or out of court. Its shares fell 58 percent. Exco's notice capped off one of the heaviest weeks of bankruptcy filings since crude prices nosedived from more than $100 a barrel in mid-2014...The number of U.S. energy bankruptcies is closing in on the staggering 68 filings seen during the depths of the telecommunications sector bust of 2002 and 2003, according to Reuters data, the law firm Haynes & Boone and bankruptcydata.com. "
US energy bankruptcy wave surges despite recovering oil prices
Reuters, 13 May 2016

"Barring any compromise among OPEC members or a serious degradation in Middle East security, oil markets won't balance until next year, Russian analysis finds. Crude oil prices started moving below $100 per barrel in mid 2014 as energy companies ramped up production, notably in U.S. shale basins. The excess of supply has lingered for years as global economic recovery is too slow to correct the imbalance. Vygon Consulting, a research group with headquarters in Moscow, said that if members of the Organization of Petroleum Exporting Countries agree on steps to curb production, markets could return to balance. That hinges on Iran, from which the report said most of the new production from OPEC originates. "The balance may only be reached in case the OPEC member-states strike a compromise or if the geopolitical situation in the Middle East seriously worsens," the report said. "Otherwise, the excess of oil will persist throughout 2017." The report from Moscow contrasts with indications market balance is returning. The International Energy Agency this week reported growth in new crude oil production was slowing at the same time that demand was growing."
Russia sees oil market balance in 2017
UPI, 13 May 2016

"While Elon Musk is concentrating on making electric cars mass market, another firm is hoping to do the same for the trucking industry with an electric/natural gas hybrid. Utah firm Nikola has revealed the 'Nikola One', which is capable of pulling a total gross weight of 80,000 pounds and offering more than 1,200 miles between stops. It boasts six motors, and has a hi-tech touchscreen cockpit - and can drive a convoy of five driverless trucks behind it. The truck, called the Nikola One, has been developed in secret for the past three years. It features a 150-gallon dHybrid storage system stacked behind its cab that fuels a turbine generator, which charges a 320-kilowatt-hour battery pack that drives six motors, one for each wheel. In this way, it works much like a diesel-electric locomotive. It boasts a 335 horsepower electric motor and a dual gear reduction at every one of its six wheels,giving it over 2,000 horsepower."
The Tesla of the truck world: Hybrid electric and natural gas cab can pull 80,000 pounds and go for 1,200 miles between stops
Mail, 12 May 2016

"The Southern Gas Corridor, a project of pipelines to bring new gas supplies to Europe, is running on time and on budget, a BP senior executive said on Thursday. The Southern Gas Corridor consists of a chain of pipelines which will transport gas from the Shah Deniz field in Azerbaijan to European markets for the first time in history. Around 10 billion cubic metres (bcm) per year of Azeri gas should reach Europe by 2020 at the latest via the Trans-Atlantic Pipeline as well as the South Caucasus Pipeline through Georgia and the Trans-Anatolian Pipeline (TANAP) through Turkey. BP is developing the Shah Deniz II field and has stakes in the pipelines, along with other companies."
Southern Gas Corridor ‘on time and on budget’ – BP executive
Reuters, 12 May 2016

"Three bankruptcies this week shows that $45 a barrel oil isn’t enough to rescue energy companies on the verge of collapse. Since the start of 2015, 130 North American oil and gas producers and service companies have filed for bankruptcy owing almost $44 billion, according to law firm Haynes & Boone. The tally doesn’t include Chaparral Energy Inc., Penn Virginia Corp. and Linn Energy LLC, which filed for bankruptcy this week owing more than $11 billion combined. At least four more oil and gas companies owing more than $8 billion are nearing default, including Breitburn Energy Partners LP and SandRidge Energy Inc. Bankruptcies have accelerated as cash-starved companies find it almost impossible to raise capital. Energy companies have been virtually shut out of the high-yield bond markets, banks are cutting credit lines and asset sales have slowed. "I don’t think the E&P model in North America is economic and I don’t think it was real economic even at $80 and $100 oil," Jim Chanos, Kynikos Associates founder and president, said in an Bloomberg TV interview Thursday. "It’s certainly not economic at $45 oil." Several more are struggling to sustain crippling debt loads. SandRidge Energy, which owes $4.13 billion, said in its annual financial report that auditors have raised doubts about its ability to stay in business. It delayed releasing its first-quarter results, citing ongoing discussions with creditors on a “potential comprehensive restructuring transaction.” Breitburn, which owes $3 billion, missed interest payments in April and is in talks with creditors. W&T Offshore Inc. owes almost $1.5 billion and is overdrawn on its credit line, which was cut to $150 million from $350 million in March. The company has said it will pay off the loan in three monthly installments. Connacher Oil and Gas Ltd. has told creditors it’s making preparations to file for bankruptcy as it continues to search for a way to stave off default, according to two people familiar with the matter.... While troubled companies may not be saved by $45 oil, some of the better operators will turn profitable at $50, said Subash Chandra, an analyst with Guggenheim Securities in New York. Companies best able to take advantage will be those with with acreage in North Dakota’s Bakken shale, the Permian in Texas or the Scoop and Stack prospects in Oklahoma. "If oil is at $50, fortunes turn dramatically," Chandra said. "But the problem is they turn so much that the service companies come in and raise prices and take a share of it, or if production responds so quickly that oil has a hard time staying at $50." While some of the best operators in the most prolific acreage may boast well break-evens of $35 a barrel, that only includes the cost of drilling, said Spencer Cutter, a credit analyst with Bloomberg Intelligence. Expenses like overhead, salaries, taxes and interest expenses easily add another $10 to $15 a barrel, he said. "The short answer is $45 a barrel doesn’t save anybody," Cutter said. "Anyone who was going bankrupt at $30 is still going bankrupt at $45. You need to see oil sustained at $60 to $65 before you see a real turnaround in profitability for the sector.""
Oil at $45 a Barrel Proving No Savior as Bankruptcies Pile Up
Bloomberg, 12 May 2016

"Saudi Arabia is raising production and pressing ahead with a global expansion plan for its state oil company ahead of what could be the world’s largest ever stock market listing. In some of the first comments since a government reshuffle at the weekend, Saudi Aramco chief executive Amin Nasser emphasised the company’s willingness to compete with rivals, putting on notice oil producers from regional adversary Iran to US shale producers. “Whatever the call on Saudi Aramco, we will meet it,” he said during a rare media visit to the headquarters of the state oil company in Dhahran. “There will always be a need for additional production. Production will increase upward in 2016.” The oil industry is watching for any shifts in Saudi policy or crude output levels after the kingdom on Sunday replaced veteran oil minister Ali al-Naimi after more than two decades in office. Mohammed bin Salman, deputy crown prince, has hinted that the kingdom could easily accelerate output to more than 11m b/d as Iran, Riyadh’s regional rival, tries to attract customers after years of sanctions. Saudi Aramco, which pumps more than one in every eight barrels of crude globally, is at the centre of a reform programme being pushed by Prince Mohammed, who has emerged as the man holding the main levers of power in Saudi Arabia. He believes the company could be valued at more than $2tn. The plan — Vision 2030 — aims to end the country’s dependency on oil within 15 years, leveraging the assets of the state oil company to fund wide-ranging investments to diversify its economy."
Saudi raising oil output ahead of Aramco IPO
Financial Times, 10 May 2016

"Discoveries of new oil reserves have dropped to their lowest level for more than 60 years, pointing to potential supply shortages in the next decade. Oil explorers found 2.8bn barrels of crude and related liquids last year, according to IHS, a consultancy. This is the lowest annual volume recorded since 1954, reflecting a slowdown in exploration activity as hard-pressed oil companies seek to conserve cash. Most of the new reserves that have been found are offshore in deep water, where oilfields take an of average seven years to bring into production, so the declining rate of exploration success points to reduced supplies from the mid-2020s. The dwindling rate of discoveries does not mean that the world is running out of oil; in recent years most of the increase in global production has come from existing fields, not new finds, according to Wood Mackenzie, another consultancy. But if the rate of oil discoveries does not improve, it will create a shortfall in global supplies of about 4.5m barrels per day by 2035, Wood Mackenzie said. That could mean higher oil prices, and make the world more reliant on onshore oilfields where the resource base is already known, such as US shale. Paal Kibsgaard, chief executive of Schlumberger, the world’s largest oil services company, told analysts last month: “The magnitude of the E&P [exploration and production] investment cuts are now so severe that it can only accelerate production decline and the consequent upward movement in [the] oil price.” The slump in oil and gas prices since the summer of 2014 has forced deep cuts in spending across the industry. Exploration has been particularly vulnerable because it does not offer a short-term pay-off. ConocoPhillips is giving up offshore exploration altogether, and Chevron and other companies are cutting back sharply. The industry’s spending on exploring and appraising new reserves will fall from $95bn in 2014 to an expected $41bn this year, and is likely to drop again next year, according to Wood Mackenzie. There also has been a predominance of gas, rather than oil, in recent finds. In spite of the decline in activity, the total combined volume of oil and gas discovered last year rose slightly, but the proportion of oil dropped from about 35 per cent in 2014 to about 23 per cent in 2015. The two largest finds of last year, Eni’s Zohr field off the coast of Egypt, and Kosmos Energy’s Greater Tortue off Mauritania and Senegal, both hold gas. Bob Fryklund of IHS said: “We’ve hunted a lot for oil over the years, and now the areas that are oil-prone are fewer than the areas that are gas-prone.”"
Oil discoveries slump to 60-year low
Financial Times, 8 May 2016

"Most investors are aware that there is significant carnage in the oil patch. Low energy prices caught overleveraged companies off guard, and it’s forced many of these companies to seek protection from their creditors through bankruptcy. However, the pace of new bankruptcies is accelerating fast, and now bigger companies are being affected. This week’s chart shows that the 11 new bankruptcies in April 2016 carry a substantial debt load of nearly $15 billion – most of which is unsecured. A quick look at the data, which we pulled from Haynes and Boone, LLP, tells the tale... In the first two months of 2016, there were nine bankruptcies. Not one of the companies filing had debts that exceeded $200 million. In March, there were a total of seven new bankruptcies, including Venoco Inc. Venoco is a private company that is heavily oil-weighted with assets located offshore and onshore in Southern California. Venoco’s filing listed that it had $1.28 billion in debts, 71% of which are unsecured. Meanwhile, April was the biggest month for oil patch bankruptcies in the last two years. A total of 11 companies filed, but even more meaningful to investors is that four of the bankruptcies were public companies with debts exceeding $1 billion. Pacific Energy, formerly Pacific Rubiales, used to be the largest operating oil company in South America. Now, however, the company is in the midst of undergoing dramatic restructuring. Common shares have been delisted and the company is also seeking to get extensions on its $5 billion of unsecured debt. Texas-based Ultra Petroleum, which has nearly $4 billion in unsecured debt, has dropped from the NYSE to the OTC as it too seeks protection. The stock’s 52 week high was $17, but it now shares are trading for mere pennies. Two other big companies to go to court were Energy XII and Midstates Petroleum. They each owe roughly $3 billion and $2 billion of total debt, respectively. Energy XII operates 10 of the largest oilfields on the Gulf of Mexico Shelf, while Oklahoma-based Midstates is focused on the application of modern drilling and completion techniques in oil and liquids-rich basins in the onshore U.S. The grand total of debt for all April bankruptcy filers was an astounding $14.9 billion, most of which is unsecured. For reference, the 42 energy companies that filed for bankruptcy in all of 2015 had a combined $17.2 billion in debt."
Bankruptcy Mayhem in the Oil Patch
Visual Captialist, 6 May 2016

"Households face paying a new £38 levy on their energy bills to avert blackouts in winter 2017-18, official documents suggest. Ministers were accused of trying to bury bad news by quietly releasing an impact assessment showing the new costs on the morning of the local election results. Under the plans, the Government will make consumers pay subsidies to old power plants to keep running through winter 2017-18. These subsidies could cost up to £3bn, costing every household up to £38 on their energy bills in 2018. But ministers claim the scheme will actually leave households better off - because if they failed to intervene Britain could have faced serious power shortages that would have made electricity prices soar and sent bills up even further.... Without the new subsidies - expected to be paid primarily to coal, gas and nuclear plants - several power stations had already said they planned to shut down, leaving Britain with zero spare power plant capacity in winter 2017-18 and at risk of blackouts. Supply shortages would have been expected to increase wholesale power prices."
Households face new £38 energy bill levy to avert blackouts
Telegraph, 6 May 2016

"The United States is deeply concerned about the Nord Stream-2 gas pipeline project as a threat to national security, a senior U.S. energy envoy said on Friday, after the issue was raised at talks in Washington this week. Since its conception last year, the Nord Stream-2 project to double the volume of gas shipped directly from Russia to Germany has triggered strong reactions. Many EU governments complain it increases dependency on Russia's Gazprom, which supplies around a third of the European Union's gas. The issue was raised at a meeting in Washington this week of the U.S.-EU energy council, a body set up to debate security of energy supply following the 2009 gas crisis when Russia cut off gas supplies to Ukraine, with knock-on effects for the EU. "Our commitment to energy security in Europe is directly linked to our concern for national security," Amos Hochstein, U.S. special envoy and coordinator for international affairs, told journalists in a conference call. "The U.S. is deeply concerned about a pipeline that would endanger the economic viability of Ukraine," he said, adding it would "deepen the rift between East and West". Ukraine, the main transit route for shipping Russian gas to the European Union, has been locked in conflict with Moscow since Russia seized Ukraine's Crimea region in March 2014. The row about how much Gazprom charges Ukraine for its gas is also unresolved. The Nord Stream-2 consortium, which includes Gazprom, E.ON, Wintershall, Shell, OMV and Engie, says the project is purely commercial and that Russian pipeline gas is cheaper than liquefied natural gas (LNG), which the United States, for instance, can supply. But Hochstein dismissed that argument, saying it didn't make commercial sense for Europe to "double down on physical infrastructure that is not accessible to new markets". "There are enormous amounts of gas coming into the market over the next five years from Australia and the United States," he said. Analysts question how much of that will make its way to Europe rather than Asia, where demand is rising and gas is likely to command a higher price, although a first U.S. LNG cargo arrived in Portugal in April. Nord Stream-2 is due to be completed by the end of 2019, according to Gazprom."
U.S. deeply concerned Nord Stream gas link is security threat
Reuters, 6 May 2016

"First supplies of shale gas, extracted using the unconventional fracking process, could enter the British gas market as early as mid-2017, the head of shale gas firm Cuadrilla Resources told Reuters on Friday. Britain is estimated to have substantial amounts of shale gas trapped in underground rocks and Prime Minister David Cameron has pledged to go all out to extract those reserves to help offset declining North Sea oil and gas output. But progress has been slow as applications for shale gas projects have been held up at local government level where they have faced vocal opposition from environmental campaigners. Cuadrilla initially wants to carry out fracking -- which injects water, sand and chemicals into rock formations to release shale gas -- at two sites in northwest England. It hopes to get government approval to start operations at the sites before August."
First fracked gas could hit UK market in 2017 – Cuadrilla
Reuters, 6 May 2016

"The US Federal Reserve has warned that the world is awash with excess oil and starting to run out of places to store the glut, with no sustained recovery in sight for the oil industry until 2017 at the earliest. Robert Kaplan, head of the Dallas Fed, poured cold water over talk of a fresh oil boom this year and said the US shale industry has taken far longer to cut output than many expected. “As we sit here today, Dallas Fed economists estimate that global daily oil production exceeds daily consumption by more than 1m barrels per day,” he told the Official Monetary and Financial Institutions Forum in London. “Excess inventories in the OECD member countries now stand at approximately 440m barrels. This is a record level and has raised concerns about whether there is sufficient storage capacity in certain geographic areas,” he said. Oil prices have surged by 80pc since touching bottom at $26 in mid-February. West Texas crude reached a five-month high of $46.70 this week. Speculative long positions on crude oil have risen to all-time highs on the futures markets, a sign that the rebound may have lost touch with fundamentals. There is an armada of tankers building up in the North Sea, while the latest loading data from China show that May deliveries are falling. “We think China has for now stopped filling its strategic petroleum reserve. They have filled up the sites,” said Ian Taylor, head to the giant trading group Vitol.... Mr Kaplan, a former banker at Goldman Sachs, said the oil markets have taken “too much comfort” from talk of a production freeze between the OPEC cartel and Russia. The cold reality is that Iran is ratcheting up output towards pre-sanctions levels. The Dallas Fed’s team of energy experts is closely watched for clues about the health of the shale industry in Texas. Mr Kaplan said the break-even price of oil for US frackers has dropped to $35 to $50, lower than many assume."
Dallas Fed cautions on fresh oil bubble as glut keeps building
Telegraph, 29 April 2016

"A new study by the University of Michigan has found that a single oil and gas field in the western United States is largely responsible for a global uptick of the air pollutant ethane. The research team found that fossil fuel production at the Bakken Formation located in North Dakota and Montana is emitting roughly 2 percent of the ethane detected in the Earth’s atmosphere. Ethane reacts with sunlight to form ozone, which triggers respiratory problems. “Two percent might not sound like a lot, but the emissions we observed in this single region are 10 to 100 times larger than reported in inventories. They directly impact air quality across North America. And they’re sufficient to explain much of the global shift in ethane concentrations,” said Eric Kort to the Michigan News. Kort is a U-M assistant professor of climate and space sciences and engineering, and first author of the study published in Geophysical Research Letters. The study solves what had been a scientific mystery after a mountaintop sensor in Europe registered an increase of ethane in 2010, following decades of declines. Searching for the source, an aircraft from the National Oceanic and Atmospheric Administration sampled air from over the Bakken region in May 2014. Those measurements showed ethane emissions far higher than previously reported."
Study: Bakken oil fields leading cause in global air pollution uptick
Associated Press, 29 April 2016

"Senators patted themselves on the back last week after passing a wide-ranging energy bill, a feat that seems amazing given the partisanship on Capitol Hill and the deep divisions between the parties on fossil fuels in particular. But the hype was too good to be true: The bill has at least one glaring flaw that must be changed before President Obama considers signing it....the bill also would command the Environmental Protection Agency to “recognize biomass” — that is, plant matter such as wood harvested from forests — “as a renewable energy source” because of its “carbon-neutrality.” This is a rank example of Congress legislating science rather than allowing agency experts to make determinations based on facts, and the results could be very bad for the environment. Burning wood produces carbon dioxide emissions; the case for treating biomass energy as carbon-neutral is that, as plants grow back, they recapture carbon dioxide from the air. Yet burning biomass releases a lot of CO2 into the atmosphere all at once, and plant regrowth takes time. Meanwhile, scientists warn that the planet could reach climate tipping points soon. This alone is reason not to treat biomass and, say, wind energy as equivalent. Moreover, trees will continue growing, sequestering carbon dioxide all along, if they are not harvested for energy, which calls into question the net carbon benefits of chopping them down and growing new ones. Using wood for electricity also means that other industries, such as paper, might have to get their raw materials from other places, which could end up increasing deforestation. The country cannot get much electricity out of biomass, anyway. Tim Searchinger, a Princeton University researcher, calculates that obtaining 4 percent of the country’s electricity from biomass would require 74 percent of its timber harvest. Biomass advocates respond that the product is better than fossil fuels. That might be so, but it is not an excuse to treat biomass like any other renewable. Sixty-five experts, including Mr. Searchinger, warned senators in February against including the biomass language in the bill, predicting that it would “promote deforestation in the U.S. and elsewhere and make climate change much worse.”"
Dear Congress: Burning wood is not the future of energy
Washington Post, 28 April 2016

"Russian President Vladimir Putin is on the verge of realizing a decade-old dream: Russian oil priced in Russia. The nation’s largest commodity exchange, whose chairman is Putin ally Igor Sechin, is courting international oil traders to join its emerging futures market. The goal is to increase revenue from Urals crude by disconnecting the price-setting mechanism from the world’s most-used Brent oil benchmark. Another aim is to move away from quoting petroleum in U.S. dollars. If Russia is going to attract international participation in Russian-based pricing, the Kremlin will need to persuade traders it’s not simply trying to push prices up, some energy analysts said. The government is dependent on oil revenue to fund its budgets. “The goal is to create a system where Russian oil is priced and traded in a fair and straightforward way,” said Alexei Rybnikov, president of the St. Petersburg International Mercantile Exchange, or Spimex, in a phone interview. Russia, which exports about half its crude, has long complained about the size of the discounts for lower quality Urals oil compared to North Sea Brent prices, which are assessed by the Platts agency. With world oil prices down by half in the past two years and Russia facing the prospect of its worst budget deficit as a percentage of its economic output since 2010, it needs every dollar of petroleum revenue it can get. Having its own futures market would improve Russian oil price discovery as well as help domestic companies generate extra revenue from trading, said Rybnikov....Moscow is not alone in its push to change global oil pricing. China, which vies with the U.S. as the world’s biggest crude importer, has spent two decades trying to introduce its own oil futures contact, now expected this year. Iran and Venezuela, members of the Organization of Petroleum Exporting Countries, have called for trading oil in other currencies than U.S. dollars."
Putin's Decade-Old Dream Realized as Russia to Price Its Own Oil
Bloomberg, 28 April 2016

"Global supply-side pressures could reverse within 20 years as low crude oil prices crimp spending on exploration and production, Wood Mackenzie finds. For the fifth week in a row, oil services company Baker Hughes reported a decline in rig activity in North America, with a 2 percent drop to 431. Last year's count for the week ending April 22 was 932. Lower oil prices means less capital is available for energy companies to invest in exploration and production activity. If that situation doesn't improve, experts with analysis group Wood Mackenzie said in an emailed report the global oil market may face long-term shortages. "Over 7,000 conventional fields have been discovered in the last 15 years and, although these developments will play a critical role in securing future oil supply in the medium term, modeling a continuation of poor exploration results shows that the market could see a 4.5 million barrel per day shortfall by 2035," Patrick Gibson, director of global oil supply research at Wood Mackenzie, said in a statement."
Long-term oil shortfall predicted by Wood Mackenzie
UPI, 27 April 2016

"In February, the financial services firm Deloitte predicted that over 35 percent of independent oil companies worldwide are likely to declare bankruptcy, potentially followed by a further 30 percent next year—a total of 65 percent of oil firms around the world. Since early last year, already 50 North American oil and gas producers have filed bankruptcy. The cause of the crisis is the dramatic drop in oil prices—down by two-thirds since 2014—which are so low that oil companies are finding it difficult to generate enough revenue to cover the high costs of production, while also repaying their loans. Oil and gas companies most at risk are those with the largest debt burden. And that burden is huge—as much as $2.5 trillion, according to The Economist. The real figure is probably higher.At a speech at the London School of Economics in February, Jaime Caruana of the Bank for International Settlements said that outstanding loans and bonds for the oil and gas industry had almost tripled between 2006 and 2014 to a total of $3 trillion. This massive debt burden, he explained, has put the industry in a double-bind: In order to service the debt, they are continuing to produce more oil for sale, but that only contributes to lower market prices. Decreased oil revenues means less capacity to repay the debt, thus increasing the likelihood of default. This $3 trillion of debt is at risk because it was supposed to generate a 3-to-1 increase in value, but instead—thanks to the oil price decline—represents a value of less than half of this. Worse, according to a Goldman Sachs study quietly published in December last year, as much as $1 trillion of investments in future oil projects around the world are unprofitable; i.e., effectively stranded. Examining 400 of the world’s largest new oil and gas fields (except U.S. shale), the Goldman study found that $930 billion worth of projects (more than two-thirds) are unprofitable at Brent crude prices below $70. (Prices are now well below that.) The collapse of these projects due to unprofitability would result in the loss of oil and gas production equivalent to a colossal 8 percent of current global demand. If that happens, suddenly or otherwise, it would wreck the global economy."
We Could Be Witnessing the Death of the Fossil Fuel Industry—Will It Take the Rest of the Economy Down With It?
AlterNet, 22 April 2016

