2012 PEAK OIL AND ENERGY CRISIS NEWS ARCHIVES

2012

"Wind farms have just half the useful lifespan which has been claimed, according to new research which found they start to wear out after just 12 years. A study of almost 3,000 turbines in Britain – the largest of its kind – sheds doubt on manufacturers claims that they generate clean energy for up to 25 years, which is used by the Government to calculate subsidies. Professor Gordon Hughes, an economist at Edinburgh University and former energy advisor to the World Bank, predicts in the coming decade far more investment will be needed to replace older and ineffective turbines – which is likely to be passed on in higher household electricity bills."
Wind turbines 'last for half as long as previously thought' as study shows they show signs of wearing out after just 12 years
Mail, 30 December 2012

"In a first-ever meeting, peak oil proponents met with the US Energy Information Administration earlier this month to urge the nation's top statistical agency to temper its rosy outlook on future US energy production. Representatives from The Association for the Study of Peak Oil & Gas USA (ASPO) met for two hours on December 17 with EIA Administrator Adam Sieminski and EIA staff to discuss concerns laid out in an October letter. Specifically, the group wanted to learn more about how EIA compiles the data that leads to its projections of US and international crude output and to offer alternative sources of data and expertise to aid in that effort. It was the first time the group had ever met with the EIA, ASPO Executive Director Jan Lars Mueller told Platts in a recent interview. 'We wanted to figure out how we can better work with EIA,' Mueller said. 'We did not expect them to embrace' our point of view he said. 'We think they need to be open. Otherwise, they'll be more subject to confirmation bias.' In the meeting, ASPO representatives pressed the need for projections for future oil and gas supply to 'properly consider technical and economic factors that may constrain US domestic production,' the group said in a follow-up report to its members. The group also emphasized that EIA and its parent agency, the Department of Energy, 'need to recognize broader trends that may be increasing the risk of a world oil crisis.' In its letter to Sieminski and Energy Secretary Steven Chu, the group said it was worried that industry and media hype, fueled by increases in production from shale formations, was creating a misleading picture of US energy supplies going forward. 'The prospect that the United States can be 'energy independent' by increasing North American oil production is overly optimistic and has been grossly overstated,' the group wrote. 'At the same time, the dangers of rising global demand and declining trends for oil exports on which the United States depends have been understated and overlooked.'"
Peak oil group presses EIA to temper optimistic crude outlook
Platts, 26 December 2012

"US Energy Information Administration (EIA) data confirms that despite the US producing a 'total oil supply' of 10 million barrels per day (up by 2.1 mbd since January 2005) world crude oil production and lease condensate – conventional production – remains on the largely flat, undulating plateau it has been on since it stopped rising in around that very year at 74 million barrels per day (mbd). According to John Hofmeister, former President of Shell Oil, 'flat production for the most part' over the last decade has dovetailed with annual decline rates for existing fields of about '4 to 5 million bpd.' Combined with 'constant growing demand' particularly from China and emerging markets, he argues, this will underpin higher oil prices for the foreseeable future. The IEA’s WEO actually corroborates this picture – but the devil is in the largely overlooked details. Firstly, the main reason US oil supply will overtake Saudi Arabia and Russia is because their output is projected to decline, not rise as previously assumed. So while US output creeps up from 10 to 11 mbd in 2025, post-peak Saudi output will fall to 10.6 mbd and Russia to 9.5 mbd. Secondly, the report’s projected increase in 'oil production' from 84 mbd in 2011 to 97 mbd in 2035 comes not from conventional oil, but 'entirely from natural gas liquids and unconventional sources' (and half of this from unconventional gas including shale) – with conventional crude oil output (excluding light tight oil) fluctuating between 65 mbd and 69 mbd, never quite reaching the historic peak of 70 mbd in 2008 and falling by 3 mbd sometime after 2012. The IEA also does not forecast a return to the cheap oil heyday of the pre-2000 era, but rather a long-term price rise to about $125 per barrel by 2035....world conventional oil production is already on a fluctuating plateau and we are now increasingly dependent on more expensive unconventional sources. The age of cheap oil abundance is over."
The Great Oil Swindle: why the new black gold rush leads off a fiscal cliff
Ceasefire, 20 December 2012

"The current story is something along these lines: 'Hey, look at how clever we've been. Because of the magic of technology, we have discovered how to unlock these incredible oil and gas resources that we just didn't even know about before.' When I talk to people who are in the oil business, they say, 'Oh, no, no, we've known about those shale deposits, we've been drilling into and through them for decades. We've had horizontal drilling for decades; we've had fracking for decades. What we haven't had is $80-a-barrel oil reliably enough to support us going into those with those technologies.' So what really unlocked those reserves was price. Not technology, not cleverness, not ingenuity. Don't get me wrong, there's a lot of very clever, ingenious stuff going on in those drilling actions, but price was the primary driver here. Here's the thing, though: When more expensive energy comes out of the ground, it means that everything that you use to go get that energy, after a lag, becomes more expensive too. This is doubly compounded by this idea that there's less net energy coming from these finds. They use more energy to get that energy, but that more energy is more expensive. So that feedback loop is already in play here. It simply means that there's less to be used as we like elsewhere in the economy. When I look at America's apparent energy abundance I'm a little worried that it's been oversold. In particular, the dynamics of depletion that exist in both the tight shale oil and shale gas plays are very different from conventional reservoir depletion dynamics. I'm concerned that people are accustomed to the old and relatively slow reservoir depletion dynamics and are lulled by the sharp increases in output that these new reservoirs offer without really understanding just how rapidly they fall off as well. Here's an example, in the Barnett shale gas play, in one region where they drilled 9,000 wells, there was just this exponential increase in gas output. But then there was no more room for any more wells in that section, and within one single year the gas output from that region with all of those beautiful, technologically marvelous 9,000 wells had fallen by 44%. One year!... Fossil fuels. They're a one-time gift. You get to extract them and burn them exactly once. That is, whatever you choose to do with them is what gets done. They perform work for us. So we really should be focused on what sort of work we want those fossil fuels to do for us. There are, right now, about a dozen proposals to liquefy and export US natural gas, and a study just came out this past week, commissioned by the EIA, saying that that's a good idea. Wrong, it's a terrible idea. Fully 25% or more of the energy contained within the natural gas is expended just in the process of liquefying it. That's what you get to do with 25% of the units of work. You get to turn the gas into a liquid, and nothing else."
Don't Fall for the Shale Boom Hype - Chris Martenson Interview - Part II
Oilprice.com, 19 December 2012

"Wind power in Portugal had its most productive day ever last Friday churning out 85 Gigawatts per hour and accounting for 54 percent of the country’s electricity consumption that day, according to statistics released on Tuesday by national grid operator REN. More specifically, at 2.45pm, the winds were blowing and the turbines turning to generate some 3,765 Megawatts (MW) and providing the national grid with 51 percent of the electricity being consumed at that time.This contrasts with the previous Portuguese renewable wind high of 81 GW per hour and 3,702 MW achieved in November 2011. On average terms, wind power produces some 20 percent of electricity energy consumption while favourable conditions can push that up to 30 percent while November’s wind drove that all the way up to 56 percent, a peak for the year."
Wind power hits peak to cover half of all electricity production
Portugal News Online, 19 December 2012

"The International Energy Agency (IEA) says that coal will catch up with oil as the world's leading energy source by 2022. In a report, the Agency says that increased demand from India and China are fuelling the push. Natural gas offers the best hope of reducing carbon emissions in the short term the report concludes. It comes as the European Union acknowledged that it has been unable to fund a single project to capture and store CO2. Economic and population growth in developing countries are spurring the drive for coal says the IEA."
Coal to equal oil as world's top energy source within 10 years
BBC Online, 18 December 2012

"Household energy bills will be about �600 higher per year in the coming decades if the UK relies increasingly on gas, the government's climate advisers warned on Thursday. But the Committee on Climate Change found that bills would only be �100 higher than today's average dual fuel bill of about �1,300, if the country concentrated on renewable power generation, such as wind power. The committee's findings rebuff the government's argument that gas will in future provide a cheap source of electricity and heating – and the findings are based on the government's own research.... David Kennedy, the chief executive of the committee, told the Guardian: 'You hear a lot about the costs of moving to low-carbon power systems [such as wind and solar energy] but not much about the benefits. What we are showing is that a key benefit is the insurance you get against potentially very high gas prices and rising carbon prices.' He said paying �100 more by 2020 for renewables was 'a sensible insurance' against paying potentially �600 more for a reliance on gas. But he added: "We don't think the policies are in place [to take up this insurance by encouraging renewables]."
Gas 'will add more to energy bills than renewables' – government advisers
Guardian, 13 December 2012

"Whether crude costs $60 a barrel or twice that amount, the U.S. is almost free of depending on imported energy and positioned to supplant Saudi Arabia as the world’s No. 1 producer of oil. Even if U.S. benchmark West Texas Intermediate oil drops 30 percent from the current $86 a barrel, oil companies will boost production as new technologies allow them to extract crude from shale formations, said Ed Morse, the global head of commodities research at Citigroup Inc. The nation, which was last self-sufficient when Harry S. Truman was president in 1952, met 83 percent of its energy needs in the first eight months of this year, according to the Energy Department in Washington. Saudi Arabia can’t afford a decline of that magnitude after the government pledged an unprecedented $630 billion on social welfare and building projects. The kingdom, which uses Brent crude to help set export rates, couldn’t meet those commitments if prices fell 25 percent from the current $108 a barrel, according to Samuel Ciszuk, an oil consultant at KBC Energy Economics in Walton-on-Thames, England. 'U.S. shale oil producers can’t lose,' Leo Drollas, the chief economist at the London-based Centre for Global Energy Studies, which was founded by Saudi Arabia’s former oil minister, said in a Dec. 10 telephone interview. 'The Saudis really need to balance their budget at about $95. For the U.S. producers, that is more than ample.'.... While Morse says U.S. producers break even with prices of about $72 to $75 a barrel, and will keep drilling new shale wells at $60 because they’ve already hedged future output, Saudi Arabia faces different challenges. Last year, as popular uprisings toppled leaders in Tunisia, Libya and Egypt and sparked a civil war in Syria, Saudi King Abdullah promised to spend $130 billion on extra subsidies for housing and benefits as well as $500 billion for previously announced infrastructure projects. The kingdom’s population of 28.4 million is growing 2.9 percent a year, according to the Central Department of Statistics and Information. At current rates, it will need all its own oil by 2032, leaving nothing to export, Citigroup said in a Sept. 4 report. The country uses about 25 percent of its fuel production domestically, more per capita than any other industrialized nation, the report said."
Oil at $60 or $120 Doesn’t Prevent U.S. Supplanting Saudis
Bloomberg, 13 December 2012

"U.S. Sen. Richard G. Lugar, Republican leader of the Senate Foreign Relations Committee, today introduced the Liquefied Natural Gas (LNG) for NATO Act, a bill that would reduce U.S. NATO allies’ vulnerability to over-reliance on Russian and Iranian gas supplies. The bill is a product of a report Lugar also released today entitled Energy and Security from the Caspian to Europe. The report includes text of the legislation and is available at http://www.foreign.senate.gov/publications/download/energy-and-security-from-the-caspian-to-europe. 'Lack of diversity in natural gas supplies to NATO allies and friends is a critical concern for United States national security interests. For the first time, vigorous U.S. diplomacy can be coupled with allowing free trade in liquefied natural gas from the United States,' Lugar said. 'Now is the time to dramatically shift gas markets to blunt the temptation for political manipulation of supplies by Russia and Iran.' In the report commissioned by Lugar, SFRC Republican staff members present the strategic rationale for strong diplomacy to diversify natural gas in Eastern Europe via LNG exports to NATO and stronger U.S. engagement on the completion of the next stage of the so-called Southern Corridor, a strategic initiative to link oil and gas supplies from the Caspian basin to Europe. The report argues that, 'The United States with our European allies have an unprecedented opportunity to advance broad natural gas diversification. The Southern Corridor is vital for such a strategy in Central and Southeastern Europe and Turkey.' The LNG for NATO Act introduced today would amend the Natural Gas Act to place NATO allies on the same footing as all free trade partners under an automatic licensing regime for natural gas exports. Last week, the Department of Energy released its own report that found net domestic economic benefits to LNG trade under any scenario."
U.S. Sen. Richard G. Lugar introduces the Liquefied Natural Gas (LNG) for NATO Act
LNG Global, 12 December 2012

"The Association for the Study of Peak Oil recently held its annual conference down in Austin, Texas.... At the Texas conference, opposing views as to the validity of these forecasts were presented. Two speakers forecast that U.S. tight oil production would increase from essentially zero in 2005 to 4 or 4.5 million b/d by 2020 and would remain there to 2030 or beyond. It is not clear if these optimistic forecasts have really examined the extraordinarily fast decline rates of fracked wells.... This year the conference focused on two main themes – the rapid growth of tight oil production in the U.S. and where it is going; and the economics of oil – or will prices continue to allow us to grow our economy... one of several [speakers] who have actually studied the depletion rates of fracked wells, clearly has a problem with all this euphoria. There are now about 5,000 wells in North Dakota, one of the two major tight oil production 'plays' that are pumping out an average of 143 b/d for each well or some 700,000 per day. Our speaker’s well-by-well study of the first 2500 wells in the Bakken discussed at the conference, however, concluded that this production would drop by 38 percent within a year unless more wells were drilled. At these depletion rates, it will take 1,600 new wells per year just to stay even. In the most recent 12 months of drilling available some 1750 new wells came into production in the Bakken – leaving very few to increase production. If we assume that the decline characteristics are similar in other tight oil formations, then if production were ever to reach 3 million b/d, well over 1 million b/d of production would have to be replaced through new well drilling each year to maintain production. For this reason, the skeptical presenter at the Texas conference estimates that tight oil production in the U.S. will only reach 1-2 million b/d by 2020 – depending on price – as compared to the 4 million b/d forecast by the optimistic presenters. We should know which of these widely divergent forecasts will be closer to reality in the coming year. If production at the Bakken and Eagle Ford shales keep increasing rapidly over the next 12-24 months then perhaps 3 million b/d of oil production or more is possible. However, if the spectacular rate of increase we have seen in the last few years starts to slow, then a peak of tight oil production in the 1-2 million b/d range seems more likely. Another question that bears on the question of how much tight oil will be available in coming years is just how much a tight oil well costs to drill and how much oil can be recovered from each. Here the estimates are widely divergent with the pessimists talking about costs in excess of $10 million per well and breakeven costs in the area of $85 a barrel. The optimists say it costs $6 – 7 million to drill and frack a tight oil well and that breakeven costs are in the area of $40-50 a barrel. If these numbers are true, then drillers should be making lots of money; if, however, the marginal breakeven cost is close to what tight oil can be sold for, then drilling should start slowing soon."
The Peak Oil Crisis: Deep in the Heart of Texas
Fall Church News Press, 12 December 2012

"New discoveries and technological advances have increased the oil industry's ability to increase production in recent years, pushing global maximum oil production to 98 million barrels per day for longer than initially expected, Total SA's Chairman and Chief Executive Christophe de Margerie said Tuesday. Global oil production should plateau at that level for some time before dropping as reserves gradually deplete, de Margerie said during a meeting with the Anglo-American Press Association in Paris. Technological constraints led the French oil major to estimate in 2007 that the 'peak oil' production rate would be at around 95 million barrels per day, or mb/d--a conservative estimate compared with those of its competitors."
Total: Oil Production to Peak at 98M Barrels per Day
Dow Jones Newswire, 11 December 2012

"More than half of chief executives regard energy and raw material costs as a major threat to their growth prospects, according to a new survey of nearly 800 corporate bosses from around the world. Preliminary findings from PwC's Annual Global CEO Survey reveal concerns over energy costs and resource scarcity are at a three-year high, with 53 per cent of chief executives claiming the issues have overtaken sluggish consumer spending as one of the top threats to future growth, a seven percentage point increase on last year. The company said concerns over rising energy prices and raw material price shocks were most pronounced in developing economies in Asia and Africa, but high numbers of chief executives in all geographies regard environmental issues as a growing risk. For example, a quarter of European chief executives identified energy and resource costs as a problem, while a third said increasing natural disaster risks could have a negative impact on their operations.... 'With a much more challenging environment for growth, businesses can ill afford price shocks in energy and resource costs for business, so it's no surprise they are rising up the list of threats to their future growth prospects,' said Richard Gledhill, partner at PwC's sustainability and climate change division. He added that, despite the global economic slowdown and the gas boom in the US, the long-term trend for energy prices remained upwards due to 'demand from emerging markets, regulatory pressures and the scale of energy investment that's required'."
Bosses' fears over energy and resource costs hit new high
BusinessGreen, 10 December 2012

"Shale gas is not a game changer in the UK, a Government adviser has said, as a new report warns production will disrupt communities and risk water supplies. There is estimated to be trillions of barrels of gas in porous rocks underneath the UK. The controversial fuel source is forced out of the ground by 'fracking', which sees liquids pumped into rocks to push out the gas. George Osborne, the Chancellor, has said shale gas could make a “substantial contribution” to UK gas supplies from the 2020s. The Government is set to give the green light to fracking within days. Boris Johnson, the Mayor of London says the UK should 'get fracking'. ... However David Kennedy, Chief Executive of the Committee on Climate Change, voiced a note of caution. Even at the most optimistic estimates, he said shale gas will only provide 10 per cent of the UK’s current gas demand. 'It is not going to be a game changer,' he said. 'There may be enough shale gas to contribute to heating our homes but let’s be clear, it is not going to drive prices down and it is carbon intensive.' The British Geological Survey estimate there are 5.2 trillion cubic feet (150 billion cubic metres) of shale gas under the UK, 50 per cent more than conventional gas reserves and enough to power Britain for decades. However it is not clear how much of that gas will actually be accessible. More accurate estimates are due to be released in the new year. Most of the accessible shale gas is around Blackpool but it is also under the home counties."
Shale gas is not a game changer
Telegraph, 10 December 2012

"The City has put the UK on triple-dip recession alert after news that falling factory and North Sea production have sent the output of industry plunging to its lowest level in 20 years... North Sea production has fallen by almost 50% in the past three years and saw a fresh fall in October."
UK on triple-dip recession alert after industrial slowdown
Guardian, 7 December 2012

"North Sea oil and gas production could confound expectations by rising significantly over the next few years - but may fall short of government hopes in the longer-term, a new study has claimed. With high oil prices of at least $90 per barrel, output from the UK could rise to 1.4m barrels per day (bpd) in 2017 as large new fields are developed, the University of Aberdeen study found. Last year production fell more than 17pc to 1.04mpbd. Gas production could also increase, until 2015, but would show a 'quite brisk' decline rate over the rest of the decade before the development of more fields would help to moderate the fall, the report by Professor Alexander Kemp and Linda Stephen said. The Department of Energy and Climate Change (DECC) has said it expects oil and gas production declines to continue, albeit at a slower rate than in 2011. Despite the University of Aberdeen’s short-term bullishness, the report forecast that total oil and gas production over the next three decades was likely to come in at 16.8bn barrels of oil equivalent (boe), below DECC’s central estimate of 20bn boe and top estimate of 33bn boe. Those forecasts were despite factoring in the 'substantial' effect of tax breaks already announced by the Government over the past year, which were likely to be felt in the long term because they mostly affected expensive, difficult-to-exploit fields."
North Sea oil production 'could rise in short-term'
Telegraph, 5 December 2012

"George Osborne on Wednesday fired the starting gun on a new 'dash for gas' that will partly use tax breaks for shale production, though the government admitted it did not know whether future gas prices would rise or fall. The chancellor used the autumn statement on the country's finances to unveil a long-awaited but highly controversial gas generation strategy that critics believe will lock Britain in to a high-carbon future. 'We are consulting on new tax incentives for shale gas and announcing the creation of a single office for unconventional gas so that regulation is safe but simple,' Osborne told the House of Commons. With his more carbon-conscious energy secretary, Ed Davey, at climate change talks in Doha, Osborne said Britain should not miss out on the opportunities being enjoyed in the US where gas prices have plunged due to shale gas produced by horizontal drilling and 'fracking', where toxic chemicals are used to break up rock formations. The move triggered an angry reaction from environmental groups and businesses which believe their best interests are served by the UK building a more sustainable future using wind and other low-carbon power sources. 'The chancellor is misleading people to position shale gas as the answer to UK's energy woes. The impact of fracking in the US is irrelevant because energy experts say the US shale gas boom cannot be replicated here,' said Joss Garman, political director at Greenpeace. 'Over a third of the UK's economic growth in the last year came from the low-carbon sector. By ignoring this and instead offering incentives to the gas industry, George Osborne is undermining crucial green growth.'"
Gas strategy unveiled by George Osborne
Guardian, 5 December 2012

"While China's oil dealings with countries like Iran and Sudan receive global attention, its budding relationship with Iraq may turn out to be the most important. A lot of attention has been paid in recent years to energy-hungry China’s billion-dollar bids on oil fields in Canada and the Asian giant’s reliance on oil from countries like Iran and Sudan to fuel its growing economy. But its growing interest in another major oil producer has gone largely unnoticed, and if current trends continue, that Middle Eastern country could become the world’s next 'oil superpower,' with China, not the West, acting as both Iraq’s main partner and top beneficiary of its rich resources in what some now call the B&B trade axis. In the past decade or so, China waited patiently on the sidelines while the U.S. and its allies coped with Iraq’s new, and often times messy internal dynamics that followed the 2003 overthrow of Saddam Hussein by a U.S.-led coalition. China reemerged in 2008, however, to sign post-Saddam Iraq’s first major oil deal with a foreign country. While the majority of Iraqi oil deals in the post-Saddam era were awarded to Western firms, the Western shift to a more amenable and independent oil-rich Kurdish region in the north amid disenchantment with southern Iraq is creating a vacuum that China has found hard to resist. Even more so than Russia, a traditional player in Iraq during the Soviet era, China has the capital that Baghdad is desperately seeking to build its oil and gas infrastructure, while Iraq has crude potentials that are alluring to a China that seeks to diversify its energy sources. Already, Chinese oil firms have taken an active interest in acquiring deals that had been awarded to Western firms in 2009-2010, which the latter are now relinquishing so they can focus on alternative oil fields in Kurdistan. Although talks between China and Iraq go back to at least 1997, major investments have only occurred in recent years, with Chinese National Petroleum Company (CNPC) focusing on the 17 billion barrel Rumaila field — Iraq’s largest — and Halfaya, both in the south. As of 2010, China had made five major oil investments in Iraq since the overthrow of Saddam Hussein, one of which was in Kurdistan."
China’s Oil Quest Comes to Iraq
The Diplomat, 2 December 2012