"A new peer-reviewed study led by the Institute of Physics at the National Autonomous University of Mexico has undertaken a comparative review of the EROI of all the major sources of energy that currently underpin industrial civilization—namely oil, gas, coal, and uranium. Published in the journal Perspectives on Global Development and Technology, the scientists note that the EROI for fossil fuels has inexorably declined over a relatively short period of time: “Nowadays, the world average value EROI for hydrocarbons in the world has gone from a value of 35 to a value of 15 between 1960 and 1980.” In other words, in just two decades, the total value of the energy being produced via fossil fuel extraction has plummeted by more than half. And it continues to decline. This is because the more fossil fuel resources that we exploit, the more we have used up those resources that are easiest and cheapest to extract. This compels the industry to rely increasingly on resources that are more difficult and expensive to get out of the ground, and bring to market. The EROI for conventional oil, according to the Mexican scientists, is 18. They estimate, optimistically, that: “World reserves could last for 35 or 45 years at current consumption rates.” For gas, the EROI is 10, and world reserves will last around “45 or 55 years.” Nuclear’s EROI is 6.5, and according to the study authors, “The peak in world production of uranium will be reached by 2045.” The problem is that although we are not running out of oil, we are running out of the cheapest, easiest to extract form of oil and gas. Increasingly, the industry is making up for the shortfall by turning to unconventional forms of oil and gas—but these have very little energy value from an EROI perspective. The Mexico team examine the EROI values of these unconventional sources, tar sands, shale oil, and shale gas: “The average value for EROI of tar sands is four. Only ten percent of that amount is economically profitable with current technology.” For shale oil and gas, the situation is even more dire: “The EROI varies between 1.5 and 4, with an average value of 2.8. Shale oil is very similar to the tar sands; being both oil sources of very low quality. The shale gas revolution did not start because its exploitation was a very good idea; but because the most attractive economic opportunities were previously exploited and exhausted.”"
We Could Be Witnessing the Death of the Fossil Fuel Industry—Will It Take the Rest of the Economy Down With It?
AlterNet, 22 April 2016

"The driving force behind the accelerating decline in resource quality, hotly denied in the industry, is ‘peak oil.’ An extensive scientific analysis published in February in Wiley Interdisciplinary Reviews: Energy & Environment lays bare the extent of industry denialism. Wiley Interdisciplinary Reviews (WIRES) is a series of high-quality peer-reviewed publications which runs authoritative reviews of the literature across relevant academic disciplines. The new WIRES paper is authored by Professor Michael Jefferson of the ESCP Europe Business School, a former chief economist at oil major Royal Dutch/Shell Group, where he spent nearly 20 years in various senior roles from Head of Planning in Europe to Director of Oil Supply and Trading. He later became Deputy Secretary-General of the World Energy Council, and is editor of the leading Elsevier science journal Energy Policy. In his new study, Jefferson examines a recent 1865-page “global energy assessment” (GES) published by the International Institute of Applied Systems Analysis. But he criticized the GES for essentially ducking the issue of ‘peak oil.” “This was rather odd,” he wrote. “First, because the evidence suggests that the global production of conventional oil plateaued and may have begun to decline from 2005.” He went on to explain that standard industry assessments of the size of global conventional oil reserves have been dramatically inflated, noting how “the five major Middle East oil exporters altered the basis of their definition of ‘proved’ conventional oil reserves from a 90 percent probability down to a 50 percent probability from 1984. The result has been an apparent (but not real) increase in their ‘proved’ conventional oil reserves of some 435 billion barrels.” Added to those estimates are reserve figures from Venezuelan heavy oil and Canadian tar sands, bringing up global reserve estimates by a further 440 billion barrels, despite the fact that they are “more difficult and costly to extract” and generally of “poorer quality” than conventional oil. “Put bluntly, the standard claim that the world has proved conventional oil reserves of nearly 1.7 trillion barrels is overstated by about 875 billion barrels. Thus, despite the fall in crude oil prices from a new peak in June, 2014, after that of July, 2008, the ‘peak oil’ issue remains with us.” Jefferson believes that a nominal economic recovery, combined with cutbacks in production as the industry reacts to its internal crises, will eventually put the current oil supply glut in reverse. This will pave the way for “further major oil price rises” in years to come. It’s not entirely clear if this will happen. If the oil crisis hits the economy hard, then the prolonged recession that results could dampen the rising demand that everyone projects. If oil prices thus remain relatively depressed for longer than expected, this could hemorrhage the industry beyond repair."
We Could Be Witnessing the Death of the Fossil Fuel Industry—Will It Take the Rest of the Economy Down With It?
AlterNet, 22 April 2016

"For the companies that operate offshore rigs on behalf of oil producers — including Transocean, Seadrill, Ensco and Noble Corp — the slump in crude prices since the summer of 2014 has been brutal. They have been reporting large losses, and have cut or scrapped their dividends. Their share prices have plunged. The impact of low oil prices is often depicted as a battle between Saudi Arabia and the onshore shale producers of the US. But other relatively high-cost sources of supply around the world have also been hit, and for offshore oil the effect is likely to last longer. The latest data for offshore oil and gas production still look healthy. Last year output from the UK sector of the North Sea rose 7 to 8 per cent, while crude production in the US waters of the Gulf of Mexico rose 10 per cent. That growth is the result of decisions taken years ago, however. Matt Cook of Douglas-Westwood, a consultancy, says that because offshore projects take years to develop, the impact of falling oil prices is felt only after a lag....The number of drillships and “semi-submersible” floating rigs working around the world has dropped from 251 in September 2014 to 169 last month, according to the RigLogix database from Rigzone, a research firm. Only a handful of new offshore projects were given the green light last year, including Royal Dutch Shell’s Appomattox in the Gulf of Mexico, Eni’s OCTP off the coast of Ghana, and Statoil’s Johan Sverdrup field in the Norwegian sector of the North Sea. Even more ominously for the contractors, many oil producers have cut back sharply on exploration to find fields that will lead to future developments. ConocoPhillips of the US said last year it would pull out of deepwater exploration altogether by 2017. Paal Kibsgaard, chief executive of Schlumberger, the world’s largest oil services group, on Friday told analysts that its customers showed signs of “facing a full-scale cash crisis”, and in the second quarter their spending was likely to be even lower than in the first three months of 2016. One particular weak spot for Schlumberger was sales of offshore seismic survey data — essential for exploration — which Mr Kibsgaard said had fallen to “unprecedented low levels”. With cash flows under extreme pressure, and commitments to investors that dividends will not be cut, oil companies see little benefit in spending money on exploration that might at best pay off in production 10 years from now. The slowdown in both exploration for new fields and the development of past discoveries is causing particular difficulties for those rig operators that are heavily indebted. ....Transocean’s regular fleet status report last week showed that of its 28 rigs capable of working in “ultra deep” waters, just 12 were under contract, with the rest “stacked” or idle....Although offshore and especially deepwater oil is expensive, the fields found can be very large. So the cost per barrel is not necessarily higher than for US shale, says Amrita Sen of Energy Aspects, a consultancy. The big difference, however, is in flexibility. Offshore, a well might cost $100m and take many weeks to drill, while onshore it will cost about $5m to $7m and take less than two weeks.... ExxonMobil told investors last month that it was pursuing “several” offshore development opportunities. However, executives also stressed the flexibility of its US onshore assets, which would allow them to ramp up production quickly if oil process rise. Mr Kibsgaard of Schlumberger suggested on Friday that this would be a common view across the industry. Large new offshore projects, he said, were “not going to be the first area that our customers are going to start putting money into“. When the recovery comes, he added, investment will pick up onshore first and offshore — and especially in deep water — only later. That means the financial pressures on the rig companies will continue, potentially with significant low-term consequences. Keeping a modern drillship “hot stacked” — ready to move off to a job if needed — can cost $150,000 per day, according to Antoine Rostand, president of Kayrross, an energy technology start-up. That creates an incentive for the operators to scrap or sell rigs, rather than retain them to wait for the upturn. There is a widespread expectation that as oil prices recover, the US shale industry will spring back to life. If, for whatever reason, that fails to happen, then it will take a long time for the offshore industry to be revved up to fill the gap. The result could be a surge in oil and gas prices, at least for a while. “This is a dangerous game for the industry,” says Mr Rostand. “The knock-on effect of reduced activity on the industry will be prolonged.”"
Offshore rig operators reel from oil price rout
Financial Times, 24 April 2016

"An extensive new scientific analysis published in Wiley Interdisciplinary Reviews: Energy & Environment says that proved conventional oil reserves as detailed in industry sources are likely “overstated” by half. According to standard sources like the Oil & Gas Journal, BP’s Annual Statistical Review of World Energy, and the US Energy Information Administration, the world contains 1.7 trillion barrels of proved conventional reserves. However, according to the new study by Professor Michael Jefferson of the ESCP Europe Business School, a former chief economist at oil major Royal Dutch/Shell Group, this official figure which has helped justify massive investments in new exploration and development, is almost double the real size of world reserves. Wiley Interdisciplinary Reviews (WIRES) is a series of high-quality peer-reviewed publications which runs authoritative reviews of the literature across relevant academic disciplines. According to Professor Michael Jefferson, who spent nearly 20 years at Shell in various senior roles from head of planning in Europe to director of oil supply and trading, “the five major Middle East oil exporters altered the basis of their definition of ‘proved’ conventional oil reserves from a 90 percent probability down to a 50 percent probability from 1984. The result has been an apparent (but not real) increase in their ‘proved’ conventional oil reserves of some 435 billion barrels.” Global reserves have been further inflated, he wrote in his study, by adding reserve figures from Venezuelan heavy oil and Canadian tar sands - despite the fact that they are “more difficult and costly to extract” and generally of “poorer quality” than conventional oil. This has brought up global reserve estimates by a further 440 billion barrels. Jefferson’s conclusion is stark: "Put bluntly, the standard claim that the world has proved conventional oil reserves of nearly 1.7 trillion barrels is overstated by about 875 billion barrels. Thus, despite the fall in crude oil prices from a new peak in June, 2014, after that of July, 2008, the ‘peak oil’ issue remains with us.” Currently editor of the leading Elsevier science journal, Energy Policy, Professor Jefferson was also for 10 years deputy secretary-general of the World Energy Council, a UN-accredited global energy body representing 3,000 member organisations in 90 countries, including governments and industry. Earlier this year, Deloitte predicted that over 35 percent of independent oil companies worldwide are likely to declare bankruptcy, potentially followed by a further 30 percent next year - a total of 65 percent of oil firms around the world. Already 50 North American oil producers have gone bankrupt since last year due to a crisis of profitability triggered by bottoming oil prices."
Where did all the oil go? The peak is back
Middle East Eye, 24 April 2016

"The head of the world's largest provider of services to oilfields has warned of a "full-scale crisis" as the industry is lashed by an unprecedented slump in trading conditions. Paal Kibsgaard, chairman and chief executive of Schlumberger used a conference call with investors over the weekend to detail 8000 job cuts at the services giant. One-third of Schlumberger's workforce, or roughly 42,000, has now been cleaved off since the worst crude-market crash in a generation began in mid-2014.... The International Energy Agency reiterated on Thursday it expects non-OPEC output to fall by about 700,000 barrels a day this year, which would be the sharpest drop in a quarter century. US production fell to 8.95 million barrels a day, the Energy Information Administration said on Wednesday.... Schlumberger's profit fell in the first quarter as the company, which helps explorers find pockets of oil underground and drill for it, adjusts to shrinking margins in North America as customers scale back work. Customers are slashing spending by as much as 50 percent in the U.S. and Canada."
`Full-scale cash crisis' in oil sector
Bloomberg, 24 April 2016

"Last year the Saudis announced a plan to drive a ship canal through Saudi desert, Oman and Yemen to the Gulf of Aden, bypassing the straits of Hormuz. This would reduce ship journeys by approximately 500 miles, and limit any potential physical threat to shipping from Iran. It is worth noting that Iran has stated it will not block the strait of Hormuz, and is a signatory to the UN Law of the Sea Convention which would make that illegal. .... The canal project is moving forward in the Saudi governmental system and has now formally been assigned to the Ministry of Electricity.... It is to be called the King Salman canal....given that the eastern Yemeni regions through which it would pass are predominantly Shia, this is a major problem for the Saudis. A problem that could only be resolved by taking effective military control of Yemen."
UK Killing Civilians for Oil Again in the King Salman Canal Project
Craig Murray Blog, 21 April 2016

"The collapse of OPEC talks with Russia over the weekend makes absolutely no difference to the balance of supply and demand in the global oil markets. The putative freeze in crude output was political eyewash. Hardly any country in the OPEC cartel is capable of producing more oil. Several are failed states, or sliding into political crises. Russia is milking a final burst of production before the depleting pre-Soviet wells of Western Siberia go into slow run-off. Sanctions have stymied its efforts to develop new fields or kick-start shale fracking in the Bazhenov basin. Saudi Arabia’s hard-nosed decision to break ranks with its Gulf allies at the meeting in Doha - and with every other OPEC country - punctures any remaining illusion that there is still a regulating structure in global oil industry. It told us that the cartel no longer exists in any meaningful sense. Beyond that it was irrelevant.... Market dynamics are changing fast. Output is slipping all over the place: in China, Latin America, Kazakhstan, Algeria, the North Sea. The US shale industry has rolled over, though it has taken far longer than the Saudis expected when they first flooded the market in November 2014. The US Energy Department expects total US output to drop to 8.6m barrels per day (b/d) this year from 9.4m last year. China is filling up the new sites of its strategic petroleum reserves at a record pace. Its oil imports have jumped to 8m b/d this year from 6.7m in 2015, soaking up a large part of the global glut. Some is rotating back out again as diesel: most is being consumed in China.... The Saudi price war has several targets. A top official hinted at the hierarchy a month ago, listing Iran, Russia, the Arctic, Canada’s oil sands, Venezuela’s Orinoco tar, ultra-deep water wells, US shale, and renewables, in that order. The primary foe is obviously Iran, the leader of Shia Islam and arch-rival for strategic dominance of the Middle East. The two countries are at daggers drawn in Syria, Yemen, and Iraq. Many suspect that the secondary undeclared foe is Russia, currently the world’s top producer at 10.8m b/d but short of money and running down its infrastructure. The Kremlin will exhaust its budget reserve funds by the end of the year, forcing Vladimir Putin to contemplate draconian budget cuts. The Saudis may think it worth going for the kill by trying to hold down prices for a few more months. The trouble for the Saudis is that their strategy has probably killed OPEC – the instrument that leverages their global power – and may set fire to their own strategic neighbourhood, if it has not done so already.... In Libya, ISIS has gained a foothold in the heart of the oil region around Sirte. It has vowed to ignite rebellion in Algeria, another state spiraling into financial crisis. Most of the Maghreb is now a powder keg. Any one of these countries could spin out of control. It is not far-fetched to imagine two or three occurring at the same time. This would change the dynamics of the oil markets in a heartbeat and would bring the ageing post-Lehman expansion of the global economy to an abrupt halt, exposing the nasty pathologies that have been building up. It never was cheap oil that threatened our economies. The scare earlier this year was misguided. It is the next oil supply crunch we should fear most."
Saudis are going for the kill but the oil market is turning anyway
Telegraph, 18 April 2016

"U.S. oil and gas companies have been hammered by collapsing crude prices, and now the banks that provide their lifeblood are under pressure to curb their lending to them. This month, the energy industry has entered a regular, twice-annual review period that will determine whether banks reduce their access to credit. The current period comes at a time when only the healthiest drillers are able to tap equity and bond markets. Banks and syndicates of lenders typically extend loans to drillers in the form of a revolving line of credit. That is the go-to financing option for day-to-day expenses. When exploration and production firms need more funding, they typically take out a second lien loan or issue new equity or bonds. Those credit lines are tied to the value of drillers' proved oil and gas reserves. Since those asset values fluctuate with commodity prices, banks re-evaluate their energy customers' creditworthiness twice a year in a process the industry calls the borrowing base redetermination. On average, lenders, borrowers and other stakeholders expect a 38 percent decrease in borrowing bases, according to a survey by Houston-based law firm Haynes and Boone. With U.S. crude futures down 62 percent from their 2014 high, the best most drillers can hope for is to have their existing borrowing ability left intact. In the worst-case scenario, the borrowing ceiling is slashed below the outstanding balance, and the company can't make interest payments, triggering bond covenants that lead to bankruptcy....Banks have been increasing their provisions for bad loans. Earlier this year, JPMorgan announced it was adding $500 million to an $815 million reserve to cover potential losses in its energy loan portfolio. Banks simply do not want to lend to oil and gas customers at this point, and they see an opportunity to reduce their exposure to unfunded energy loans by cutting borrowing bases, said Kim Brady, a restructuring specialist and partner at financial advisory firm Solic Capital. "To the extent that the borrowing base can be lowered without the company going out of business ... I think their goal is going to be to reduce their exposure as much as they can," he told CNBC. If a bank lowers a driller's borrowing base too much, it can push the company into bankruptcy and leave the lender holding depressed assets. Banks have already cut the borrowing bases of more than a dozen oil and gas companies by a total of $3.5 billion, or roughly a fifth of available credit, according to data compiled by Reuters."
Oil industry may see cash tighten as banks face pressure
CNBC, 15 April 2016

"A dramatic build-up in China’s strategic petroleum reserve and surging demand for imported crude oil are likely to transform the global energy markets this year, regardless of any production freeze agreed by OPEC and Russia this weekend. Chinese credit stimulus and a 20pc rise in public spending has set off a fresh mini-cycle of growth that is already sucking in oil imports at a much faster pace than expected. Barclays estimates that the country will import an average of 8m barrels per day (b/d) this year, a huge jump from 6.7m b/d last year. This is arguably enough to soak up a big chunk of the excess supply currently flooding global markets. Standard Chartered said Chinese imports could reach 10m b/d by the end on 2018, implying a supply crunch and a fresh spike in oil prices as the market is turned on its head. Energy consultancy Wood Mackenzie says $400bn in oil and gas projects have been shelved since the onset of the commodity slump. A great number of depleting fields will not be replaced. Feifei Li, Barclay’s oil analyst, said China is in a rush to fill four new storage sites of its petroleum reserve coming available this year. “It is an urgent priority of the government to fill up the tanks while the price of oil is cheap,” he said. Fresh storage is likely to average 250,000 b/d, five times the level last year. The pace will rise further in the second half of the year. China is building vast underground rock caverns in the interior of the country as a top national security priority, fully aware of the way Japan was squeezed by the US fuel embargo in the late 1930s. It aims to boost reserves to 550m barrels and ensure a 90-day buffer to resist an external supply shock. China’s own output of oil has fallen by 200,000 b/d over the last year as PetroChina and Sinopec slash investment, while demand has continued to grow. Car sales are expected to rise by 6pc this year and Chinese customers are switching to bigger models. The International Energy Agency forecasts that Chinese petrol demand will jump by 8.8pc this year, and jet fuel by 7.5pc. Some of China’s oil imports are rotating back out again into the world market in the form of diesel as the so-called ‘teapot’ refiners burst on the Chinese scene, but this may be less of a threat than originally feared...Ultimately what happens in China and matters far more than OPEC choreography. The country has overtaken the US this year to become the world’s biggest importer of crude and the authorities are once again injecting a huge stimulus into the economy."
Soaring oil demand in China rescues OPEC
Telegraph, 15 April 2016

"US coal giant Peabody Energy has filed for bankruptcy, the most powerful convulsion yet in an industry that is enduring its worst slump in decades. The company voluntarily filed petitions under Chapter 11 for the majority of its US entities in the United States Bankruptcy Court for the Eastern District of Missouri. All of Peabody’s mines and offices are continuing to operate in the ordinary course of business and are expected to continue doing so for the duration of the process, it said."
US energy giant Peabody crashes into bankruptcy as coal industry convulses
Telegraph, 13 April 2016

"The Asian Development Bank is confident that it can overcome by 2020 the challenges of building a $10-billion gas pipeline through Afghanistan's most violent areas. Shareholders of the planned Turkmenistan, Afghanistan, Pakistan and India (TAPI) project agreed on April 7 to invest $200 million in studies and engineering for the $10 billion project. The proposed underground pipeline will go through the southern province of Helmand, one of the most violence-hit in the country. Sean O'Sullivan, the Central and West Asia director general of the ADB, an adviser for the project, said on April 8 that, despite the challenges, the project is "doable." "If it happens, it will be quite an unprecedented example of regional cooperation, particularly in a region that finds it difficult to cooperate," he said in an interview with the Reuters news agency. Under current timelines, the pipeline could be operational by 2020."
TAPI Gas Pipeline Through Afghanistan 'Doable'
Radio Free Europe, 9 April 2016

"Russian Energy Minister Alexandr Novak says Russia is ready to freeze oil production at January's level of 10.9 million barrels a day in an agreement with other major producers this month. But he said other nations at a meeting of OPEC and non-OPEC producers on April 17 in Doha may propose freezes at different levels, such as February's output levels, and Russia is open to that as well."
Russia's Novak Says Ready To Freeze Oil Output At January Level
Radio Free Europe, 9 April 2016

"The US energy information administration last month released estimates showing coal production declining across the country by 29% in the first 10 weeks of 2016 compared with the same period last year. The agency said it anticipates natural gas will overtake coal as the country’s biggest source of electricity this year – a projection that is expected to result in hundreds more layoffs in the coming months. On the same day, Arch Coal announced it would stop pursuing the Otter Creek project in Montana, which would have been one of the biggest surface mines in the country, blaming capital costs and weakness in the coal markets. The Obama administration has also squeezed off prospects for future coal projects, overhauling the system of fossil fuel leases on public lands. In his final State of the Union address, Obama said he would push for changes to the leasing of public lands for oil, coal and gas leases at cut-rate prices, saying: “Rather than subsidize the past, we should invest in the future.” Meanwhile, the US coal industry’s efforts to find new markets in Asia and Europe have run into troubles. China is moving away from coal, and it is getting harder to get coal to the other big potential market in India. On 1 April, the company behind the proposed Gateway Pacific Terminal suspended the $700m project until the courts can rule on a challenge from the Lummi tribe."
The death of US coal: industry on a steep decline as cheap natural gas rises
Guardian, 8 April 2016

"The following is excerpted from The Oracle of Oil: A Maverick Geologist’s Quest for a Sustainable Future, by Mason Inman. Copyright © April 11, 2016. W .W. Norton & Co. Adapted from Chapter 17, “A Magical Effect.” Author’s Note: In the mid-1950s, M. King Hubbert was the first to explain correctly how a new technique known as hydraulic fracturing—or, for short, “fracking”—actually worked. This excerpt covers how he solved the puzzle, and (with the help of his assistant) convinced others of his explanation. The study of fracking he and his assistant published in 1957 is now considered a classic, still cited often today......"
How the Prophet of Peak Oil Explained Fracking in the 1950s
Scientific American, 8 April 2016

"The profitability of the North Sea oil and gas sector has plunged to lows not seen since 1997, according to official government data. Explorers active in the UK Continental Shelf (UKCS) have seen the rate of return on their investments fall from just 2pc in the third quarter of last year to 0.6pc in the last quarter of 2015, according to the Office for National Statistics. The rate of return expresses how much a profit a company makes as a percentage of the capital used to produce it. For the whole of 2015, the rate of return in North Sea oil was 3.5pc, the lowest since the ONS series began in 1997. The extent of the collapse in profitability is demonstrated by the fact that at its peak in 2007, North Sea oil was enjoying returns of up to 65pc, as Brent crude prices soared. This rally pushed prices to almost $140 a barrel by the summer of 2008. But since mid-2014 global oil prices have plummeted, reaching 12-year lows this year and piling pressure on the aging North Sea industry. “This is the lowest quarterly figure since the series began in 1997 and reflects falling oil and gas prices, which failed to be offset by increased quarter-on-quarter sales,” the ONS said.... Earlier this year the Office for Budget Responsibility (OBR) found that the North Sea oil industry made a £100m loss for the public purse in the current financial year, the first in more than four decades, thanks to the collapse in oil prices. In addition, the OBR said tax receipts would remain negative by up to £1.2bn a year between 2016 and 2021 because of repayments of corporation tax and petroleum revenue tax to loss-making operators."
North Sea oil profitability plunges to near 20-year lows
Telegraph, 6 April 2016

"UK renewable electricity output in 2015 grew by a further 29% year-on-year to 83.3 terawatt-hours (TWh), following a 20% increase over the previous 12 months. According to government statistics released this week, renewables accounted for 24.7 per cent of all electricity produced on an annual basis, more than both coal (23 per cent) and nuclear (21 per cent). Total renewable electricity installed capacity at the end of 2015 reached 30 gigawatts, maintaining an annual growth rate of more than 20 per cent, and now accounts for nearly one-third of all UK power stations. Even more remarkably, renewables’ share of electricity generation increased to a new high of 27 per cent in the fourth quarter of 2015 (October to December), closing the gap with gas generation (at 29.7%, currently the main source of UK electricity)."
A quarter of all UK power from renewables in 2015
NFU Online, 1 April 2016

"United States crude oil production fell for the fourth consecutive month in January, but rising output from shale formations in Texas highlighted United States producers’ ability to keep output near record levels in the face of low prices. Production in January fell by 56,000 barrels per day to 9.179 million b.p.d., according to monthly data from the United States Energy Information Administration released on Thursday. The level was the lowest since October 2014. Shale producers have proved more resilient to low prices than the market initially anticipated, as producers last month began to lock in crude hedges at just $45 a barrel, indicating that their break-even prices have gotten even lower."
Crude Oil Production Falls to Lowest Level Since 2014
Reuters, 31 March 2016

"The recent EIA drilling productivity reports show a peaking of shale oil production in the main production regions. We see that in 2015 production from new wells declined abruptly. The intersection point with old wells corresponds to the peak in production. The old wells decline has moderated suggesting that more and more old wells have entered their phase of final, flat production at very low levels."
US shale oil peak in 2015
Crude Oil Peak, 30 March 2016

"A surprisingly high 48% of U.S. oil production from the contiguous states came from wells drilled since 2014. The vast majority is from unconventional formations such as shale. They went from providing 500,000 barrels a day in 2009 to a peak of 4.6 million last May, but output has been declining since then as spending was slashed. Based on geology alone, that decline should have been worse. Production from a shale well typically falls by half during the first year in operation and then by another quarter to one-third in the following year. The reason it hasn’t is a significant rise in productivity per well—a modest additional investment squeezed out extra barrels. That trend is reaching its limits, though.... But a large number of uncompleted wells colloquially referred to as a “fracklog” stands ready to come on stream fairly quickly once prices rise by another $20 a barrel or so. By keeping its financial powder dry, a leaner U.S. shale patch can storm back soon after prices become more attractive and enjoy the last laugh."
Shale Is the Odd Man Out in Oil Reckoning
Wall St Journal, 30 March 2016

"Iranian oil flows to Europe have begun to pick up from a slow start after sanctions were lifted in January, but trading sources say a lack of access to storage part-owned by Tehran's Gulf Arab rivals now looms large on a list of obstacles. European countries accounted for more than a third of Iran's exports, or 800,000 barrels a day, before the European Union imposed sanctions in 2012 over its nuclear program. Since January, Tehran has sold 11 million barrels to France's Total (TOTF.PA), 2 million barrels to Spain's Cepsa and 1 million to Russia's Litasco, according to Iranian officials, traders and ship-tracking data. Some of these cargoes will not arrive in Europe before mid-April. With most U.S. sanctions still in place, there is no dollar clearing, no established mechanism for non-dollar sales and banks are reluctant to provide letters of credit to facilitate trade.A new initiative by international ship insurers has helped, but traders say exports have been hampered by Iran's unwillingness to sweeten terms for potential European buyers. Iranian oil officials and international traders have also grown increasingly concerned by a delay regaining access to storage tanks in Egypt's port of Sidi Kerir on the Mediterranean coast, from where it supplied up to 200,000 bpd to Europe back in 2011. 'As of now, there is no tankage for Iran there. Before sanctions, it was Iran's main terminal for supplies to Western nations,' one Iranian oil source said. Four traders with western oil majors and major trading houses told Reuters Iranian officials have notified them Iran cannot get access to the SUMED-owned terminal for now and so could not supply them with crude from there."
Iran's oil storage struggle holds back exports to Europe
Reuters, 24 March 2016

"Despite its ongoing fracking boom, the U.S. added more new wind capacity in 2015 than natural gas, according to new data. The Energy Information Administration indicated it was the fourth time since 2006 that this has occurred. The U.S. added more than 8,000 megawatts of new wind capacity, compared with about 6,000 megawatts of new natgas capacity."
Despite fracking boom, the U.S. added more wind than natural gas power last year
Fusion, 23 March 2016

"Rystad Energy estimates that the crash in oil prices has cut into upstream investment so severely that natural depletion rates will overwhelm the paltry new sources of supply in 2016. Existing fields will lose about 3.3 million barrels per day (mb/d) in production this year, while new fields brought online will only add 3 mb/d. This does not take into account rising oil demand, which will soak up most of the excess supply by the end of the year. But the 3 mb/d of new supply in 2016 will mostly come from large offshore projects that were planned years ago, investments that were made before oil prices started crashing. The EIA sees four offshore projects starting up in 2016 – projects from Shell, Noble Energy, Anadarko, and Freeport McMoran – plus two more in 2017. The industry completed eight projects in the Gulf in 2015. U.S. Gulf of Mexico production will climb from 1.63 mb/d in 2016 to 1.91 mb/d by the end of 2017. However, outside of these large-scale multiyear offshore projects, the queue of new oil fields is starting to be cleared out. By 2017, the supply/depletion balance will go deeper into negative territory. Depletion will exceed new sources of production by around 1.2 mb/d before widening even further in 2018 and 2019. A few months ago, Wood Mackenzie estimated that around $380 billion in planned oil projects had been put on ice due to the crash in oil prices. Wood Mackenzie says that between 2007 and 2013, the oil industry greenlighted about 40 large oil projects on average each year. That figure plunged to fewer than 10 in 2015. The coming supply crunch stands in sharp contrast to the short-term picture. The EIA reported on March 23 that crude oil storage levels once again increased, surging by 9.4 million barrels last week to break yet another record. Total inventories in the U.S. now stand at 532.5 million barrels. Record high storage levels, which continue to climb, are signs of short-term oversupply. The IEA expects supply to continue to outstrip demand by about 1.5 mb/d until later this year. Oil storage levels will have to fall to more normal levels before oil prices can rise substantially."
Why We Could See An Oil Price Shock In 2016
Oil Price.com, 23 March 2016

"A wave of projects approved at the start of the decade, when oil traded near $100 a barrel, has bolstered output for many producers, keeping cash flowing even as prices plummeted. Now, that production boon is fading. In 2016, for the first time in years, drillers will add less oil from new fields than they lose to natural decline in old ones. About 3 million barrels a day will come from new projects this year, compared with 3.3 million lost from established fields, according to Oslo-based Rystad Energy AS. By 2017, the decline will outstrip new output by 1.2 million barrels as investment cuts made during the oil rout start to take effect. That trend is expected to worsen. 'There will be some effect in 2018 and a very strong effect in 2020,' said Per Magnus Nysveen, Rystad’s head of analysis, adding that the market will re-balance this year. 'Global demand and supply will balance very quickly because we’re seeing extended decline from producing fields.' A lot of the new production is from deepwater fields that oil majors chose not to abandon after making initial investments, Nysveen said in a phone interview. Royal Dutch Shell Plc is scheduled to start the Stones project in the Gulf of Mexico’s deepest oil field this year after approving it in May 2013. Benchmark Brent crude averaged $103 a barrel that month compared with about $41 on Monday. Stones will add about 50,000 barrels a day to Gulf of Mexico output at a peak rate, according to Shell. Two other deepwater projects, run by Noble Energy Inc. and Freeport-McMoran Inc., are due to commence this year, the U.S. Energy Information Administration said in a Feb. 18 report. Anadarko Petroleum Corp. started the Heidelberg field in January. That will help boost production in the Gulf of Mexico by 8.4 percent this year to a record annual average of 1.67 million barrels a day, according to the U.S. Energy Information Administration....'There is a wide range of upstream projects coming online in 2016, and that is a function of the high levels of investment deployed back when we were in a $100 a barrel world,' said Angus Rodger, a Singapore-based analyst at energy consulting firm Wood Mackenzie Ltd. 'In the short term, they will generate far lower returns than originally envisaged.' Yet, these developments won’t be enough to counter the natural decline in oil fields that are starting to suffer from lower investment. A little more than a year after Shell approved the Stones project in 2013, oil prices began their slump, with Brent dropping to a 12-year low below $28 a barrel in January. That has squeezed budgets of oil producers and project approvals have dwindled. From 2007 to 2013, companies took final investment decisions on an average 40 mid- to large-sized oil and gas projects a year, Wood Mackenzie’s Rodger said. That fell to below 15 in 2014 and to less than 10 last year. Neither Rodger nor Rystad’s Nysveen expect an upturn this year. Morgan Stanley estimates nine projects are in contention to get the green light this year, including BP’s Mad Dog Phase 2 in the Gulf of Mexico and Eni SpA’s Zohr gas field in Egypt. These are among 232 projects, excluding U.S. shale, awaiting approval following deferrals over the past two years, according to a Jan. 29 report. Companies cut capital expenditure on oil and gas fields by 24 percent last year and will reduce that by another 17 percent in 2016, according to the International Energy Agency. That’s the first time since 1986 that spending will fall in two consecutive years, the agency said Feb. 22. 'We see oil investments are declining substantially,' IEA Executive Director Fatih Birol said in Berlin on March 17. 'That we’ve never seen in the history of oil.' Even after reducing costs for conventional projects by an average of about 15 percent last year, many still aren’t competitive, Wood Mackenzie’s Rodger said. Shell approved the Appomattox oil field in the Gulf of Mexico last year at a break-even oil price of $55 a barrel, still above current market rates of $41.15 a barrel at 9:59 a.m. in New York Tuesday."
Drillers Can't Replace Lost Output as $100 Oil Inheritance Spent
Bloomberg, 22 March 2016

"The Gatwick Gusher has produced the highest flow rates of any onshore wildcat well in the UK, matching the kind of levels normally seen in the North Sea, its majority owner UK Oil & Gas said. The exploration company said it had completed its final test at Horse Hill, just north of Gatwick Airport, and that the aggregate flow from three layers of oil-bearing rock had been 1,688 barrels per day. 'The flow test results are outstanding, demonstrating North Sea-like oil rates from an onshore well,' said UKOG executive chairman Steve Sanderson. 'This simple vertical well has achieved an impressive aggregate oil rate equivalent to 8.5 per cent of total UK onshore daily oil production."
‘Outstanding’ oil flow produced by Gatwick Gusher
Indepdenent, 22 March 2016

"Total chief Patrick Pouyanne told the French senate last week that prices could deflate as fast as they rose. “The market won’t come back into balance until the end of the year,” he said. Mr Pouyanne said the collapse in annual oil and gas investment to $400bn – from $700bn in 2014 – would lead to a global shortage of 5m barrels by 2020 and another wild spike in prices, but first the glut has to be cleared. The oil rally is now at a make-or-break juncture. A growing number of oil traders warn that speculative purchases of “paper barrels” by hedge funds have decoupled from fundamentals. There is usually a seasonal slide in demand over the late summer. Adam Longson, from Morgan Stanley, said “quant” funds have taken out big positions on Brent crude. "If trends reverse, it could be a catalyst for liquidation," he warned. Mr Longson said supply outages – chiefly in Nigeria and Canada – have held back 2m b/d and temporarily balanced the market, but this may not last. Canada should be back on stream by June."
Saudi financial crisis 'could leave oil at $25’ as contractors face being paid in IOUs
Telegraph, 22 March 2016

"For oil companies, the legacy of $100 crude is starting to run dry. A wave of projects approved at the start of the decade, when oil traded near $100 a barrel, has bolstered output for many producers, keeping cash flowing even as prices plummeted. Now, that production boon is fading. In 2016, for the first time in years, drillers will add less oil from new fields than they lose to natural decline in old ones. About 3 million barrels a day will come from new projects this year, compared with 3.3 million lost from established fields, according to Oslo-based Rystad Energy AS. By 2017, the decline will outstrip new output by 1.2 million barrels as investment cuts made during the oil rout start to take effect. That trend is expected to worsen. “There will be some effect in 2018 and a very strong effect in 2020,” said Per Magnus Nysveen, Rystad’s head of analysis, adding that the market will re-balance this year. “Global demand and supply will balance very quickly because we’re seeing extended decline from producing fields.”"
Drillers Can't Replace Lost Output as $100 Oil Inheritance Spent
Bloomberg, 22 March 2016

"The US shale revolution may already be capping the price of gas in the UK, months before the first gas exports are set to arrive at European terminals. Fresh data from energy market analysts shows that the price of summer gas in the UK has fallen in line with the estimated cost of exporting US liquefied natural gas (LNG) to Europe, representing a major shift in global energy market dynamics. Jefferies analysts said that US could now become the price-setter for the UK market 'even before actual cargoes arrive'. 'If this apparent convergence becomes established, it would represent one of the most significant developments in the UK - and wider European - energy market for more than a decade. 'In effect it would mean that the UK gas price would be set by [the US]. And therefore a direct pricing link would be established between US shale gas production and the UK market,' the analysts said."
US shale already setting UK gas prices, say analysts
Telegraph, 21 March 2016

"About 600 people packed on to the Machinery Auctioneers lot on the outskirts of San Antonio, Texas, last week to pick up some of the pieces shaken loose by the oil crash. Trucks, trailers, earth movers and other machines used in the nearby Eagle Ford shale formation were sold at rock-bottom prices. One lucky bargain hunter was able to pick up a flatbed truck for moving drilling rigs — worth about $400,000 new — for just $65,000. Since the decline in oil prices began in mid-2014, activity in the Eagle Ford, one of the heartlands of the shale revolution, has slowed sharply. The number of rigs drilling for oil has dropped from a peak of 214 to 37, and businesses, from small 'mom and pop' service providers to venture capital companies, are trying to offload unused equipment.... From 2006 to 2014, the global oil and gas industry’s debts almost tripled, from about $1.1tn to $3tn, according to the Bank for International Settlements. The smaller and midsized companies that led the US shale boom and large state-controlled groups in emerging economies were particularly enthusiastic about taking on additional debt.... Borrowers and lenders alike were reassured by the consensus that the world had entered an era of persistently high oil prices. In June 2014, a barrel of Brent crude for 2020 delivery was $98. And central banks’ post-crisis monetary policies pushed investors towards riskier assets, including oil and gas companies’ equity and debt. 'Two things happened: we had high oil prices, and central banks had zero interest rates and quantitative easing policies,' says Spencer Dale, the chief economist of BP, who formerly held that role at the Bank of England. 'That was a potent mix.' From 2004 to 2013, annual capital spending by 18 of the world’s largest oil companies almost quadrupled, from $90bn to $356bn, according to Bloomberg data. The assumptions used to justify that borrowing were fuelled by a textbook example of disruptive technological innovation: the advances in hydraulic fracturing and horizontal drilling that made it possible to produce oil and gas from previously unyielding shales. The success of those techniques added more than 4m barrels a day to US crude production between 2010 and 2015, creating a glut in world markets that has sent prices down 65 per cent since the summer of 2014. The expectations of sustained high prices have vanished: crude for 2020 delivery is $52 a barrel. Oil is now back to where it was in 2004, but most of the debt that was taken on in the boom years is still there....Many analysts expected US shale oil production to fall rapidly if prices went below $70, but the companies slashed costs while raising productivity, so total US output is declining only gently. Russia’s oil production hit a post-Soviet record in January. Saudi Arabia also hit record output last year. The decline in the industry’s cash flows has prompted huge cuts in investment, with about $380bn worth of projects delayed or cancelled according to Wood Mackenzie, the consultancy. Sooner or later production will fall and the market will come back into balance. But a long period of volatility in oil prices may persist even after the oversupply is worked off. The decision by Saudi Arabia, Opec’s de facto leader, not to cut its output amid surging US oil production means that prices are being set by market forces, not political decisions. Daniel Yergin, vice-chairman of IHS, the research group, says shale has made the US 'the inadvertent swing producer' in world oil markets. Shale wells are much faster to drill and complete than large developments such as offshore oilfields. 'How production goes down and up is determined not by an oil minister, but by thousands of decision makers across the economy,' he says....Falling production costs mean that if oil rises much above $50, drilling shale wells in the US will start to look attractive again. New wells can break even in all the main shale regions with prices from about $40 to the low $50s, according to Rystad Energy, a consultancy. What has yet to be tested is how keen banks and bond investors will be to finance that drilling. Mr Dale is one of many in the industry who suspects they will be cautious.... Mr Yergin agrees. 'Company directors and bankers will not forget that prices can go down as well as up,' he says. 'So we’re not going to see the same 100-miles-per-hour development that we saw when oil was at $100.'"
Oil and gas: Debt fears flare up
Financial Times, 21 March 2016

"A Wirral ecohome so energy efficient it only costs £15 a year to run has been nominated for an award. The ‘passivhaus,’ designed by John McCall Architects is so well designed that it runs on the same amount of energy as one 40w lightbulb and has been nominated for an award from the Royal Institution of Chartered Surveyors. Colin Usher, who is a director at John McCall, designed the home in Lang Lane, West Kirby for himself and his wife, Jenny. The pair now pay less than the price of an average takeaway for their years supply of energy for heating, lighting, cooking and hot water. The total cost of the build - including purchasing the land and demolishing the existing property - was £500,000, which is the going rate for four bedroom properties in the area, meaning the couple have technically spent no more than buying an ‘average’ house on the road. High ceilings, carefully positioned glass and big open spaces allow natural light into the property to provide heat. It is designed to maintain an even temperature year round by using insulated concrete and a high-tech heat pump that takes in heat from the outside air and uses it to warm the house."
How one couple's yearly energy bills cost less than a take away
Liverpool Echo, 20 March 2016

"The North Sea oil industry, once a huge moneyspinner for the Treasury, is set to become a £1bn burden for the taxpayer next year as the plunging crude price hits revenues. New forecasts from the Office of Budget Responsibility (OBR) show oil companies that were providing £11bn of tax revenues as recently as 2012 will contribute zero in 2015-16, moving to minus £1.1bn in 2016-17 - a loss that will be repeated annually until at least 2021. 'Payments of offshore corporation tax and petroleum revenue tax (PRT) will be lower and are likely to be dwarfed by repayments relating to [platform] decommissioning costs,' said the OBR, adding that the burden would be made worse by oil companies posting losses."
Oil price plunge 'will lead to £1bn burden on taxpayers'
Guardian, 16 March 2016

"Russian central bankers have fewer reasons to offer relief to their recession-wracked economy than you might think.Their decision whether to resume an interest rate-cutting cycle this week is almost beside the point as the government of Vladimir Putin lubricates the economy in the background with oil wealth amassed in better times. Russian banks are sitting on the most cash in five years, allowing them to lend to each other at a lower rate than they borrow from the central bank. In the eurozone and in the U.S., money market rates are higher than benchmarks.....The Finance Ministry transferred 2.6 trillion rubles ($37 billion) of accumulated oil riches from the $50 billion rainy-day sovereign wealth fund into the economy last year to cover a fiscal gap. It’s budgeting another 2 trillion-ruble drawdown from the Reserve Fund in 2016. The influx of cash is allowing Russian banks to wean themselves off the central bank loans they were relying on to help them weather international sanctions. Those obligations fell to 1.57 trillion rubles as of March 10 from 7.8 trillion rubles at the end of 2014."
Putin's $50 Billion Oil Cache Gives Russia Luxury to Ignore ECB
Bloomberg, 13 March 2016

"Oil Minister Bijan Zanganeh said Iran would join discussions between other producers about a possible freeze of oil production after its own output reached four million barrels per day (bpd), Iran's ISNA news agency reported on Sunday. Zanganeh said Iran saw $70 per barrel as a suitable oil price, but would be satisfied with less, ISNA reported.... Iran has rejected freezing its output at January levels, put by OPEC secondary sources at 2.93 million barrels per day, and wants to return to much higher pre-sanctions production. It is working to regain market share, particularly in Europe, after the lifting of international sanctions in January. The sanctions had cut crude exports from a peak of 2.5 million bpd before 2011 to just over 1 million bpd in recent years. Iran's oil exports are due to reach 2 million bpd in the Iranian month that ends on March 19, up from 1.75 million in the previous month, he said. A meeting between oil producers to discuss a global pact on freezing production is unlikely to take place in Russia on March 20, sources familiar with the matter said last week, as OPEC member Iran is yet to say whether it would participate in such a deal."
Iran set to join oil freeze talks after output at 4 mbpd: ISNA
Reuters, 13 March 2016

"The slide in oil prices has paused after crude fell more than 70% from its 2014 peak. Now the question is whether the recent rise itself could spark another downward spiral. U.S. oil prices are up more than 45% from a 13-year low in February, boosted by talks among Saudi Arabia, Russia and other major producers about capping their output. A temporary reduction in global crude supply following outages in Nigeria and Iraq also helped buoy the market. On Friday, the International Energy Agency said that oil prices may have bottomed out, and it forecast U.S. output to decline by nearly 530,000 barrels a day this year. The report seemed to support the market’s increasingly bullish mood, pushing U.S. oil prices up 1.7% to $38.50 a barrel. But this rally could lead to its own demise, many analysts warn. Higher prices will likely encourage shale producers to ramp up output again, muddying any forecasts for shrinking U.S. supply. Shale wells can be drilled and fracked within a matter of months, compared with the years it can take to complete other types of oil wells. “My concern is if the market surges right back to $50 a barrel…we just end up with another problem six months from now,” said Jeffrey Currie, head of commodities research at Goldman Sachs Group Inc. “You’d be taking a lot of risk entering this market early,” he said, because a rally could be self-defeating.... The oil surplus may be easing compared with a year ago. U.S. production fell on a yearly basis in December for the first time since 2011, according to the Energy Information Administration. Global production dropped 0.7% in the first two months of this year, the International Energy Agency said on Friday. But Iranian production is expected to rise this year by several hundred thousand barrels a day, analysts say, as international sanctions are lifted."
Oil-Price Rise Could Be Its Own Undoing
Wall St Journal, 13 March 2016