"On 12 November the IEA’s World Energy Outlook report for 2012 (WEO-2012) was presented by the chief economist of that organisation, Dr Fatih Birol. When he did so there was one idea that the journalists in the audience latched on to – that by 2020 the USA would become the world’s largest oil producer. The USA would even produce more oil than Saudi Arabia! The New York Times led with the news, 'U.S. to Be World’s Top Oil Producer in 5 Years, Report Says' and in their article they wrote that, 'The United States will overtake Saudi Arabia as the world’s leading oil producer by about 2017 and will become a net oil exporter by 2030, the International Energy Agency said Monday.' Of course, I wondered if these were Fatih Birol’s actual words. On 23 November Dr Birol was invited to Stockholm by Sweden’s Minister for Energy Anna-Karin Hatt to present WEO-2012. Representatives from the diplomatic corps in Stockholm, from industry, from academia and others were invited to attend the presentation.... The presentation was given at KTH, the Royal Institute of Technology, and is now accessible via their 'Video Library'. To do so, go to http://www.kth.se/ece/stabsfunktioner/kth-medieproduktion/showroom/kth-live-1.318500 and select 'Live Show [livestream] Fri'. The presentation is 1 hour, 24 minutes long and begins with 10 minutes where there is no talking. Dr Birol’s presentation begins at the 18th minute. Those magical words on the USA’s future can be heard at 31 minutes into the video: 'As the result of a new technology developed there [the USA] we have seen a growth coming from unconventional oil replacing the decline in the conventional oil and we expect as a result of this development, the United States in five years of time, will overtake Saudi Arabia as the largest oil producer of the world, a development that was difficult to imagine a few years ago.' That the USA would become self-sufficient and able to export oil in the future was not stated. Instead, Dr Birol gave the USA’s import needs as approximately 30% of consumption in 2035.... [From the report] We see that conventional oil production continues to decline but that unconventional oil production, estimated at around 2 million barrel of oil equivalents per day (Mboe/d) in 2010, will continue to increase. Together they give an estimated total oil production of over 10 Mboe/d in 2020. It is then that the USA will reportedly be producing more oil than Saudi Arabia. Dr Birol mentions nothing about 2035.... Eight years ago, when I began to criticise the WEO projections, WEO-2004 predicted oil production in Saudi Arabia of 22.5 Mb/d in 2025. Now WEO-2012 paints a completely different picture. In 2011 Saudi oil production was 11.1 Mb/d and the IEA now predicts this will decline to 10.6 Mb/d by 2020 before growing to 10.8 Mb/d in 2025! Then production will continue to grow to reach 12.3 Mb/d by 2035. In the criticism that I advanced in 2004 I said that 22.5 Mb/d for Saudi Arabia in 2025 was completely unrealistic. The IEA’s current prediction of 10.8 Mb/d in 2025 shows that I was correct. In the graph that Dr Birol presented on the USA’s future oil production (see above and note that it gives production quantities in barrels of oil equivalent, not simple volumetric barrels) it is difficult to determine the exact production but with help of a computer program that can determine quantities from graphical figures I obtained a value of 10.4 Mboe/d in 2025 which is not more than they give for Saudi Arabia in the same year (10.8 Mboe/d). In 2035 Saudi Arabia is definitely the world’s largest oil producer with 12.3 Mb/d of production.... Now, referring to WEO-2012 and Figure 3.18 of that report (below) we get a different picture of past and future oil production in the USA. Here, oil production is 11 Mb/d in 2020 and thus greater than in Saudi Arabia (predicted by the IEA to be 10.6 Mb/d in 2020). Note that the slow decline in (conventional) crude oil production shown requires that new oilfields are found that can provide 40% of crude oil production in 2035.... The USA’s Energy Information Administration (EIA) has also made predictions of future US oil production. In its report, 'Annual Energy Outlook 2012 with Projections to 2035' released in June 2012 the EIA also included biofuels as part of oil production with volumes of 1.0 Mb/d in 2010, 1.1 Mb/d in 2020 and 1.7 Mb/d in 2035. These should be subtracted if the EIA figures for oil production are to be compared with those of the IEA and, if we do so, we see that the EIA predicts oil production at 10.0 Mb/d for 2020 (compared with the 11 Mb/d of the IEA). If we also subtract 'xTL' (second generation biodiesel) and coal-to-liquids (CTL) production from the EIA’s 2035 production figure we get 10.2 Mb/d in that year (compared with 9 Mb/d from the IEA). Thus we can conclude that the IEA believes that shale oil will attain a higher peak of production than predicted by the EIA but that this production will also decline faster than predicted by the EIA. The ultimate result is that the EIA and IEA predict similar cumulative volumes of shale oil produced by 2035.... For the 'Lower 48 offshore' it is worthwhile citing a comment by the EIA, 'Growth in lower 48 onshore crude oil production comes primarily from the continued development of tight oil resources, mostly from the Bakken and Eagle Ford formations. Tight oil production surpasses 1.3 million barrels per day in 2027 and then declines to about 1.2 million barrels per day in 2035 as 'sweet spots' are depleted'. It is also remarkable that the IEA has a figure for 'light tight' oil production that is twice as large as that given by the EIA.... it is interesting that the EIA mentions 'sweet spots' and points out that oil production from the sweet spot area of the Bakken shale in Montana reached a maximal production of 300,000 barrels per day in the third quarter of 2006.... The New York Times writes that the USA, 'will become a net oil exporter by 2030'. There is no evidence for this in WEO-2012. Instead, the IEA shows in Figure 2.17 (below) that very significant improvements in the efficiency of oil use are required for the USA to reduce its import requirements to somewhat over 3 Mb/d by 2020. We also see that 'Increased oil supply' (from increased domestic production) has its greatest significance between 2020 and 2030.... The IEA also understands that the 'validity of the assumptions' is important for the accuracy of its scenarios. However, when the IEA discusses uncertainties none of them are related to the physical conditions of the resources to be produced. We at Uppsala University have specifically studied these physical conditions and we can point on a number of important factors..... The critical sentence from WEO 2012 is the following: 'In 2011, 12 billion barrels were discovered, equal to 40% of the oil produced during the year.' Since we are using 30 billion barrels per year we see as a fact that the available resources are shrinking.... The next doubtful analysis that is reported in WEO-2012 is the R/P ratio. 'The global reserves-to-production ratio, which is sometimes used as an indicator of future production potential, has increased steadily in recent years, to around 55 years at end-2011.' The signal to the reader is that you don’t need to worry for the next 50 years. Everyone in the oil industry knows that the reported reserves according to the Oil & Gas Journal can never be produced during the next 50 years. All oilfields in the world show increasing production to a maximum before they begin to decline. The most dramatic decline in production that any oilfield has shown is that seen for the super-giant Cantarell. Once Cantarell was the oilfield with the world’s second-highest rate of production but its production has been declining extremely rapidly in recent years; 'it is currently producing only about 400 kb/d, down from a peak above 2.1 mb/d in 2003-2004'. A statistical analysis made at Uppsala University shows that, generally, the peak production of giant oilfields is reached before 50% of their oil is produced. My recommendation is that IEA stops reporting the very unscientific R/P ratio number....The majority of the oil we consume is crude oil and this statement from WEO-2012 should be noted by all: 'Crude oil output from those fields that were in production in 2011 falls by close to two-thirds, to only 26 mb/d by 2035 (Figure 3.15). Thus, the projected production of 65 mb/d in 2035 requires almost 40 mb/d of new capacity to be added over the projection period. Of this capacity, 26 mb/d, or 66%, comes from discovered fields yet to be developed, most of which are in OPEC countries, and the remaining 13 mb/d from fields that have yet to be found, mainly in non-OPEC countries.' .... In WEO-2010 the production from fields yet to be found was set to 19 Mb/d in 2030 and in our publication 'The Peak of the Oil Age' we showed that this was not attainable with the discovery volumes predicted by the IEA. Our reanalysis of the IEA data produced a number of 9 Mb/d. Adding 5 more years beyond 2030 should increase that number and the fact that the IEA now has a lower number than in WEO-2010 shows that their calculations are becoming more realistic in that respect. The rate of production decline stated by the IEA for the fields that were in production in 2011 is also what we have reported in a publication but the rate of oil production from fields yet to be developed is still too high, the IEA’s 26 Mb/d should probably be lower by 10 Mb/d. In 2004 when I for the first time said that the WEO-2004 was wrong they were stating that crude oil production in 2030 would be 108 Mb/d. The IEA has lowered the scenario output for 2030 by 42 Mb/d down to 66 Mb/d. That is a change of 40% in 8 years!"
An analysis of World Energy Outlook 2012 by Professor Kjell Aleklett
ASPO International, 29 November 2012

"Ed Davey, the energy and climate change secretary, has warned supporters of shale gas that it may take many years for substantial exploration in the UK, and predicted it would not lead to an era of cheap gas. Davey was speaking to the Guardian before the publication of the energy bill on Thursday and promised he had weapons he could use if there was a danger his policies were locking too much gas into the energy mix. It is expected that the chancellor, George Osborne, will publish a strategy for gas alongside his autumn statement next week and, at the same time, Davey will give permission for the restart of suspended exploration of shale. The suspension was imposed last year due to concerns about the fracking technology used to exploit it by the company Cuadrilla. Davey said: 'I have never been anti-shale gas. I think shale gas has a real role to play, not least in energy security if we can get shale gas in an environmentally safe way and in a way that is publicly acceptable. 'The thing about shale gas is people over-promise about what it will do – they say we have got huge supplies ... but the truth is that nobody knows. Even if they can estimate the reserves in the UK, you have to lay across that what is technically recoverable and what is economically recoverable. I am optimistic. I hope we will be able to produce a lot, but in terms of big production of shale gas it is going to take years. It is not going to happen tomorrow. Sometimes you listen to some of the commentators and they seem to think you can just turn shale gas on.' He claimed advocates of shale gas, such as the Spectator editor, Fraser Nelson, were unrealistic about what shale might do to prices: 'There are people like Fraser Nelson who think we can get cheap gas and cheap energy here only if we had shale gas tomorrow. Not only will we not get shale gas tomorrow, but it is very unclear what the impact on the gas and energy price will be. The ideas that we can replicate the north American experience here is really not proven. Many people have huge doubts about that even globally. It is said there is shale in Ukraine, China, Algeria and Argentina and no doubt other places, but even if we do mange to get all that, many people – gas market analysts, international energy agencies – say it is still not going to produce cheap energy.' Davey predicted 'the demand effect is going to swamp the supply effect even though there is a lot of gas being found.'"
Energy secretary says shale exploration won't lead to era of cheap gas
Guardian, 28 November 2012

"In the IEA WEO, tight oil production is expected to reach over 3.2 mb/d by 2025 in their New Policies Scenario, implying an increase of around 2.2 mb/d over current levels. According to the EIA’s most recent data (in the October Monthly Energy Review), the U.S. produced an average 6.225 mb/d of crude oil plus condensates (natural gas liquids which are naturally associated and produced along with the crude) in the first seven months of 2012, including tight oil. Over the same period, Saudi Arabia produced 9.926 mb/d of crude plus condensates. Adding the anticipated 2.2 mb/d increase in U.S. tight oil would bring the U.S. crude plus condensate total to 8.425 mb/d, which is less than Saudi Arabia’s current production. Under the IEA’s forecast that Saudi Arabia’s production will be roughly the same in 2025 as it is today, the U.S. will not overtake it in oil production. So how did the IEA come up with the figures suggesting that the U.S. would overtake Saudi Arabia? By including stuff that is not oil, mainly natural gas liquids (NGLs). Including these additional liquids would bring the U.S. total to 11.1 mb/d in 2020, versus Saudi Arabia’s 10.6 mb/d.... This also implies a reduced outlook for Saudi production, which the EIA projected last year would rise to 13.9 mb/d by 2025. Even if this optimistic scenario pans out for the U.S., it’s hardly good news from a global standpoint.... To complete the picture of U.S. energy self-sufficiency, IEA assumes that oil demand can be cut by 5 mb/d, a 26 percent drop from the current consumption level of 19 mb/d. This would reduce net U.S. oil imports to 3.4 mb/d."
U.S. will not surpass Saudi Arabia’s oil production by 2020
Smart Planet, 28 November 2012

"Global demand for crude is growing so strongly that the world needs 'every single drop of Canadian oil,' the International Energy Agency’s chief economist said on Monday, playing down fears that growing U.S. production could hit Canadian exports. Fatih Birol said that even if U.S. output rises as much as the agency expects, the country would still need to import four million barrels a day and that Canada is an obvious supplier. In its annual forecast this month, the IEA said the United States could come close to energy self-sufficiency by 2035, largely because of the boom in development of unconventional light oil resources. Canada is the single largest supplier of energy to the United States, sending around 2 million barrels a day to its southern neighbor....In its forecast, the IEA said oil sands output was expected to nearly triple to 4.3 million barrels a day by 2035, assuming environmental concerns about development can be addressed."
High demand means world needs all of Canada’s oil: IEA
Reuters, 28 November 2012

"An incredible new material made from common dirt can take heat and directly convert it into an electrical current, a study claims.Researchers say they produced the groundbreaking substance using commonly found materials and that it can be cheaply manufactured. They believe the it could spark a revolution in eco-friendly power generation by taking waste heat from a range of common sources and converting it directly to electricity. So-called thermoelectric materials are able to directly convert differences in temperature to electrical voltage, and vice versa. This are potentially important, scientists say, because the vast majority of heat that is generated from, for example, a car engine, is lost through the tail pipe. It's the thermoelectric material's job to take that heat and turn it into something useful, like electricity. Such materials have been made before, but previous examples have been derived from rare and sometimes toxic elements, often by way of expensive synthesis procedures. Donald Morelli, a professor of chemical engineering and materials science at Michigan State University, led the team which developed the material based on natural minerals known as tetrahedrites. 'What we've managed to do is synthesize some compounds that have the same composition as natural minerals,' said Professor Morelli, director of MSU's Centre for Revolutionary Materials for Solid State Energy Conversion. 'The mineral family that they mimic is one of the most abundant minerals of this type on Earth – tetrahedrites. By modifying its composition in a very small way, we produced highly efficient thermoelectric materials.'... The researchers expect this discovery could pave the way to many new, low-cost thermoelectric generation opportunities. Potential applications include waste heat recovery from industrial power plants, conversion of vehicle exhaust gas heat into electricity, and generation of electricity in home-heating furnaces. The research, supported by the U.S. Department of Energy, was published in the online journal Advanced Energy Materials."
Cheap material made from DIRT can convert heat directly to electricity
Mail, 28 November 2012

"China is ratcheting up its fracking ambitions with virtually no regard for groundwater protection or other environmental safety measures, according to a new investigation by the independent publication Caixin. The report points to an 24 October white paper on energy development released by China's top cabinet which 'calls for ramping up the industry and pumping 6.5 billion cubic meters of natural gas from underground shale formations by 2015.' 'The model for China's anticipated success is the US shale gas sector,' the article states. 'Geologists estimate the nation's recoverable reserves at about 25 trillion cubic meters, on par with the United States.' Fracking has particular appeal in China because it provides an alternative to burning coal, which currently supplies about 70 percent of the nation's consumed energy. Because natural gas can generate electricity at half the greenhouse gas emissions of coal, some see it as a way to reduce China's carbon footprint."
China planning 'huge fracking industry'
Guardian, 27 November 2012

"The most common misconception about peak oil is that it means the world is running out of oil. Many articles that seek to debunk the notion of peak oil start with that premise, and then they proceed to tear down that straw man. Peak oil is about flow rates, and the overall flow rate will begin to decline while there is still a lot of oil left in the ground. Another misconception is that peak oil beliefs are homogeneous. The beliefs among people who are concerned about the impacts of peak oil cover a wide span. There are those who believe that a peak is imminent, to be followed by a catastrophic decline....... A more mainstream peak oil position is that the real threat is much higher oil prices, leading to stagnant economies.... The points of contention are the timing, the steepness of the decline, the impact on the global economy and the ability of other energy sources to fill the supply gap. Some believe we will smoothly transition to alternatives, and some people believe peak oil will be catastrophic."
Peak Oil: Misconceptions and Realities
Investing Daily, 26 November 2012

"The government has published details of its long-awaited Energy Bill, designed to keep lights on and emissions down. It will allow energy firms to charge households an extra �7.6bn until 2020, which will go towards the development of low-carbon electricity generation. A decision about setting carbon emission targets for 2030 has been delayed until 2016, after the election. Fears have been expressed about the impact on bills and whether this delay will put off investors in new plants. Announcing the Bill, the government said: 'With a fifth of the UK's electricity generating capacity due to close this decade, reforms are needed to provide certainty to investors to bring forward �110 billion investment in new infrastructure to keep the lights on and continue the shift to a diverse, low carbon economy as cheaply as possible'. The independent advisory committee on climate change estimates the �7.6bn the plan allows for will add about �110 to the average household energy bill in 2020. The Department for Energy and Climate Change (DECC) has a lower estimate of �95 - or a rise of 7% - although some analysts think it would be more. DECC believes the clean energy and efficiency measures will save on bills in the long run. The Energy and Climate Change Secretary, Ed Davey, told the BBC that the measures would eventually save about the same amount. Environmentalists condemned the bill, saying the lack of a 2030 emissions target would make it very hard to meet the UK's law on climate change.... Crudely speaking, the bill has been a battleground between Chancellor George Osborne, who favours gas-powered generation, and the Liberal Democrats, who want clean energy. The chancellor is adamant that gas will help keep down power bills in the future. Labour said this was a 'humiliating failure' for the Lib Dems, who wanted gas banished from the electricity system almost entirely by 2030 to reduce CO2 emissions in line with the Climate Change Act, although gas will be needed as a back-up. The Lib Dems believe gas prices are too volatile to be a reliable source of energy. The International Energy Agency has forecast natural gas prices to rise by 40% by 2020, even with an influx of cheap shale gas....The conservative chairman of the Commons' Energy Select Committee, Tim Yeo, said the lack of a target was a 'significant' omission which would add to uncertainty for energy firms deciding whether to spend billions of pounds on building new power plants over the next few decades."
Energy Bill: Households to fund �7.6bn green investment
BBC Online, 23 November 2012

"Saudi Arabia plans to produce electricity from its first nuclear plant by 2020 and begin operating a solar farm by 2015, said an official at the agency developing the country’s renewable energy program. The country will start work on its first solar-power facility early next year, which may take as much as 24 months to complete, Khalid al-Suliman, vice president at the King Abdullah City for Atomic and Renewable Energy, told the state-owned Saudi Press Agency.... Saudi Arabia, which is tapping renewable energy as a way to free more crude oil for export, is planning for $109 billion in investment to create a solar industry that generates a third of the nation’s electricity by 2032. The world’s largest crude oil exporter targets 41,000 megawatts of solar capacity within two decades, according to the plan that was announced in May. Al-Suliman said 16,000 megawatt of that will be generated from photovoltaic panels. The rest comes from solar-thermal technology, which use mirrors to focus the sun’s rays on heating fluids that turns a power turbine."
Saudi Arabia Plans $109 Billion Boost for Solar Power
Bloomberg, 22 November 2012

"Turkish Premier Recep Tayyip Erdogan accused the Iraqi government on Wednesday of trying to drag the country into civil war, amid rising tensions between Baghdad and Iraqi Kurdish forces.... His comments came after Iraqi Prime Minister Nuri al-Maliki issued a warning to Kurdistan Regional Government's (KRG) forces in not to advance towards government troop positions following deadly clashes the area last week. Relations between Baghdad and KRG have been fraught since the establishment of a new military command covering disputed territory, and over various other long-running disputes including how to share the region's oil wealth. Iraq and Turkey have been at odds over several issues, including the Syrian conflict, the Turkish military presence in Iraq to pursue Kurdish militants, and the oil dispute. The Baghdad-KRG oil dispute has an impact on Turkey as it has a pipeline handling Kurdish oil and is also a major customer. Earlier this month, Iraq blocked Turkish national energy firm TPAO from bidding for an oil exploration contract, a decision Erdogan said was not 'smart business,' and accused Baghdad of acting 'childishly'."
Turkey PM accuses Baghdad of dragging Iraq to civil war
Agence France Presse, 21 November 2012

"More than 1,000 coal-fired power plants are being planned worldwide, new research has revealed. The huge planned expansion comes despite warnings from politicians, scientists and campaigners that the planet's fast-rising carbon emissions must peak within a few years if runaway climate change is to be avoided and that fossil fuel assets risk becoming worthless if international action on global warming moves forward. Coal plants are the most polluting of all power stations and the World Resources Institute (WRI) identified 1,200 coal plants in planning across 59 countries, with about three-quarters in China and India. The capacity of the new plants add up to 1,400GW to global greenhouse gas emissions, the equivalent of adding another China – the world's biggest emitter. India is planning 455 new plants compared to 363 in China, which is seeing a slowdown in its coal investments after a vast building programme in the past decade."
More than 1,000 new coal plants planned worldwide, figures show
Guardian, 20 November 2012

"The International Energy Agency in Paris dropped a bombshell last week when its 2012 World Energy Outlook forecast that US tight (shale) oil production would continue to grow more rapidly than expected for the rest of the decade.... Oil production from the Bakken Shale in North Dakota is currently about 660,000 b/d and production from Eagle Ford fields in Texas is about 600,000 and growing. There is talk that the two fields will produce 2 million b/d in the next year or so. The IEA seems to be saying that tight oil production in the US will continue to grow and peak at about 5 million b/d circa 2020..... demand is currently increasing at about 750,000 b/d each year so that eight years from now an additional 6 million b/d of new production will be required worldwide plus the 3 or 4 million b/d that will be needed each year to replace the depletion from existing fields. The first problem with the IEA’s estimate is the rapid depletion of fracked oil wells. Despite limited experience with this relatively new technology, some are calculating that production from many of these wells is dropping by over 40 percent or more a year. We do know that the average daily production from North Dakota’s 4630 producing wells is currently 143 b/d. If we assume that the Bakken oil fields are to produce 2.5 million b/d by the end of the decade then it will need some 18,000 wells each producing the average of 140 b/d. While this is a not an inconceivable number, when one takes into account that most if not all of these wells will have be redrilled twice in the next 8 years the number becomes improbable. We shall have to drill more and more wells just to maintain the same level of production. Another caveat to the optimism over tight oil is the very high cost of the horizontal drilling and fracking of these wells which may run three or four times that of a conventional well. Some people put the cost of producing a barrel of oil from the Bakken at $80-90, which is just about where oil is currently selling in the region. Should the global economy continue to contract, the selling price of fracked oil could well fall below the cost of production, bringing a marked slowdown to further drilling."
Peak oil review
ASPO-USA, 19 November 2012