"Markets have been waiting for U.S. energy producers to slash output during a period of depressed crude prices. But these companies have been paying their top executives to keep the oil flowing. Production and reserve growth are big components of the formulas that determine annual bonuses at many U.S. exploration and production companies. That meant energy executives took home tens of millions of dollars in bonuses for drilling in 2014, even though prices had begun to fall sharply in what would be the biggest oil bust in decades. The practice stems from Wall Street’s treatment of such companies’ shares as growth stocks, favoring future prospects over profitability. It has helped drive U.S. energy producers to spend more unearthing oil and gas than they make selling it, energy executives and analysts say. It has also helped fuel the drilling boom that lifted U.S. oil and natural-gas production 76% and 31%, respectively, from 2009 through 2015, pushing down prices for both commodities. 'You want to know why most of the industry outspent cash flow last year trying to grow production?' William Thomas, chief executive of oil producer EOG Resources Inc. said recently at a Houston conference. 'That’s the way they’re paid.' Lately, though, some shareholders are asking companies to reduce connections between pay and production, saying such incentives don’t make sense since abundant supplies have caused commodity prices to crash."
Key Formula for Oil Executives’ Pay: Drill Baby Drill
Wall St Journal, 11 March 2016

"On a freezing afternoon in Paris, Thomas Piquemal, the 46-year-old finance director of French state-backed utility EDF, prepared to tell his boss the unthinkable: that their company was on the road to ruin.The former investment banker walked into the office of Jean-Bernard Lévy, EDF’s chief executive, and told him that an £18bn nuclear project they were planning to build at Hinkley Point in the UK had to be delayed to avert financial disaster. The risks of it going wrong were too great, he said over a black coffee, and EDF’s finances were too weak to absorb the blow if it did....Hinkley Point C is integral to the energy strategy of the French and UK governments for the next 30 years. When completed, it will provide 7 per cent of electricity in the UK. China General Nuclear Power Corp (CGN) is set to have a one-third stake in the project. On Monday, EDF announced that Mr Piquemal had resigned, without saying why. Mr Lévy simply said: “I regret the haste of his departure,” adding that a final investment decision on the project was coming in the “near future”. On Friday, he said EDF will not go ahead with Hinkley Point unless it obtains “commitments from the state to help secure our financial position”, according to a leaked memo by the chief executive seen by the Financial Times. It is hard to imagine that EDF, a company that has built 58 reactors in France and is a national champion, could be brought to its knees by a single project in Somerset, south-west England. The 70-year-old former monopoly is almost a wing of the French state, employing 110,000 people in France alone. It provides more than two-thirds of the country’s electricity, and is one of the UK’s biggest power generators. But Mr Piquemal was simply adding his voice to a growing number who believe there is a risk of failure for the company. Several unions with board seats sounded the alarm this year, saying the project puts EDF “in grave danger”. .... Dissenters inside EDF have harboured two concerns over Hinkley Point. First, they say, the reactor technology due to be used — the so-called European Pressurised Reactor — is so complex that the construction risk is immense. The EPR, dreamt up in the 1990s and early 2000s by Areva and Germany’s Siemens, is designed to be one of the most powerful reactors and also the safest. One of its selling points after the terror attacks on September 11 2001 was its supposed ability to withstand a direct hit from a commercial aircraft. But this level of sophistication has proved to be a challenge for engineers. The first EPR to be commissioned, an Areva-led project in Finland, has been delayed by nine years and is €5.2bn over budget. Losses on the project eventually brought down Areva. The company is being broken up as part of a government-backed bailout, with parts of the business sold off to EDF and other companies. The second EPR project, in Flamanville, France, has faced similar problems. The EDF-led project is six years behind schedule and €7.2bn over initial budget estimates. It is now set to come online in 2018. Given EDF’s construction risks and the expense of building Hinkley Point, the UK government has guaranteed a price of £92.50 per megawatt hour of electricity — more than twice the current market cost — for 35 years. Francis Raillot, from the CFE-CGC union, which has a seat on the board, says the Hinkley project is so large that EDF will struggle to finance it. Construction delays could be ruinous. “If it goes badly like all the other EPRs, it could be the end of EDF,” he told the Financial Times. There are also safety concerns at Flamanville. The French nuclear regulator said last April that “very serious anomalies” had been found in its reactor vessel. A full report on the issue will be delivered this year, but if the reactor vessel does not meet safety standards it could mean that the entire project would have to be scrapped or completely overhauled, say safety experts."
EDF: At breaking point
Financial Times, 11 March 2016

"China aims to keep energy consumption within 5 billion tonnes of standard coal equivalent by 2020, it said in its five-year plan published on Saturday, marking the first time the world's second-biggest economy has set such a target. China has long been considering an energy consumption cap in a bid to improve industrial efficiency, tackle smog and control greenhouse gas emissions, which are the highest in the world. Beijing is also pushing structural reforms to decouple economic growth from energy consumption.... Yang Fuqiang, senior advisor at the U.S.-based think tank, the Natural Resources Defense Council, said the 5 billion figure was calculated by combining China's 6.5 percent economic growth projections for 2016-2020 with its target to cut energy intensity by 15 percent over the same period. "Based on my experience the government plans are conservative," he said. "There could be a higher 18 percent cut in energy intensity, and that means energy consumption could be kept at about 4.8 billion tonnes.... China is aiming to eliminate as much as 500 million tonnes of surplus coal capacity from the market in the next five years. China also aims to cut carbon intensity - the amount of emissions per unit of GDP growth - by 18 percent over the same period. As part of its global climate change commitments, China has already pledged to reduce carbon intensity to 40-45 percent below 2005 levels by 2020."
China sets cap for energy consumption for first time
Reuters, 5 March 2016

"U.S. oil prices rose for a third consecutive week as drilling continued to decline. The number of rigs drilling for crude in the U.S., which is viewed as a rough proxy for activity in the oil industry, dropped by eight in the past week to 392, the lowest level since 2009, oil-field-services company Baker Hughes Inc. said Friday. The combined number of oil and natural-gas rigs fell by 13 to 489, just above the record low of 488 rigs in 1999, according to Baker Hughes data starting in late 1948. “We’re starting to see a lot of erosion in U.S. production,” said Carl Larry, director of oil and gas at Frost & Sullivan. “We’re inching our way back to $40.” U.S. oil output has fallen from a peak in April as companies sharply cut spending on new drilling, but it hasn’t declined as much as some investors expected because producers increased their efficiency and lowered drilling costs. Some analysts say U.S. production is due to drop more quickly this year because companies have announced new budget cuts in recent weeks."
Oil Prices Jump as Drilling Drops
Wall St Jouranl, 4 March 2016

"Fossil fuel millionaires collectively pumped more than $100m into Republican presidential contenders’ efforts last year – in an unprecedented investment by the oil and gas industry in the party’s future. About one in three dollars donated to Republican hopefuls from mega-rich individuals came from people who owe their fortunes to fossil fuels – and who stand to lose the most in the fight against climate change. The scale of investment by fossil fuel interests in presidential Super Pacs reached about $107m last year – before any votes were cast in the Republican primary season. Campaign groups said the funds raised questions about what kind of leverage the fossil fuel industry might enjoy if the Republicans were to take the White House. Ted Cruz, the Texas senator seen as having the best chance of stopping Donald Trump from clinching the Republican nomination, was among the biggest beneficiaries of fossil fuel support to his Super Pac. Cruz, who more than any other Republican candidate openly rejects mainstream science on climate change, banked some 57% of the funds to his Super Pac, or about $25m, from fossil fuel interests, according to campaign filings compiled by Greenpeace and reviewed by the Guardian... [Greenpeace's Jesse] Coleman suggested that Republicans were unlikely to give up climate denial even if Cruz does not win the nomination. “While Donald Trump, also a climate change denier, is mostly self-funded for now, he will look to the fossil fuel industry for political support if he wins the nomination. Mr. Trump also has millions of dollars directly invested in the fossil fuel industry.”... Fossil fuel donors traditionally have favoured Republican candidates many times over their Democratic counterparts. However, Hillary Clinton, the Democratic frontrunner, appears to have made inroads into the ranks of the favoured. Mega-rich fossil fuel donors pumped about 7% of the funds into Clinton’s Super Pac last year, according to the filings. Clinton was criticised by Bernie Sanders and Martin O’Malley, her erstwhile rival, for taking funds from fossil fuel lobbyists. The findings revealed the largely unseen power players behind the Republicans’ presidential hopefuls – led by the Wilks family in Texas. The family, which made its fortune from making equipment used in fracking oil and gas wells, gave about $15m to a Cruz-supporting Super Pac in 2015. Next in line among the big fossil donors to Cruz was Toby Neugebauer, the son of Texas Republican congressman Randy Neugebauer and cofounder of an energy investment firm which has invested heavily in the Barnett Shale – ground zero of oil and gas fracking in Texas. The younger Neugebauer donated about $10m to Cruz’s Super Pac last year. Cruz also won big from groups associated with the Kochs, the oil billionaires who have emerged as major funders of ultra-conservative causes in the US. Cruz’s Super Pac took in $11.9m from donors who have supported Koch causes or its Freedom Partners organisation – compared to $7.8m for Rubio."
Oil and gas industry has pumped millions into Republican campaigns
Guardian, 3 March 2016

"Russian oil companies back the idea to freeze output at near-record levels reached in January, but did not support any proposals to cut oil production to lift global prices, Energy Minister Alexander Novak said. Russian President Vladimir Putin met the heads of the country's top producers, including Rosneft (ROSN.MM) Chief Executive Igor Sechin, Lukoil (LKOH.MM) CEO and co-owner Vagit Alekperov and others, to hear their views on last month's proposed output freeze. Novak, who was negotiating the first potential global oil pact in 15 years in Doha, said Putin and the oil firms, which pumped at a new post-Soviet high in January at 10.88 million barrels per day (bpd), discussed the deal at the Kremlin. ... If Russia keeps average oil output this year at January levels, this will represent a 1.5 percent increase over 2015, also a post-Soviet high. Novak said the global oil market was currently oversupplied by around 1.5 million bpd, but if the freeze was implemented then the surplus would be curbed and the period of low oil prices would be reduced by one year. He did not say when the market may rebalance but said prices were unlikely to return to levels above $100 per barrel, calling prices in the range of $50 to $60 as optimal. Benchmark Brent crude futures LCOc1 traded around $37 per barrel on Tuesday. Novak added that 73 percent of oil exporting nations were ready to join the deal but a lot depended on other countries' position toward Iran. It is true that Iran has a special situation as Iran is at its lowest levels of production. So in my opinion, it (Tehran) may be approached individually with a separate decision," said Novak, who will visit Iran later this month. Non-OPEC Oman and some OPEC sources have floated the idea of exempting Iran from any output freeze, an approach taken toward Iraq in the past when it was subject to international sanctions. But so far Tehran has not been offered any special terms, according to OPEC sources."
Russian oil bosses voice support for oil output freeze, not cut
Reuters, 1 March 2016

"Britain's energy supply forecasts have plunged "into the red" next winter for the first time on record, suggesting the country will be forced to rely on imports and costly emergency interventions to prevent blackouts. Figures from National Grid show that on current plans there will not be enough power plants operating in the UK market to keep the lights on for most of December, January and February. The supply gap has emerged because a series of old, polluting power stations have been shut down, while hardly any replacement plants are being built. A separate, "last resort" reserve of back-up power plants is highly likely to be called upon to bolster supplies through much of the winter, adding tens of millions of pounds to consumer energy bills, experts have warned. National Grid confirmed that next winter is the first time since the published data system began in 2001 that it has not forecast a surplus margin of spare power plants in the UK market, and has instead forecast "negative margins". In mid-December and early January the figures show a shortfall of more than two gigawatts (GW) – roughly equivalent to the electricity needs of two million homes. The forecasts exclude power imported on undersea cables, which can bolster supplies if the UK is willing to pay a higher price than the continent. However, they also assume only average weather conditions, while a cold spell could further increase demand. The forecasts also assume that UK wind farms will be generating more than 3GW of power, despite the fact they could produce almost nothing on a still day. Jon Ferris, of energy consultants Utilitywise, warned it was a "leap of faith" to assume that level of wind power would be available when needed. He said he believed National Grid would be forced to call upon its emergency measures "for much of December and January" in what would be its "most challenging winter for decades"."
UK energy supply forecasts 'into the red' for first time next winter
Telegraph, 26 February 2016

"The US shale oil industry, which helped precipitate the collapse in oil prices with a debt-fuelled production boom, is in dire financial straits. Continental Resources and Whiting Petroleum, the two largest producers in the Bakken formation of North Dakota, one of the heartlands of that boom, said this week they were stopping bringing any new wells into production in the region....David Hager, chief executive of Devon Energy, an independent production company, says that at $55 to $60 oil, “the vast majority” of US shale fields are economically viable. ... Others put the number rather higher. Scott Sheffield, chief executive of Pioneer Natural Resources, another leading independent, suggests oil would need to be $60 to $70 for US shale production to grow. No one, however, is talking about $90 or $100. Everyone in the industry is going to have to learn to compete at prices influenced by US shale. And given the uncertainties involved — the US shale business is so new, it has still not yet been through one full cycle of growth, downturn and recovery — it makes sense to take a cautious view of how far prices can rebound. .... Statoil, the Norwegian oil company, is aiming to cut the price needed for its US shale oil operations to break even from $90 per barrel in 2014 to $50 in 2018. Marvin Odum, the head of Royal Dutch Shell’s US business who announced his departure this week, says the company has a similar approach for its North American shale oil and gas operations. “The cost structure is coming down in a very sustainable way,” he adds. “As we get down into the low 50s and now into the 40s in terms of the break-evens......in the sweet spots [shale is] a globally competitive resource.”"
Oil sector aims for profits at $50 crude
Financial Times, 25 February 2016

"The US has exported its first shipment of natural gas in a historic move that shifts the balance of power in the global energy market and kicks off a struggle with Russia for market share. Surging US supply over the next five years threatens to break the Kremlin's dominance over Europe's gas market, and is already provoking talk of a "Saudi-style" counter attack by Moscow to drive US shale gas frackers out of business before they gain a footing. At the very least, it sharpens a global price war as liquefied natural gas (LNG) bursts onto the scene, and closes the chapter on the 20th century system of pipeline monopolies. Gas is starting to resemble the spot market for crude oil, with the same wild swings in prices and boom-bust cycles. A seven-year, $11.5bn project by Cheniere Energy finally came to fruition this week as the first LNG cargo left Sabine Pass in Louisiana - in a special molybdenum-hulled ship at -160 degrees Centigrade - destined for Petrobras in Brazil. "It is a big day for our natural gas revolution," said Ernest Moniz, the US energy secretary. Speaking at the IHS CERAWeek summit in Texas, he said the emergence of the US as a gas superpower is a geopolitical earthquake, though he has always been coy about the exact intention. "It is a change in the energy security picture," he said. The US is ramping up LNG exports to almost 130bn cubic metres a day (BCM) by the end of the decade, roughly equal to Russia's gas exports to Europe. This may rise to 200 BCM and possibly beyond as the shale industry keeps finding once unthinkable volumes of gas....Martin Houston, chairman of Parallax Energy, said the US may account for a quarter of the world's LNG market within a decade, and is so efficient that it can deliver gas to Europe for as little as $5 per million British thermal unit (Btu) despite the high cost of liquefaction and shipping...The US shipments are aimed directly at Europe, where there is a large and unused infrastructure of LNG terminals, including Lithuania's new "Independence" plant designed to end reliance on Russian pipelines. The mere prospect of American LNG deprives Russia of its pricing power and political leverage in Europe, spoiling its gas cash cow. Just as US shale oil has turned global crude markets upside-down, LNG from shale is now doing the same to the gas markets - beaching countless projects around the world launched in the pre-shale era. Alexander Medvedev, deputy chairman of Gazprom's management committee, made light of the US challenge. "There is room enough for all in this gas market. Europe needs another 70 BCM of gas by 2020," he said at the CERAWeek forum... Russia faces a dilemma. Gazprom can easily undercut LNG from the US, able to deliver gas for just $3.50. It has 100 BCM of idle capacity in west Siberia, according to the Oxford Institute for Energy Studies (OIES). James Henderson, a senior research fellow at the OIES, said it is tempting for Russia to "crater" the price until it falls below the break-even cost of shale frackers, much as Saudi Arabia is doing to oil frackers. “There may be some logic for Gazprom in adopting a Saudi-like strategy in order to reinforce its long-term competitive advantage,” he said. Russian gas prices in Europe have already fallen so far - to $5.80 today from $11.20 in 2013 - that it may be worth the pain of pushing it a little lower to defend Moscow's 30pc share of the market. The OIES said Gazprom could lose $25bn to $40bn in revenues over the next five years if it fails to act. The question is whether to strike a pre-emptive blow now while the first US cargoes are still modest. America's huge ramp-up occurs after 2018. Bud Coote, a former chief energy analyst at the US Central Intelligence Agency and now a senior fellow at the Atlantic Council, said the Kremlin may try to knock out America's LNG industry but that too would be very costly. For the US, the start of LNG exports is a bitter-sweet victory. The first cargoes come just as the market crumbles. The price of LNG in Europe has dropped from $12 to $5.35 over the past three years. In Asia it has dropped from $17 to $6 as Japan's nuclear power plants restart after the 2011 Fukushima crisis, and discounted Indonesian LNG is currently selling for $4.50. The glut has undermined the whole calculus behind the dash for LNG, at least for now."
Energy price war spreads to gas as US shale storms global market, stalks Russia
BBC Online, 25 February 2016

"Shale producers may not snap back quite as fast as hoped if oil prices stay in the $30-per-barrel range for much longer. Energy drillers say the U.S. is finally beginning to see real declines in production, and the longer prices stay low, the longer it will take to reverse the effects across the industry of cutbacks in production, capital spending and staffing....financing is no longer easy, and some producers face real hardship, including fire sales or bankruptcy..... There was some hope in the industry that a proposed production freeze between Russia and Saudi Arabia could lead to talks of output cuts, but the industry learned at the IHS CERAWeek conference that cuts are not on the agenda. ..... Hager said innovation has become much more important, and for instance, his company is using a higher sand concentration in fracking to increase output. "Thirty dollars (per barrel ) is not working at this point. I think you're going to see a lot of plays that work in $45 to 50 range. At $60, most work. We certainly don't need $90," Hager said. Sheffield said $50 per barrel oil would not be enough for growth in the industry, because there would not be enough cash flow."
At $30 oil price, shale rebound may take much, much longer
CNBC, 25 February 2016

"The U.S. shale boom was fueled by junk debt. Companies spent more on drilling than they earned selling oil and gas, plugging the difference with other peoples’ money. Drillers piled up a staggering $237 billion of borrowings at the end of September, according to data compiled on the 61 companies in the Bloomberg Intelligence index of North American independent oil and gas producers. U.S. crude production soared to its highest in more than three decades. Oil prices have now fallen more than 70 percent from a 2014 peak, and banks and bondholders are fighting for scraps. Bond prices reflect investors’ fears. U.S. high-yield energy debt lost 24 percent last year, the biggest fall since 2008, according to Bank of America Merrill Lynch U.S. High Yield Indexes. Investors are now demanding a yield of 19.6 percent to hold U.S. junk-rated energy bonds, after borrowing costs for these companies exceeded 20 percent for the first time ever this month, according to data compiled by Bank of America Merrill Lynch....Most of the shale industry’s debt is in the form of bonds, according to data compiled for the Bloomberg Intelligence index. Of those $197 billion of securities, $101 billion is junk-rated....Banks are setting aside more money to cover potential losses on souring energy loans. JPMorgan Chase & Co said on Wednesday that it would need to boost reserves for impaired loans to the sector by $1.5 billion if oil prices hold at about $25 a barrel over 18 months. S&P estimates that credit lines to energy companies could be cut by 30 percent by April, when banks conduct one of their twice-yearly evaluations of their loans."
Biggest Wave Yet of U.S. Oil Defaults Looms as Bust Intensifies
Bloomberg, 25 February 2016

"Big Oil must thwart the movement to leave fossil fuels in the ground, the world’s most powerful oilman said on Tuesday. Addressing executives in Texas, Saudi oil minister Ali Al-Naimi said the industry had to shed its “Dark Side” image and show it was a “force for good”. The growing divestment campaign bids to blacklist the industry as others shunned tobacco producers or Apartheid-era South Africa. By last December, over 500 institutions including large insurers, funds and banks managing US$3.4tn of assets pledged to move out of fossil fuels for climate reasons. That’s a 70-fold rise on September 2014. Fossil fuels were not the problem, but their “harmful emissions,” said Al-Naimi, who represents the hydrocarbon-rich Middle Eastern kingdom at UN climate talks and stepped down as chairman of national oil company Aramco in 2015. The world must scale up technologies that capture carbon dioxide, instead of replacing the polluting fuels with renewable sources, he added. The US now leads Saudi Arabia as the world’s top oil producer following a revolution in techniques to extract it from shale rock, according to BP data."
Oil industry must thwart 'misguided' divestment campaign, says Saudi minister
Guardian, 25 February 2016

"One day after Saudi Arabia’s oil minister said it was time for high-cost producers to call it quits, two Bakken shale drillers announced they’re doing just that. Continental Resources Inc., the shale oil pioneer controlled by billionaire wildcatter Harold Hamm, halted all fracking in the Bakken shale formation in the U.S. Williston Basin after posting its first annual loss since the company’s public debut in 2007. Whiting Petroleum Corp. estimates it will leave 73 uncompleted wells in the region by year-end, and another 95 in the Niobrara shale area in the Denver-Julesburg Basin. Hamm, owner of 76 percent of Continental’s common stock, has responded to plummeting crude prices by slashing his drilling budget and shutting down rigs in the Bakken, where the company is one of the dominant explorers. After spending $1.27 billion on acquisitions to expand its footprint in the region since late 2011, Continental is now seeking to raise cash by attracting investments from joint-venture partners in an Oklahoma discovery known as the Stack....Continental said it has no fracking crews currently working in the Bakken. The company continues to drill there, focusing on areas with the highest returns, but will leave most wells unfinished this year."
Shale Drillers Halt Bakken Fracking as Saudis Send Gloomy Note
Bloomberg, 24 February 2016

"Feb 24 North Dakota oil producer Whiting Petroleum Corp said on Wednesday it will suspend all fracking and spend 80 percent less this year, the biggest cutback to date by a major U.S. shale company reacting to the plunge in crude prices. Shares of Whiting jumped 7.7 percent to $4 per share in after-hours trading as investors cheered the decision to preserve capital. During the trading session, Whiting had slid 5.6 percent to $3.72. Whiting's cut is one of the largest so far this year in an energy industry crippled by oil prices at 10-year lows. The cuts will have a big impact in North Dakota, where Whiting is the largest producer. Denver-based Whiting said it will stop fracking and completing wells as of April 1. Most of its $500 million budget will be spent to mothball drilling and fracking operations in the first half of the year. After June, Whiting said it plans to spend only $160 million, mostly on maintenance. Rival producers Hess Corp and Continental Resources Inc have also slashed their budgets for the year, though neither has cut as much as Whiting."
Whiting slashes budget, suspends fracking; shares jump
Reuters, 24 February 2016

"The North Sea oil industry is standing at “the edge of a chasm”, according to an official report warning nearly half its fields are on course to operate at a loss this year and of a “domino effect” of closures. Oil and Gas UK’s 2016 activity survey said that the North Sea is entering a phase of “super maturity”, with only £1 billion expected to be spent this year on new projects compared to a recent average of £8 billion. It concluded that exploration is at an all-time low “with no sign of improving” and a “significant permanent reduction” in tax is required in George Osborne’s Budget next month to attract back investment. Although production increased by nearly 10 per cent last year, the survey said revenues fell by 30 per cent thanks to the collapse in the oil price to around $30 per barrel. The fields predicted to operate at a loss this year account for around a sixth of the North Sea’s total production, it said, but their “interconnectivity” with other fields would mean many more would fall into the red thanks to a “domino effect.” It also emerged that explorer First Oil Expro, owned by Aberdeen oil tycoon Ian Suttie, has entered administration. The company said it had been in talks with KPMG last year as it battled the collapse in oil prices. The survey by Oil and Gas UK, the industry body, was published only two weeks after Scottish Government figures showed oil generated only £7 million per month in tax revenues last year."
North Sea oil 'standing at the edge of a chasm'
Telegraph, 23 February 2016

"Saudi Arabia won’t cut oil production because it doesn’t trust other countries to share the sacrifice, [Saudi Arabia oil minister] Al-Naimi said. Instead it will keep output where it is now and let low prices kill off higher cost production. "It may sound harsh, and unfortunately it is, but it is the most efficient way to rebalance markets," he said. Saudi Arabia’s decision not to cut production shouldn’t be seen as a war on U.S. shale or an attempt to chase greater market share at the expense of other producing nations, Al-Naimi said. "I have no concerns about demand, and that’s why I welcome new additional supplies, including shale oil."...Shale drillers are "grievously wounded" and are about to be "decimated" in the coming months, said Mark Papa, the former EOG Resources Inc. chief executive officer who helped create the shale industry more than a decade ago. Companies will rise from those ashes with more conservative leadership, and eventually make U.S. shale the leading oil supplier in the world."
Lessons From IHS CERAWeek: What We Heard on Conference's Day 2
Bloomberg, 23 February 2016

"This week, Saudi Oil Minister Ali Al-Naimi will for the first time face the victims of his decision to keep oil pumps flowing despite a global glut: U.S. shale oil producers struggling to survive the worst price crash in years. While soaring U.S. shale output brought on by the hydraulic fracturing revolution contributed to oversupply, many blame the 70-percent price collapse in the past 20 months primarily on Naimi, seen as the oil market's most influential policymaker. During his keynote on Tuesday at the annual IHS CERAWeek conference in Houston, Naimi will be addressing U.S. wildcatters and executives who are stuck in a zero sum game. "OPEC, instead of cutting production, they increased production, and that's the predicament we're in right now," Bill Thomas, chief executive of EOG Resources Inc (EOG.N), one of the largest U.S. shale oil producers, told an industry conference last week, referring to 2015. It will be Naimi's first public appearance in the United States since Saudi Arabia led the Organization of Petroleum Exporting Countries' shock decision in November 2014 to keep heavily pumping oil even though mounting oversupply was already sending prices into free-fall. Naimi has said this was not an attempt to target any specific countries or companies, merely an effort to protect the kingdom's market share against fast-growing, higher-cost producers. It just so happens that U.S. shale was the biggest new oil frontier in the world, with much higher costs than cheap Saudi crude that can be produced for a few dollars a barrel. "I'd just like to hear it from him," said Alex Mills, president of the Texas Alliance of Energy Producers. "I think it should be something of concern to our leaders in Texas and in Washington," if in fact his aim is to push aside U.S. shale producers, Mills said. Last week's surprise agreement by Saudi Arabia, Qatar, Russia and Venezuela to freeze oil output at January levels - near record highs - did not offer much solace and the global benchmark Brent crude LCOc1 ended the week lower at $33 a barrel and U.S. crude futures CLc1 ended unchanged at just below $30. Prices fell sharply on Tuesday after Iran, the main hurdle to any production control in its zeal to recapture market share lost to sanctions, welcomed the plan without commitment. Iraq was also non-committal. Many U.S. industry executives understand that all is fair in love, war and the oil market, but "the Saudis have probably overplayed their hand," said Bruce Vincent, former president of Houston-based shale oil producer Swift Energy (SFYWQ.PK), which filed for bankruptcy late last year.... Texas, where oil production has more than doubled over the past five years thanks to the Eagle Ford and Permian Basin fields, is feeling acute pain. The state lost nearly 60,000 oil and gas jobs between November 2014 and November 2015, according to the Texas Alliance's most recent data. Only 236 rigs are still actively drilling wells in the state, down from more than 900 in late 2014, Baker Hughes data showed. Financial distress among U.S. producers has deepened. More than 40 U.S. energy companies have declared bankruptcy since the start of 2015, with more looming as lenders are set to cut the value of companies' reserves, often used as collateral for credit. Anadarko Petroleum Corp (APC.N) and rival ConocoPhillips (COP.N) both cut their dividends this month, unusual moves that showed financial stress."
Saudi oil minister to face rival U.S. producers as price rout bites
Reuters, 21 Reuters 2016

"The Saudi Arabian Foreign Minister has said the kingdom will not cut oil production, following talks in Doha earlier this week. The development, reported by the AFP news agency, comes after an agreement with Russia on Tuesday in which they agreed to freeze output."
Saudi Arabia says it 'will not cut oil production'
Independent, 18 February 2016

"A growing number of energy firms are at risk of filing for bankruptcy this year as debt pressure mounts, Deloitte's John England said Tuesday. Nearly 35 percent of publicly traded oil and gas exploration and production companies around the world — about 175 firms — are at high risk of falling into bankruptcy, the auditing and consulting firm reported. Not only do these companies have high debt levels, but their ability to pay interest on those loans has deteriorated, according to the firm. "Clearly, this is the year of hard decisions I think for a lot of these companies. They were kind of sheltered in 2015 through hedges and some access to equity and debt markets," England, Deloitte's U.S. oil and gas leader, told CNBC's "Fast Money: Halftime Report." Those tough choices include selling assets that are core to drillers' portfolios, cutting shareholder payouts, laying off more workers, and further slashing capital spending plans, he said. Oil and gas companies canceled or postponed about $380 billion in projects between the start of the oil price rout in 2014 and the beginning of this year, according to consultant Wood Mackenzie. The probability of bankruptcy is high for 50 members of the roughly 175 companies, said Deloitte. That is because their assets are worth less than the outstanding balances on their loans or their leverage ratios have crept into the danger zone. Some 160 companies are also in danger because, while less leveraged, they are facing cash-flow constraints, Deloitte said. Those groups include both micro-cap companies and firms with market capitalizations in excess of a billion dollars, England told CNBC. .... Wolfe Research senior oil & gas analyst Paul Sankey said Tuesday he expects to see bankruptcies almost daily. On the other hand, Wolfe is most optimistic about Pioneer Natural Resources, Sankey said, noting that the company remains heavily hedged. The firm also likes Occidental Petroleum on the strength of its balance sheet, he said. Almost every other company is in trouble at current crude prices below $30 a barrel, including oil major Exxon Mobil, which faces risk to its credit rating, he said. "Our analogy at these prices is that you've got a landslide of the whole industry basically slipping down the slope, and Exxon's mansion is cracking at the top of the hill," he told CNBC's "Squawk on the Street." "
35% of drillers at high risk of bankruptcy: Report
CNBC, 16 February 2016

"UK Oil & Gas (UKOG), the company behind the plan to extract oil from the Gatwick area, says oil has flowed to the surface at a faster rate than expected. UKOG said light sweet oil rose from 900 metres below ground level at a rate of 463 barrels per day. Its shares rose 38% to 1.9p following the flow test at the Horse Hill site in the Weald basin, West Sussex. Executive chairman Stephen Sanderson said the test was significant. "Importantly, tests so far show oil has flowed to the surface under its own pressure and has not, so far, required artificial lift," he said. The company says it could produce up to 500 barrels of oil a day. According to Mr Sanderson, additional extraction techniques could further increase flow rates. David Lenigas, the former chairman of UKOG, had claimed that there could "multiple billion" barrels of oil across the Weald, which stretches across the South East corner of England. It was originally suggested there could be as much as 100 billion barrels of oil in that region. However, the most recent assessment by Schlumberger, the oil services company, predicted there were 10.9 billion barrels of oil in the 55 square mile area covered by UKOG's licences. UKOG has a 30% direct investment in Horse Hill Developments, which is drilling the site.""
UK Oil & Gas says oil is flowing fast at its Gatwick site
BBC, 16 February 2016

"Israel’s $6.5bn Leviathan offshore gas project has been thrown into doubt after the country’s supreme court challenged Benjamin Netanyahu’s decision to circumvent the Knesset by drafting a framework to jump-start investment. Shares in energy companies fell by 3 per cent in Tel Aviv on Monday, a day after the rightwing Israeli prime minister made an unprecedented appearance in the Supreme Court to defend the gas plan, which has faced stiff resistance. Left-of-centre opposition parties and non-governmental groups had petitioned the court to block it....The gasfield, one of the largest in the eastern Mediterranean, was discovered in 2010. However, its development has been delayed by regulatory red tape — including a challenge in 2014 from Israel’s antitrust commissioner — and a political backlash from Israelis who accuse their government of giving investors too generous a deal at a time when gas prices are low."
Israeli supreme court puts Leviathan gas project at risk
Financial Times, 15 February 2016

"New gas fields off Shetland could supply 100% of Scotland's gas needs, analysts say. Advice provided to the Scottish Parliament Information Centre said peak production at the Laggan and Tormore fields could satisfy average demand across the whole of Scotland. Operator Total started production at its new Shetland plant on Monday. Highlands and Islands MSP Mike MacKenzie said it was "good news" for the country and the industry. In total, the two new fields, which have a lifespan of 20 years, will produce about 8% of the UK's gas needs. The Laggan and Tormore fields lie about 125km (77 miles) north west of the Shetland Islands, in an area where almost one fifth of the UK's remaining oil and gas reserves are thought to be held."
New Shetland gas fields 'could supply whole of Scotland'
BBC Online, 14 February 2016

"...profitable sustainability is coming of age, at least as far as renewable energy is concerned. With the value of fossil fuel holdings plummeting and the profitability of renewables growing, investors and companies are increasingly looking to sustainable investments for good long term bets. At January’s UN Investor Summit on Climate Risk – an event attended by 500 global investors representing an estimated $22tn in assets – most of the presenters shunted aside the standard public relations and millennial hire arguments in favor of an old fashioned look at profits and losses. And, as they made clear, companies and investors that shun sustainable, low-carbon assets stand to lose a lot of money. Michael Liebreich, chairman of Bloomberg New Energy Finance, explained the new math of fossil fuels. Coal, he pointed out, is losing value in every country except India. Gas prices have also fallen sharply, leading to a steep drop in investment. A recent Citibank report predicted that oil is likely to “bottom out” in 2016. And Bloomberg recently quoted Vitol oil holding group CEO, Ian Taylor, as saying that crude oil will likely stay at $60 a barrel for at least 10 years. On the other hand, renewable energy is becoming increasingly viable, a trend that could potentially be a game-changer for investors, particularly large scale, global investors like the ones attending the UN summit. The falling prices of renewables-generated electricity are pulling the rug out from under fossil fuels, which are getting priced out of the market. According to former vice president Al Gore, who also spoke at the UN Investor Summit on Climate Risk, solar power has been dropping by 10% per year. If this curve continues, Gore said, then its price is going to fall “significantly below the price of electricity from burning any kind of fossil fuel in a few short years”. In some places, Liebreich said, this is already happening. A year ago, a solar project in Dubai went online, and offered electricity at a rate of $0.058 per KwH. “This was the solar equivalent of the shot that was heard around the world,” he explained. “In the Middle East, a solar project was producing electricity more cheaply than you could produce it using natural gas.” This month, Liebreich said, Morocco announced an offshore wind farm that will produce electricity for $0.03 per KwH. “This is probably the cheapest new electricity that you could build anywhere in the world,” he said. And not only is this a boon for consumers, but it also sends a clear message to utilities. “When you get electricity this cheaply, you have to buy some.” The same thing is happening in the US. Gore pointed out that in Nevada, energy generators are selling solar electricity to utilities for $0.3 cents per KwH, a price well below that of coal-based electricity. And some utilities are even giving electricity away for free. Gore cited TXU, a utility in Texas. “Here’s their new rate plan: your rates will go up a little bit during the peak use periods during the day, but from 9pm until 6am the next morning, you can use all the electricity you want for free,” he said. “They have to get rid of it because it’s too hard to turn off the turbines. And in south Australia and parts of Germany, they’ve gone to negative rates for renewable electricity.”"
Have we reached the tipping point for investing in renewable energy?
Guardian, 13 February 2016

"The UK could face gas supply shocks and spiking prices as the oil rout accelerates the decline of North Sea reserves, former energy minister Charles Hendry has warned. The Privy Council member said that the UK’s increasing dependence on imported gas meant that without investment in gas storage, the UK could become increasingly exposed to supply interruptions. In 2012 a cut in gas supply from Russia and Ukraine caused prices to spike, and a year later a Belgian pipeline outage in early spring led to record highs in the UK gas market because domestic storage facilities were already empty. In the past the UK has relied on the North Sea for a predictable gas supply, but crashing gas prices could speed the region's decline as firms are forced to scale back investment in new projects - resulting in a supply shortfall within five years, industry experts warn. “The risk of course is that it takes five years to build gas storage,” Mr Hendry said. “So if you want to see them built on the time scale that is necessary, then you need to see more investment come through more quickly.... The government is banking on the booming liquefied natural gas (LNG) market to play a greater role in the UK’s range of gas supply options. LNG is gas converted into liquid for easier transportation. The UK currently relies on the North Sea for around 35pc of its gas supply, with 25pc imported from Norway and 10-15pc each from LNG deliveries and storage tanks. The rest is sourced from pipelines to neigbouring markets. Ed Cox, gas market expert at Icis, said that in the short term Europe's gas demand growth would not be enough to absorb the huge increase in global LNG as the US begins to export its shale reserves this year. But the UK will still be exposed to potentially volatile pricing from 2025 when global demand begins to catch up with the strong supply."
North Sea crisis raises UK gas supply risk, former energy minister warns
Telegraph, 12 February 2016

"Oil prices are rebounding Friday after hitting a low not seen since 2003. But a new report suggests oil producers may not be hurting as much as the historically bad prices suggest. The report, from the energy research firm Wood Mackenzie, says just 4% of the world's oil is unprofitable at $35 a barrel, a price oil was trading near just a few weeks ago. Oil prices were up about 10% Friday after a tweet from a Wall Street Journal reporter indicated that the oil cartel OPEC may be considering production cuts. In response to that news, WTI crude, the US benchmark, was trading near $29 a barrel, while Brent crude, the international benchmark, was sitting near $32. Wood Mackenzie's report, cited by the energy news service Platts, said about 3.4 million barrels' worth of oil a day was not profitable below $35 a barrel. According to the International Energy Agency, the world's supply is 97.07 million barrels a day. While today's oil prices are below this threshold, the report suggests the price at which US shale and other producers would be forced out of the market is lower than previously thought. As Platts writes, "For many producers, being cash negative is not enough of an incentive to shut down fields as restarting flow can be costly and some are able to store output with a view to selling it when prices recover." This falls in line with a report from Citi in December showing that the amount per barrel that most producers needed to receive just to keep the lights on, referred to as the cash cost point, was well under $30. And as we wrote earlier this week, the way these projects are financed most likely has an impact on the stubbornness of production levels. Because so much of US shale production has been financed by debt, not equity, companies have a reason to continue getting whatever cash they can for their production to meet debt repayments. In theory, losses from production pauses that were aimed at goosing prices higher could be inflicted on equity investors over a period of time."
Just a fraction of the world's oil supply isn't profitable at $35 a barrel
Business Insider, 12 February 2016

"At least 67 U.S. oil and natural gas companies filed for bankruptcy in 2015, according to consulting firm Gavin/Solmonese. That represents a 379% spike from the previous year when oil prices were substantially higher. With oil prices crashing further in recent weeks, five more energy gas producers succumbed to bankruptcy in the first five weeks of this year, according to Houston law firm Haynes and Boone. "It looks pretty bad. We fully anticipate it's only going to get worse," said Buddy Clark, a partner at Haynes and Boone and 33-year veteran in the energy finance space. This bleak outlook highlights one of the flip sides to cheap energy prices. Sure, it's great for drivers filling their tanks with cheap gas. But it's also fueling the demise of dozens of drilling and servicing companies -- and killing thousands of jobs in the process. Even Chesapeake Energy (CHK), one of the better known winners from the shale boom, was forced to deny bankruptcy rumors earlier this week as its stock tanked. The dramatic increase in bankruptcy filings corresponds with the plunge in oil prices from over $100 a barrel in mid-2014 to below $27 today. It also reflects the drop in natural gas prices, which are near 14-year lows. When oil prices were comfortably in the $90-$100 range and the shale oil boom took off, companies took on tons of debt to fund expensive drilling. But the ensuing surge in U.S. oil production created an epic supply glut that caused crude to crash. ... 'We saw the low hanging fruit already happen. Now the ones that were able to survive this long are going to start teetering,' said Ted Gavin, founding partner of Gavin/Solmonese, which did the bankruptcy analysis from data compiled by The Deal. Even the oil drillers that survive face an uncertain future. "The companies that are just making it today may not have the cash to invest in their future. That's a recipe for disaster three or four years from now," said Gavin."
U.S. oil bankruptcies spike 379%
CNN Money, 11 February 2016

"BP has predicted a bright future for the oil and gas industry with crude prices spiking at $100 a barrel again, huge increases in shale output and new production from Canadian tar sands. The British oil company believes fossil fuels will still be providing 80% of total energy supply in 2035 and admits that under this scenario, carbon emissions will rocket. The forecasts were immediately attacked by critics who accused BP of deliberately talking up the prospects for its own business while providing a downbeat assessment of future demand for wind and solar power. The predictions are contained in the latest annual BP Energy Outlook, which looks at long-term trends and develops projections for world energy markets over the next two decades.... The outlook predicted that “tight oil” – mainly US shale – would rise from around 4m barrels of oil equivalent to 8m in the 2030s. It added that US shale gas could provide almost 20% of the world’s supplies within 20 years. BP also forecast a major future increase in output from non-Opec production in deep water Brazilian fields and the Canadian tar sands, even though the latter is very expensive and involves high carbon production methods."
BP upbeat about oil industry and expects prices back at $100
Guardian, 10 February 2016

"...experts say the UK’s shale industry is threatened less by planning protests and environmental campaigns and more by simple economics: the tumbling price of gas. “There could not be a worse time to be embarking on challenging gas projects,” said Howard Rogers, director of gas research at the Oxford Institute for Energy Studies. “UK shale might [become] commercially successful but I struggle to see that it is going to be of material scale.” The price of wholesale gas in the UK on the spot market has come down from about $1.20 per therm — the unit in which prices are generally measured — in late 2013 to about $0.40 now. Ahmed Farman, an oil and gas analyst at Jefferies, said: “There is a global glut of gas and we continue to see gas supply everywhere. That is why prices have come down so much. It means there is a big economic challenge for shale producers in the UK.” Estimates for how much it would cost to extract shale gas in the UK and Europe more broadly vary, but most price it at between $0.70 and $1.20 per therm — 40 per cent above current spot prices. More worrying for UK gas producers, say analysts, is that US prices have come down so much it could soon be cheaper to import gas from there rather than buy domestically produced supplies. “The price setting is being done increasingly by US shale gas,” said Mr Farman. “That is a big negative for domestic producers in the UK.”"
Tumbling gas price blows hole in UK shale industry’s ambitions
Financial Times, 9 February 2016

"Worldwide, the fall in the oil price since 2014 has transferred $2 trillion from oil producers to oil consumers. Oil is the largest and most indispensable commodity on which society depends, the vital energy-amplifier of our everyday actions. The value of the oil produced every year exceeds the value of natural gas, coal, iron ore, wheat copper and cotton combined. Without oil, every industry would collapse - agriculture first of all. Cutting the price of oil enables you to travel, eat and clothe yourself more cheaply, which leaves you more money to spend on something else, which gives somebody else a job supplying that need, and so on.... The shale revolution is the dominant reason for the fall... The Price of Oil, a book by Roberto Aguilea and Marian Radetzki (fellow and professor of economics at universities in Australia and Sweden respectively,) predicts that this shale revolution has a long way to go. Although the current low oil price is bankrupting many producers and explorers in North Dakota and elsewhere, and many rigs are now standing idle with jobs being lost, there has only been a modest fall in production. That is because the technology for getting oil out of the ground is improving rapidly and the cost is falling fast, so some producers can break even at $30 or even $20 a barrel and it takes fewer rigs to generate more oil..... This means the shale industry can now put a lid on oil prices in the future. Aguilera and Radetzki argue that not only is the US shale industry still in its infancy, but that there is another revolution on the way: when the price is right, conventional oil fields can now be redrilled with the new techniques developed for shale, producing another surge of supply from fields once thought depleted."
Matt Ridley - Cheap oil is here to stay thanks to fracking
London Times, 8 February 2016, Print Edition, P21

"Almost 150 oil platforms in UK waters could be scrapped within the next 10 years, according to industry analysts. Douglas Westwood, which carries out market research and consultancy work for the energy industry worldwide, said it anticipated that “146 platforms will be removed from the UK during 2019-2026”, around 25% of the current total. The North Sea has been hit hard by plummeting oil prices, with the industry body Oil and Gas UK estimating 65,000 jobs have been lost in the sector since 2014."
A quarter of North Sea oil platforms 'could be scrapped in 10 years'
Guardian, 7 February 2016

"The last leg of the bear market that began in mid-2014 is probably in sight, as marginal producers fall by the wayside. Supply cutbacks should bring a rebound in the price of crude by the second half of 2016. But before a rebound, West Texas Intermediate crude will probably continue to fall, perhaps as low as $20 a barrel, before vaulting to the mid-$50s by year end...The worldwide oversupply of oil is evident from the buildup of inventories. Storage-tank capacity outside the U.S. is virtually exhausted. Edward Morse, head of global commodity research at Citigroup, who was cited in our first story, says that warm weather in December caused a buildup of heating-oil supplies in Europe that is being stored on ships, since there’s nowhere else to put the stuff....“We think,” says Morse, “that the world is poised to lose a lot of oil production in the U.S., Colombia, Mexico, Venezuela, China, and then potentially in Russia, Brazil, and the United Kingdom sector of the North Sea.”"
Here Comes $20 Oil
Barron's, 6 February 2016