"The US as the new Saudi Arabia, energy insecurity for most of the rest of the world, and climate chaos for everyone – such were the headline points of the latest World Energy Outlook from the International Energy Agency. Consider these assertions:

Crude oil production peaked in 2008 at 70 mb/d, and will never return to that level;
US production of tight oil (shale oil) will peak at 3.2 mb/d by 2025, with a minor contribution from the rest of the world;
Production of natural gas liquids (primarily the gases ethane, propane and butane, always counted as liquids) will rise from 12 mb/d today to 18 mb/d by 2035;
Remaining recoverable resources are now 5900 billion barrels, including tight oil and oil retorted from shale by heating;
The US will be a net oil exporter by 2030, producing 11.1 million b/d in 2020 and 10.2 mb/d in 2030. Note that current US demand is 18.8 mb/d

So conventional oil production has peaked, some 4-5 million b/d of tight oil may be possible adding some 5% to global oil production, most of the rise in production isn’t exactly liquid, huge amounts of unconventional carbon can now be technically extracted and burned, and the US is expected to export oil by, we presume, slashing its consumption."
ODAC Newsletter, 16 November 2012

"Oil headed for the fourth weekly decline in five in New York as signs of a slowing economy in the U.S., the world’s biggest crude user, countered concern that tension in the Middle East will disrupt supplies. West Texas Intermediate futures were little changed after falling 1 percent yesterday as a report showed U.S. unemployment claims climbed to the highest level since April 2011. Crude stockpiles grew last week to the highest since July as output rose to an 18-year high, according to the Energy Department. Oil pared losses after Israel said it’s ready to escalate military operations against Gaza. 'Supplies are overwhelming while demand is non-existent,'said Andrey Kryuchenkov, a London-based analyst at VTB Capital who predicts WTI may slip to $84 a barrel this month.'Geopolitical risks are hopefully going to subside, and so ultimately macroeconomic and demand concerns will still dominate the agenda.' WTI for December delivery, which expires today, slipped 15 cents to $85.30 a barrel in electronic trading on the New York Mercantile Exchange at 12:28 p.m. London time. The January contract dropped 14 cents to $85.73. The front-month future dropped 87 cents yesterday to $85.45 and is down 0.9 percent this week. Prices have retreated 14 percent this year. Brent for January settlement on the London-based ICE Futures Europe exchange rose 28 cents to $108.27 a barrel. The front-month European benchmark grade was at premium of $22.55 to the corresponding WTI contract, from $25.53 yesterday."
Oil Heads for Weekly Decline as Economy Counters Mideast Tension
Bloomberg, 16 November 2012

"After the fall of the Berlin Wall, the rise of China and the Arab spring, American energy independence looks likely to trigger the next great geopolitical shift in the modern world. US reliance on the Gulf for its oil – and its consequent need to maintain a dominant presence in the Middle East to keep the oil flowing – has been one of the constants of the post-1945 status quo. That could be turned on its head. It's been dubbed 'the homecoming'. After decades in which the hollowing out of American manufacturing has been chronicled in Bruce Springsteen's blue-collar laments, cheap energy is being seen as the dawn of a new golden age for the world's biggest economy. The reason is simple. The US is the home to vast shale oil and gas deposits made commercially viable by improvements to a 200-year-old technique called fracking and by the relentlessly high cost of crude. Exploitation of fields in Appalachian states such as West Virginia and Pennsylvania, and further west in North Dakota, have transformed the US's energy outlook pretty much overnight. Professor Dieter Helm, an energy expert at Oxford University, said: 'In the US, shale gas didn't exist in 2004. Now it represents 30% of the market.' If all the known shale gas resources were developed to their commercial potential in North America and other new fields, production could more than quadruple over the next two decades, and account for more than half of US natural gas production by the early 2030s, according to recent study by the Harvard Kennedy School Belfer Centre."
How cheap energy from shale will reshape America's role in the world
Guardian, 15 November 2012

"A paper published recently by the IMF gives us some insight into how oil prices and availability might affect the global economy in the next decade. The paper, entitled Oil and the World Economy: Some Possible Futures, starts with the statistic that global oil production grew by 1.8 percent annually from 1981 to 2005, then stagnated with production remaining essentially flat thereafter. In the last seven years what is called global 'growth' in 'oil' production has come largely from substitutes for crude such as natural gas liquids, tar sands, and biofuels. While these substitutes do have important uses, they do not have the versatility of conventional oil and in the long run, falling supplies of normal crude can and probably are acting as a brake on economic growth. There are other, non-liquid, substitutes for oil such as coal, natural gas and even nuclear power, but to implement these as a major source of transportation energy would be a long, expensive and in some cases an impossible task. Airplanes won’t run on coal very well without a lot of expensive preprocessing. Global oil production has been on a plateau, at historically high prices, for so long now that it seems unlikely that it will ever resume sustained growth at the rates we saw in the decades prior to 2005. The only possible outcomes are prolonged stagnation, which some like to call the 'bumpy plateau', or decline of global production. The rate of decline, of course, will be critical to the future of the global economy and is the core of the IMF’s paper. With the world producing and burning some 31 billion barrels of oil, or some combustible liquid we call 'oil,' each year, and at a relatively cheap average price to boot, our stagnant plateau is unlikely to continue much longer. Most people who are willing to hazard informed guesses as to when global oil production will start down are saying that the decline will begin somewhere between 2015 and 2020. There has been considerable discussion in the mainstream media recently about the growing supply of 'shale' oil from North Dakota and Texas, more properly termed 'tight oil,' which it is claimed will soon make America the world’s biggest oil producer – free from the tyranny of imported oil. Anyone digging into this issue will find that 'tight' oil will turn out to be another bubble. Tight oil wells cost several times more to drill and frack in comparison with conventional land or shallow water wells and have an average annual depletion rate on the order of 40 percent a year in comparison with 4 or 5 percent for conventional wells. In recent months, however, thanks to an all out drilling effort, the oil coming out of the fracked fields in North Dakota and Texas has been on the order of 950,000 b/d and has been increasing at the rate of about 350,000 barrels a day (b/d) each year. This has pushed up U.S. domestic oil production to the highest level in nearly 30 years – no wonder the press is bursting with optimism for America’s future. The true story, however, is not as good as it seems. North Dakota currently has some 4,500 producing wells pumping out an average of only 144 barrels a day per well. A good conventional well will produce 3-5,000 b/d and those big deep water platforms are designed to produce 100-200,000 b/d from multiple well holes. To produce the 8 million additional b/d that the U.S. would need to obtain 'energy independence' it would take 60,000 wells pumping out 144 b/d. These and the 6,000 or so fracked wells we already have would have to be redrilled every 3 or 4 years to maintain production. This is clearly impossible as the best prospects have already been drilled and from here on we are likely to see less productive tight (fracked) oil wells. If the price of crude in the mid-west, currently about $85 a barrel, drops another $10 or so a barrel it will be selling for less that the marginal cost of production if it isn’t already in some cases. When the value of the produced oil gets too low, the sinking of new wells will decline rapidly as it has for shale gas drilling. A good estimate would be that the 'shale oil bubble,' while adding to America’s current production, only has another year or two before it begins to fizzle."
The Peak Oil Crisis: Alternative Futures
Falls Church News-Press, 14 November 2012

".... a report Monday from the International Energy Agency that predicts in eight years the U.S. will surpass Saudi Arabia as the world's largest oil producer. The prediction is a stunning testament to energy companies' success in extracting oil that was previously unrecoverable, but it's the one bright spot in a report that otherwise requires highly selective reading to be called good news. One paragraph above the prediction about the U.S. and Saudi, the IEA lays out a far more disturbing scenario, highlighted in boldface type: 'The world is still failing to put the global energy system onto a more sustainable path.' It goes on to outline a future in which consumer demand continues to rise faster than production as nations fight for ever bigger pieces of the same pie. Even its projection of U.S. oil dominance has an important qualifier. The IEA estimates the switch would happen 'around 2020' but noted that the U.S. would remain the biggest oil producer only 'until the mid-2020s.' Our reign as the world's oil king, if it ever happens, probably won't last more than five years. Some energy company executives already are questioning the forecast. David Roberts, the chief executive officer of Marathon Oil, which has extensive domestic drilling operations, told investors on a webcast Tuesday that IEA's findings may be too optimistic. 'I don't see it, in terms of this country matching Saudi Arabia,' he said. What's more, being the biggest producer would mean little to U.S. consumers. We won't be paying less at the pump because, as the IEA notes, 'no country is an energy 'island' and prices for all fuel sources are increasingly global. 'Policy makers looking for simultaneous progress toward energy security, economic and environmental objectives are facing increasingly complex - and sometimes contradictory - choices,' the IEA wrote. Taken as a whole, the report outlines a world in which we face a shrinking supply of oil, rising prices and a growing toll on the environment. While U.S. production has been rising, topping 2004 levels, it remains well below our peak production of the early 1970s. Much of the increase is coming from hydraulic fracturing, an expensive technique that results in wells from which initial production declines more quickly than conventional ones. 'It is critically important to understand that the overall rate of decline in oil production from existing U.S. wellbores is going up, as an increasing percentage of U.S. crude oil production comes from shale oil plays, which have a very high decline rate,' said Jeffrey Brown, an independent petroleum geologist who studies and writes about production data. The result is that oil producers have to drill more and more wells just to stay in place. So far, we've been able to drill more domestically in part because higher oil prices have made shale plays profitable. Even if we assume that we can maintain and accelerate the pace, even if we are miraculously exporting oil by 2030, it probably won't make gasoline any cheaper. That's because the world's available net exports will remain little changed, Brown said. We may reorder the ranks of the producers, but it will do little to change the results in the global market. While conservation and efficiency in the U.S. is expected to reduce oil consumption, it will be offset by increases from emerging economies such as China and India, which in 2005 imported one barrel of oil for every 8.9 barrels of total exports available. By last year, that number had fallen to 5.3 barrels. If that trend continues, in 18 years, those two countries alone will consume all oil available for export in the world, Brown said. In other words, who produces the most oil will have less to do with what we pay at the pump than who imports the most oil. 'We're not out of the woods,' said Art Berman, a Sugar Land energy economist. 'We have a very real problem with world supply, world price and the environment. None of this makes that go away. This shouldn't give people a license to squander fuel."
Steffy: Our reign as oil king likely to be very short
Houston Chronicle, 13 November 2012

"Iranian oil output rose in October after seven months of decline due to Western sanctions and its exports rebounded strongly as China and South Korea bought more oil, the West' energy watchdog said on Tuesday. The International Energy Agency, adviser to industrialised nations on energy policy, said the rebound in Iranian output was adding to a bearish picture of growing oil supply while demand remained depressed due to a weak global economy. The IEA also added that a new round of sanctions against Iran was likely to further cripple its finances although not necessarily further reduce its oil deliveries to markets. 'With the bulk of Iranian crude now heading to Asia, however, the main impact of the new EU measures will likely be on the country's financial sector,' the IEA said. Iran's finances have been drastically stretched since U.S. and EU sanctions more than halved its oil exports compared to last year, undermining its budget and leading to a spike in inflation and a sharp weakening of its currency. The sanctions are part of a stand-off between the West and Iran over Islamic Republic's nuclear programme. The European Union further broadened the sanctions against Iran's energy and banking industries in October in a bid to bring Iran back to the negotiating table. The IEA said Iranian oil output rose by around 70,000 barrels per day (bpd) to 2.7 million bpd in October. Iranian exports jumped to 1.3 million bpd from 1.0 million seen in the two previous months. 'China and South Korea appear to account for the lion's share of the increase in Iranian imports,' the IEA said in its monthly report. The jump in imports could have brought Iran an additional $900 million last month, according to Reuters calculations based on the price for its oil of $100 a barrel. The IEA also cited estimates as showing Iranian crude oil held in floating storage nearly halved to 13 million barrels at the end of October from as high as 25-30 million in April as its state tanker company is increasingly using its own fleet to deliver crude to buyers unable to obtain shipping insurance... Speaking at a conference in London with van der Hoeven after the release of the IEA report, OPEC Secretary General Abdullah al-Badri agreed: 'There is no shortage anywhere in the world.' Global oil supply rose by 800,000 bpd in October month-on-month to 90.9 million bpd due to a rebound in supplies from the Americas and the North Sea. That offset a slight decline in OPEC crude supplies, mainly on the back of disruptions in Nigeria, which saw output tumble to two-and-a-half-year lows. 'Compared to a year ago, global oil production stood 2.0 million bpd higher, with 80 percent of the increase coming from OPEC crude and natural gas liquids,' the IEA report said. 'The North American supply revolution, a surge in Saudi and Iraqi supplies to 30 year highs and record Russian output helped blunt the impact of supply losses elsewhere,' the IEA said. For 2013, non OPEC production is projected to rise by 860,000 bpd to 54.1 million bpd, some 150,000 higher than in the previous forecast, the IEA said. It also cut estimates for global oil demand for the fourth quarter of 2012 by around 300,000 bpd from last month's report in the wake of Hurricane Sandy. Global oil demand is now forecast to grow by 670,000 bpd this year and by 830,000 in 2013 to 90.4 million bpd -- 100,000 bpd lower than the IEA assumed last month. 'A weak economic backdrop - with the global economy forecast to rise by 3.3 percent in 2012 and 3.6 percent in 2013 - continues to restrain oil demand growth throughout the forecast,' the IEA said."
Iranian oil output, exports rebound - IEA
Reuters, 13 November 2012

"Ever since the Arab oil embargoes in the 1960s and 1970s, American presidents have pledged to end the country’s dependence on foreign oil by drilling more at home and increasing energy efficiency. But 'energy independence' was little more than a dreamy campaign slogan. Now, suddenly, the dream looks to be in reach. The International Energy Agency reported this week that the United States was poised to become the world’s biggest oil producer thanks to new drilling technologies in shale fields across the country. With oil production going up each month, not only are imports from the Organization of the Petroleum Exporting Countries going to drop, the energy agency predicted, but the United States will also become a net oil exporter by 2030. At first look, the changing energy panorama seems implausibly fortuitous, and it is no doubt a strategic game-changer. But the report also warns that the global energy future is still full of challenges, and many energy experts say any celebrations should remain muted. Even if the United States were no longer dependent on oil from the tumultuous Middle East and North Africa, vital American trading partners like China, India, Japan and Europe would continue to import increasing amounts of oil from the region. Future price shocks at the pump would still be likely as long as the world depended on unsteady producing nations like Venezuela, Nigeria, Iraq, Libya and Iran, where politics often mixes inharmoniously with crude. 'This isn’t the end of history,' said Michael Makovsky, a Pentagon official in the George W. Bush administration. 'If we are going to be a consumer of oil, it’s better that it be our oil rather than from the Middle East. But the oil market is still global, and the North American oil market will still be greatly impacted by developments in the Middle East.' It may go without saying, but burning American oil rather than Saudi oil brings few environmental advantages.... to some, the report may offer the tantalizing prospect that American security ties to the Middle East might loosen. If the United States can surpass Saudi Arabian and Russian oil production before the end of the decade and decrease its thirst for energy by producing more fuel-efficient cars, as the agency report projects, it is arguable that future American military interventions in the Persian Gulf region would be less likely. Why would the United States protect Kuwaiti tankers from Iranian attack, as the Reagan administration did in the late 1980s? Or fight Iraq over an invasion of Kuwait, as the first Bush administration did in the early 1990s? Why would the Fifth Fleet, now based in Bahrain to patrol the Persian Gulf area, have to exist if the United States got all of its oil from shale fields in North Dakota and Texas and the Arctic coast of Alaska? Unfortunately, energy and foreign policy experts say, the United States would still need to worry about the Middle East since oil prices are set globally and much of the oil traded on world markets is produced by countries like Saudi Arabia, Iraq and Iran. The energy agency report projects that oil demand in China and India will grow considerably in the decades ahead and that Europe will remain thirsty for energy. That means oil shipments through the Suez Canal will increase, according to the report, as Egypt’s future stability remains in question.... More ominous, perhaps, will be the continued global dependence on the Straits of Hormuz — now a flash point between the United States and Iran, and historically an area of dispute between Saudi Arabia and Iran. The agency report estimated that the amount of oil passing through that narrow waterway would increase to 25 million barrels a day in 2035, or 50 percent of the global oil trade, from 18 million barrels a day in 2010, or 42 percent of the trade. A disruption of the Straits of Hormuz would be disastrous for the economies of China, India and Japan, and it would probably spark a global recession if the blockage lasted for months. The United States could not insulate itself from the damage to its trading partners. 'We’re still going to need to protect the sea lanes,' said David L. Goldwyn, who served as the State Department’s coordinator for international energy affairs in the Obama administration. 'The rise in domestic production will not diminish in any way the need for the U.S. to retain global reach, particularly in the Middle East.'"
Energy Independence in the United States? Don’t Pop the Cork Yet
New York Times, 13 November 2012

"The U.S. is set to increase oil production so much that it will overtake Saudi Arabia and become the world’s biggest producer by around 2017, the International Energy Agency said today. The reaction from 'peak oil' theorists? Not a chance. They continue to argue that the surge in U.S. production coming from shale oil and shale gas is a flash in the pan. Before long, they say, U.S. output will start falling again—as will global output. The price of oil will skyrocket and the industrial economy will be brought to its knees, they argue. I first reached Kjell Aleklett in Sweden. He’s president of the Association for the Study of Peak Oil and a physics professor at Uppsala University. Aleklett acknowledged that peak oil theorists didn’t predict the U.S. output increase, but he said the jump doesn’t undermine their main case. 'We were wrong that it was not possible for the U.S. [production] to swing back again. But we don’t know how high the swing will be,' Aleklett said. 'The shale production we are talking about now relies on thousands of wells drilled every year. If the drilling capacity should go down, or for some reason it becomes too expensive, then the production will go down very fast,' Aleklett said. What’s more, he said, the U.S. success is not being duplicated in other countries. In densely populated Europe, Aleklett said, the best shale happens to be beneath the city of Paris, making it off-limits to production (unless the Eiffel Tower is converted into a production platform). Aleklett also pointed out that the U.S. Energy Department’s own outlook contradicts that of the Paris-based International Energy Agency. In 2035, according to the U.S. Energy Information Administration, imports of crude oil, liquid fuels, and other petroleum, plus natural gas will still total about 24 quadrillion BTUs a year, nearly triple the level of exports."
U.S. the New Saudi Arabia? Peak Oilers Scoff
Bloomberg, 12 November 2012

"The United States will overtake Saudi Arabia and Russia as the world's top oil producer by 2017, the West's energy agency said on Monday, predicting Washington will come very close to achieving a previously unthinkable energy self-sufficiency. The International Energy Agency (IEA) said it saw a continued fall in U.S. oil imports with North America becoming a net oil exporter by around 2030 and the United States becoming almost self-sufficient in energy by 2035. 'The United States, which currently imports around 20 percent of its total energy needs, becomes all but self-sufficient in net terms - a dramatic reversal of the trend seen in most other energy importing countries,' it said. The forecasts by the IEA, which advises large industrialized nations on energy policy, were in sharp contrast to its previous reports, which saw Saudi Arabia remaining the top producer until 2035. 'Energy developments in the United States are profound and their effect will be felt well beyond North America - and the energy sector,' the IEA said in the annual long-term report, giving one of the most optimistic forecasts for U.S. energy production growth to date. 'The recent rebound in U.S. oil and gas production, driven by upstream technologies that are unlocking light tight oil and shale gas resources, is spurring economic activity - with less expensive gas and electricity prices giving industry a competitive edge,' it added. IEA Chief Economist Fatih Birol told a news conference in London he believed the United States would overtake Russia as the biggest gas producer by a significant margin by 2015. By 2017, it would become the world's largest oil producer, he said. This could have significant geopolitical implications, if Washington feels its strategic interests are no longer as embedded in the Middle East and other volatile oil producing regions. Analysts ask whether an energy independent United States would still be prepared to safeguard major trade routes around the world, such as the Strait of Hormuz in the Middle East..... Birol said he realized how optimistic the IEA forecasts were given that the shale oil boom was a relatively new phenomenon. 'Light, tight oil resources are poorly known ... If no new resources are discovered (after 2020) and plus, if the prices are not as high as today, then we may see Saudi Arabia coming back and being the first producer again,' he said. The IEA said it saw U.S. oil production rising to 10 million barrels per day (bpd) by 2015 and 11.1 million bpd in 2020 before slipping to 9.2 million bpd by 2035. Saudi Arabian oil output would be 10.9 million bpd by 2015, the IEA said, 10.6 million bpd in 2020 but would rise to 12.3 million bpd by 2035. That would see the world relying increasingly on OPEC after 2020 as, in addition to increases from Saudi Arabia, Iraq will account for 45 percent of the growth in global oil production to 2035 and become the second-largest exporter, overtaking Russia. OPEC's share of world oil production will rise to 48 percent from 42 percent now. Russian oil output, which over the past decade has been steadily above Saudi Arabia, is predicted to stay flat at over 10 million bpd until 2020, when it will start to decline to reach just above 9 million bpd by 2035. 'Russia, which remains the largest individual energy exporter throughout the period, sees its revenues from oil, natural gas and coal exports rise from $380 billion in 2011 to $410 billion in 2035,' the IEA said. The U.S. oil boom would accelerate a switch in the direction of international oil trade, the IEA said, predicting that by 2035 almost 90 percent of oil from the Middle East would be drawn to Asia. The report assumes a huge expansion in the Chinese economy, which it saw overtaking the United States in purchasing power parity soon after 2015 and by 2020 using market exchange rates. Chinese real gross domestic product is expected to increase by 5.7 percent annually between 2011 and 2035. A rise of 1.8 billion in the world's population to 8.6 billion would lead to a spike in global oil demand by more than a 10th to over 99 million bpd by 2035, keeping pressure on oil prices, the IEA said. The agency's central 'New Policies' scenario, which assumes a range of measures are taken to curb oil consumption in Europe, the United States, China and elsewhere, sees the average import cost of oil rise to just over $215 per barrel by 2035 in nominal terms, or $125 in 2011 terms. If fewer steps are taken to promote renewable energy and curb carbon dioxide emissions, oil was likely to exceed $250 per barrel in nominal terms by 2035 and reach $145 in real terms -- almost level with the record highs seen four years ago."
U.S. to Overtake Saudi Arabia as Top Oil Producer, Agency Forecasts
Reuters, 12 November 2012

"Oil cartel Opec acknowledged the growing importance of unconventional 'shale’ oil reserves for the first time on Thursday - as it cut its oil demand forecasts on fears over eurozone growth. In its annual world oil outlook report, Opec - whose 12 members include Saudi Arabia, Iran, Iraq and Venezuela - said: 'Shale oil represents a large change to the supply picture.' While in previous reports 'no significant shale oil contribution to liquids supply was envisaged,' this year 'a rise in the importance of shale oil is expected', Opec said. 'Resource development is moving rapidly in the US and production has markedly increased.' Opec cut its forecast for demand for its own crude supplies, while forecasting that non-Opec oil supply would grow significantly. Between 2011 and 2016 non-Opec liquids supply would be boosted by increased output 'mainly from shale oil in the US, Canadian oil sands, and crude oil from the Caspian and Brazil'. With Opec supplies also growing, Opec was expected to have crude oil spare capacity in excess of 5mbpd (million barrels per day) 'as early as 2013/14'. However it said that future shale oil production was 'likely to be beset by several constraints and challenges, such as environmental concerns, questions over the availability of equipment and skilled labour, rising costs and steep well-production declines'. With the 'best shale oil plays tapped first', Opec forecast modest shale oil growth beyond 2020, to 3mbpd by 2035."
Shale oil will change global supply, Opec admits
Telegraph, 8 November 2012

"Iraq’s Oil Ministry says it has finalized a deal with a consortium led by Russian oil giant Bashneft to search for oil in the country’s south. Ministry spokesman Assem Jihad says Bashneft and its UK partner Premier will explore the 8,000-square-kilometer (3,100-square-mile) Block 12 , shared by the provinces of Muthana and Najaf. They will be paid US$5 for each barrel of oil equivalent. Thursday’s signing ceremony took place at the Oil Ministry in Baghdad. The contract is one of four deals Iraq awarded in its latest bidding round to hunt for oil and gas. Iraq, which sits atop of 143.1 billion barrels of proven oil reserves and 126.7 trillion cubic feet of natural gas, is seeking to develop its vast resources after decades of war, U.N. sanctions and neglect."
Iraq signs deal with Russia’s Bashneft-led consortium to search for oil in southern provinces
Washington Post, 8 November 2012

"... the EU's 20-year approach to carbon emissions is bankrupt - a point made powerfully by Dieter Helm, Professor of Energy Policy at Oxford University, in his new book The Carbon Crunch. Professor Helm arugues that the current generation of renewables cannot solve climate change, and that the only answer in the short term is to move to gas from coal, while levying carbon taxes to help to move the world to cleaner technologies."
Sober suits know better than bearded greens
London Times, 8 November 2012, Print Edition, P33

"Exxon Mobil has informed the Iraqi government it wants to pull out of a $50 billion oil project, and Baghdad expelled Turkey's state oil operator from another contract on Wednesday, both signals of trouble in Iraq's petroleum policy. 'Exxon has stated in its letter that it has started discussions with some international oil companies to sell its stake,' Abdul-Mahdy al-Ameedi, director of Iraq's contracts directorate, told reporters. The move by Exxon to quit the West Qurna-1 oilfield in south Iraq will exacerbate tensions between Baghdad and the autonomous Iraqi Kurdistan region, where Exxon has signed oil deals seen as more lucrative but dismissed by the central government as illegal. Kurdistan has upset Baghdad by signing oil deals with foreign companies including Exxon, Chevron and Total . Kurdish officials say they have the constitutional right to do so, but the central government says only it controls oil policy. Iraq's cabinet also said it was expelling Turkey's state-owned TPAO from its exploration block 9 oilfield for an unspecified reason, denying it was prompted by any move by the Turkish company into Kurdistan. Baghdad plans to reply to the letter from Exxon by Sunday, another oil official said. But it was unclear who would replace Exxon if it leaves the huge oilfield, which pumps around 400,000 barrels per day of crude, with minority partner Royal Dutch Shell. Exxon has not commented publicly on its plans. Doubts about who can replace Exxon in the important project could raise questions about Iraq's target to increase crude output to 5-6 million barrels per day by 2015 from 3.4 million bpd. Some industry sources have said Baghdad is keen to replace Exxon with companies from Russia or China as a way to hit back at major Western oil majors. But it was unclear which companies would have the financial heft to follow Exxon. Russia's LUKOIL and Gazprom Neft are already working in Iraq. LUKOIL, which already runs a project to develop West Qurna-2, has said that it lacks the resources to take on a project like West Qurna-1 for the moment. Exxon is now at the heart of a long-running dispute over oil reserves and territory between the Arab-led central government and ethnic Kurds, who have run their own regional administration in northern Iraq since 1991."
Iraq says Exxon to quit oilfield, ends Turkey TPAO deal
Reuters, 7 November 2012

"Iranian parliamentarians have prepared a draft law to reduce the country's crude exports by up to a third this year in retaliation for western sanctions against Iran's oil sector, the semi-official Fars news agency said on Wednesday. The bill drawn up by the Iranian parliament's Energy Commission is waiting to be put to parliament for approval, Fars said. Iran's assembly has little say in making policy, where Supreme Leader Ayatollah Ali Khamenei has the last word. The International Energy Agency (IEA) estimates that Iranian oil exports have slumped from 2.2 million bpd at the end of 2011 to just 860,000 bpd in September 2012 - a fall of 60 percent."
Iran MPs draft law to cut oil exports by a third
Reuters, 7 November 2012

"What now provides a building block for a genuine export-led recovery? Where is Britain still strong in advanced manufacturing and know-how? What is now a bigger UK sector than car manufacturing, aerospace or telecoms? The answer, which will surprise many, is the UK green sector. It is now worth more than �120bn a year, equivalent to 8% of UK GDP, and provides nearly 1 million jobs. It exports �800m a year in green goods and services to China, some �330m to the US, and nearly �300m to Germany. Yet it is derided in government circles and especially on the Tory Right. Nearly 100 Tory MPs recently wrote to Osborne begging him to withdraw support for the UK green industry, an attitude of ideological disdain and economic petulance. It is so much a posture of ‘cutting off your nose to spite your face’ that some Tory MPs, though a much smaller number, have now organised a whip-round to tell Cameron & Osborne not to be so daft."
Green economy now biggest UK growth source, but rejected by Govt
Michael Meacher (Blog), 7 November 2012

"Britain will walk away from talks with French giant EDF Energy over its planned UK nuclear plant if the burden for the consumer is too high, says John Hayes, the energy minister. Britain is prepared to walk away from talks with French giant EDF Energy over its planned UK nuclear plant if the burden for the consumer is too high, said John Hayes, the energy minister. EDF, majority-owned by the French state, is negotiating with the UK Government over a guaranteed price for electricity from the plant at Hinkley Point in Somerset, which would leave consumers liable for 'top up' subsidies. Mr Hayes on Tuesday told a select committee hearing that the Government has a bottom line it will not abandon, after MPs asked if the Coalition is prepared to say 'that’s too much for the consumer'."
Government 'prepared to walk away’ from EDF nuclear talks
Telegraph, 6 November 2012

"The Iranian deputy oil minister says the Islamic Republic and Afghanistan have agreed to build a pipeline in order to facilitate the exports of Iran’s oil products to its eastern neighbor. According to Press TV, Ali Reza Zeighami said on Tuesday 'With the construction of this pipeline, part of the energy needed by Afghanistan will be met with full guarantee and security.'”
'Iran to build oil pipeline to Afghanistan'
Iran English Radio, 6 November 2012

"Orders for wind turbines destined for the UK have almost ground to a halt as industry figures warn that the Government has caused an 'unnecessary investment freeze' in renewable energy projects. The three largest manufacturers of turbines have received only one order for UK offshore wind farms between them, reports the Financial Times. Keith MacLean of SSE, which is developing offshore farms off the UK coast, told the newspaper that the Government's attempts to change low-carbon energy subsidies had caused an 'unnecessary investment freeze'."
Government causes wind farm 'investment freeze'
Telegraph, 5 November 2012

"IRAQ is blessed with abundant oil that is cheap to extract and close to newly built export terminals. Production has hit a three-decade high and continues to rise steadily. By 2035, predicts the International Energy Agency (IEA), an advocate for rich-world consumers, Iraqi output could more than double, to 8.3m barrels per day (b/d). But Western oil firms are increasingly reluctant to play a part in this boom. ExxonMobil appears keen to sell its stake in West Qurna, one of the giant fields in southern Iraq that will provide much of the production growth. Royal Dutch Shell and BP are both still working in the south, but unhappily so. Suffocating bureaucracy and onerous contract terms make life difficult. Heavier-than-expected costs and delays to infrastructure undercut profits. Three years ago when they signed contracts with the Iraqi government, the oil majors were prepared to accept hiccups. But their patience has thinned with the arrival of an alternative source of Iraqi oil. Kurdistan, the semi-autonomous province in the country’s north, has been offering competing and much more lucrative deals. ExxonMobil’s decision last year to acquire six blocks in the region angered the central government, which considers the deal illegal and lays claim to Kurdish oil. But the world’s largest oil company started a trend. In July Total, Chevron and Gazprom all signed contracts with the Kurdistan regional government, potentially dooming their chances of winning future business in the south. BG, a British firm, was in Erbil, the Kurdish capital, on a scouting mission in late October. 'Kurdistan is 11 years ahead of the rest of Iraq in terms of political and commercial development,' says Luay al-Khatteeb, head of the Iraq Energy Institute, a London-based think-tank. Kurdistan’s potential oil reserves of around 45 billion barrels are less than a third of those in southern Iraq. Still, the Kurdish oil minister, Ashti Hawrami, believes output of 1m b/d is possible within three years. The tricky part is getting the oil to market. The Kurds today export around 200,000 b/d through pipelines controlled by the central government. Mr Hawrami wants to build a new Kurdish-owned pipe to Turkey, feeding long-held dreams of Kurdish independence. That unnerves Turkey which is fighting Kurdish separatists in its south-east. Some Turkish officials seem to acknowledge the possibility of an eventual Kurdish state in northern Iraq and seek to make it commercially dependent on Turkey. Co-operating with the Iraqi Kurds would also generate lucrative transit fees and offer Turkey an alternative to oil from Russia and Iran. So far, Turkey has only allowed the Iraqi Kurds to export oil by lorry. To win approval for a pipeline, they would probably have to support Turkish opposition to Kurdish separatism outside Iraq. That seems unlikely. But the growing civil war in Syria is helping the Kurds. Recep Tayyip Erdogan, Turkey’s prime minister, is angry with the Iraqi government for supporting Syria’s murderous regime. Backing Kurdish oil exports makes that point. But approving a pipeline may be a step too far for Mr Erdogan just now. The Iraqi government is pondering how to respond. It could sweeten the terms of its contracts with the oil firms in the south. That might staunch the flow of Western capital to Kurdistan. In the meantime, the main beneficiaries of the majors’ receding interest in southern Iraq are Asian oil firms. Chinese will account for about 2m b/d of Iraq’s production by 2020. Fatih Birol, the IEA’s chief economist, talks of a 'Baghdad-to-Beijing' axis."
The Kurdish opening
Economist, 3 November 2012

"The amount of [UK] power expected to be generated from gas by 2030 has quadrupled in the last year, according to official projections that will infuriate green campaigners who are demanding greater use of renewable energy sources. They claim that the statistics, buried in recently published government documents, will leave the country unable to meet its carbon emission targets. The figures will reinforce the sense that chancellor George Osborne is winning his battle to downgrade the role of green energy in favour of a dash for gas. The coalition is divided over energy policy, with Osborne favouring a major increase in gas use, promising generous tax subsidies to the shale gas industry at last month's Tory party conference. The Liberal Democrats want greater emphasis on renewable energy. The chasm was laid bare last week when Tory energy minister John Hayes declared 'enough is enough' over onshore windfarms, only to be slapped down within hours by Lib Dem energy secretary Ed Davey. Data from the department of energy and climate change show the amount of power being generated from gas by 2030 leapt from 8GW in its 2011 projections to 31GW in the same projections 12 months later. The data also show that, as it stands, the carbon targets for the 2020s – called the fourth carbon budget – will be broken. Less than a tenth of the gas power is projected to have carbon capture and storage technology fitted to trap and bury carbon dioxide emissions."
Huge scale of UK's 'dash for gas' revealed
Observer, 3 November 2012

"The nuclear industry could get subsidies from the taxpayer to build new reactors, the new energy minister has said, despite opposition in the coalition agreement and repeated assurances to the contrary. John Hayes told MPs on Thursday that new nuclear power would not receive specific government subsidy but could be eligible if other forms of electricity generation also benefited from the scheme. The Conservative minister's admission during energy questions in the House of Commons appears to back up a long-held suspicion that the government's proposed scheme to offer a guaranteed minimum price for new low-carbon energy to encourage companies to build new capacity – known as Contracts for Difference – would become a backdoor subsidy for the expensive nuclear industry. In reply to a question from the Liberal Democrat deputy leader, Simon Hughes, Hayes said: 'Let me be crystal clear … there will be no direct payment, no market support for electricity supplied or capacity provided by a private-sector nuclear operator, unless similar support is also made available more widely to other types of generation.'"
New nuclear reactors could be eligible for subsidies, says minister
Guardian, 1 November 2012

"The world's top oil and gas companies are struggling to improve output and failing to capture the full value of a resilient price for crude oil while weak gas prices in the United States take their toll. Third-quarter results from Exxon Mobil, Royal Dutch Shell and other top international players released over the past few days mostly beat expectations thanks to a shortage of the fuels and other crude-oil based products they make. That widened the gap between fuel prices and crude oil, lifting margins in the downstream part of the business. But underlying profits were lower because of maintenance issues and delays bringing on new production of oil and gas - the primary products that drive profitability for the long term. With the 'easier' oil and gas assets now tightly controlled by well-endowed countries in the Middle East and elsewhere, the private sector is spending more and more in deeper water and harsher environments like the Arctic, on 'tight' oil and gas resources that are tricky to extract, and on costly Liquefied Natural Gas (LNG) projects.... World No. 1 Exxon's oil and gas output fell by a greater-than-expected 7.5 percent in the quarter."
Oil companies struggle to increase output
Reuters, 1 November 2012

"As China and Japan are involved in a spar to gain control of a tiny group of islands in the sea between them, the deeper issue is whether which of Asia's two biggest economies will first gain control of the valuable oil and natural gas located there. Since mid-September, a number of Chinese ships have sailed close to the eight uninhabited islands in the East China Sea in order to assert its claim there. Japan now controls the islands, known as the Senkaku in Tokyo and the Diaoyu in Beijing. It had announced in September that it was buying the islands, which sparked mass street protests in China and a diplomatic crossfire so intense that US officials have urged calm. 'If they could get it, oil and gas would be hugely important,' Liu Chia-jen, petrochemicals analyst with KGI Securities in Taipei said."
Oil and gas real reason behind territorial dispute between China and Japan: Report
ANI, 30 October 2012

"... the problem for the U.S. is not total energy. We have always had an abundant endowment of coal and natural gas. The problem is liquid fuel for transport and that comes from crude oil. The shale revolution in oil that [Mark J. Perry] describes is notable and important but it only returns production to 2003 levels which were lower than at any time after 1951.... After production peaked in 1970, not even the discovery of Prudhoe Bay, the largest oil field in the U.S. (12.8 billion barrels produced to date), brought production back to the 1970 peak. Including the recent increase from shale oil, the gap between production and consumption is approximately 9 million barrels of oil per day, almost as much as 1970 peak production.... The star performer in total fossil fuel production is natural gas. While it is true that gas offers the possibility of replacing crude oil refined products as a transport fuel, this will be decades in the future (massive equipment changes and distribution infrastructure) and does not address the near- to medium-term problem of oil imports."
Arthur E. Berman - The Big Deal About U.S. Energy Self-Sufficiency
The Oil Drum, 31 October 2012

"Renewable energy capacity will overtake nuclear power in the UK by 2018, if current rates of growth continue, and will provide enough power for one in 10 British homes by 2015, according to new research. The amount of electricity supplied by wind energy alone is up by a quarter since 2010, in a surprisingly good year for the renewables industry. While the government has notably cooled on wind power – more than 100 Tory MPs signed a statement this year opposing new windfarms, and the chancellor of the exchequer, George Osborne, has queried the future of subsidies – the industry has continued to grow, with investment in offshore wind up by about 60% to �1.5bn in the past year. Planning approvals for onshore windfarms also rose, up by about half, to reach a record level, according to the trade association Renewable UK. Despite the outspoken opposition from many Tory MPs against wind power, there was a rise in the amount of onshore wind capacity approved last year for the first time since 2008."
Renewable energy will overtake nuclear power by 2018, research says
Guardian, 30 October 2012

"Coal is enjoying a renaissance, with the highest consumption of the fuel since the late 1960s. The unexpected development threatens to put climate change targets out of reach – and much of the reason is the rise of a supposedly 'green' fuel, natural gas. The controversial use of shale gas in the US, where it now makes up a quarter of electricity generation, has brought down carbon emissions there – but the greenhouse gases have simply been exported elsewhere, meaning no net gain for the planet, research by the Guardian and other sources has found. As gas power has replaced coal in the US, the excess coal has pushed down prices on world markets, sparking a bonanza for the high-carbon fuel. Last year, coal had its best year in more than four decades, according to the World Coal Association. Its global share of primary energy consumption rose from about 25%, where it has been for years, to 30% – the highest level since 1969, long before governments made any efforts to tackle climate change.... In the UK, between the second quarter of 2011 and the second quarter of 2012, coal consumption rose by nearly a quarter. Europe overall has burned more coal in the past year than any time since it pledged steep emissions cuts, and China and India have also been burning more. Cheap coal, caused by weakening demand in the US where power stations have switched fuels to use gas, has been the biggest factor. The role of shale gas in this bonanza has been overlooked by supporters of the controversial fuel. In the US, which has pioneered the technology of fracking – whereby rocks are blasted apart under huge pressure to release natural gas – the resulting gas has been championed as a green fuel because it emits half the carbon of coal when burned. Fracking has cut the US's greenhouse gas emissions to their lowest level since 1992, as power stations across the country have switched to gas from coal. That switch may even enable the US to meet its international climate change target of cutting emissions by 17% compared with 2005 levels, as agreed at the Copenhagen climate summit in 2009. But if the use of gas in the US is bringing down emissions there, the opposite is the case elsewhere. Cheap coal has flooded Europe, driving up consumption. A report from the Tyndall Centre for Climate Change Research, at the University of Manchester, published on Monday, found carbon dioxide emissions from domestic energy in the US fell by 8.6% from 2005, the equivalent of 1.4% per year. But more than half of the power sector emissions were displaced overseas by the trade in coal.... Another reason for the resurgence of coal in Europe has been the failure of the European Union's main climate change mechanism, the, to stop the rise in coal use. The price of carbon permits is extraordinarily low under the scheme, which was intended to penalise the burning of high-carbon fuels, forcing companies to use modern technologies and become more efficient. Low permit prices take away that incentive."
Coal resurgence threatens climate change targets
Guardian, 29 October 2012

"At the Leganes toll booth outside Madrid, the workers scan the horizon for cars. In Spain's recession, the stream of paying drivers has slowed to a trickle and the toll road is all but bankrupt. Like the housing bubble, pumped up until it burst in 2008, and its speculation-funded phantom airports, the folly of Spain's road-building boom too is now being laid bare in vast stretches of tarmac. 'Right now we can't meet our debt repayments. We are in the hands of the judge,' said Jose Antonio Lopez Casas, director of Accesos de Madrid, the company that manages two major highways around the capital. The two highways, Radial 3 and Radial 5, opened in 2004 at the height of Spain's construction boom. Now the company owes 660 million euros ($850 million) to the bank, 340 million to the builders and 400 million to residents evicted to build it. Since the Madrid-Toledo highway entered bankruptcy proceedings in May, the trend has spread, with five other major routes following. 'It's no surprise,' says Paco Segura, a transport specialist at the environmental campaign group Ecologists in Action. 'In Spain, just as there was a real estate bubble, there was also a bubble in infrastructure, and one of the areas that got most developed was the motorways,' he added. 'We built thousands and thousands of kilometres of motorways on routes that did not have the traffic concentration to justify it.' The craze drove Spain to break records: it became the country in Europe with the most kilometres of motorways and the most commercial international airports, and was second only to China in the world for the length of its high-speed train lines. But while the state was approving all these projects by private companies, it was also developing a network of toll-free highways, naturally preferred by drivers. In the first quarter of this year, with Spain in recession, motorway traffic fell 8.2 percent compared to a year earlier, hitting its lowest level since 1998, the transport ministry said. 'Traffic around Madrid has fallen by between 15 and 20 percent in the past five years,' Lopez said. 'In our case it has fallen by much more,' he said of his toll roads. 'The economic situation makes the cost of a toll road much more of a factor in deciding whether to take a route or not, when there is a free alternative of sufficient quality," said Jacobo Diaz, director of the Spanish Road Association.'"
Spain's empty highways lead to bankruptcy
AFP, 28 October 2012