"After a year of low oil prices, only 0.1 percent of global production has been curtailed because it’s unprofitable, according to a report from consultants Wood Mackenzie Ltd. that highlights the industry’s resilience. The analysis, published ahead of an annual oil-industry gathering in London next week, suggests that oil prices will need to drop even more -- or stay low for a lot longer -- to meaningfully reduce global production. OPEC and major oil companies like BP Plc and Occidental Petroleum Corp. are betting that low oil prices will drive production down, eventually lifting prices. That’s taking longer than expected, in part due to the resilience of the U.S. shale industry and slumping currencies in oil-rich countries, which have lowered production costs in nations from Russia to Brazil. The Wood Mackenzie analysis provides an estimate for the amount directly impacted by low prices -- to the tune of 100,000 barrels a day since the beginning of 2015 -- rather than output affected as new projects build up and aging fields decline. Canada, the U.S. and the North Sea have been affected the most by closures related to low prices. The International Energy Agency does estimate year-over-year change, and says global production in the fourth quarter was 96.9 million barrels a day. It forecast that outside the Organization of Petroleum Exporting Countries, output will fall this year by 600,000 barrels a day, the largest annual decline since 1992. Last year, non-OPEC output rose 1.4 million barrels a day. “Since the drop in oil prices last year there have been relatively few production shut-ins,” according to the report. The company, which tracks production and costs at more than 2,000 oilfields worldwide, estimates that another 3.4 million barrels a day of production are losing money at current prices, of about $35 a barrel. It cautioned against expecting further closures, because “many producers will continue to take the loss in the hope of a rebound in prices.” For major oil companies, a few months of losses may make more sense than paying to dismantle an offshore platform in the North Sea, or stopping and restarting a tar-sands project in Canada, which may take months and cost millions of dollars. “There are barriers to exit,” said Robert Plummer, vice president of investment research at Wood Mackenzie."
How Much Oil Output Halted Due to Low Prices? Just 0.1%
Bloomberg, 5 February 2016

"The decline in the number of rigs drilling for oil in the US accelerated sharply this week, as companies adjusted to the latest slump in the price of crude. Baker Hughes, the oilfield services group, said 467 rigs were drilling oil wells in the US this week, down 31 from last week. It was the steepest drop for 10 months. The number of working US oil rigs has dropped 71 per cent from its peak in October 2014, to its lowest level in almost six years. The slowdown in activity is expected to contribute to a decline in US oil production over the coming months. RT Dukes of Wood Mackenzie, a consultancy, said the sharp drop was a sign that the slowdown in the rig count was “not over yet”. He expects the number of rigs drilling the more productive horizontal oil wells in the US to drop from 372 this week to less than 250. Until now, the drop-off in drilling has had little effect on US crude production, which peaked last April at 9.7m barrels per day, and by November had dropped just 376,000 b/d to 9.3m. However, forecasters including the government’s Energy Information Administration expect the decline in US production to continue this year. The cutbacks in drilling follow a 16 per cent drop in benchmark US crude this year to about $31 per barrel, taking its total decline since June 2014 to 71 per cent. Several US oil producers have said in recent weeks that they expect their output to decline this year, after announcing another round of capital spending cuts as they attempt to conserve cash...Wood Mackenzie on Friday published an analysis showing that although about 3.4m b/d of production worldwide was losing money with Brent at $35 per barrel, most of it was not being shut down. The largest share of that, about 2.2m b/d, is in Canada’s oil sands, where if operations are shut down they are expensive to restart, and there is a risk of damage to equipment or the reservoir. About 96.5 per cent of global oil production can cover its operating costs with Brent crude at $35 per barrel, including most of the US shale industry, but that does not include the cost of drilling and completing new wells. Analysts say very few US shale wells can cover their full costs with oil at $30. As production from existing wells declines, and fewer new wells are brought into production, US oil output is expected to decline. Mr Dukes said production from countries not in Opec was likely to drop this year, and the US would contribute a “supermajority” of that decline."
Fall in number of oil rigs drilling in US speeds up
Financial Times, 5 February 2016

"Iran wants to recover tens of billions of dollars it is owed by India and other buyers of its oil in euros and is billing new crude sales in euros, too, looking to reduce its dependence on the U.S. dollar following last month's sanctions relief. A source at state-owned National Iranian Oil Co (NIOC) told Reuters that Iran will charge in euros for its recently signed oil contracts with firms including French oil and gas major Total (TOTF.PA), Spanish refiner Cepsa CPF.GQ and Litasco, the trading arm of Russia's Lukoil (LKOH.MM). "In our invoices we mention a clause that buyers of our oil will have to pay in euros, considering the exchange rate versus the dollar around the time of delivery," the NIOC source said. Lukoil and Total declined to comment, while Cepsa did not respond to a request for comment. Iran has also told its trading partners who owe it billions of dollars that it wants to be paid in euros rather than U.S. dollars, said the person, who has direct knowledge of the matter."
Iran wants euro payment for new and outstanding oil sales - source
Reuters, 5 February 2016

"SSE has announced plans to shut most of its Fiddler's Ferry coal-fired power plant in April, wiping 1.5 gigawatts of power capacity from the UK grid and worsening the looming energy crisis next winter. The energy giant said it intended to shut three out of four units at the loss-making Cheshire power station, reneging on a Government subsidy contract to keep them running until 2018-19 and putting 213 jobs at risk. The move, which the Telegraph revealed SSE was considering last week, was condemned as "extremely disappointing" by the Government, which sought to reassure households the lights would stay on."
UK energy crisis deepens as SSE plans early plant closure
Telegraph, 3 February 2016

"The world's biggest offshore wind farm is to be built 75 miles off the coast of Grimsby, at an estimated cost to energy bill-payers of at least £4.2 billion. The giant Hornsea Project One wind farm will consist of 174 turbines, each 623ft tall - higher than the Gherkin building in London - and will span an area more than five times the size of Hull. Developer Dong Energy, which is majority-owned by the Danish state, said it had taken a final decision to proceed with the 1.2 gigawatt project that would be capable of powering one million homes and create 2,000 jobs during construction. First electricity from the project is expected to be generated in 2019 and the wind farm should be fully operational by 2020. The wind farm was handed a subsidy contract by former energy secretary Ed Davey in 2014 that will see it paid four times the current market price of power for every unit of electricity it generates for 15 years."
World's biggest offshore wind farm to add £4.2 billion to energy bills
Telegraph, 3 February 2016

"More bad news for oil investors and workers: BP is cutting thousands of jobs after it sank to a huge loss in 2015. The company posted an annual loss of $5.2 billion, compared with a profit of $8.1 billion in 2014.Much of the reversal was due to charges relating to the fallout from the 2010 Gulf of Mexico disaster, but the steep fall in oil and gas prices played a big part too. Stripping out one-off charges, profits slumped by 50% to $5.9 billion. BP is the first big European oil company to report 2015 results after prices of crude dropped 35% last year. The earnings were worse than expected and shares in BP slumped more than 8% in London. The company also announced plans to cut 7,000 jobs by the end of 2017, 3,000 more than it was expecting to shed just three weeks ago."
BP to cut 7,000 jobs after posting huge loss
CNN, 2 February 2016

"Plunging oil prices are a massive problem for a tiny state like North Dakota. The shortfall, released in new budget estimates on Monday, represents more than 20% of its tax revenues for the budget cycle that started last July. The state is scrambling to come up with spending cuts, and dipping into savings in order to keep its government up and running. More than 200 oil rigs were up and running in North Dakota during the boom times a few years ago. But that figure has dwindled to just 44 rigs operating today, and that's been a huge drain on the state's sales tax revenue. "A lot of the materials the rigs use -- the fracking sand, the piping, the cement -- all that is subject to sales tax," said state budget analyst Allen Knudson."
North Dakota's oil boom has gone bust, leaving the state government with a gaping $1 billion hole in its two-year budget
CNN, 2 February 2016

"A peak in global oil demand is unlikely to occur before 2040 in a sub-$70 oil world, according to a research report from Bank of America Merrill Lynch (BoAML). Over the medium-term, low oil prices will influence the trajectory of demand growth in three key ways, the report entitled “Global Energy Weekly: Oil is back to the future” explained... Income inequality has been a major political topic around the world in the past decade. Now the massive drop in oil prices from $115 in mid-2014 to $30 per barrel (/bbl), if sustained, will push back $3 trillion a year from oil producers to global consumers, setting the stage for one of the largest transfers of wealth in human history. This figure equates to an average net transfer of $400 per capita to the global consumer, likely having a long-term positive effect on global growth. Naturally, the price drop will have long-lasting effects on petroleum demand too."
No peak oil demand until 2040: BoAML report
TradeArabia News Service, 3 February 2016

"Saudi Arabia wants to cooperate with other oil producers to support the oil market, Saudi-owned Al Arabiya television reported on Sunday, quoting an unnamed Saudi source. The source also told the Dubai-based satellite channel that the kingdom was not the source of a proposal to cut production that Russia was studying. Russia said on Thursday that OPEC had proposed oil production cuts of up to 5 percent in what would be the first global deal in over a decade to help reduce a glut of crude and prop up sinking prices. Russian Energy Minister Alexander Novak also told reporters that there was a proposal of a meeting between Organization of the Petroleum Exporting Countries (OPEC) members and non-OPEC countries, and that Russia was ready for the meeting. So far, OPEC powerhouse Saudi Arabia has withstood pressure from other cartel members to cut output, instead sticking to a strategy of allowing the price of oil to drop to levels that were likely to force rivals such as U.S. shale producers out of business. The prospect that Saudi Arabia could relent helped oil prices rebounding on Friday, gaining more than 25 percenton the 12-year lows hit earlier in the month. .... But experts were skeptical of Russia's claims and a number of media outlets reported denials from unnamed Saudi sources that the crude giant was the source of the proposal to slice 5 percent from production levels. Arabiya reported on Saturday that it was Venezuela that had proposed a February meeting of oil producers to discuss steps to prop up prices. Arabiya also reported that another oil producer, Iraq, would accept a decision by OPEC and non-OPEC members to cut output....Meanwhile, Reuters reported that a senior Iranian oil official told Shana, the Iran oil ministry's news agency, that the country aimed to boost crude oil production capacity by 160,000 barrels a day once it had completed expansion projects at two oilfields."
Saudi Arabia will cooperate on oil output, didn't propose production cut, says Arabiya
CNBC, 31 January 2016

"The UK is facing an unprecedented “energy gap” in a decade’s time, according to engineers, with demand for electricity likely to outstrip supply by more than 40%, which could lead to blackouts. New policies to stop unabated coal-fired power generation by 2025, and the phasing out of ageing nuclear reactors without plans in place to build a new fleet of gas-fired electricity plants, will combine to create a supply crunch, according to a new study. Under current [government] policy, it is almost impossible for UK electricity demand to be met by 2025,” said Jenifer Baxter, head of energy and environment at the Institution of Mechanical Engineers (IMechE), which published the report, entitled Engineering the UK’s Electricity Gap, on Tuesday. As many as 30 new gas-fired power stations are likely to be needed to make up the supply deficit, according to the report, but these are not being built. Reforms to the electricity market brought in under the previous coalition government are also not helping to encourage construction. Attempts to encourage energy efficiency, such as the “green deal” to insulate houses, which was scrapped, have not been enough. Although a new nuclear reactor could be built at Hinkley Point by 2025, there is little chance of any more being constructed by that date. In addition, the government has slashed subsidies for onshore wind and solar power, making future growth in those energy sources doubtful. The government has also abandoned plans for pioneering carbon capture and storage technology, which could have given an extension to some coal-fired power plants. “The UK is facing an electricity supply crisis,” Baxter warned. “As the population rises, and with greater use of electricity in transport and heating, it looks almost certain that electricity demand is going to rise. However, with little or no focus on reducing electricity demand, the retirement of the majority of the country’s ageing nuclear fleet, recent proposals to phase out coal-fired power by 2025, and the cut in renewable energy subsidies, the UK is on course to produce even less electricity than it does at the moment.” She said: “We have neither the time, resources, nor enough people with the right skills to build sufficient power plants. Electricity imports will put the UK’s electricity supply at the mercy of the markets, weather and politics of other countries, making electricity less secure and less affordable.” The supply gap could be equivalent to about 40% to 55% of electricity demand by the middle of the next decade, according to the study. Only four new gas-fired power stations have been built in the last 10 years."
Engineers warn of looming UK energy gap
Guardian, 26 January 2016

"China has detailed its plans to build floating nuclear plants amid Beijing's drive to double its atomic energy capacity by the end of this decade. The buoyant power stations will be a first once completed in 2020. Chinese authorities on Wednesday confirmed the Asian country's resolve to build floating nuclear power stations. The chairman of the China Atomic Energy Authority, Xu Dazhe, said the marine stations would be needed to exploit the oceans. "China is devoted to becoming a maritime power, and so we will definitely make full use of ocean resources," Xu told reporters in Beijing. The offshore power plants are meant to provide energy for offshore oil and gas drilling platforms as well as to island development projects."
China to build floating nuclear power plants
Deutshce Welle, 27 January 2016

"The Opec oil cartel has issued its strongest plea to date for a pact with Russia and rival producers to cut crude output and halt the collapse in prices, warning that the deepening investment slump is storing up serious trouble for the future. Abdullah al-Badri, Opec’s secretary-general, said the cartel is ready to embrace rivals and thrash out a compromise following the 72pc crash in prices since mid-2014. "Tough times requires tough choices. It is crucial that all major producers sit down and come up with a solution," he told a Chatham House conference in London. Mr al-Badri said the world needs an investment blitz of $10 trillion to replace depleting oil fields and to meet extra demand of 17m barrels per day (b/d) by 2040, yet projects are being shelved at an alarming rate. A study by IHS found that investment for the years from 2015 to 2020 has been slashed by $1.8 trillion, compared to what was planned in 2014. Mr al-Badri warned that the current glut is setting the stage for a future supply shock, with prices lurching from one extreme to another in a deranged market that is in the interests of nobody but speculators. "It is vital that the market addresses the stock overhang,” he said. Mr al-Badri warned that the current glut is setting the stage for a future supply shock, with prices lurching from one extreme to another in a deranged market that is in the interests of nobody but speculators. "It is vital that the market addresses the stock overhang,” he said. Leonid Fedun, vice-president of Russia’s oil group Lukoil, said Opec policy had set off a stampede, comparing it to a “herd of animals rushing to escape a fire”. He called on the Kremlin to craft a political deal with the cartel to overcome the glut. “It is better to sell a barrel of oil at $50 than two barrels at $30,” he told Tass. This is a significant shift in thinking. It has long been argued that Russian companies cannot join forces with Opec since the Siberian weather makes it hard to switch output on and off, and because these listed firms are supposedly answerable to shareholders, not the Kremlin. Mr Fedun said Opec will be forced to cut output anyway. “This could happen in May or in the summer. After that we will see a rapid recovery,” he said. He accused the cartel of incompetence. “When Opec launched the price war, they expected US companies to go under very quickly. They discovered that 50pc of the US production was hedged,” he said. Mr Fedun said these contracts acted as a subsidy worth $150m a day for the industry though the course of 2015. “With this support shale producers were able to avoid collapse,” he said. The hedges are now expiring fast, and will cover just 11pc of output this year. Iraq’s premier, Haider al-Abadi, was overheard in Davos asking US oil experts exactly when the contracts would run out, a sign of how large this issue now looms in the mind of Opec leaders. Mr Fedun said 500 US shale companies face a “meat-grinder” over coming months, leaving two or three dozen “professionals”. Claudio Descalzi, head of Italy’s oil group Eni, said Opec has stopped playing the role of “regulator” for crude, leaving markets in the grip of financial forces trading “paper barrels” that outnumber actual barrels of oil by a ratio of 80:1. The paradox of the current slump is that global spare capacity is at wafer-thin levels of 2pc as Saudi Arabia pumps at will, leaving the market acutely vulnerable to any future supply-shock. “In the 1980s it was around 30pc; 10 years ago it was 8pc,” said Mr Descalzi. Barclays said the capitulation over recent weeks is much like the mood in early 1999, the last time leading analysts said the world was “drowning in oil”. It proved to be exact bottom of the cycle. Prices jumped 50pc over the next twenty days, the start of a 12-year bull market. Mr Norrish said excess output peaked in the last quarter of 2015 at 2.1m b/d. The over-supply will narrow to 1.2m b/d in the first quarter as of this year as a string of Opec and non-Opec reach “pain points”, despite the return of Iranian crude after the lifting of sanctions. By the end of this year there may be a “small deficit”. By then the world will need all of Opec’s 32m b/d supply to meet growing demand, although it will take a long time to whittle down record stocks. Mr Norrish said the oil market faces powerful headwinds. US shale has emerged as a swing producer and will crank up output “quite quickly” once prices rebound. Global climate accords have changed the rules of the game and electric vehicles are breaking onto the scene. Yet the underlying market is tighter than in 1999, when there was ample spare capacity, the geopolitical risks are much greater in a Middle East torn by a Sunni-Shia battle for dominance. Barclays said extreme positioning on the derivatives markets has prepared the ground for a short squeeze. “Unhedged short positions held by speculators are huge so there is certainly the potential for a steep move up in prices at some point,” it said. "
Opec pleads for Russian alliance to smash oil speculators
Telegraph, 25 January 2016

"Hedge funds and private equity groups armed with $60bn of ready cash are ready to snap up the assets of bankrupt US shale drillers, almost guaranteeing that America’s tight oil production will rebound once prices start to recover. Daniel Yergin, founder of IHS Cambridge Energy Research Associates, said it is impossible for OPEC to knock out the US shale industry though a war of attrition even if it wants to, and even if large numbers of frackers fall by the wayside over coming months. Mr Yergin said groups with deep pockets such as Blackstone and Carlyle will take over the infrastructure when the distressed assets are cheap enough, and bide their time until the oil cycle turns. “The management may change and the companies may change but the resources will still be there,” he told the Daily Telegraph. The great unknown is how quickly the industry can revive once the global glut starts to clear - perhaps in the second half of the year - but it will clearly be much faster than for the conventional oil. “It takes $10bn and five to ten years to launch a deep-water project. It takes $10m and just 20 days to drill for shale,” he said, speaking at the World Economic Forum in Davos. In the meantime, the oil slump is pushing a string of exporting countries into deep social and economic crises. “Venezuela is beyond the precipice. It is completely broke,” said Mr Yergin. Iraq’s prime minister, Haider al-Abadi, said in Davos that his country is selling its crude for $22 a barrel, and half of this covers production costs. “It’s impossible to run the country, to be honest, to sustain the military, to sustain jobs, to sustain the economy,” he said. This is greatly complicating the battle against ISIS, now at a critical juncture after the recapture of Ramadi by government forces. Mr al-Albadi warned that ISIS remains “extremely dangerous”, yet he has run out of money to pay the wages of crucial militia forces. .... Mr Yergin is author of “The Prize: The Epic Quest for Oil, Money and Power”, and is widely regarded as the guru of energy analysis. He said shale companies have put up a much tougher fight than originally expected and are only now succumbing to the violence of the oil price crash, fifteen months after Saudi Arabia and the Gulf states began to flood the global market to flush out rivals. “Shale has proven much more resilient than people thought. They imagined that if prices fell below $70 a barrel, these drillers would go out of business. They didn’t realize that shale is mid-cost, and not high cost,” he said. Right now, however, US frackers are in the eye of the storm. Some 45 listed shale companies are already insolvent or in talks with creditors. The fate of many more will be decided over the spring when an estimated 300,000 barrels a day (b/d) of extra Iranian crude hits an already saturated global market. .... Output per rig has soared fourfold since 2009. It is now standard to drill multiples wells from the same site, and data analytics promise yet another leap foward in yields. “$60 is the new $90. If the price of oil returns to a range between $50 and $60, this will bring back a lot of production. The Permian Basin in West Texas may be the second biggest field in the world after Ghawar in Saudi Arabia,” he said. Zhu Min, the deputy director of the International Monetary Fund, said US shale has entirely changed the balance of power in the global oil market and there is little Opec can do about it. “Shale has become the swing producer. Opec has clearly lost its monopoly power and can only set a bottom for prices. As soon as the price rises, shale will come back on and push it down again,” he said. The question is whether even US shale can ever be big enough to compensate for the coming shortage of oil as global investment collapses. “There has been a $1.8 trillion reduction in spending planned for 2015 to 2020 compared to what was expected in 2014,” said Mr Yergin. Yet oil demand is still growing briskly. The world economy will need 7m b/d more by 2020. Natural depletion on existing fields implies a loss of another 13m b/d by then. Adding to the witches’ brew, global spare capacity is at wafer-thin levels - perhaps as low 1.5m b/d - as the Saudis, Russians, and others, produce at full tilt. “If there is any shock the market will turn on a dime,” he said. The oil market will certainly feel entirely different before the end of this decade. The warnings were widely echoed in Davos by luminaries of the energy industry. Fatih Birol, head of the International Energy Agency, said the suspension of new projects is setting the stage for a powerful spike in prices. Investment fell 20pc last year worldwide, and is expected to fall a further 16pc this year. “This is unprecedented: we have never seen two years in a row of falling investment. Don’t be misled, anybody who thinks low oil prices are the ‘new normal’ is going to be surprised,” he said. Ibe Kachikwu, Nigeria oil minister and the outgoing chief of Opec, said the ground is being set for wild volatility. “The bottom line is that production no longer makes any sense for many, and at this point we’re going to see a lot of barrels leave the market. Ultimately, prices will shoot back up in a topsy-turvey movement,” he said...Saudi Arabia has made it clear that there can be no Opec deal to cut output and stabilize prices until the Russians are on board, and that is very difficult since Russian companies are listed and supposedly answerable to shareholders."
Saudis ‘will not destroy the US shale industry’
Telegraph, 24 January 2016