"A nuclear fuel pellet the size of your little finger provides more energy than 800 kilograms of coal or 650 litres of oil – and all without belching any carbon dioxide or other fumes into the atmosphere. But the intense power of uranium, the raw material of nuclear fuel, was demonstrated to the world by the Fukushima disaster last year. Its price on global markets has collapsed, from a record $136 a pound in 2007 to just $44 last week – a slump so severe that some of the world's biggest miners have decided they're better off leaving the mineral in the ground. The market suffered further blows in the last month or so as several developed-world governments announced or confirmed plans to move away from atomic power for good. But even as the west retreats, the nuclear industry may be about to rise again – in the developing world. In the last few days, China announced plans to restart its massive �170bn reactor building programme, intended to create generating capacity so large that it could power the whole of Spain. Last March, Japan went into lockdown and shut all of its nuclear plants, which had provided 30% of the nation's electricity. Fears of a nuclear apocalypse rippled across the globe, turning the lights out at reactors around the world, and many of them still lie idle 18 months later. Japan, which is now running a series of expensive and polluting diesel generators at 100% capacity to replace its nuclear fleet, has announced plans to completely end its reliance on nuclear power by 2040, at an estimated cost of $620bn. Germany and Belgium are also giving up on nuclear power, while Italy has cancelled a long-planned move back to it, and even France – the most pro-nuclear country in the world – is scaling things down. The future of the UK's nuclear ambitions also hangs in the balance after Vincent de Rivaz, the chief executive of EDF Energy, the French company charged with building new reactors in the UK, told parliament the company had yet to make up its mind whether it was worth building plants without support from the government. Two German companies – RWE and E.ON – have already pulled out of the Horizon joint venture to build new nuclear plants in the UK..... Heenal Patel, a senior industrial analyst at Bloomberg Industries... says President Fran�ois Hollande's decision to close France's oldest nuclear plant last month, and his commitment to lowering the country's dependence on nuclear power from 75% to 50% of total electricity demand, has caused the biggest waves in the industry: 'If the world's most pro-nuclear country is blowing cold it is noticed by other countries.' Uranium miners have noticed the cool wind too. This summer, BHP Billiton, the giant Anglo-Australian mining group, shelved plans for the world's largest open-pit copper and uran, and announced it has no plans to build or acquire other uranium minesium mine in south Australia. The �12bn Olympic Dam mega-project would have transformed the mine 350 miles north of Adelaide into a massive pit capable of producing 19,000 tonnes of uranium a year. Explaining the decision to stall the project, Marius Kloppers, BHP's chief executive, said demand for uranium had "collapsed". BHP has also sold off its Yeelirrie uranium field in Western Australia. Canada's Cameco, the world's third-largest uranium miner, has said it is only worth pressing ahead with its Kintyre uranium project in Australia's Great Sandy Desert if the uranium price climbs back above $67 a pound.... Paladin Energy, which mines uranium in Malawi and Namibia (the largest sources of uranium oxide, or "yellowcake", after Kazakhstan, Canada and Australia), has warned that if the price stays depressed, supply will dip by 25% by 2020. Chief executive John Borshoff says his analysis "confirms a supply industry in crisis, in which production is unable to meet emerging requirements in the short to medium term". Another, more unusual, source of uranium could also run dry soon. At present, about 16% of the world's uranium (and half of supplies used in American reactors) come from Soviet nuclear weapons. The "megatons to megawatts" programme, which formed part of the 1993 US-Russia non-proliferation treaty, has seen highly enriched uranium from the equivalent of 18,000 Russian warheads converted to lower-grade fuel for use at power plants in the US cities at which they were once aimed. But the programme is due to come to an end next year. Despite the current collapse in demand, analysts say the uranium price will recover in the long term. The rapacious growth of China and India will be dependent on nuclear fuel, and the oil-rich Gulf nations are planning big forays into nuclear so that they can extend the lifetime of their highly profitable oil exports. There are 65 reactors being built around the world, and 69% of them are in the fast-growing Bric countries (Brazil, Russia, India and China). Beijing's ambitious programme will increase nuclear from 2% to 5% of the country's electricity supply by 2020, and make China the world's biggest market for new nuclear equipment. India – which lacks fossil fuel resources and has been growing so fast that its electricity supply is falling 12% short at peak hours, causing frequent blackouts – is also planning a massive expansion programme. The country hopes nuclear will account for 50% of its electricity needs by 2050, up from just 3.7% last year." Nuclear power turns to developing world as west recoils from Fukushima
Guardian, 28 October 2012

"Royal Dutch Shell has attacked the 'ridiculous' impact of European energy policy, warning that governments are erasing the environmental benefits from expensive renewables by allowing coal use to increase. Andrew Brown, one of Shell’s most senior executives, also warned that shale gas would not have the same impact in the UK as it has in the US, where is has been heralded as a new era of cheap energy. In an interview with The Daily Telegraph, Mr Brown, Shell’s upstream international director, said the UK and Europe were 'missing a trick' in their policies. 'There are a lot of subsidies going towards renewables. Gas and coal are having to compete to be taken into power generation,' he said. Because cheap gas is reducing coal demand in the US, there is 'a lot of cheap coal in the marketplace'. As a result, Europe is burning more coal, while demand for gas – which emits much less CO2 than coal – is declining. 'You have this ridiculous situation where cash-strapped Europe is putting a lot of money into renewables to reduce CO2, meanwhile allowing ... the power generators to take much more coal and back out gas,' he said."
Shell attacks 'ridiculous' effects of European energy policy
Telegraph, 28 October 2012

"U.S. oil output is surging so fast that the United States could soon overtake Saudi Arabia as the world's biggest producer. Driven by high prices and new drilling methods, U.S. production of crude and other liquid hydrocarbons is on track to rise 7 percent this year to an average of 10.9 million barrels per day. This will be the fourth straight year of crude increases and the biggest single-year gain since 1951. The boom has surprised even the experts. 'Five years ago, if I or anyone had predicted today's production growth, people would have thought we were crazy,' says Jim Burkhard, head of oil markets research at IHS CERA, an energy consulting firm. The Energy Department forecasts that U.S. production of crude and other liquid hydrocarbons, which includes biofuels, will average 11.4 million barrels per day next year. That would be a 40-year high for the U.S. and just below Saudi Arabia's output of 11.6 million barrels. Citibank forecasts U.S. production could reach 13 million to 15 million barrels per day by 2020, helping to make North America 'the new Middle East.' The last year the U.S. was the world's largest producer was 2002, after the Saudis drastically cut production because of low oil prices in the aftermath of 9/11. Since then, the Saudis and the Russians have been the world leaders. The United States will still need to import lots of oil in the years ahead. Americans use 18.7 million barrels per day. But thanks to the growth in domestic production and the improving fuel efficiency of the nation's cars and trucks, imports could fall by half by the end of the decade. The increase in production hasn't translated to cheaper gasoline at the pump, and prices are expected to stay relatively high for the next few years because of growing demand for oil in developing nations and political instability in the Middle East and North Africa. Still, producing more oil domestically, and importing less, gives the economy a significant boost.... The major factor driving domestic production higher is a newfound ability to squeeze oil out of rock once thought too difficult and expensive to tap. Drillers have learned to drill horizontally into long, thin seams of shale and other rock that holds oil, instead of searching for rare underground pools of hydrocarbons that have accumulated over millions of years. To free the oil and gas from the rock, drillers crack it open by pumping water, sand and chemicals into the ground at high pressure, a process is known as hydraulic fracturing, or 'fracking.' While expanded use of the method has unlocked enormous reserves of oil and gas, it has also raised concerns that contaminated water produced in the process could leak into drinking water. The surge in oil production has other roots, as well: _ A long period of high oil prices has given drillers the cash and the motivation to spend the large sums required to develop new techniques and search new places for oil. Over the past decade, oil has averaged $69 a barrel. During the previous decade, it averaged $21. _ Production in the Gulf of Mexico, which slowed after BP's 2010 well disaster and oil spill, has begun to climb again. Huge recent finds there are expected to help growth continue. _ A natural gas glut forced drillers to dramatically slow natural gas exploration beginning about a year ago. Drillers suddenly had plenty of equipment and workers to shift to oil. The most prolific of the new shale formations are in North Dakota and Texas. Activity is also rising in Oklahoma, Colorado, Ohio and other states. Production from shale formations is expected to grow from 1.6 million barrels per day this year to 4.2 million barrels per day by 2020, according to Wood Mackenzie, an energy consulting firm. That means these new formations will yield more oil by 2020 than major oil suppliers such as Iran and Canada produce today. U.S. oil and liquids production reached a peak of 11.7 million barrels per day in 1970. It nearly reached that level again in 1985 when Alaskan fields were producing enormous amounts of crude, then it began a long decline. From 1986 through 2008, crude production fell every year but one, dropping by 44 percent over that period. The United States imported nearly 60 percent of the oil it burned in 2006. By the end of this year, U.S. crude output will be at its highest level since 1998 and oil imports will be lower than at any time since 1992, at 41 percent of consumption. 'It's a stunning turnaround,' Burkhard says. Whether the U.S. supplants Saudi Arabia as the world's biggest producer will depend on the price of oil and Saudi production in the years ahead. Saudi Arabia sits on the world's largest reserves of oil, and it raises and lowers production to try to keep oil prices steady. Saudi output is expected to remain about flat between now and 2017, according to the International Energy Agency. But Saudi oil is cheap to tap, while the methods needed to tap U.S. oil are very expensive. If the price of oil falls below $75 per barrel, drillers in the U.S. will almost certainly begin to cut back. The International Energy Agency forecasts that global oil prices, which have averaged $107 per barrel this year, will slip to an average of $89 over the next five years – not a big enough drop to lead companies to cut back on exploration deeply. Nor are they expected to fall enough to bring back the days of cheap gasoline. Still, more of the money that Americans spend at filling stations will flow to domestic drillers, which are then more likely to buy equipment here and hire more U.S. workers."
US may soon become world's top oil producer
Associated Press, 25 October 2012

"It’s become common to blame the flagging fortunes of coal mining companies on low natural gas prices that have convinced many U.S. utilities and industries to slash their use of coal. But there’s another reason for the woes of mining firms: The cost of mining coal has been going up. Although it’s commonly said that the United States is the Saudi Arabia of coal with more than 200 years worth of reserves, digging up those coal reserves and delivering them to customers has been getting more expensive. That’s because of rising costs of transportation, explosives, wages — and geology. In most areas, companies first dig coal from areas that are easiest to access and that have the thickest, richest seams. Over time, however, it becomes more expensive to mine — and more difficult to do so profitably. That’s particularly true in central Appalachia, where the political fight over the reasons for the coal industry’s woes have been most intense. With a lot riding on the outcome of the election in swing states such as Ohio and Virginia, where some coal companies have announced layoffs and mine closures, GOP presidential hopeful Mitt Romney has been blaming the coal industry’s problems on the Environmental Protection Agency’s regulations on coal-burning power plants. Indeed, EPA has issued regulations that require new controls at some of the country’s oldest and least efficient coal-fired power plants. And the Labor Department has added safety regulations on mines after workers were killed in some mine explosions. But some of the higher costs of mining have nothing to do with regulations, many analysts say. 'The issues aren’t mine inspectors and environmentalists. It’s a geological fact of life in central Appalachia,' said Tom Sanzillo, a former senior official in the New York State comptroller’s office and now a financial consultant. 'You mine for 100 years and you take a lot of coal. It’s the cost of production. That’s the reality of it.' Marie Shmaruk, a director at Standard & Poor’s who analyzes metals and mining companies, agreed. 'We have been relatively negative on central Appalachia for quite some time because it’s an expensive area to mine,' she said. 'It’s been mined out and has thinning coal seams. We’ve been mining there forever.' Shmaruk said that 'central Appalachia is being squeezed the most. At natural gas prices today, the coal in a lot of those mines is not really competitive. And you’re seeing a lot of the utilities in that area have moved to natural gas.'... In its annual energy review this year, the U.S. Energy Information Administration forecast an 'upward trend of coal prices [that] primarily reflects an expectation that cost savings from technological improvements in coal mining will be outweighed by increases in production costs associated with moving into reserves that are more costly to mine.' At a conference held by industry newsletter Platts in September, coal consultant Alan Stagg said, 'This is the elephant in the room. No one wants to acknowledge that reserve depletion is profound,' according to a Platt’s coal publication. 'Mining conditions are difficult, and the cost to produce is high,' Stagg said. 'That is a physical fact. It’s not pleasant. Nobody wants to acknowledge it. That is a fact, and companies that ignore that fact will not do so well.'.... The problem of rising costs is a global one. 'Mining costs have risen significantly in recent years – on average by around 9 percent per year since 2005,' the International Energy Agency said in its most recent coal market report. Coal mining companies are going to need to invest more to produce steady quantities of coal. In its 'Coal Information' report for 2012, the IEA said that between 2008 and 2010 it required $7.80 a ton for new production capacity and that those costs would rise to $9.30 a ton going forward. 'Due to strong demand growth, production increased aggressively, causing productivity to decline and increasing mining machinery attrition costs,' said the IEA. 'Moreover, with rapid depletion of existing deposits, new mines have tended to move farther away from export infrastructure and thus incur higher inland transport costs.'"
Cost of mining coal continues to climb
Washington Post, 25 October 2012

"The impact of unconventional fuels like shale oil on the global energy system is still an issue of great uncertainty. Not so much because of the size of the tank (the resource base), but due to the large physical effort necessary to obtain a sizeable supply of this type of fossil fuel. For instance, to exploit tight shale oil formations we need large capital expenditures to obtain relatively low flow rates from many horizontally drilled wells. The developments of all things shale oil were discussed at a seminar organized by [solictors] Allen & Overy and their Future Energy Strategies Group in London on 16 October... There is a wide spectrum of views on the potential for shale oil production in the United States, with the pessimistic end being a maximum of 1.8 million b/d (of which 0.9 million is already in production) from Corelabs, and the optimistic spectrum expecting 3 to 4 million b/d from shale oil in the longer run (2020s). If the more optimistic scenarios become reality the consequence would be a substantial decline in US oil imports, falling from 10 million b/d to 6 or 7 million b/d from 2008 to 2015.... The first presentation about the big picture on shale oil was given by Justin Jacobs, journalist at the Petroleum Economist. He highlighted the importance of the US Eagle Ford & Bakken plays (approx. 27% and 63% of total shale oil supply), and emphasized large production expectations in the short term, with the EIA forecasting 1.5 million b/d shale oil production in 2013.... The key issue according to Jacobs is whether the large existing resources can be developed economically at sufficient scale. The development requires thousands of wells due to the steep decline rate, which necessitates the on-going development of a new services sector in the majority of countries with plays. Similar to calculations by Rune Likvern as well as Arthur Berman and Lynn Pittinger published at the Oil Drum, he cited shale oil development to require high oil prices at 80-90+ USD per barrel. Another relevant point brought forward was that the abundance of shale gas in the US sent natural gas prices plunging. The effect is unlikely to be replicated in the oil market. The reason is the difference in market structure. The oil market is fungible in its imports and exports and requires a high oil price to meet demand. In contrast the US gas market is fairly closed with production being sufficient to meet domestic demand."
Shale Oil: The Latest Insights
The Oil Drum, 24 October 2012

"How's this for a paradox? Iran, an oil power seeking to become a nuclear power, has instead become a natural gas power. According to the latest figures from the Natural Gas Vehicle Knowledge Base, Iran, with the world’s second-largest natural gas reserves after Russia, in 2011 became the world leader in natural gas vehicles with some 2.9 million on the road, narrowly edging Pakistan, which is trailed by Argentina, Brazil and India, respectively. (The United States, which does not subsidize and promote the fuel like other countries do, ranks 16th.) Iran’s reliance on its cleaner fossil fuel seems unlikely to diminish as international sanctions continue to bear down on its nuclear program, which in turn have curbed imports of gasoline; though Iran has large oil reserves, its ability to refine its own gasoline falls well short of its needs. But for ordinary Iranian motorists, natural gas is less a geopolitical or environmental issue than a pocketbook concern. 'This sort of fuel is cheap, and it gets me home every day — that’s what I care about,' said Sasan Ahmadi, a 42-year-old office assistant filling up his Iranian-made Kia Pride at a natural-gas station for his hour commute home. The government began promoting natural gas about a decade ago, and not just in response to American-led sanctions. A big initial reason was the increasingly thick yellow blankets of smog that often engulf greater Tehran and its 12 million inhabitants. That was a result of rising auto sales by domestic carmakers like Iran Khodro and Saipa, which took off as oil revenue began rising sharply around 15 years ago, enriching tens of millions of Iranians. While rising car ownership fit nicely into the government’s narrative of life as ever-improving after the 1979 Islamic revolution, clouds of smog from increased traffic congestion did not. To deal with the pollution, Iranian government planners found an answer in natural gas and its infrastructure, which was already serving the heating and cooking needs of consumers. 'We already had a network of gas pipes in place all over the country,' said Reza Hajj Hosseini, a spokesman for the Iranian Fuel Distribution and Refinery Company, a subsidiary of the state oil company. 'It was relatively inexpensive for us to start offering alternative fuel.' As a means to counter outside economic pressure, natural gas’s usefulness is clear. Because of its inadequate investment in oil refineries, Iran has long been forced to refine a portion of its own crude at refineries in Europe to satisfy rising domestic demand for gasoline. So when the European Union in July barred gasoline sales to the country, natural gas helped to blunt the blow."
In Oil-Rich Iran, Natural Gas Turns Wheels
New York Times, 23 October 2012

"The future of nuclear power in the UK is hanging in the balance, the chief executive of the company charged with building new reactors has said.Vincent de Rivaz, chief executive of EDF Energy, told MPs at a select committee hearing on Tuesday that he had still not made up his mind whether to go ahead with a construction programme that would see the first new nuclear power stations in the UK for decades. He said the company was waiting for further reassurances from the government on what assistance the company will receive. This includes assurances on the disposal of waste and the decommissioning of plants at the end of their life, and a regulatory regime that should favour nuclear power through the provision of long-term 'contracts for difference' that will penalise fossil fuels in favour of low-carbon forms of energy. 'We are on the brink of delivering an infrastructure project similar in scale to the London Olympics. We are poised to deliver immense benefits in terms of jobs, skills and economic growth – locally and nationally,' said de Rivaz, appearing before the parliamentary select committee on energy and climate change. 'But like all investors in capital intensive infrastructure projects we need to have a compelling business case. In this respect our final investment decision requires more progress to be made.' This new regulatory system, known as electricity market reform (EMR), has been criticised by renewable power companies as unwieldy and overly complex. They fear it will favour big companies and squeeze smaller players out of the market. The French state company EDF is the government's best hope of having new nuclear power stations built in the UK, because two German utilities – RWE and E.ON – pulled out of plans to build new nuclear power stations earlier this year. Their consortium, called Horizon, was put up for sale but failed to garner the expected interest."
Future of UK nuclear power hangs in the balance, says EDF boss
Guardian, 23 October 2012

"President Vladimir Putin ordered a rethink of Russia's natural gas export policy to take advantage of rising Asian demand, as giant producer Gazprom launched a huge Arctic field to supply Europe, where demand is falling. Putin has tightened his personal grip on Russia's gas export policy since the formal launch of a European Commission probe into pipeline gas export monopoly Gazprom's pricing under its standard long-term contracts, which are linked to the oil price. In the past year, he has been urging Gazprom to update its strategy and develop capacity to produce liquefied natural gas (LNG) that can be exported by sea. 'The priorities should be supplies to the domestic market, our own economy and our enterprises, as well as diversification of markets to account for the prospective Asian segment and means of delivery,' Putin told a meeting on Tuesday of a Kremlin energy policy commission. Russia, the world's second-largest producer of natural gas after the United States, has for years unsuccessfully tried to secure a deal to sell pipeline gas to China, the world's largest energy consumer. The two countries have failed so far to iron out differences over issues such as price and routes. Russia is now aiming to sell LNG to China, Korea and India."
Putin tells Russian gas exporters to look east
Reuters, 23 October 2012

"Today, oil prices are above the carrying capacity of the OECD economies, that is, they cannot sustain oil consumption levels. This is true both for Europe and for the US. The reason? Oil supply growth is inadequate to meet the needs of all countries, and therefore the non-OECD countries are bidding away the OECD’s consumption. The result: oil prices settle above the carrying capacity of the OECD economies (estimated at $95 Brent for the US), but below the carrying capacity of the non-OECD (estimated at $112-118 Brent). Since the beginning of the Great Recession, OECD consumers – not oil producers–have provided about 56% of the non-OECD’s incremental oil consumption. Now, the US can support oil consumption at about 4% of GDP. Above that, the country will reduce oil demand as consumers seek to rebalance their consumption bundles.... The OECD economies are suffering for a lack of oil. That is, we continue to be in an oil shock and this is adversely affecting the OECD economies. Thus, the Keynsian notion that the weakness of the OECD economies is primarily due to a lack of aggregate demand may be false."
Steven Kopits, Douglas-Westwood, New York
On line comment, Platts 'The Barrel', 22 October 2012

"It takes energy to mine tar sands, frack shale, or drill a deepwater oil well. In the early days of the oil and gas industry—when geologists were chasing large, shallow, onshore deposits—the energy returned on energy invested in exploration and production was astronomical, better than 100 to 1 in many cases. Today that ratio is declining rapidly—it’s less than 5:1 for many unconventional oil and gas plays. Long before we get to a 1:1 ratio, the costs of production will mount and companies will start trying to make ends meet by selling off drilling leases, arbitrage, and creative accounting. In fact, we’re already seeing that kind of behavior. This evidence suggests that fossil fuels are losing their 'cost efficiency' quite rapidly... The high oil prices of the past few years are not primarily due to speculation, but to depletion of the cheap-to-produce oil that fueled economic growth in the 20th century. Today the industry needs high prices—in the range of $90 to $100 per barrel—to justify developing new production capacity in deepwater, tar sands, and tight (fracked) reservoirs. Meanwhile we’ve learned over the past few decades that when prices stray into the $100 region for very long, the economy stalls or contracts. Now, I’m not suggesting that oil prices will never fall. They will if demand crashes because of weakness in the broader economy. What we won’t see again are low oil prices in the context of a growing economy and growing demand. That means that, effectively, oil prices have become a governor on economic growth. And with each passing year, as the low-hanging fruit of conventional oil resources are burned, the dial clicks one more notch in the direction of zero growth. A lot of people will say, 'What’s the problem? Technology can work wonders. Just look at the increasing production from the Bakken shales in North Dakota!' But fracking / horizontal drilling technology has been around for decades; the only reason it’s being used in the Bakken is that high oil prices can justify it. These are unconventional resources that the oil industry wouldn’t bother with if it had any decent plays to pursue. Per-well decline rates are very high and the Montana portion of the Bakken is already seeing falling production; the North Dakota portion will likely follow shortly. Depletion is relentless and it leads to the problem of declining resource quality, for which technology is only a partial solution."
Richard Heinberg
Asking Richard Heinberg: Is the world running out of oil?
Washington Times, 22 October 2012

"Dozens of wells drilled this year across rural Ohio are quietly pumping out the answer to the U.S. energy industry's most loaded question: Is the Utica shale formation, touted as a potentially $500 billion frontier, a boom or a bust? Yet the answer is likely to remain concealed for some time. More than a year after Chesapeake Energy Corp Chief Executive and top Ohio driller Aubrey McClendon declared the Utica to be 'the biggest thing to hit Ohio since the plow,' investors, landowners and even the federal government are still in the dark over the true pace of oil and natural gas production in the state. That's because Ohio is one of the nation's least transparent states when it comes to energy data - a distinction the industry worked to maintain this year, according to a review of legislative documents and interviews with state and industry officials. Secrecy still surrounds the most eagerly anticipated drilling campaign in the country, one that began in the middle of last year when McClendon boasted that the 1.3 million acres of land the company had leased could hold oil and gas worth $20 billion. Months later, with drilling into the 8,000-foot-deep (2,500- meter) formation just starting, he said the Utica - centered under Ohio but reaching seven other states and Canada - probably held hydrocarbons worth $500 billion. By this spring, a new energy bill being crafted by lawmakers initially included a clause that would have allowed regulators to publicly disclose quarterly energy production data. The current requirement calls for annual reporting. But the clause was struck from the bill after discussions with the industry, a Reuters investigation has found. Instead the law, which took effect in August, explicitly bars the government from publishing the quarterly figures it now obtains. Almost every other energy-producing state releases production data and drilling results on a monthly basis; even Saudi Arabia now self-reports its once-secret production volumes once a month. The latest Ohio figures for 2011 provide information on only five wells. The volume of oil and gas pumping out of dozens of new wells drilled this year will not be available until April 2013, as much as 15 months after they were drilled. In Ohio, companies control the flow of information, and their selective disclosure is creating doubts about Utica's ultimate bounty. It remains unclear whether the Utica will be a major winner for companies who have invested billions of dollars leasing land and drilling there, and for the state's finances, or if it will turn out to be a relative flop. Drillers such as Devon Energy Corp and Anadarko Petroleum Corp have released information on only about half the 33 wells now producing in the Utica, according to a Reuters review of company filings and state data. The data is often limited, and the companies have no regulatory obligation to divulge the results of every well they drill. 'It gives investors a little bit of concern because you don't have any independent, third-party reporting on any of this data,' said Leo Mariani, an analyst at RBC Capital Markets. 'You are reliant on the companies coming out with the data as they see fit to report it. It adds a level of incremental ambiguity.' The growing concern among many is that the Utica, far from being the oil-rich patch originally believed, is largely filled with natural gases and related liquids, whose prices have slumped to near break-even rates for drillers. Some recall the dramatic boom and bust of Michigan's own shale play two years ago, which fizzled in just months after promptly reported well data showed disappointing results. The lack of transparency risks testing shareholders' patience for returns on the billions of dollars spent leasing land across the state. It may also put drillers at odds with landowners. 'The industry has lobbied very heavily in Columbus to keep this reporting requirement down to an annual basis,' said Ohio Representative Mark Okey, a Democrat, who voted against the bill. 'How are people supposed to understand what their potential royalties might be if there is not reporting on a more frequent basis?' Chesapeake led the charge into Ohio, and others quickly followed. France's Total paid $2.3 billion to buy a share of Chesapeake's holdings, while major oil companies such as Exxon Mobil, Chevron and Anadarko joined in. Minors like Gulfport Energy Corp and Rex Energy Corp are also present. Since then results have been mixed. One of the first five Chesapeake wells in the Utica - called Buell 10-11-5 8H - spewed an impressive 9.5 million cubic feet per day of natural gas, according to data released by the Ohio Department of Natural Resources (DNR) in April. But with gas prices trading this spring at their lowest in a decade, the news spurred little enthusiasm. In August, Devon said results from two wells in the western, oil-rich sections of the Utica were not encouraging. Well permits, which hit a record high in August after doubling since the start of the year, dipped in September. Marathon Petroleum, the Midwest's largest refiner, recently made changes at its 78,000 barrel-per-day refinery in Canton, Ohio, anticipating increased Utica crude output. So far it only processes 1,500 bpd of Utica oil and condensates. 'I would say the growth has been slower than we originally anticipated,' Donald Templin, Marathon's vice president and CFO, told an energy conference last month. Even Chesapeake has muted its trumpet. In an SEC filing this May, the company said it was planning to drill a significant number of wells in Utica's 'oil window' over the rest of this year, referring to an area that is expected to hold mostly oil. Three months later it said it 'continues to focus on developing the wet gas and dry gas windows,' with no mention of oil. Chesapeake declined to comment on the change in description. Early comparisons between the Utica and the prolific Eagle Ford shale play in Texas are looking increasingly tenuous. In 2011, one year after shale drilling commenced in earnest in the Eagle Ford formation, oil production had surged tenfold to nearly 120,000 barrels per day, state data show. It has pumped almost 300,000 bpd so far this year. Ohio pumped around 13,000 bpd last year, a volume that has been almost unchanged for a decade, according to the U.S. Department of Energy. More recent figures are unavailable. 'Initial indications are that it is not quite living up to its promise,' said Phil Weiss, an energy analyst at Argus Research in New York. 'The Utica does not appear to be comparable to the Eagle Ford, but there is so little data.'.... Most states are sensitive to the risk of publicly releasing information on energy activities by private companies, especially on early drilling results that may tip competitors to a new hot spot. To ensure that companies are not giving away any competitive advantage too quickly, they offer a confidentiality period of three to six months before publishing any so-called initial production data. Once a well is declared commercially viable and enters routine production, most states see little need for secrecy. In Louisiana and North Dakota, well-specific output is reported monthly. In Pennsylvania, home to the Marcellus shale that overlaps the Utica, it is every six months. The case of Michigan's Collingswood shale provides a stark example of the power of data in the energy sector. In January 2010, Encana Corp drilled the State Pioneer 1-3 HD1 well in Missaukee County, one of Michigan's first shale wells. During the first production test that April, it gushed gas at an impressive 3 million cubic feet per day. Because the 90-day confidentiality period had expired, those results were made public almost immediately, prompting a frenzy of leasing that caused land prices to spike as much as 100-fold. Output quickly dropped to less than half the initial rate, according to reports that were released in June. 'After 30 days or so the trend was that the well had peaked and it was declining,' said Larry Organek, an engineer with Michigan's Department of Environmental Quality. The well was plugged, and the leasing boom came to an abrupt halt."
Insight: Is Ohio's 'secret' energy boom going bust?
Reuters, 22 October 2012

"Chesapeake ran 38 rigs in the region. All told, it has sunk more than 1,200 wells into the Haynesville, a gas-rich vein of dense rock that straddles Louisiana and Texas. Fed by a gold-rush mentality and easy money from Wall Street, Chesapeake and its competitors have done the same in other shale fields from Oklahoma to Pennsylvania. For most of the country, the result has been cheaper energy. The nation is awash in so much natural gas that electric utilities, which burn the fuel in many generating plants, have curbed rate increases and switched more capacity to gas from coal, a dirtier fossil fuel. ... And companies like fertilizer and chemical makers, which use gas as a raw material, are suddenly finding that the United States is an attractive place to put new factories, compared with, say, Asia, where gas is four times the price..... But while the gas rush has benefited most Americans, it’s been a money loser so far for many of the gas exploration companies and their tens of thousands of investors. The drillers punched so many holes and extracted so much gas through hydraulic fracturing that they have driven the price of natural gas to near-record lows. And because of the intricate financial deals and leasing arrangements that many of them struck during the boom, they were unable to pull their foot off the accelerator fast enough to avoid a crash in the price of natural gas, which is down more than 60 percent since the summer of 2008. .... Although the bankers made a lot of money from the deal making and a handful of energy companies made fortunes by exiting at the market’s peak, most of the industry has been bloodied — forced to sell assets, take huge write-offs and shift as many drill rigs as possible from gas exploration to oil, whose price has held up much better. Rex W. Tillerson, the chief executive of Exxon Mobil, which spent $41 billion to buy XTO Energy, a giant natural gas company, in 2010, when gas prices were almost double what they are today, minced no words about the industry’s plight during an appearance in New York this summer. 'We are all losing our shirts today,' Mr. Tillerson said. 'We’re making no money. It’s all in the red.' Like the recent credit bubble, the boom and bust in gas were driven in large part by tens of billions of dollars in creative financing engineered by investment banks like Goldman Sachs, Barclays and Jefferies & Company. After the financial crisis, the natural gas rush was one of the few major profit centers for Wall Street deal makers, who found willing takers among energy companies and foreign financial investors. Big companies like Chesapeake and lesser-known outfits like Quicksilver Resources and Exco Resources were able to supercharge their growth with the global financing, transforming the face of energy in this country. In all, the top 50 oil and gas companies raised and spent an annual average of $126 billion over the last six years on drilling, land acquisition and other capital costs within the United States, double their capital spending as of 2005, according to an analysis by Ernst & Young. Now the gas companies are committed to spending far more to produce gas than they can earn selling it. Their stock prices and debt ratings have been hammered. 'We just killed more meat than we could drag back to the cave and eat,' said Maynard Holt, co-president of Tudor Pickering Holt & Company, a Houston investment bank that has handled dozens of shale deals in the last four years. 'Now we have a problem.'.... The industry was also driven to keep drilling because of the perverse way that Wall Street values oil and gas companies. Analysts rate drillers on their so-called proven reserves, an estimate of how much oil and gas they have in the ground. Simply by drilling a single well, they could then count as part of their reserves nearby future well sites. In this case, higher reserves generally led to a higher stock price, even though some of the companies were losing money each quarter and piling up billions of dollars in debt. Just as in the earlier real estate bubble, the main players publicly predicted success even as, privately, their doubts were growing, court documents show.... In hindsight, it should have been clear to everyone that a bust was likely to occur, with so many new wells being drilled and so much money financing them. But everyone was too busy working out new deals to pay much heed. The bust has certainly hit the Haynesville hard. Some local landowners, having spent their initial lease bonuses, are now deeply in debt. Local restaurants and other businesses are suffering steep losses now that so many drillers have left town.”
After the Boom in Natural Gas
New York Times, 20 October 2012

"Over the next five years, India plans to start building a safe nuclear reactor that can be installed in the heart of Delhi or Mumbai without posing danger to people and environment. The 300-MWe advanced heavy water reactor (AHWR), whose construction will start in the 12th plan period, would be so safe that it can be erected in the heart of any city, said S A Bhardwaj, director (technical), Nuclear Power Corporation of India Ltd. The design of AHWR is such that it does not need any exclusion zone, which is currently a standard practice in nuclear power plant. NPCIL currently acquires 600 acre of land for setting up a nuclear power plant as a large tract of land is used to keep a 5-km exclusion zone around the main plant. Acquisition of large tracts of land for nuclear power plants has become a contentious issue in the last few years with intense opposition registered in Jaitapur in Maharashtra, Gorakhpur in Haryana and Haripur in West Bengal. The opposition forced NPCIL to shell out a fatter compensation package to oustees in Jaitapur and Haryana, but the issue has not been sorted out yet. The first AHWR reactor – with thorium for fuel -- will be used to test new technologies on safety as well as on thorium fuel cycle, Bhardwaj said. It will be India's first step to embrace thorium as the nuclear fuel of choice. India has thorium in abundance."
Coming: Safe N-plants that cities can host
Deccan Herald, 19 October 2012

"The United States supports the Southern Corridor project to weaken the monopoly on gas supplies to Europe, U.S. Secretary of State Hillary Clinton said. Giving a lecture on Energy Diplomacy in the 21st Century at Georgetown University on Thursday, Clinton said that one of the focuses 'of our energy diplomacy is helping to promote competition and prevent monopolies.' 'Consider what's been happening in Europe. For decades, many European nations received much of their natural gas via pipeline from one country: Russia,' Clinton said. 'But that has now changed in part because of the increased production here in the United States, there's a lot more natural gas in the global market looking for a home. Plus, there's natural gas in the Caspian and in Central Asia. They'd like to sell it, and Europe would like to buy it. But first, they need to build pipelines. And that's the goal of a project called the Southern Corridor, which would stretch across the European continent. The United States has been an active partner to all those participants to help move this project to fruition,' Clinton said. The Southern Corridor project calls for building gas pipelines from the Caspian and Central Asia to Europe, bypassing Russia. Clinton said the U.S. is helping to move this project along because 'we want to see countries grow and have stronger economies, but also because energy monopolies create risks.' 'Anywhere in the world, when one nation is overly dependent on another for its energy that can jeopardize its political and economic independence. It can make a country vulnerable to threats and coercion. And that's why NATO has identified energy security as a key security issue of our time. It's also why we created the U.S.-European Union Energy Council to deepen our cooperation on strategic energy issues. It's not just a matter of economic competition, as important as that is. It's also a matter of national and international security,' Clinton said."
U.S. actively helping gas pipeline project to bypass Russia - Clinton
Interfax-Ukraine, 19 October 2012

"Wave energy farms installed on the outskirts of the UK Continental shelf could generate energy at half the cost of nearshore sites currently being developed, according to new research. The Carbon Trust yesterday published a report claiming to include the most detailed analysis to date of where wave power farms could best be developed in the UK. The paper estimates up to 42 terawatt hours of energy could be extracted from UK waters each year, equating to 11 per cent of the UK's current power production. Previous research by the Carbon Trust has found the levelised cost of energy for a commercial scale wave energy farm based on current technologies would stand at around 40 pence per kilowatt hour. However, the report published today found that the most attractive sites could generate power at half the cost of projects being developed today. The cheapest areas for development were identified at the edge of the Rockall Trough to the west of Scotland and at the edge of UK waters off south-west England. Both of these areas are around 100 kilometres from shore and in water a few hundred metres deep, so would require significant innovation to become a reality. They could also face objections from other sea users such as fishermen. However, Stephen Wyatt, head of technology acceleration at the Carbon Trust, said developing offshore sites could be technically feasible with the help of further research and development."
Innovation could halve cost of UK wave power
BusinessGreen, 18 October 2012

"Wall Street giant Goldman Sachs , one of the biggest banks in commodity trading, has called an end to the oil price super-cycle, reversing years of bullish recommendations, citing a rise in unconventional oil supplies in the United States and Canada. Goldman has been highest predictor among major oil price forecasters but said on Thursday 'long-dated' or five-year forward Brent crude may be anchored at about $90 a barrel. The bank also cut its 2013 Brent forecast to $110 a barrel from $130. Brent trade near $112 on Thursday. 'Over the past three years long-dated Brent crude oil prices have shown signs of stabilizing around $90 per barrel. This suggests a return to the pricing regime that characterized the crude oil market in the 1990s," Goldman's analysts Jeffrey Currie and David Greely said in a note. 'We expect that going forward long-dated oil prices will be anchored by the potential for substantial growth in crude oil supplies from U.S. shale, Canadian oil sands, and the deepwater. Net, we see a return to a structurally stable, but cyclically tight market,' they said. The U.S. shale oil boom has seen the country's oil production rised to multi-decade highs, catching many industry watchers surprise, reshaping global oil flows. The United States is now importing less crude from West Africa and the Middle East, leaving more volumes for booming demand in Asia. Some expect North America including Mexico and Canada to become a net oil exporter..... U.S. crude oil production has risen above 6.6 million barrels per day, the highest since 1995, thanks largely to new technologies that have allowed shale hydrocarbons to be produced more economically. The development has fueled ideas of North American energy independence and a subsequent shift to lower oil prices. 'The growth will likely put a cap on long term oil prices, making any runaway increase in average prices much above $110-$115 per barrel, beyond geopolitical or economic reasons, increasingly difficult,' said Amrita Sen at thinktank Energy Aspect. Sen previously worked as energy analyst at Barclays , which together with Goldman, Deutsche Bank, Morgan Stanley and JP Morgan, are the biggest banks in commodities. All now have sharply cut their price outlooks for 2013. Banks earn money in commodities by selling hedging services to clients. Goldman's Thursday note carried page section devoted to recommendations to oil consumers, producers and refiners. Goldman this month saw significantly lower revenues from commodities drag down its trading businesses in the third quarter. Sen said that oil was unlikely to fall much below $90 a barrel because lower prices make development of new shale projects uneconomic. 'If we move away from $90 plus Brent prices, non-OPEC supply will be struggling again,' she said."
Oil bull Goldman sees end to rising prices
Reuters, 18 October 2012

"Middle Eastern and North African companies planning $740 billion in energy projects will need to tap foreign export credit agencies and local banks as commercial lending to the industry slumps to a nine-year low. Loans for facilities such as refineries and power plants may dwindle to $13 billion this year, down from a record $44 billion in 2010, as European banks curtail exposure to the region, said Arab Petroleum Investments Corp., a multilateral investment bank. Companies in 18 nations from Morocco to Oman have paid an average of 190 basis points above the London Interbank Offered Rate for loans this year, up from an average of 157 basis points from 2007 through 2011, data compiled by Bloomberg show. Saudi Arabian Oil Co., known as Saudi Aramco, and Qatar Petroleum are already turning to export credit agencies, state-backed lenders that finance purchases of equipment and materials from their countries. Political upheaval from the so-called Arab Spring has made global banks more wary of the region. Bonds hold scant appeal as an alternative to loans because many energy companies in the Middle East and North Africa lack ratings. .... States supplying at least 52 percent of global crude want to invest $740 billion in energy projects through 2017, Apicorp said, to boost output and meet local demand for oil and natural gas. Iraq alone needs to invest $16 billion a year to fulfill its potential for doubling crude production by 2020, the International Energy Agency said in a study published Oct. 9. Oil-producers, enriched by prices averaging more than $112 a barrel in London this year, can pay for much of this targeted investment from their export earnings and internal funds. They’ll need to borrow the rest, as will energy and utility companies in nations with negligible oil and gas reserves. The last time combined loans for energy projects were as low as Apicorp projects for this year was in 2003, at $10 billion.... Saudi Arabia, propelled by record oil revenues from crude prices that have risen 6 percent this year in London, is bucking the downturn in lending, with syndicated loans more than doubling so far in 2012. Companies funding projects in the world’s biggest oil exporter raised almost $12 billion in loans this year from banks including Banque Saudi Fransi and Samba Financial Group (SAMBA), according to data compiled by Bloomberg. That’s up from about $5.3 billion at the same time in 2011."
Aramco Draws on Export Finance as Bank Loans Wither: Arab Credit
Bloomberg, 18 October 2012

"The European Commission has watered down proposals to reduce the indirect climate impact of biofuels, but is sticking to a strict new limit on the amount of food crops that can be used to make fuel, draft legislation showed. The late changes mean that fuel suppliers will not, as originally planned, be held accountable for the indirect emissions biofuels cause by displacing food production into new areas, resulting in forest clearance and peatland draining known in EU jargon as ILUC. 'The 5 percent limit is still in, but the ILUC factors are now purely for reporting purposes and not part of the sustainability accounting rules for biofuels,' one EU source involved in the discussions said. The plan to limit use of crop-based biofuels to 5 percent of total EU transport energy demand by 2020 represents a virtual halving of the bloc's current goal, which mandates a 10 percent share of renewables in transport by the end of the decade."
EU Commission weakens biofuel rule changes: draft
Reuters, 16 October 2012

"The world could see a gradual easing of oil prices over the next five years due to sluggish economic growth and rising energy efficiency and as production increases steeply in Iraq and North America, the West's energy watchdog said on Friday. The International Energy Agency, which advises industrialised nations on energy policy, cut its global oil demand growth projection for 2011-2016 by 500,000 barrels per day (bpd) compared to its previous report in December 2011. As a result, the pressure on OPEC to produce more oil will ease dramatically and the cartel will have to cut production to no more than 31 million bpd until 2017 to balance global demand. It has been producing between 31 and 32 million bpd this year. 'Expectations of economic growth through the forecast period have been reduced amid persistent OECD debt concerns, especially in the euro zone. Even China, the main engine of demand growth in the last decade, is showing signs of slowing down,' the IEA said in its Medium-Term Oil Market Report. 'Readings suggest a gradual easing of prices over the forecast period.' London Brent crude prices fell after the IEA report, trading down more than a dollar a barrel, below $115 at 0930 GMT."
Oil prices to ease on slow economy, higher output
Reuters, 12 October 2012

"Npower and British Gas fuelled fears of a 'cold winter' for more households after they raised gas and electricity prices. Npower announced it was raising average gas tariffs by 8.8pc and 9.1pc for electricity on Friday afternoon - a �9 a month rise for its 3m customers. Hours earlier, British Gas increased energy costs for 8.5m customers by 6pc, adding �80 to the average dual fuel bill. Both companies blamed rising costs largely outside their control, but with food and some mortgage costs also on an upward path there were fears about how the elderly and hard-up will cope with the latest rises."
Npower and British Gas price rises fuel fears of 'cold winter' for households
Telegraph, 12 October 2012

"BP faces a major new threat after the president of Azerbaijan accused it of making 'false promises' about production volumes and warned it to expect 'serious measures'. The oil major made 'grave mistakes' that had resulted in an $8.1bn (�5bn) shortfall in the government’s revenues, President Ilham Aliyev said in a dramatic televised attack. The embattled company was accused of failing to meet its output targets at a giant field in the country, which accounts for 4pc of its global oil production. ... President Aliyev said the BP-led consortium had repeatedly failed to meet output targets for ACG, producing 40.3m tons against a forecast of 46.8m tons in 2009, 40.6m tons of a 42.1m forecast in 2010, and just 36m tons of 40.2m forecast in 2011."
Azerbaijan threatens BP with 'serious measures' over oil revenue shortfall
Telegraph, 11 October 2012

"Iraq is considering replacing ExxonMobil with Russian companies at the supergiant West Qurna-1 oilfield, after the U.S. major angered Baghdad by venturing into Kurdistan, according to a media report citing industry sources. The northern Kurdish region has riled Baghdad by signing deals with foreign oil majors, such as Exxon, Total and Chevron, contracts the central government rejects as illegal... On Wednesday, Putin, a vocal opponent of the U.S.-led invasion of Iraq in 2003, called for Russia to strengthen its presence in the OPEC oil producer state at the meeting with al-Maliki."
Iraq wants Russians to replace Exxon at West Qurna: report
Reuters, 11 October 2012

"Iraq officially stepped back on Wednesday from its ambitious plans to more than triple its oil production by 2017, but it remains more optimistic than the world’s leading global energy monitor about how fast and how high it can boost output. Baghdad’s latest targets show that Iraq, which is now pumping some 3.4 million barrels a day, is eager to be a major player on the world energy map despite decades of wars and sanctions. It recently nudged out Iran as OPEC’s second-largest producer, and further production gains would solidify its place behind the bloc’s top producer, Saudi Arabia. Speaking at a ceremony in Baghdad to mark the release of the International Energy Agency’s less rosy outlook for Iraq’s energy sector, Iraq’s Deputy Prime Minister on energy Hussain al-Shahristani predicted that the country’s oil production will reach 5 million to 6 million barrels per day in 2015. He envisions that rising to 9 million to 10 million barrels per day by 2020, a level that could be sustained for 20 years. Iraq had previously been targeting production capacity of 12 million barrels per day by 2017. Many experts consider that target unrealistic. 'The conclusion of our studies and those of the independent consultants engaged in the Ministry of Oil are that it is feasible and desirable for Iraq to raise its oil production to about 9 to 10 million barrels per day by 2020,' al-Shahristani added, without giving reasons for adjusting the oil targets. The Paris-based IEA issued Tuesday a mid-range forecast envisioning oil production of 6.1 million barrels a day by 2020 and 8.3 million barrels a day by 2035. Encouraged by improvement in the security situation, Iraq started in 2008 to attract international oil companies to develop its vast untapped oil and gas reserves to bring in sorely needed cash for postwar reconstruction. Top among major oil companies are the U.S.’s Exxon Mobil, Anglo-Dutch Royal Dutch Shell, the U.K.’s BP, China’s CNPC and Russia’s Lukoil. Since then, Iraq has awarded 12 oil deals to develop about 65 percent of its 143.1 billion barrels of proven oil reserves. Three other deals to develop major gas fields were also awarded. As a result, Iraq’s daily production and exports have jumped to levels not seen since the late 1970s or early 1980s. It is now producing 3.4 million barrels a day, up from nearly 2.4 million a day in 2009, and its daily exports averaged 2.6 million barrels a day last month. Oil revenues make up nearly 95 percent of the budget. But the IEA said Iraq needed to sort out internal issues in order for its predictions to come true. Among the most troublesome is the lack of oil-related infrastructure like pipeline networks, storages and export terminals. Another is the dispute between Iraq’s central government and the self-ruled northern Kurdish region over rights to develop natural resources. The IEA report also noted that boosting Iraq’s oil production is crucial for international markets, as Iraq is expected to account for nearly half of the expected growth in global oil output in the current decade. A more pessimistic IEA forecast in the same report sees Iraqi oil output rising to just 4 million barrels a day in 2020 and to 5.3 million barrels in 2035. In its high case, IEA says that oil production could reach 9.2 million barrels in 2020."
Iraq retreats from ambitious oil plans, says will still play key role in world energy market
Associated Press, 10 October 2012