"Oil has rebounded to about $31 in the past couple of days but is still down around 16 per cent this year. The price slump contributed to the brutal sell-off in global equity markets that shaved off $4tn in value this year before stocks began staging a rebound on Thursday. Investors have been concerned not only about oil companies but also the knock-on effects on suppliers, jobs and banks. There are also signs of financial strain in oil-producing countries. At around $30 a barrel, a level that Saudi Aramco chairman Khalid al-Falih described as “irrational” at the World Economic Forum in Davos, there is very little US shale production that is economically viable. Companies have achieved remarkable gains in productivity by optimising production techniques and drilling only in the “sweet spots” that generate the most. They have also been driving down the prices they pay their suppliers and contractors. Jim Burkhard of IHS, the research group, says the cost of drilling and completing a typical shale well fell 35-40 per cent last year..... “The cost of drilling new wells has plummeted in US shale, but not by as much as the oil price,” Mr Burkhard says. “$30 oil is suffocating.” The effect of that is to call into question the entire business model that made the US shale oil boom possible. US crude production rose from 5.1m barrels a day at the start of 2009 to 9.7m b/d in April last year, a surge that has few parallels in the industry’s history. This is in part because of advances in the techniques of hydraulic fracturing and horizontal drilling, but also because of the easy availability of financing. The small and medium-sized companies that led the shale revolution raised $113bn from selling shares and $241bn from selling bonds during 2007-15, according to Dealogic. Colin Fenton of Blacklight Research says the US Federal Reserve’s near-zero interest rate policy, which started from late 2008, “overstimulated debt-driven investment in energy supply”. Low rates drove investment in marginal US shale projects “that are uncompetitive at lower prices and now need to be unwound”, he wrote in a recent note. The boom years left the US oil industry deep in debt. The 60 leading US independent oil and gas companies have total net debt of $206bn, from about $100bn at the end of 2006. As of September, about a dozen had debts that were more than 20 times their earnings before interest, tax, depreciation and amortisation. Worries about the health of these companies have been rising. A Bank of America Merrill Lynch index of high-yield energy bonds, which includes many indebted oil companies, has an average yield of more than 19 per cent. Almost a third of the 155 US oil and gas companies covered by Standard & Poor’s are rated B-minus or below, meaning they are at high risk of default....Eventually, declining output in the US will help rebalance the global oil market. Once the price returns to $50-$60 a barrel, it will stimulate enough new drilling in the US to stop the decline in production, according to Skip York of Wood Mackenzie, the consultancy. However, there are reasons to believe the growth rates seen in the first shale boom will not be back for a long time. First, some long-term damage will have been done to the industry’s infrastructure and its skills base. The US oil and gas industry has lost 86,000 jobs over the past year, about 16 per cent of its workforce, and many of those people will never return. When the industry does want to expand again, it will need to offer attractive wages and training, which will raise costs."
Oil: US shale’s big squeeze
Financial Times, 22 January 2016

"Oilfield services giant Schlumberger has cut 10,000 jobs in the past three months amid the plunge in oil prices. News of the near-10% jobs cull came as the firm unveiled a net loss for the last three months of $1bn - its first quarterly loss in 12 years. Revenues fell 39% to $7.74bn, with chief executive Paal Kibsgaard warning that there was "no signs" of an oil price recovery on the horizon.... Oil prices have dipped below $28 a barrel in a drawn-out slump since mid-2014. Many analysts have slashed their 2016 oil price forecasts, with Morgan Stanley analysts saying that "oil in the $20s is possible." Economists at the Royal Bank of Scotland say that oil could fall to $16, while Standard Chartered predicts that prices could hit just $10 a barrel."
Schlumberger reveals 10,000 recent job losses amid oil price slump
BBC Online, 22 January 2016

"For the oil markets what worries me the most is that: last year we have seen oil investments in 2015 decline more than 20%, compared to 2014, for the new projects. And this was the largest drop we have ever seen in the history of oil. And, moreover, in 2016, this year, with the $30 price environment, we expect an additional 16% decline in the oil projects, investments. So, we have never seen 2 years in a row oil investments declining. If there was a decline 1 year, which was very rare, the next year there was a rebound.... this leads me to the very fact that in a few years of time, when the global demand gets a bit stronger, when we see that the high cost areas such as the United States start to decline, we may well see an upward pressure on the prices as a result of market tightness. So my message, my 1st message is: don’t be misled that the low oil prices will have an impact on the oil prices in the market in a few years’ time... If oil prices remain at $30 in 2016, an equivalent of 20% of the Middle East GDP will be erased. It’s a big thing. For Russia, about 10% of Russian GDP will be erased if the prices remain at this level. At the same time for Europe, for China, for India it’s an economic stimulus....these low oil prices and the unprecedented low investments mean we are having a fertile ground in the future for strong rebound in the prices. Second, topic of our discussion, transformation of energy, low oil prices are complicating the transformation."
Fatih Birol, Executive Director of International Energy Agency
World Economic Forum: The Transformation of Energy, 21 January 2016

"If you are waiting for Saudi Arabia to save the oil market, don't hold your breath. The country will not cut production and give up its market share in order to prop up prices, the chairman of Saudi Aramco said at the World Economic Forum in Davos "We are not going to accept to withdraw our production to make space for others," Khalid al-Falih said at a panel hosted by CNN's emerging markets editor John Defterios. Saudi Arabia is the world's second biggest oil producer and the top crude exporter. "This is the position that we've earned...we are not going to leave that position to others," al-Falih said. He said Saudi Arabia has in the past played the role of a "reserve bank" in the oil market, smoothing short terms shocks. The country has acted during the financial crisis and during civil unrest and wars in oil producing regions that have disrupted supplies. But it will not step in to fix the hugely oversupplied market. "Saudi Arabia has never advocated that it would take the sole role of balancing market against structural imbalance," he said at the CNN panel."
Defiant Saudi Arabia says it can handle low oil prices 'for a long, long time'
CNN, 21 January 2016

"Russia's former finance minister and the head of the Civic Initiatives Committee thinktank Alexey Kudrin does not rule out oil prices could plunge to $16-18 per barrel. "Today there is a wide range of factors putting pressure on [oil] price. It will be lower than today. It may reach 18 and even 16 [dollars per barrel] but for a short period of time. Indeed, it will be the lowest point," Kudrin said."
Russia’s ex-finance minister says oil price may plunge to $16-18 per barrel
Tass, 21 January 2016

"Winners and losers are emerging from the energy bust. ....The four biggest U.S. banks -- Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co. -- have set aside at least $2.5 billion combined to cover souring energy loans and have said they’ll add to that if prices stay low."
Some Bankrupt Oil and Gas Drillers Can't Give Their Assets Away
Bloomberg, 20 January 2016

"Back in 2008, with gas prices averaging nearly $4 a gallon, President Barack Obama set a goal of getting one million plug-in electric vehicles on the roads by 2015. Since then, his administration has backed billions of dollars in EV subsidies for consumers and the industry. Yet today – with gas prices near $2 a gallon - only about 400,000 electric cars have been sold. Last year, sales fell 6 percent over the previous year, to about 115,000, despite the industry offering about 30 plug-in models, often at deep discounts. Such challenges are part of the backdrop for Obama’s Wednesday visit to Detroit, where he’s expected to discuss the state of the auto industry. Despite slow plug-in sales, the industry continues to roll out new models in response to government mandates and its own desire to create brands known for environmental innovation. At the Detroit Auto Show last week, General Motors Co(GM.N) showed off its new electric Bolt EV; Ford Motor Co(F.N) unveiled a new plug-in version of its Ford Fusion; and Fiat Chrysler Automobiles NV(FCHA.MI) unveiled its first plug-in hybrid, a version of its new Pacifica minivan. Ford CEO Mark Fields said last week that EVs "are a difficult sell at $2 a gallon.” Plug-in vehicles accounted for fewer than 1 percent of the 17.4 million cars and trucks sold last year, according to data from HybridCars.com and Baum & Associates, a Michigan-based market research firm.... The main obstacles for electric vehicles are their high cost and short driving range. The Chevy Bolt promises a breakthrough on both fronts, with a 200-mile range and a price starting at about $30,000 - after government incentives. Still, that’s a steep buy-in compared to increasingly efficient gasoline-powered economy cars that can sell for less than $20,000."
Electric vehicle sales fall far short of Obama goal
Reuters, 20 January 2016

"Oil is so plentiful and cheap in the U.S. that at least one buyer says it would pay almost nothing to take a certain type of low-quality crude. Flint Hills Resources LLC, the refining arm of billionaire brothers Charles and David Koch’s industrial empire, said it offered to pay $1.50 a barrel Friday for North Dakota Sour, a high-sulfur grade of crude, according to a corrected list of prices posted on its website Monday. While the near-zero price is due to the lack of pipeline capacity for a particular variety of ultra low quality crude, it underscores how dire things are in the U.S. oil patch. U.S. benchmark oil prices have collapsed more than 70 percent in the past 18 months and fell below $30 a barrel for the first time in 12 years last week. West Texas Intermediate traded as low as $28.36 in New York. Brent, the international benchmark, settled at $28.55 in London....High-sulfur crude in North Dakota is a small portion of the state’s production, with less than 15,000 barrels a day coming out of the ground, said John Auers, executive vice president at Turner Mason & Co. in Dallas. The output has been dwarfed by low-sulfur crude from the Bakken shale formation in the western part of the state, which has grown to 1.1 million barrels a day in the past 10 years. Different grades of oil are priced based on their quality and transport costs to refineries. High-sulfur crudes are generally priced lower because they can only be processed at plants that have specific equipment to remove sulfur. Producers and refiners often mix grades to achieve specific blends, and prices for each component can rise or fall to reflect current economics."
The North Dakota Crude Oil That's Worth Almost Nothing
Bloomberg, 18 January 2016

"Europe's top gas suppliers Russia and Norway both reported higher pipeline gas exports last year, but the market is braced for imports of liquefied natural gas (LNG) from the United States, which could add pressure to prices and sales. "It is likely that (U.S.) LNG volumes could primarily be heading to Europe," Anfinnsen said. The first LNG cargo from Cheniere Energy's (LNG.A) landmark Sabine Pass terminal in Louisiana, however, will be delayed until later February or March, its subsidiary said last week. Norwegian exports peaked at a record 108.4 billion cubic metres (bcm) "a result of higher demand from Europe", the Norwegian Petroleum Department said last week.... Statoil, which markets about 80 percent of gas to Europe at prices linked to spot prices on the European gas hubs, such as British NBP and Dutch TTF, also plans to move away from oil-indexation completely. "We believe that we will be moving closer towards the 100 percent mark through this year," Anfinnsen said. Statoil has come under pressure to move away from indexation as buyers want a pricing system that better reflects the market and the higher availability of LNG imports. Low gas and oil prices weighed on Statoil's results in the third quarter, when the company posted less than expected operating profit and further cut capital spending. On Monday oil prices hit the lowest level since 2003 as the market braced for additional Iranian exports after sanctions against the country were lifted over the weekend."
Statoil expects higher gas demand in UK, Germany in 2016
Reuters, 18 January 2016

"Firms on Wall Street helped bankroll America's energy boom, financing very expensive drilling projects that ended up flooding the world with oil. Now that the oil glut has caused prices to crash below $30 a barrel, turmoil is rippling through the energy industry and souring many of those loans. Dozens of oil companies have gone bankrupt and the ones that haven't are feeling enough financial stress to slash spending and cut tens of thousands of jobs. Three of America's biggest banks warned last week that oil prices will continue to create headaches on Wall Street -- especially if doomsday scenarios of $20 or even $10 oil play out. For instance, Wells Fargo (WFC) is sitting on more than $17 billion in loans to the oil and gas sector. The bank is setting aside $1.2 billion in reserves to cover losses because of the "continued deterioration within the energy sector." JPMorgan Chase (JPM) is setting aside an extra $124 million to cover potential losses in its oil and gas loans. It warned that figure could rise to $750 million if oil prices unexpectedly stay at their current $30 level for the next 18 months."....The oil crash has already caused 42 North American oil companies to file for bankruptcy since the beginning of 2015, according to a list compiled by Houston law firm Haynes and Boone. It's only likely to get worse. Standard & Poor's estimates that 50% of energy junk bonds are "distressed," meaning they are at risk of default."
Big banks brace for oil loans to implode
CNN, 18 January 2016

"In December, Carbon Tracker, a financial think-tank that promotes the green energy market, told Sputnik that China aimed to become the world’s largest green economy due to Beijing’s determination to move away from coal to wind and solar energy. "The most proximate forecast is that China…will consume some 45 percent less of traditional energy sources, with the way it is creating alternative energy," Gref, who is also the former minister of economic development of Russia, said at the Gaidar Forum. Given the development of electric cars, Gref noted that, "we can say that the oil age is over."
'Age of Crude Oil Over' as China Develops Alternative Energy Sources
Sputnik, 15 January 2016

"On December 20, a low-pressure weather system crossed through the Texas panhandle and created sustained wind speeds of 20 to 30 mph. The burst of wind propelled Texas to surpass its all-time record for wind energy production, with wind providing 45 percent of the state’s total electricity needs — or 13.9 gigawatts of electric power — at its peak. That’s 13,900,000,000 watts: enough electricity to power over 230 million conventional 60 watt incandescent light bulbs, or more than 11 times the 1.21 gigawatts that Doc Brown’s time machine needed in Back to the Future. In other words, a heck of a lot of power. The latest record is news not only because wind provided nearly half of Texas’s electricity needs, but also that it did so for so many hours in a row. The sustained winds brought on by the low-pressure front caused wind energy production to exceed 10 gigawatts for essentially the entirety of December 20."
Texas Sets New All-Time Wind Energy Record
Scientific American, 14 January 2016

"Shale-oil billionaire Harold Hamm is calling for oil prices to double by year-end to $60 a barrel, a call in contrast to analyst projections that have crude sliding toward $20 or below. In an interview with The Wall Street Journal, the founder and chief executive of Oklahoma-based Continental Resources Inc. CLR, -2.02% predicted the global glut of crude will ease as U.S. shale producers scale down production. Hamm also reiterated his charge that Saudi Arabia and its partners in the Organization of the Petroleum Exporting Countries, or OPEC, are making a costly mistake in flooding the world with oil in an effort to force higher-cost producers, including those in the U.S. shale regions, out of business. U.S. oil production, which grew sharply as the so-called shale revolution took hold around five years ago, has slowed, but not as sharply as had been anticipated, in response to falling oil prices. Hamm told the Journal that producers are now cutting output at a rate of 1.6 million barrels a year, which would take U.S. production back to levels seen three years ago. Once the world falls back into a supply deficit, producers can’t reverse course quickly, he said. And with Saudi Arabia already pumping at close to full capacity, it will be difficult to make up the shortfall, Hamm argued."
Shale billionaire says oil to rebound to $60 a barrel by year-end
MarketWatch, 14 January 2016

"Police have detained 55 people after protests over rising food prices in Azerbaijan. At least one person was treated in hospital and several were hurt as police used tear gas and rubber bullets to disperse protesters in Siyazan. The demonstrators were angry at worsening economic conditions sparked by the fall in the price of oil. Azerbaijan's economy is heavily dependent on oil. Nearly half its GDP in 2014 came from the oil sector. Oil prices have slumped by 70% in the past 15 months, down to $31 a barrel on international markets. Azerbaijan's currency, the manat, has also fallen dramatically in value. The interior ministry said the protests were organised by the opposition and religious extremists. The government has ordered a cut in the price of flour in response to the crisis, effective from Friday, according to Reuters news agency.VAT was being waived on wheat imports and the sale of bread and flour, it said. In a further move to prop up the faltering manat, Azerbaijan's central bank has banned the sale of foreign exchange in bureaux de change run by commercial banks, Reuters adds."
Azerbaijan hit by price protests amid oil slump
BBC Online, 14 January 2016

"An estimated $380 billion worth of oil and gas projects have been cancelled since 2014, according to a new estimate from Wood Mackenzie. The downturn in oil prices have hit projects all around the world, and Wood Mackenzie says that 68 major projects were scrapped in 2015, which account for around 27 billion barrels of oil and natural gas. In the latter half of 2015 when oil prices fell once again following a modest rebound in the spring, the industry pushed off 22 major projects worth 7 billion barrels of oil equivalent. “The impact of lower oil prices on company plans has been brutal. What began in late-2014 as a haircut to discretionary spend on exploration and pre-development projects has become a full surgical operation to cut out all non-essential operational and capital expenditure,” Wood Mackenzie analyst Angus Rodger said in a statement. The cancellations will lead to dramatically lower oil production in the years ahead. An estimated $170 billion in capex spending was slashed for the period between 2016 and 2020. All told, industry cuts will translate into at least 2.9 million barrels of oil production per day (mb/d) that will not come online until at least sometime next decade.... The average breakeven costs for all the projects that Wood Mackenzie surveyed stood at around $60 per barrel. Most of the projects that suffered cuts were in deepwater, which tend to suffer from much higher development costs. For example, projects in the Gulf of Mexico, offshore Nigeria and Angola will be deferred until the 2020s. Canada’s expensive oil sands has also seen investment dry up. The $380 billion in spending cuts identified far exceeded the $200 billion that Wood Mackenzie totaled in June 2015. More cuts could be forthcoming in 2016. The report also finds that 85 percent of the greenfield projects on the drawing board have internal rates of return of 15 percent or less. The chances that they will move forward are “bleak.”.... Energy analysts are falling over each other with new estimates for where the price of oil will bottom out. Goldman Sachs was one of the first to call for $20 oil last year, but now everyone is jumping on the bandwagon. Morgan Stanley says $20 oil is possible, with much of the blame put on the strength of the dollar. Standard Chartered, not to be outdone, says oil could fall to $10 per barrel. RBS issued perhaps the most panic-inducing warning of them all, mostly because it applied to the broader state of the global economy: “sell everything except high quality bonds,” because the world is facing a “fairly cataclysmic year ahead.” The consensus suddenly seems to be that oil will remain in the $30s, or even lower, for much of the year, despite the incessant optimism from some oil executives. But the extended slump for oil is setting up the world for a situation in which a supply fails to meet demand in the not-so-distant future. The Wood Mackenzie report shines a spotlight on this phenomenon, which is becoming increasingly likely. The world is oversupplied right now, by some 1 mb/d. But the industry is shelving nearly 3 mb/d in future output because of conditions today. Lasting financial damage will lead to a shortfall in investment, a slowdown in spending that could outlast the oil bust. As the years pass and that production fails to come online, demand could start to outstrip supply, potentially leading to a price spike. The difference between the 1980s, the last time the world had to work through a supply-side oil bust, is that today the oil markets are not as oversupplied as they seem. OPEC had several million barrels per day sitting on the sidelines in the 1980s, which were ramped up over the course of several years to incrementally match demand needs. At this point, OPEC is producing flat out. Spare capacity hit 1.33 mb/d in the 3rd quarter of 2015 – the lowest level since 2008. It is hard to imagine a shortage when oil is dipping below $30 per barrel. But global supplies could very well tighten in the next few years."
27 Billion Barrels Worth Of Oil Projects Now Cancelled
OilPrice.com, 14 January 2016

"The first signs of a thaw are emerging for the battered oil market after Russia signalled a sharp fall in exports this year, a move that may offset the long-feared surge of supply from Iran. The oil-pipeline monopoly Transneft said Russian companies are likely to cut crude shipments by 6.4pc over the course of 2016, based on applications submitted so far by Lukoil, Rosneft, Gazprom and other producers. This amounts to a drop of 460,000 barrels a day (b/d), enough to eliminate a third of the excess supply flooding the world and potentially mark the bottom of the market. Russia is the world’s biggest producer of oil, and has been exporting 7.3m b/d over recent months. Transneft told journalists in Moscow that tax changes account for some of the fall but economic sanctions are also beginning to inflict serious damage. External credit is frozen and drillers cannot easily import equipment and supplies. New projects have been frozen and output from the Soviet-era fields in western Siberia is depleting at an average rate of 8pc to 11pc each year. Russia's deputy finance minister, Maxim Oreshkin, told news agency TASS that the oil price crash could lead to “hard and fast closures in coming months”. What is unclear is whether the production cuts are purely driven by markets or whether it is in part a political move to pave the way for a deal with Saudi Arabia. Opec stated in December that it is too small to act alone and will not cut production unless non-Opec states join the effort to stabilize the market, a plea clearly directed at Russia." Kremlin officials insist publicly that they cannot tell listed Russian companies what to do, and claim that Siberian weather makes it harder to switch supply on and off. Oil veterans say there are ways to cut quietly if president Vladimir Putin gives the order. Helima Croft, from RBC Capital Markets, said the expected cuts could be the first steps towards an accord. “As the economic reality of lower oil prices begins to bite, perhaps Putin will push for a course correction and reach a deal with the Saudis. It would certainly upend the current conventional wisdom that Opec is down for the count," she said. Russia has a strong incentive to strike a deal. Anton Siluanov, the finance minister, said the Kremlin is drawing up drastic plans to slash spending by 10pc, warning that the country’s reserve fund may run dry by the end of the year. “We have decided not to touch defence spending for now,” he said.... The oil markets have so far shrugged off the news from Moscow, focusing on the more immediate glut. Short positions on the derivatives markets remain extremely stretched, but this creates the conditions for a vicious "short squeeze" if sentiment turns. Brent crude is hovering near 11-year lows at $30.50, while Saudi Arab light is trading in Asia at $24.57, and Basra heavy is down to $17.77. The cheapest West Canadian is selling at $16.30."
Glimmers of hope for oil as Russia poised to slash output
Telegraph, 14 January 2016

"While oil prices flashing across traders’ terminals are at the lowest in a decade, in real terms the collapse is even deeper. West Texas Intermediate futures, the U.S. benchmark, sank below $30 a barrel on Tuesday for the first time since 2003. Actual barrels of Saudi Arabian crude shipped to Asia are even cheaper, at $26 -- the lowest since early 2002 once inflation is factored in and near levels seen before the turn of the millennium. Slumping prices are a critical signal that the boom in lending in China is “unwinding,” according to Adair Turner, chairman of the Institute for New Economic Thinking. Slowing investment and construction in China, the world’s biggest energy user, is “sending an enormous deflationary impetus through to the world, and that is a significant part of what’s happening in this oil-price collapse,” Turner, former chairman of the U.K. Financial Services Authority, said in an interview with Bloomberg Television. The nation’s economic expansion faltered last year to the slowest pace in a quarter of a century. “You see a big destruction in the income of the oil and commodity producers,” Turner said. Saudi prices would be less than $17 a barrel when converted into dollar levels for 1998, the year oil sank to its lowest since the 1980s."
The Real Price of Oil Is Far Lower Than You Realize
Bloomberg, 14 January 2016

"Despite the market focus on an oil supply surplus, demand side pressures are also hurting prices, as world trade growth slows, a top HSBC economist said on Thursday. "You have a situation where emerging markets in general are extremely weak, that in turn is causing commodity prices to decline rapidly, including oil prices, so rather than saying lower oil prices are a stimulus for the commodity consuming parts of the world, I think you should see lower oil prices as a symptom of weakness in global demand," HSBC's senior economic advisor Stephen King told CNBC. Oil prices, already at 12-year lows, extended their decline in Asian hours, with both U.S. WTI around $30.50 a barrel while Brent crude has plunged to a fresh 12-year low below $30 a barrel. The 19-month plunge in oil has mostly been blamed on the Saudi Arabia-led OPEC policy of keeping production high even in the face of global oversupply, in an attempt push out higher production-cost rivals such as U.S. shale oil producers. But King said that the forces moving oil were more nuanced than that. "If it's a situation where it's a reflection of weaker global demand, you get lower oil prices and at the same time, much weaker low trade growth," King said. "If it were simply a supply-side beneficial shock, then you get lower oil prices, higher real incomes in the west, maybe higher world trade growth. So it's not just the fall in the oil prices itself but world trade growth which is extremely weak - both of which is symptomatic of this broad deflationary trend.""Investment in various parts of the world has been much, much weaker than expected. Exports are a lot weaker than expected. More importantly, around the world, there has been very, very high level of debt," he said. "The problem with very low inflation or deflation, (when) interest rates are already at zero, the more the inflation falls, the higher your debt level becomes, the more difficult it is to deleverage and you end up with with grinding constraint on the ability of the global economy to expand." "
Weak demand as global trade slows has hit oil price, says HSBC's Stephen King
CNBC, 13 January 2016