"Iraq’s contribution to the world’s oil supply will significantly increase to more than 8 million barrels a day by 2035, outstripping its current output, the International Energy Agency said on Tuesday. In its 'Iraq Energy Outlook' report, the IEA said the country’s oil and gas reserves would be key to its own future, as well as playing an essential role in stabilizing the global energy markets. It is expected that Iraq will dominate oil supply over the coming decades and will become the world’s largest oil exporter after Russia by the 2030s. Iraq will also become the key supplier to the fastest growing economies of Asia, the report said. 'Developments in Iraq’s energy sector are critical to the country’s prospects and also for the health of the economy,' Fatih Birol, chief economist and the report’s author said. He went on to warn, however: 'Success is not assured and failure to achieve the anticipated increase in Iraq’s oil supply would put global markets on course for troubled waters.' The report notes that one of the biggest obstacles to Iraq’s more prominent role is the supply of electricity in the country with 'supply insufficient to meet demand' and building a modern electricity system is recognized by the report as an 'immediate priority.' Iraq would need to invest over $530 billion in its energy sector for the country to realize its potential by 2035, according to the report, but it would stand to gain much more than its investment with receipts predicted to top $5 trillion over that period."
Iraq Poised to Become World’s Largest Oil Exporter: IEA
CNBC, 9 October 2012

"Iraqi oil output is set to more than double over the rest of the current decade, rising to 6.1 million b/d by 2020 and reaching 8.3 million b/d in 2035, the International Energy Agency said Tuesday in a special report on the Middle East country. This 5.6 million b/d increase between 2011 and 2035, the central scenario in the report, makes Iraq by far the largest contributor to global oil supply growth, the IEA said, adding that Iraq was expected to account for some 45% of anticipated growth in global output. The concentration of super-giant fields in the south of the country around Basra will provide the biggest production boost, the IEA said, although it added that substantial growth could also come from the north if the Kurdistan Regional Government and Baghdad resolve their differences over administration of the oil sector. Boosting output capacity from the current 3 million b/d will require cumulative energy investment of more than $530 billion or more than $25 billion annually -- three times the estimated $9 billion spent in 2011 -- over the period, the IEA said. This could lead to almost $5 trillion in oil export revenues between now and 2035, an annual average of $200 billion, it said.... But the IEA warned that delayed investment could cost the country $3 trillion in lost national wealth and a much lower trajectory for oil production, which would reach just 4 million b/d in 2020 and 5.3 million b/d in 2035. It said the anticipated increase could be at risk if efforts to modernize and reform the country's legal framework and institutions were delayed or frustrated, or if fluctuations in oil prices and revenues were to result in irregular capital spending. 'Adequate rigs will need to be available at the right time. Early investment in a challenging project to bring up to 8 million b/d of water inland from the Gulf to Iraq's southern fields will be essential to support oil production and to reduce potential stress on scarce freshwater resources,' it said.... The IEA said successful development of Iraq's hydrocarbon potential and effective management of resulting revenues would be crucial in fueling the country's social and economic development. On the other hand, it said, 'failure will hinder Iraq's recovery and put global energy markets on course for troubled waters.'"
IEA sees Iraqi oil output doubling to 6.1 mil b/d in 2020
Platts, 9 October 2012

"Iraq’s oil output will more than double from 2.6 million to 6 million barrels a day (b/d) by the end of the decade. This is 45pc of world oil supply growth over these years. It will reach 8 million b/d by 2035. By then, Iraq will have overtaken Russia to become the world’s second biggest oil exporter – supplying China with 2 million b/d in a modern marine revival of the silk trade – and earning $200 billion a year in revenues. It will also be a major gas exporter....As the IEA says, this will require $530 billion of new investment. 'The obstacles are formidable: political, logistical, legal, regulatory, financial, lack of security and insufficient skilled labour,' it said.... The IEA has long warned that the world faces a horrendous energy crunch before long as the industrial revolutions of Asia come of age, with China alone adding 20 million cars a year already. Iraq may help to plug part of the gap – with great help from North American shale oil and gas, and perhaps Chinese shale in the future – but I doubt that it will alleviate the full strain. For now, note that Brent crude is trading at $113 even though Europe is stuck in slump, much of Asia has slowed sharply and is in a quasi-recession, and the US is so weak that the Fed has just launched QE3."
Ambrose Evans-Pritchard - Will Iraq’s energy boom postpone peak oil yet again?
Telegraph (blog), 9 October 2012

"Retail gasoline prices in California hit an all-time high on Sunday of $4.65 a gallon of regular, exceeding the 2008 high. Several factors contributed in the sudden increase in prices but the proximate cause was troubles at a southern California refinery that was out of production for most of the week, coupled with problems at other refineries that reduced output. California, of course, is isolated from the rest of the country and requires special gasoline blends in order to meet air quality requirements. Many major retailers such as COSTCO were forced to close their gasoline pumps as they could not acquire sufficient supplies. The problem is expected to be over this week as other large refineries have delayed maintenance and outages are expected to be repaired. The California problems contributed to a 3 cent a gallon increase in the average retail price of regular in the US to $3.81 a gallon. This is nearly 40 cents a gallon higher than at this time last year. While the West Coast, Alaska, and Hawaii are over $4 a gallon so are New York and Connecticut in the east. Analysts are starting to say that US gasoline consumers, like Europeans, are becoming used to high prices, have made whatever adjustments are necessary and are not expecting much in the way of repercussions in next month's elections."
Peak oil review
ASPO, 8 October 2012

" ... the exciting frontiers that have opened up in the past decade have provoked breathless reappraisals of the world's oil and gas potential, fuelling this rhetoric of abundance. One example of this revisionism is a recent study by Leonardo Maugeri, the former head of strategy at Italian major Eni, which sought to assess recent increases in global capacity. His conclusion: 'Contrary to what most people believe, oil supply capacity is growing worldwide at such an unprecedented level it might outpace consumption.'... But it is a controversial view. Writing in Petroleum Intelligence Weekly, where Mr Maugeri's essay originally appeared, Sadad al-Husseni, a former head of exploration at Saudi Aramco, the state oil company begged to differ. ... He said Mr Maugeri underestimated the rate of global oil capacity decline, citing International Energy Agency data showing decline rates of 6/7 per cent per year for oil fields that had passed their production peak - a rate it predicted would rise to 8.6 by 2030. Others agree that the issue of accelerating depletion rates is critical. 'Existing reservoirs are depleting three times faster than 20 years ago,' says Claudi Santiago, chief operating officer of First Reserve Corp, the energy-focused private equity group. 'The world is squeezing these reservoirs at a faster rate.'.... the new reserves that need to be mobilised are far more expensive to develop than what came before... The obstacles are epitomised by Royal Dutch Shell's travails in Alaska. The Anglo-Dutch major has spent $4.5bn and seven years preparing for an ambitious programme to explore in the Arctic Chukchi and Beaufort Seas, but has yet to complete a single well. Hurdles have ranged from encroaching sea ice to a flurry of legal challenges by green groups and indigenous peoples. Shell's troubles show that it is far too early to declare victory in the campaign for energy security. 'A lot ... needs to happen over the next 10 years to bring on the resources the world needs,' says Mr Santiago, 'If we don't hurry up, we're going to run out of time.'"
The story of plenty is yet to be realised
Financial Times, 8 October 2012

"Businesses have urged the Government to set a target of slashing carbon emissions from the power sector by 2030 to stimulate investment that will drive growth. Companies and investors have joined trade unions, environmental groups and industry bodies in warning George Osborne that support for gas power into the 2030s is undermining investment in Britain’s electricity infrastructure. In an open letter to the Chancellor on the day that he addresses the Conservative Party conference, they demand a target written into legislation to decarbonise the power sector to unleash a necessary �110 billion investment in electricity supplies. It is the latest twist in the battle over energy policy, ignited when Ed Davey, the Liberal Democrat Energy Secretary, saw off Tory calls for significant cuts to onshore wind farm subsidies — at the price of support for gas up to and beyond 2030. The Government’s climate advisers have warned that support for future gas plants without technology to cut emissions is not compatible with climate change legislation, and is harming investment in low-carbon power such as renewables and nuclear. Ed Miliband, the Labour leader, has backed a 2030 target for the power sector, and the Liberal Democrats support a target under secondary legislation."
Gas power 'is undermining energy sector'
Telegraph, 7 October 2012

"Britain faces the possibility of power blackouts and even higher electricity prices within three years as a result of coal-fired and other polluting power stations being phased out more quickly than expected. The warning, in a report by the energy regulator, Ofgem, could embolden the government to trigger an early 'dash for gas' which critics fear would mean higher carbon pollution for decades to come. Ofgem believes that the spare generating capacity available to cope with peaks and troughs in power demand will fall from the current level of 14% to just 4% as early as 2015."
Blackouts possible as coal power stations go offline early, warns Ofgem
Guardian, 5 October 2012

"One of the favourite bidders for a multi-billion pound project to build a new generation of nuclear reactors in Britain has pulled out of the race. French engineering group Areva was expected to table a bid, along with the China Guangdong Nuclear Power Corporation, for the much-vaunted Horizon joint venture but did not make a final offer by a deadline on Friday, it was reported on Tuesday night. Areva and its Chinese partner were seen as one of the most credible bidders for the programme, which could see up to six nuclear reactors built in Britain. A spokesman for Areva refused to comment on the reports. The withdrawal of the Franco-Chinese consortium narrows the field down to a two-horse race between a group led by Hitachi of Japan and Westinghouse Electric, which is owned by Toshiba. Horizon owns two vacant reactor sites, in Wylfa in Anglesey and Oldbury in Gloucestershire. A winner is due to be announced within the next few weeks for the project, which was put up for sale in March after Germany’s RWE and E.ON scrapped plans to build nuclear reactors in Britain. The two companies back-tracked after the German government’s decision to phase out gradually nuclear power generation following the Fukushima disaster in Japan. The decision by Areva and China Guangdong not to table a final bid is expected to raise fresh questions over who will be able to bank-roll the UK’s plans for new nuclear reactors. It was widely believed that only Chinese energy companies had the funds to meet the estimated �30bn needed to build six reactors on the Horizon sites."
Favourite for UK nuclear reactor contract ends bid
Telegraph, 3 October 2012

"The amount of petrol sold on UK forecourts has slumped this year, official figures have shown, as cash-strapped motorists cut down on their journeys.According to the Department of Energy and Climate Change (DECC), almost 500 million fewer litres of petrol were sold between April and June compared to the same period last year. The fall came despite a fall in prices compared to the preceding quarter. For the whole of the first half of 2012, the statistics show that more than two billions fewer litres of petrol and diesel were sold on forecourts compared to the same period in 2008 – just before recession took grip... Yesterday, research from Moneysupermarket revealed that an increasing number of motorists are sacrificing going out and shopping for clothes to help keep their cars on the road. Nearly three-quarters admitted to cutting back on spending to support the cost of running car as a combination of higher petrol costs and car insurance take their toll. Unleaded prices have gone up by 47 per cent in five years while diesel prices are up 49 per cent, AA statistics show. At the same time, car insurance costs have gone up by roughly 60 per cent, according to confused.com data. The DECC figures for petrol sales lay bare the burden carried by drivers since the financial crisis struck. In the first six months of 2008, before recession hit the UK, retail sales of petrol and diesel reached 18.97billion litres. In the first half of this year, retailers sold 16.7 billion litres - a fall of 12 per cent. Petrol sales in particular suffered in the second quarter of the year, dipping more than ten per cent compared to just the previous three months. Fuel buying was turbulent in March and April, when the threat of tanker strike action spooked British motorists into panic buying fuel and distoring the month-on-month figures."
Proof recession is forcing drivers off the road as petrol sales now 12 per cent down on pre-slump level
(Mail) This Is Money, 3 October 2012

"In a recent blog, Sir Bernard Ingham, former press secretary to Margaret Thatcher, posed an important question: do we want nuclear at any price? Sir Bernard is an avid supporter of new nuclear build, so the answer he invites – no – is all the more significant. Much of Britain's existing stock of nuclear generating capacity is due to be de-commissioned over the next decade, and as things stand, we still don't really know what's going to replace it. The moment of truth gets ever closer. Wind, sun, coal, wave, gas – none of these alternative power sources squares the circle in quite the same way that nuclear does. To ensure both that the lights stay on and that legally binding emission targets are met, new nuclear build ceases to be an option and becomes pretty much a mandatory obligation. Yet alarmingly, the Government's strategy for delivering this capacity seems fast to be running into the sand. If the Government is serious about new nuclear build, it needs urgently to change tack, and to the horror of the Chancellor – desperate to get on top of Britain's debts – it may even have to stand ready to put the public balance sheet behind the endeavour. Nuclear, it would seem, is still too big a risk for the private sector to willingly bankroll. In practice, the subsidy demanded by potential operators via guaranteed charges is heading for the stratosphere, threatening to lock-in high energy prices for generations to come. You can argue the toss about whether a guaranteed price amounts to a 'public subsidy', but most consumers, faced with a nuclear surcharge, would certainly think it does. For them, the quarterly utility bill is tantamount to a tax; you have little alternative but to pay it. Meanwhile, those still interested in financing, building and operating the proposed new reactors are falling like nine pins. This week alone we've seen another two once interested parties effectively throw in the towel. The Franco Chinese consortium of Areva and China Guangdong Nuclear Power confirmed yesterday that it has ditched its bid to build reactors in Anglesey and Gloucestershire, while retrenchment at Iberdrola, badly hit by the gathering financial crisis in Spain, may well have scuppered plans for new reactors in Cumbria. With relations between China and Japan at rock bottom, Westinghouse (owned by Toshiba) is also struggling to find the Chinese backing it needs to finance new nuclear build in Britain. Security concerns, which dictate that state controlled Chinese companies be limited to minority stakes, are in any case proving a major obstacle to Chinese participation. Germany's two biggest utilities, RWE and EON, pulled out early this year, after the German government, post the Fukushima disaster, announced that nuclear power generation in Germany was to be phased out. The upshot is that a once crowded line up of interested foreign investors has shrunk down to just one fully committed participant – EDF – and even in this case, the French utility giant's British partner, Centrica, has said that it can't take part unless satisfied that all financial risks have been removed. .... In making the case for new nuclear build back in 2008, EDF said that the expected cost of the new reactor it was building in Flamanville, France, was €4bn, to give a likely price for electricity of �45/MWh. These costs have since virtually doubled, and still nobody really knows the final bill, or where Flamanville's economic costs of production will settle. Fukushima has further upped the ante for reactors which are today required to be so robust against catastrophe that they can survive a direct hit by a jumbo jet. Quite recently, EDF angrily denied that it was looking for a guaranteed price in the UK of �140MWh, saying it was not even in that ball park. But even �100/MWh would be considered by many as too much. In a report for the Department of Energy and Climate Change last year, PB Power calculated the cost of 'first of a kind' nuclear at �74/MWh, with the price reducing to �65/MWh once the technology has been proven."
UK is haring off down the wrong path on new nuclear power plants
Telegraph, 3 October 2012

"Turning air into liquid may offer a solution to one of the great challenges in engineering - how to store energy. The Institution of Mechanical Engineers says liquid air can compete with batteries and hydrogen to store excess energy generated from renewables. IMechE says 'wrong-time' electricity generated by wind farms at night can be used to chill air to a cryogenic state at a distant location. When demand increases, the air can be warmed to drive a turbine. Engineers say the process to produce 'right-time' electricity can achieve an efficiency of up to 70%. IMechE is holding a conference today to discuss new ideas on how using 'cryo-power' can benefit the low-carbon economy."
Liquid air 'offers energy storage hope'
BBC Online, 2 October 2012

"Iraqi oil production is likely to hit 3.4 million barrels per day (bpd) while exports are expected to average 2.9 million bpd by next year, the top energy advisor to the Iraqi prime minister said on Tuesday. 'Next year, the plan is for 2.9 million barrels per day of export,' Thamir Ghadhban told reporters in Dubai. Iraqi Oil Minister Abdul-Kareem Luaibi said earlier this week that Iraqi crude exports were to exceed 2.6 million barrels per day (bpd) in September and estimated production at more than 3.3 mln bpd. With the help of foreign firms, Iraq has ambitious plans to boost production capacity beyond 12 million bpd by 2017, but this target has proved unrealistic due to infrastructure bottlenecks and logistical shortcomings. It is expected to target 8-8.5 million bpd, but some oil analysts and executives see even 6 million bpd by 2017 as a stretch for the war-torn country."
Iraq oil output likely to hit 3.4m bpd in 2012
Reuters, 2 October 2012

"Despite Tory hopes, the most optimistic estimates suggest there will only be enough shale gas - home fracked or imported - to satisfy 15% of demand in a decade's time, and we are likely to need that for industry and to heat our homes, not to generate electricity. The Tory frackers should reflect that it is their own rural Nimbys who are likely to ensure fracking moves more slowly on this crowded island than in the US."
A dash for gas alone will put out the lights
Sunday Times, 30 September, Print Edition, P25

"Twenty new gas-fired power stations are likely to be built in the UK, amounting to a massive increase in consumption of the fossil fuel, the climate and energy secretary, Ed Davey, has told the Guardian. But Davey insisted the expansion – the biggest construction effort in the power sector for decades – would not harm the prospects for investment in renewable energy or in the government's carbon reduction targets. He said: 'I strongly support more gas, just as I strongly support more renewable energy. We need a big expansion of renewable energy and of gas if we are to tackle our climate change challenges.' Davey is expected to announce a new gas strategy this autumn, which will require the investment of hundreds of billions of pounds in new electricity generation capacity and dictate the shape and construction of the UK's energy infrastructure for decades to come. But environmental groups and renewable energy investors are concerned that a new 'dash for gas' would put carbon targets beyond reach and deter investment in renewables.... Davey said the government was planning to add 20GW of electricity generation capacity from gas, between now and 2030. That is about ten times the current capacity for generating renewable energy from offshore windfarms. As of Thursday, when a new offshore windfarm was opened off the north Norfolk coast, the UK had 2GW offshore wind-generating capacity – more than any other country."
Twenty gas-fired power stations planned for the UK
Guardian, 28 September 2012

"... the world’s third-largest uranium producer [Cameco], says a supply shortage is set to hit full-on by the end of 2013 and prices should turn around for the next several years... a treaty from the Cold War between Russia and the United States, that provides 24 million pounds of uranium per year to the market from decommissioned nuclear weapons, will expire at the end of 2013. This treaty alone represents 16% of total uranium demand each year."
How to Play Uranium’s Coming Supply Shortage
Investment U, 28 September 2012

"The government has today released its latest quarterly energy statistics, confirming that the UK's renewable energy sector is continuing to expand rapidly, while also fuelling concerns that high gas prices are forcing energy companies to switch to more polluting coal power. The statistics from the Department of Energy and Climate Change (DECC) show renewable electricity output during the second quarter of 2012 rose 6.5 per cent year-on-year to 8.13TWh, while capacity soared 42.4 per cent to 14.2GW, largely as the result of the opening of a raft of new large-scale on- and offshore wind farms and the conversion of the Tilbury B power station to dedicated biomass. The increases meant that renewables' share of the UK's electricity mix edged up from nine per cent in the second quarter of 2011 to 9.6 per cent a year later. The performance would have been stronger still, but low rainfall and winds led to a 31 per cent drop in hydroelectricity production and an 11 per cent drop in power output from onshore wind farms. In contrast, output from offshore wind farms soared 47 per cent year-on-year to 1.64TWh, bioenergy edged up 6.5 per cent to just over 3TWh and energy from Solar PV and wave and tidal systems increased more than nine-fold to 0.47TWh. The figures come just days after the UK set a new record for wind power output and mean the UK is now on track to set a host of new renewable energy records during 2012, despite on-going concerns that policy uncertainty is harming investor confidence. However, the new data will also further fuel environmentalists' fears that the currently high price of natural gas is driving a new "dash for coal" that is likely to result in a significant increase in greenhouse gas emissions."
Breaking: UK renewables output soars as new figures fuel fears over 'dash for coal'
Business Green, 27 September 2012