"BP is cutting 600 jobs from its North Sea operations, a fifth of its workforce in the region, after oil prices slid to a near 12-year low. The energy giant currently employs 3,000 people in the region, including 1,800 in Aberdeen and 500 offshore. Most of the lost jobs will go this year with the rest in 2017. The cuts are among more than 4,000 posts being cut across the company's "upstream" exploration and production divisions over the next couple of years, reducing the number employed in this part of the company from 24,000 to below 20,000. BP's announcement came as a sustained slump in the oil price showed no signs of abating, with the cost of a barrel of Brent crude hitting a new near-12 year low as it slid below $31. It has tumbled by nearly three-quarters from a peak of more than $115 in the summer of 2014 amid a glut of supply and slowing demand from emerging markets, particularly China."
BP Cuts 20% Of North Sea Workforce
Sky, 12 January 2016

"Ever since the EU restricted sales of traditional incandescent light bulbs, homeowners have complained about the shortcomings of their energy-efficient replacements. The clinical white beam of LEDs and frustrating time-delay of ‘green’ lighting has left many hankering after the instant, bright warm glow of traditional filament bulbs. But now scientists in the US believe they have come up with a solution which could see a reprieve for incandescent bulbs. Researchers at MIT have shown that by surrounding the filament with a special crystal structure in the glass they can bounce back the energy which is usually lost in heat, while still allowing the light through. They refer to the technique as ‘recycling light’ because the energy which would usually escape into the air is redirected back to the filament where it can create new light. "It recycles the energy that would otherwise be wasted," said Professor Marin Soljacic. Usually traditional light bulbs are only about five per cent efficient, with 95 per cent of the energy being lost to the atmosphere. In comparison LED or florescent bulbs manage around 14 per cent efficiency. But the scientists believe that the new bulb could reach efficiency levels of 40 per cent. And it shows colours far more naturally than modern energy-efficient bulbs. Traditional incandescent bulbs have a ‘colour rendering index’ rating of 100, because they match the hue of objects seen in natural daylight. However even ‘warm’ finish LED or florescent bulbs can only manage an index rating of 80 and most are far less."
Return of incandescent light bulbs as MIT makes them more efficient than LEDs
Telegraph, 11 January 2016

"Half of U.S. shale oil producers could go bankrupt before the crude market reaches equilibrium, Fadel Gheit, said Monday. The senior oil and gas analyst at Oppenheimer & Co. said the "new normal oil price" could be 50 to 100 percent above current levels. He ultimately sees crude prices stabilizing near $60, but it could be more than two years before that happens. By then it will be too late for many marginal U.S. drillers, who must drill into and break up shale rock to release oil and gas through a process called hydraulic fracturing. Fracking is significantly more expensive than extracting oil from conventional wells. "Half of the current producers have no legitimate right to be in a business where the price forecast even in a recovery is going to be between, say, $50, $60. They need $70 oil to survive," he told CNBC's "Power Lunch.""
Half of US shale drillers may go bankrupt: Oppenheimer's Gheit
CNBC, 11 January 2016

"Saudi Aramco, the world’s biggest oil producer, is studying plans to privatise some of its subsidiaries as well as offering shares in the main business. The news follows comments made by Deputy Crown Prince Mohammed bin Salman on Thursday that he supported the trillion-dollar company being prepared for an initial public offering (IPO). If the float goes ahead it will be the world’s most valuable quoted company, dwarfing Apple, Exxon and Google. The moves have astonished the oil sector and led to speculation about whether a share float would change the Saudi strategy of driving down oil prices by refusing to cut back on production. Analysts believe the world’s most valuable business will attract a lot of interest from potential investors, but warn that the Saudis could underestimate western concerns about Aramco’s traditional secrecy and the impact of falling oil prices. A statement from the oil group said: “Saudi Aramco confirms that it has been studying various options to allow broad public participation in its equity through the listing in the capital markets of an appropriate percentage of the company’s shares and/or the listing of a bundle its downstream subsidiaries."
Saudi Aramco privatisation plans shock oil sector
Guardian, 8 January 2016

"The global economy is slipping into recession. The evidence is showing up in all the usual ways: slowing output growth, slumping purchasing-manager indexes, widening credit spreads, declining corporate earnings, falling inflation expectations, receding capital investment and rising inventories. But this is a most unusual recession—the first one ever caused by falling oil prices. We’ve had plenty of recessions caused by rising oil prices: 1973-75, 1980-81, and 1990-91. In these recessions, the oil price ultimately fell as demand collapsed. But this time oil prices have fallen more than 70% since mid-2014, while demand has been rising. The drop is entirely the result of America’s supply-side technology breakthrough with horizontal drilling and hydraulic fracturing—“fracking.” This has given consumers world-wide what amounts to a tax cut of $7.8 billion every day, or about $2.9 trillion over a full year. So shouldn’t there be an economic boom, rather than a bust? Yes, eventually. But first, because of its magnitude and speed, the technology revolution that drove down oil prices has also threatened the important institutions that benefited from high prices. Collectively, these institutions are down $2.9 trillion. .... According to bank regulators, U.S. banks have syndicated leveraged loans for the oil and gas industry of $276 billion, 15% of which are now regarded as distressed, up from less than 4% a year ago. And in our hyper-cautious, Dodd Frank-saddled world, such distress drives a tightening of lending conditions system-wide. And that drives recession. Energy company earnings have collapsed. In the U.S., earnings of the energy sector of the S&P 500 have fallen by 76%. The same is happening in energy around the world. And over the past quarter, earnings for companies in all sectors have started to slump, too. Every recession in a generation has been preceded by such an earnings rollover. The public finances of oil-producing nations—corrupt kleptocracies-cum-welfare-states, from Russia to Venezuela to Saudi Arabia—are also collapsing. When petrodollars dry up at the source, they dry up downstream as well, across the whole global economy. U.S. capital investment—which never really recovered from the housing bust—has been hit particularly hard by cutbacks in oil-field capital expenditures. That took 44 basis points off real U.S. output in the first quarter of 2015, 88 basis points in the second, and 33 basis points in the third. There are more cutbacks to come. China—an economy with rapidly increasing oil consumption—ought to be a beneficiary of low prices, but instead it is a victim, and potentially a globally systemic one. That’s because the foreign-exchange value of the U.S. dollar has surged, as it always does when oil prices fall. After substantially revaluing the yuan over a decade in response to protectionist threats, China now finds the strong dollar has left its currency grossly uncompetitive with the euro, the yen and all the rest. The alarming recent devaluation of the yuan, while a sensible response for China, is creating strains throughout emerging economies and deep uncertainty through all global supply chains. Maybe no single one of these oil-driven stresses would be enough to trigger a global recession. But a recession is often a death by a thousand cuts, not a single blow. Today’s reverse oil-shock has made a lot of cuts. And it’s not as though the world economy was all that robust to begin with. There has never been a recession caused by low oil prices, so there is no playbook for how this one might evolve. It is critically dependent on how the global consumer responds. If the rigors of recession reduce demand for oil—as happens in a typical recession—then we’d have a vicious cycle in which further oil price declines would make the recession worse."
The Recession Caused by Low Oil Prices
Wall St Journal, 7 January 2016

"Oil prices on Thursday slid to their lowest level in more than a decade — so low that black gold now costs less than spring water. At Thursday’s close at $33.27 a barrel, oil now costs 79 cents a gallon. By comparison, Shop-Rite on Thursday was selling three cases of 500-ml. bottles of Poland Spring water for $10. That works out to roughly $1.05 a gallon."
Oil is now cheaper than water
New York Post, 7 January 2016

"Oil went down to $7.00 a barrel in 1985, and that low figure is where the US government is now trying to drive the price down. Yet today the global glut is less than three percent of the oil supply, not 20 percent as in 1985. The surplus today is only 2.2 million barrels a day, according to Petroleum Intelligence Weekly. Iran will bring on initially around 600,000 barrels a day of new oil in 2016. That means later this year we will have a 2.8-million potential surplus. The problem is, according to Persian Gulf traders, an annual oil depletion of seven million barrels a day, and that cannot be replaced with the collapse in drilling. What this means is that all surplus oil could be wiped out in the first or second quarters of 2016. By mid-2016, oil prices should start surging dramatically, even with additional oil from Iran."
Saudi-Iranian spat: Another skirmish in the oil war
RT, 6 January 2016

"The United States government is frantically trying to hold the oil price down to destroy the Russian economy, using their proxy Persian Gulf producers who are pumping all out. That amounts to no less than seven million barrels a day over the OPEC quota, according to Persian Gulf traders. The US government believes it can destroy the Russian economy - again - as if the clock had been turned back to 1985, when the global glut was 20 percent of the oil supply and the Soviet Union was bogged down in Afghanistan and internally bleeding to death. Oil went down to $7.00 a barrel in 1985, and that low figure is where the US government is now trying to drive the price down. Yet today the global glut is less than three percent of the oil supply, not 20 percent as in 1985."
Saudi-Iranian spat: Another skirmish in the oil war
RT, 6 January 2016

"Overall, capital expenditure in the oil and gas industry shrank dramatically last year and is set for another 25 percent contraction this year, figures Moody’s, the ratings agency. Years of back-to-back belt-tightening are almost unheard of in the industry; the last time it happened was during the oil-price collapse of the mid-1980s. “It may take several years, but all those capex reductions will really start to bite,” said Jason Bordoff, a former energy advisor to President Barack Obama’s administration and now director of Columbia University’s Center on Global Energy Policy......... OPEC’s spare capacity is at historically low levels because everybody is pumping flat out to make what money they can with low prices. Estimates vary, but the amount of extra oil that OPEC, essentially Saudi Arabia, could quickly get to the market is estimated at between 1.25 million barrels a day and 2.3 million barrels a day, a hairbreadth margin in a global oil market that pumps almost 100 million barrels a day."
Oil Prices Have Hit a 10-Year Low. They’re Not Going to Stay There.
Foreign Policy, 6 January 2016

"Would you pay £36,000 extra for your next home if you knew it would cost just £1 a day to run? Packed with energy-saving gadgets including the latest- technology solar panels and intelligent temperature controls, some new "eco-homes" have ultra-low running costs. And, for that reason, they sell at a hefty premium. Energy-saving properties are cropping up across Britain, typically in small, newly-built developments. Some have virtually no running costs. Currently 11pc of UK homes are rated highly energy-efficient, achieving an "Energy Performance Certificate" rating of A or B. This is double the number of four years ago, according to the Department for Communities and Local Government. But the Government's support for renewable energy devices, including solar panels and energy-efficient measures, are falling (read on for further explanation). One couple who narrowly escaped the cuts are Graeme and Zoe Bidmead, both teachers from Lincolnshire, who say they have cut their energy and water bills to under £400 per year - or just £1 a day. The house generates much of its own energy through solar photovoltaic cells installed on the roof. The couple receive "feed-in-tariff" payments for the energy these panels generate and return into the grid, which is offset against all their energy spending. The £1 per day figure "includes all our water and energy use", said Mr Bidmead, who moved in this August with his partner, Zoe, and their two dogs, Sampson and Charles. Rainwater from the property's sloping roofs is harvested in tanks and used to flush the toilets. A water heating device also draws on further solar energy. It feeds into a boiler which supplies hot water fr showers and also powers underfloor heating. Ultra-efficient glazing, however, means there is little need for additional heating. "We haven't yet turned on the heating even once," said Mr Bidmead, "as the house is practically airtight." If their £1-per-day costing proves accurate over time, they are saving almost £1,000 per year compared to the average household. By comparison, the typical duel fuel energy bill in a three-bedroom family home costs upwards of £1,200 a year, according to official figures. This does not include water bills. ... However, the cost of buying a house with advanced technology adds up to 20pc to the property price, experts say. The Bidmeads bought their three-bedroom, Lincolnshire property for £365,000 – around 10pc above the cost of buying a similarly-sized property in the region."
'Extreme green' homes where energy costs £1 per day
Telegraph, 6 January 2016

"Pressure for British troops to be deployed against Islamic State militants in Libya grew on Monday after the terror group attempted to seize the country's largest oil depot. At least two people were killed when Isil fighters launched a combined gun and suicide car bomb attack on the Sidra oil port on Libya's Mediterranean coast. A rocket fired into a 420,000 barrel oil tank also sparked a huge blaze. Sidra lies around 130 miles east along the coast from the late Colonel Gaddafi's home city of Sirte, where Isil first raised its black jihadist flag a year ago. The prospect of Isil also grabbing lucrative oil facilities will increase pressure on Britain to press ahead with a plan to send troops to help Libya's fledgling government push Isil out. Under the plan, up to 1,000 British troops would form part of a 6,000-strong joint force with Italy - Libya's former colonial power - in training and advising Libyan forces. British special forces could also be engaged on the front line."
Islamic State battles to seize control of key Libyan oil depot
Telegraph, 4 January 2016

"Islamic State militants launched attacks near oil facilities in northern Libya on Monday but were pushed back, an army official has said. The jihadis carried out a suicide car bomb attack on a military checkpoint at the entrance to the town of al-Sidra, killing two soldiers, said a colonel in the army loyal to the internationally recognised government. “We were attacked by a convoy of a dozen vehicles belonging to Isis,” Bashir Boudhfira said. “They then launched an attack on the town of Ras Lanouf via the south but did not manage to enter.” For several weeks Isis has been trying to push east from the coastal city of Sirte under its control to reach Libya’s “oil crescent” where key oil terminals such as al-Sidra and Ras Lanouf are based."
Isis launches deadly attack on Libyan oil towns
Guardian, 4 January 2016

"The chief executive of Oil & Gas UK has welcomed the first increase in production on the UK continental shelf for over 15 years. Deirdre Michie, however, has warned the industry will be "extremely challenged" to sustain growth in 2016. Oil & Gas UK predicts oil and gas production increased by 7% in the past twelve months."
Oil and gas production rises for first time in 15 years
BBC Online, 4 January 2016

"A rise in Iran's crude oil exports once sanctions against it are lifted depends on future global oil demand and should not further weaken oil prices, senior officials were quoted as saying. Oil Minister Bijan Zanganeh said Iran did not plan to exacerbate an already bearish oil market. "We are not seeking to distort the market but will regain our market share," said Zanganeh, quoted by oil ministry news agency Shana. Oil prices are likely to come under further pressure this year, when international sanctions on Iran are due to be removed under a nuclear deal reached in July. Brent crude settled at $37.28 a barrel on Thursday. Iran has repeatedly said it plans to raise oil output by 500,000 barrels per day post sanctions, and another 500,000 bpd shortly after that, to reclaim its position as the Organization of the Petroleum Exporting Countries' second-largest producer... sanctions have halved Iran's oil exports to around 1.1 million bpd from a pre-2012 level of 2.5 million bpd, and the loss of oil income has hampered investments."
Iran says boosting oil exports depends on future demand
Reuters, 4 December 2016

"Oil output in Russia, one of the world's largest producers, hit a post-Soviet high last month and in 2015 as small- and medium-sized energy companies cranked up the pumps despite falling crude prices, Energy Ministry data showed on Saturday. The rise shows producers are taking advantage of lower costs due to rouble devaluation and signals Moscow's resolve not to give in to producer group OPEC's request to curb oil output to support prices. But the rise will contribute to a global oil supply glut and exert continued downward pressure on oil prices which hit an 11-year low near $36 per barrel last month, having fallen almost 70 percent in the past 18 months. For the whole of 2015, Russian oil and gas condensate output rose to more than 534 million tonnes, or 10.73 million barrels per day (bpd) from 10.58 million bpd in 2014. In December, Russian oil output rose to 10.83 million bpd from 10.78 million bpd in November. In tonnes, oil output was 45.782 million last month versus 44.115 million in November. The increase in production defied many expectations of a fall in Russian oil output which has been on a steady rise since 1998 apart from a small decline in 2008. The Energy Ministry had expected output to fall to 525 million tonnes in 2015 due to the exhaustion of mature oilfields in Western Siberia, which account for over a half of the country's total oil production. But medium-sized producers, such as Bashneft, cranked up production. And Gazprom, the world's top natural gas producer, increased production of oil, mainly gas condensate, by 5.3 percent for the year. However, oil output at Russia's leading producers declined. Production at Rosneft edged down by 0.9 percent, while output at Lukoil's Russian assets fell by 1.1 percent last year. According to a Reuters poll, Russian oil production in 2016 is expected to rise to a new post-Soviet yearly average high of 10.78 million bpd despite price falls as new fields come online and producers enjoy lower costs due to rouble devaluation."
Russian oil output hits post-Soviet record high in December, 2015
Reuters, 2 January 2016

"Iraq said it exported 1.097 billion barrels of oil in 2015, generating $49.079 billion from sales, according to the oil ministry. It sold 99.7 million barrels of oil in December, generating $2.973 billion, after selling a record 100.9 million barrels in November, said oil ministry spokesman Asim Jihad. The country sold at an average price of $44.74 a barrel in 2015, Jihad said. Iraq, with the world’s fifth-biggest oil reserves, needs to keep increasing crude output because lower oil prices have curbed government revenue. Oil prices have slumped in the past year as the Organization of Petroleum Exporting Countries defended market share against production in the U.S. OPEC’s second-largest crude producer is facing a slowdown in investment due to lower oil prices while fighting a costly war on Islamist militants who seized a swath of the country’s northwest. The nation’s output will start to decline in 2018, Morgan Stanley said in a Sept. 2 report, reversing its forecast for higher production every year to 2020."
Iraq Says It Exported More Than 1 Billion Barrels of Oil in 2015
Bloomberg, 1 January 2016

	PEAK OIL AND ENERGY CRISIS NEWS ARCHIVE 2016
Resources	To Go Direct To Current Energy Crisis News Reports - Click Here To Go Direct To 2016 News Reports Archive - Click Here	Home
Peak Oil and Energy Crisis News Reports Current 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007	Former Shell Scientist M. King Hubbert Speaks On Peak Oil in 1976 Click Here What Happened To The $11 Oil? "The chairman of Royal Dutch/Shell, Mark Moody-Stuart, three months ago unveiled a five-year plan that assumed a price of $14 a barrel. He has since publicly mused about oil at $11. Sir John Browne, chief executive of BP-Amoco, is now working on a similar assumption. Consumers everywhere will rejoice at the prospect of cheap, plentiful oil for the foreseeable future. Policymakers who remember the pain of responding to oil shocks in 1973 and in 1979-80 will also be pleased." The next shock? Economist, 4 March 1999 ".... today's $11-a-barrel price [is].... [the] lowest inflation-adjusted oil prices of the past half-century ... Even if consumption rises dramatically over time, most analysts believe prices should remain in check because of advanced technology and because OPEC nations need to sell as much as they can to maintain their incomes..... Low oil prices are excellent news, of course, for big energy consumers. A sustained $10-per-barrel drop in the price of oil cuts about 0.7 points from the annual U.S. inflation rate over five years and adds about 0.3 points to the U.S. economy's growth.... [I]f you're still operating under the assumption that the earth's petroleum--or at least the cheap stuff--is about to run out, you're not going to thrive in the new oil era. Technology is making it possible to find, produce, and refine oil so efficiently that its supply, at least for practical purposes, is basically unlimited." TREMORS FROM CHEAP OIL Businessweek, 14 December 1999 Conventional Crude Oil Production Has Peaked As Predicted By M.King Hubbert "While the oil forecasters were pumping out bearish calls, the market itself has stuck to its triple-digit price outlook. Oil buyers apparently know the Western world’s economic recovery will boost consumption, since growth and oil use are aligned. That’s not all. They also know that the math doesn’t work: Prices can’t go into gradual, long-term decline, or even stay flat, when the world’s conventional oil fields are in fairly rapid decline. Exotic production – oil sands, biofuels, natural gas liquids – are supposed to fill the gap. But this so-called unconventional production is highly expensive and quite possibly insufficient to cover the drop off in cheap, conventional production. Prices will rise to the point that demand will have to level off or fall. The 'peak oil' and 'peak demand' theories are really opposite sides of the same coin. A few days ago, Richard Miller, the former BP geochemist turned independent oil consultant, delivered a sobering lecture at University College London that laid out the case for dwindling future oil supply. His talk was based on published data from the U.S. Energy Information Agency, the International Energy Agency, the International Monetary Fund and other official sources.The data leave no doubt that the inexpensive oil is vanishing quickly. Conventional oil production peaked in 2008 at about 70 million barrels a day and is declining by about 3.3 million barrels a day, every year. Saudi Arabia pumps about 10 million barrels a day. The math says a new Saudi Arabia has to be found every three years to offset the conventional oil drop off. " Inexpensive oil vanishing at alarming rate Globe and Mail, 13 December 2013 2016 "The Permian Basin in West Texas may be the second biggest field in the world after Ghawar in Saudi Arabia,” he said. Zhu Min, the deputy director of the International Monetary Fund, said US shale has entirely changed the balance of power in the global oil market and there is little Opec can do about it. “Shale has become the swing producer. Opec has clearly lost its monopoly power and can only set a bottom for prices. As soon as the price rises, shale will come back on and push it down again,” he said. The question is whether even US shale can ever be big enough to compensate for the coming shortage of oil as global investment collapses. “There has been a $1.8 trillion reduction in spending planned for 2015 to 2020 compared to what was expected in 2014,” said Mr Yergin. Yet oil demand is still growing briskly. The world economy will need 7m b/d more by 2020. Natural depletion on existing fields implies a loss of another 13m b/d by then. Adding to the witches’ brew, global spare capacity is at wafer-thin levels - perhaps as low 1.5m b/d - as the Saudis, Russians, and others, produce at full tilt. 'If there is any shock the market will turn on a dime,' he said. The oil market will certainly feel entirely different before the end of this decade. The warnings were widely echoed in Davos by luminaries of the energy industry. Fatih Birol, head of the International Energy Agency, said the suspension of new projects is setting the stage for a powerful spike in prices. Investment fell 20pc last year worldwide, and is expected to fall a further 16pc this year. “This is unprecedented: we have never seen two years in a row of falling investment. Don’t be misled, anybody who thinks low oil prices are the ‘new normal’ is going to be surprised,” he said. Ibe Kachikwu, Nigeria oil minister and the outgoing chief of Opec, said the ground is being set for wild volatility. “The bottom line is that production no longer makes any sense for many, and at this point we’re going to see a lot of barrels leave the market. Ultimately, prices will shoot back up in a topsy-turvey movement,” he said...Saudi Arabia has made it clear that there can be no Opec deal to cut output and stabilize prices until the Russians are on board, and that is very difficult since Russian companies are listed and supposedly answerable to shareholders." Saudis ‘will not destroy the US shale industry’ Telegraph, 24 January 2016 The Energy Challenge Of The Post 9/11 Period "The U.S. needs energy — lots and lots of energy — and 37.1% of it is currently supplied by oil. As the population expands and the policy decisions and technological innovations needed to make the switch to green, renewable energy sources lag, thirst for the stuff is only going to grow. Critics have long lamented that when it comes to energy policy, 9/11 was an opportunity for the country to have an honest debate about the choices it needs to make if it's ever going to break its addiction to oil. 'We need to address the underlying issue,' says Lisa Margonelli, director of the New America Foundation's Energy Policy Initiative, 'and that's our dependence on oil.' Having a national conversation now — an adult one — is the only way forward." The Far-Ranging Costs of the Mess in the Gulf TIME, 6 May 2010
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