"The squeeze on household finances will continue for at least the next dewcade as experts warned prices would continue to increase at double the current rate of inflation. Food prices in Britain have risen by 32 per cent since 2007, double the EU average, according to figures released by the Department for Environment, Food and Rural Affairs (DEFRA). Economists expect the cost of the weekly shop to continue to rise by around 4 per cent a year until 2022 at least. The increase is almost twice the current rate of inflation of 2.5 per cent. Rising prices will take the annual food bill for the average family to over �4,000 within a decade, up from �2,766 last year, heaping further pressure on already-stretched households. Food prices have spiked across the world due to soaring commodity costs and a growing global population, which has led to increased demand. Wheat prices have been further pushed up this year by the worst drought in the US for nearly 80 years, water shortages in Russia and wet weather in the UK, which has damaged crops. Prices have risen particularly strongly in Britain because the country imports around 40 per cent of the food that it consumes, so it is at the mercy of global prices. As an island nation, transportation costs are also high.... Economists predicted misery for years to come. Clive Black, a food analyst at Shore Capital, the broker, said that food prices in Britain 'are going to go higher and higher and higher'.... Research provided to The Daily Telegraph by Mysupermarket.co.uk, the price comparison and shopping site, shows that the price of staples has risen sharply in the last year alone. The price of 500g of minced beef has risen by a fifth, from �2.20 to �2.80, since last September while a 1kg bag of onions has risen by 18 per cent, from 87 pence to �1.02. Carrots, potatoes, eggs and orange juice have also seen steep rises. Mr Black expects prices to rise by up to 4 per cent a year for a decade. The rise will drive down living standards and hit the elderly and poor most, as they spend a larger proportion of their disposable income on food. 'Living standards in Britain have been falling for some years now because wages have not been going up at the same rate as prices, and that is going to continue,' said Mr Black. Think-tank the CEBR said that food prices in the UK will continue to rise by around 4 per cent a year until 2016 at least. Rob Harbron, economist at the CEBR, warned: 'Family budgets will remain under pressure as food inflation near 4 per cent digs in for coming years'. A report last week from Rabobank, the bank, world food prices will hit an all-time high in the first quarter of next year and keep rising. James Walton, chief economist at the IGD, the retail research body, said price rises have come at the worst possible times for families. 'We saw the start of the commodity price spike coincide with the banking crisis and recession. The timing couldn’t have been worse,' he said. According to the Organisation for Economic Co-operation and Development, food prices in Britain rose by the ninth highest amount in the developed world last year, beaten only by countries including Turkey, Korea and the Slovak Republic. A spokesman for Tesco, the UK’s biggest supermarket, said that these are 'difficult times' for its customers. However he said that the supermarket is 'committed to helping keep the cost of food shopping down'. A DEFRA spokesman said that although the price of food has risen faster in Britain than in other European countries, food in the UK is still 'cheaper overall' than in other European countries. DEFRA said that despite the huge rise, overall prices in the UK last year were 4 per cent cheaper in UK than in France and 6 per cent cheaper than in Germany. The spokesman said that prices in the UK are kept low because supermarkets in this country are more competitive than those in Europe. However while the DEFRA figures showed that fish remains cheaper in the UK than in other countries, fruit and vegetables cost over a fifth more. Richard Lim, an economist at the British Retail Consortium, which represents retailers, said that that official inflation figures do not take into account the array of 'multi-buy promotions, fuel coupons and price-matching at the till' that supermarkets offer. 'The actual rate of food inflation experienced by households in the UK is lower than official statistics suggest,' said Mr Lim."
Misery for households as food prices soar at twice the EU average
Telegraph, 27 September 2012

"The CBI has distanced itself from growing calls for a 'dash for gas', arguing that while the UK will need to increase gas power capacity in the coming years, large-scale deployment of new gas plants would jeopardise carbon targets. Speaking at a fringe event at the Liberal Democrat conference this week, CBI director-general John Cridland said 'some' new gas capacity would be required to close the looming energy supply gap the UK faces – but warned that the surge in new gas investment being advocated by some MPs and think tanks could not be justified."
CBI rejects calls for all-out 'dash for gas'
BusinessGreen, 26 September 2012

"The assassination of the U.S. ambassador to Libya and the dangers posed by rival militias that refuse to bow to the North African country's post-Gadhafi government are undermining efforts to restore, and expand, Libya's all-important oil and gas industry. The violence that has flared in Libya between its fractious militias and tribal groupings in the aftermath of the 2011 war that ended the rule of dictator Moammar Gadhafi has already slowed the recovery of that industry. Most importantly, it has scared off international oil companies without which Libya's oil and gas production cannot function. The Sept. 11 killings in Benghazi, the cradle of the uprising against Gadhafi, have further slowed the return of the foreign oil workers. That has jeopardized the new government's aim of boosting production from the prewar level of 1.6 million barrels per day to 3 million bpd -- a level it last achieved four decades ago, before Gadhafi's 1967 revolution -- by the end of 2015. Libya, with Africa's largest oil reserves of 46 billion barrels, 'has the potential to become an energy or petrochemical hub, but was deprived for 40 years of reaching its potential' by the economic mismanagement of the mercurial Gadhafi's regime, says Ahmed Shawki, head of marketing for the state-run National Oil Corp. 'Without foreign companies, Libyan oil production may well stagnate just below pre-crisis levels, worse, it risks slipping backward,' Britain's Barclays Bank noted in a recent analysis of Libya's postwar prospects."
Libyan violence threatens oil recovery
United Press International, 26 September 2012

"Total has become the first oil major to publicly warn against drilling for oil in the Arctic on concerns of the potential environment impact. Chief executive Christophe de Margerie said his company would not be joining the stampede north as an oil leak 'would do too much damage to the company'. The stance puts Mr de Margerie at odds with his competitors who are busy carving out oil exploration programmes in the area. Royal Dutch Shell, ExxonMobil and Norway’s Statoil have all recently signed deals to explore the area. BP is trying to develop its exposure to the area through its Russian partnerships. Although Mr de Margerie warned against oil exploration he said Total would continue to explore opportunities to tap the area’s gas reserves. Speaking to the Financial Times he said gas leaks were much easier to deal with. Just last week Shell was forced to postpone attempts to drill the first well in Alaska for more than 20 years. The setback came after a crucial piece of safety equipment failed."
Total warns against drilling for oil in Arctic
Telegraph, 26 September 2012

"More than two centuries after coal power helped forge the world’s first industrial economy, Britain is going back to burning wood. Drax Group Plc (DRX) will spend $1 billion to turn the U.K.’s biggest coal-fired plant into western Europe’s largest clean-energy producer. The utility plans to convert one of the site’s six units to burn wood pellets by June, said Chief Executive Officer Dorothy Thompson. It intends to switch two more units to wood at a later date, investments that if completed will see it harvest a forest four times the size of Rhode Island each year. ... Coal, the most polluting fossil fuel, generates about 41 percent of the world’s electricity, while biomass accounts for 1.4 percent, according to the International Energy Agency. Drax plans to spend as much as 700 million pounds ($1.13 billion) through 2017 upgrading its boilers at Selby, northernEngland, ordering millions of tons of biomass from around the world and building facilities to store the fuel, including four silos each bigger than London’s Royal Albert Hall, a 135-foot (41-meter) high concert venue with an 800-foot circumference. The utility has hired farmers and foresters, designed special railway carriages and is investigating building wood pellet plants in North America, Thompson said. While burning biomass releases carbon dioxide, the EU deems the technology carbon-neutral because trees absorb emissions in a similar proportion to what they release in burning. Opponents argue that it’s hard to ensure enough is being planted to compensate for what is burned."
Biggest English Polluter Spends $1 Billion to Burn Wood: Energy
Bloomberg, 26 September 2012

"U.S. oil production surged last week to the highest level since January 1997, reducing the country’s dependence on imported fuels as new technology unlocks crude trapped in shale formations. Crude output rose by 3.7 percent to 6.509 million barrels a day in the week ended Sept. 21, the Energy Department reported today. America met 83 percent of its energy needs in the first six months of the year, department data show. If the trend continues through 2012, it will be the highest level of self-sufficiency since 1991. Imports have declined 3.2 percent from the same period a year earlier. A combination of horizontal drilling and hydraulic fracturing, or fracking, has helped reduce America’s reliance on foreign oil. The same technology unleashed a boom in natural gas output from shale that pushed inventories to a record last year. 'This has been driven by shale, and the two states leading the way are North Dakota and Texas,' said Andy Lipow, president of Lipow Oil Associates LLC, an energy consulting firm in Houston. 'It appears that over the next five years, U.S. oil production could climb to well over 8 million barrels a day.'”
U.S. Pumps Most Oil Since 1997 as Energy Independence Grows
Bloomberg, 26 September 2012

"Shale gas has jolted traditional roles in the planet's climate drama, giving cleaner fuel to the United States, whose displaced coal has headed to Europe to pollute the old continent. It is an ironic twist for the European Union, whose energy policy is largely based on promoting renewables and a target to cut emissions b y 20 percent by 2020. The U.S. did not ratify the Kyoto Protocol to combat global emissions and its national goals are far less ambitious than Europe's. Analysts at Point Carbon, a Thomson Reuters company, estimate increased EU coal-use will drive a 2.2 percent rise in EU carbon emissions this year, after a 1.8 percent drop in 2011."
Coal exports make U.S. cleaner, EU more polluted
Reuters, 25 September 2012

"Oil prices are likely to remain volatile over the next year, analysts say, amid worries that Saudi Arabia has become less able to pump the global market out of any extraordinary disruptions to supply. Saudi Arabia and some smaller Gulf oil producers have stepped in to cover recent shortfalls, but analysts are increasingly skeptical about whether these countries have the capacity to shield Western consumers against a new oil shock. 'The cushion to cope with supply shortfalls looks uncomfortably thin, especially in light of heightened geopolitical risks in the Middle East and Africa,' Deutsche Bank said in a report Friday....According to the International Energy Agency, Saudi spare capacity—the sustainable cushion of available oil it could pump at short notice if needed—was just under two million barrels a day last month, 12% thinner than for the same period last year, when Libya's output was virtually shut down. In addition, Saudi Arabia uses more and more of its own oil. In July, the month when the European Union began enforcing a full embargo on Iranian oil, the kingdom actually cut exports of oil and condensates by 7% on a monthly basis, according to the Joint Organization Data Initiative, an oil-transparency effort that uses numbers supplied directly by governments. Part of the drop was due to record amounts of oil used by Saudi Arabia this summer, as economic growth spurs domestic consumption. 'The Saudi spin about increasing supplies to the market is also not very credible when the supposed increase is coming after a sharp drop in exports,' Swiss consultancy Petromatrix said in a research note Friday."
Doubts on Saudi Capacity May Keep Oil Volatile
Wall St Journal, 25 September 2012

"Subsidies for new nuclear power could add �70 to annual household energy bills, Ian Marchant, the chief executive of SSE warns. Ministers should refuse to subsidise EDF Energy’s plans for the first British nuclear reactors in a generation unless the French energy giant agrees to deliver them for a substantially lower price than is widely expected, Mr Marchant argues. The government is in negotiations with EDF over a long-term guaranteed price for electricity from its proposed plant at Hinkley Point in Somerset. If the market price for electricity remains below that level, EDF will receive 'top-up’ subsidies paid for through levies on all UK electricity consumers. EDF has so far refused to say how much the plants will cost or the level of subsidy it will seek, although last month EDF Energy chief executive Vincent de Rivaz told this newspaper the price would be less than �140 per megawatt hour (MWh). Writing in the Daily Telegraph on Monday, Mr Marchant calculates that the price should be nearer �65/MWh, based on estimates EDF published in 2008, and on independent estimates produced last year for the Government. 'We will all end up bearing the cost of the opaque negotiations going on between Whitehall and Paris,' he warns. 'The difference between paying �65/MWh for new nuclear, versus �140/MWh for new nuclear, assuming we decide to build two reactors, will amount to over �2bn each and every year. That is around �70 for every household on top of the current electricity bill.'”
Nuclear power subsidies 'could add �70 to annual household energy bills'
Telegraph, 23 September 2012

"Britain's natural gas imports from outside the North Sea will surpass domestic production by 2015 and add more than $11 billion to import costs as domestic supplies dwindle and Norway increasingly struggles to fill the gap, Reuters research shows. Estimates show that Britain's own gas supplies will fall from around 43 billion cubic metres (bcm) per year today to around 16 bcm in 2030 if they continue their average annual 5 percent decline since peaking in 2000, while demand is set to hold steady between 85 and 95 bcm. Britain was a net exporter of gas until 2004, but a steady decline in output over the last few years has made it more reliant on imports, which have so far mostly come from Norway and, increasingly, Qatar. Analysts forecast that Norway's exports to the UK will grow at 1 percent a year, increasing its supplies from today's 25.5 bcm to just over 30 bcm by 2030. Reuters research shows that the ongoing decline in Britain's domestic production means that the UK will need to roughly double its imports from alternative gas sources by 2030, raising them by 2.25 percent a year from about 25 bcm now to almost 50 bcm, in order to meet its annual gas demand. The Reuters figures are projections based on current trends. That means non-Norwegian imports will have to surpass domestic natural gas production of around 35 bcm per year by 2015/2016, at a cost of more than $11.5 billion per year based on current market prices for European imports of liquefied natural gas (LNG), or over $14 billion for Russian pipeline gas to Europe, according to Reuters research.... The only feasible way to replace Norwegian and British gas is to begin importing more Russian gas through interconnectors with continental Europe, or to increase LNG imports from the Middle East, Africa and, perhaps, the United States. Qatar, the world's biggest LNG exporter, already supplies Britain with some 25 bcm of gas per year, but a moratorium on export expansion until 2015 means that its supplies will stagnate, and that Britain will have to compete with Asian and other European utilities for its cargoes. But there is also the possibility to step up imports from continental Europe, which would effectively mean importing Russian gas to Britain.... In Britain, shale gas company Cuadrilla Resources has said its site near Blackpool has enough gas to cover UK demand for generations, although experts have cast doubt on the claims. 'UK shale gas has the potential to make a useful contribution but it's certainly not going to be possible to exploit enough to offset dwindling North Sea supply,' Tim Fox, Head of Energy and Environment at the Institution of Mechanical Engineers, told Reuters. In Poland, which geologists initially said had some of Europe's biggest shale gas reserves, estimates had to be slashed by 90 percent this year after early research had proved too optimistic.... In the long-term, and to avoid the public debate fracking causes onshore, some geologists also say that fracking could move offshore, where vast reserves are seen in the North Sea. This, however, would require an oil price of far above $200 per barrel to be a profitable industry, so analysts say it will remain a back-up option against an oil price shock rather than a viable option of gas supply in the mid-term future."
UK overseas gas imports to surge to $11 billion by 2015
Reuters, 19 September 2012

"Fuel consumption in new vehicles could be slashed by half in the next 20 years, helping the world curb its dependency on oil, provided governments set up bold policies to boost the use of available technologies, the International Energy Agency said on Wednesday. The transport sector, which consumes around one fifth of global primary energy, will account for nearly all the future growth in oil use, said the Paris-based agency, which advises industrial nations on energy policy. The necessary technologies are already cost-effective, the IEA said, in that fuel savings outweigh the additional costs over vehicle life, but those are not deployed widely enough. 'Strong policies are needed to ensure that the full potential of these technologies is achieved over the next 10 to 20 years,' the IEA said in one of two reports on the fuel economy of road vehicles. 'Current technologies for conventional gasoline and diesel vehicles can reduce fuel consumption by half over the next 20 years,' the IEA said. Policies included fuel economy standards, fiscal measures and education programs, which would play a key role in boosting fuel economy improvements, the agency said."
Fuel use in new cars could halve by 2030: IEA
Reuters, 19 September 2012

"Japan's cabinet has approved a new energy plan to cut the country's reliance on nuclear power in the wake of last year's Fukushima disaster, but dropped a reference to meet a nuclear- free target by the 2030s, ministers said on Wednesday. Since the plan was announced on Friday, Japan's powerful industry lobbies have urged the government rethink the nuclear-free commitment, arguing it could damage the economy and would mean spending more on pricey fuel imports."
Japan cabinet approves plan to exit nuclear energy
Reuters, 19 September 2012

"Saudi Arabia burned record monthly volumes of oil in June and July, official government figures show, contrary to the top crude producer's plan to temper its summer oil burning spree this year with more gas. The world's leading oil exporter burned an average of 743,500 barrels per day (bpd) of crude in June and July, up 82,000 bpd from the same months last year, mainly to make electricity to keep the population cool, data issued under the Joint Oil Data Initiative (JODI) showed on Wednesday. The kingdom had hoped that more supply from Saudi gas fields being made available for power generation would save millions of barrels of valuable crude for export this summer. In June it burnt an average of 778,000 bpd, 162,000 bpd more than in June 2011.... Saudi Arabia is by far the largest user of crude oil for power generation, with most countries outside the Middle East cutting back oil-fired power generation long ago in favour of gas, nuclear and renewable energy sources."
Saudi crude burn hits new records in June, July
Reuters, 19 September 2012

"It all comes down to black gold. Anti-Japan protests erupted in at least 100 Chinese cities on Tuesday, as anger over a struggle for control of oil and gas in the East China Sea turned violent, and increased the tension between the countries. The focal point is a dispute over a remote island chain known as Senkaku in Japan and Diaoyu in China, lying east of China and south-west of Japan (see map). The US handed them to Japan after the second world war, but China says that it has a prior claim. Japan recently purchased several of the islands back from a private Japanese owner, and their nationalisation has ratcheted up anger in China. 'There is potential oil and gas,' says Pui-Kwan Tse of the US Geological Survey. It's not clear how much is there, or whether it would be economical to drill for it. However, the East China Sea is rich in oil and gas reserves, many of which have only been discovered in recent decades. China and Japan are both eager to stake a claim: China's energy demand is growing rapidly, and Japan's reserves are limited."
Oil reserves at heart of Japan-China island dispute
New Scientist, 18 September 2012

"The benefits of an alternative nuclear fuel that could offer a safer and more abundant alternative to the uranium that powers conventional reactors have been 'overstated', according a new government report on the potential of thorium. The report says the UK should continue to be engaged with the technology but downplays claims by thorium proponents who say that the radioactive chemical element makes it impossible to build a bomb from nuclear waste, leaves less hazardous waste than uranium reactors, and that it runs more efficiently. 'Thorium has theoretical advantages regarding sustainability, reducing radiotoxicity and reducing proliferation risk,' states the report, prepared for the Department of Energy and Climate Change by the National Nuclear Laboratory (NNL). 'While there is some justification for these benefits, they are often overstated.' Some of NNL's hesitance comes from UK utility companies' unwillingness to invest the money in research and development necessary to draw out thorium's advantages. 'Nevertheless, it is important to recognise that worldwide there remains interest in thorium fuel cycles and this is not likely to diminish in the near future,' the report concludes. 'It may therefore be judicious for the UK to maintain a low level of engagement in thorium fuel cycle research and development by involvement in international collaborative research activities.' The report notes that thorium's advantages would be most noticeable in reactor types other than the conventional solid fuel, water-cooled reactors used in almost all of the world's commercial nuclear electricity stations today."
Benefits of thorium as alternative nuclear fuel are 'overstated'
Guardian, 13 September 2012

"The independent Climate Change Committee (CCC) has today warned unequivocally that the government would breach the Climate Change Act if it pursues Chancellor George Osborne's plans for a surge in new gas investment. In what will be seen as an explosive intervention in the simmering row between the Lib Dems and the Chancellor over whether to include a target to decarbonise the electricity sector by 2030 in the upcoming Energy Bill, the CCC today stated categorically that 'extensive use of unabated gas-fired capacity (i.e. without carbon capture and storage technology (CCS)) in 2030 and beyond would be incompatible with meeting legislated carbon budgets'."
UK dash for gas would be illegal, says climate committee
Guardian, 13 September 2012

"Researchers have revealed that there is enough energy available in winds to meet all of the world’s demand. New research from Carnegie’s Ken Caldeira examines the limits of the amount of power that could be harvested from winds, as well as the effects high-altitude wind power could have on the climate as a whole. Led by Kate Marvel of Lawrence Livermore National Laboratory, who began this research at Carnegie, the team used models to quantify the amount of power that could be generated from both surface and atmospheric winds. .... Today, civilization uses about 18 TW of power. Near-surface winds could provide more than 20 times today’s global power demand and wind turbines on kites could potentially capture 100 times the current global power demand. At maximum levels of power extraction, there would be substantial climate effects to wind harvesting. But the study found that the climate effects of extracting wind energy at the level of current global demand would be small, as long as the turbines were spread out and not clustered in just a few regions."
Wind can provide enough energy to meet global power demand
ANI, 10 September 2012

"European development of shale gas could offset the decline in its conventional gas output but will do nothing to reduce the continent's dependence on imports, a European Commission study has found. In the United States, a boom in production of cheap shale gas in recent years has pushed down energy prices and cut greenhouse gas emissions, prompting calls from industry for Europe and others to follow suit. But investors say the U.S. shale gas revolution is unlikely to be repeated in Europe, due largely to environmental concerns and different rules on land and resource ownership. Some EU countries have even banned shale gas exploitation. 'Shale gas production will not make Europe self-sufficient in natural gas,' the report by the EU executive's Joint Research Centre said. 'The best-case scenario for shale gas development in Europe is one in which declining conventional production can be replaced, and import dependence maintained at a level around 60 percent.' The authors said the best current estimate of technically recoverable volumes of shale gas are 16 trillion cubic meters (Tcm) in Europe, 20 Tcm in the United States and 21 Tcm in China, compared with about 200 Tcm globally. 'The USA and China are well placed to become the top producers of shale gas,' the authors said, adding that significant production is likely in most other regions. If conditions favor shale gas production, natural gas could account for 35 percent of global primary energy supply by 2040, surpassing oil as the world's number one source of energy."
Shale gas will not cut EU import dependence: study
Reuters, 7 September 2012

"France is heading for a shortage of generating capacity within three years because of the planned closing of outdated fossil-fuel plants and two nuclear reactors, grid operator Reseau de Transport d’Electricite said. ... France, which gets more than three-quarters of its power from nuclear, has imported increasing amounts of electricity since 2001 as demand outpaces supply at peak periods. Lawmakers say a German decision to shut atomic plants adds to the strain. Hollande, elected in May, vowed to close the Fessenheim reactors by about the end of his term in May 2017."
French Set for Power Gap in Three Years on Nuclear Shutdowns
Bloomberg, 5 September 2012

"Nearly a year after the regime of Moammar Gadhafi ended, a Libyan oil company said it expected to realize nearly $55 billion from oil and gas this year. The state-run National Oil Corp. said it expected to make around $54.9 billion in revenue this year from exports and taxes on oil companies operating in the country, reports Bloomberg News. Libyan oil production by August 2011 was halted by war. NATO forces last year enforced a no-fly zone over the country in response to assaults on civilians by the Gadhafi regime. The U.S. Energy Department's Energy Information Administration, in its monthly review for July, reported that production by December 2011 rebounded to 800 million bpd. The report said that by April 2012, Libya oil production was at 1.4 million bpd. Libya oil production peaked in 1973 at 2.2 million bpd before settling at 1.6 bpd by 2009. The country's Arabian Gulf Oil Co., a subsidiary of NOC, announced it discovered oil and natural gas in an onshore basin located about 90 miles southwest of Tripoli, Bloomberg adds. The find of undisclosed volume was reported during the drilling of an exploration well to a depth of 10,300 feet."
Libya's oil, gas sector generating cash
UPI, 4 September 2012

"The Arctic, often presented as the promised land by oil companies, is likely to play only a marginal role in providing for the planet's future energy needs, a Norwegian study claimed Tuesday. The share of Arctic oil and gas in global energy production is expected to decline by 2050 because of prohibitively high production costs, according to a study conducted by the Centre for International Climate and Environmental Research in Oslo and national statistics agency Statistics Norway. Oil production in the region is seen doubling in absolute value during the period, but will drop from 10 percent of the global total in 2010 to eight percent in 2050, the researchers said. Their findings were published in the journal Energy Economics and summarised in Norway's leading daily Aftenposten on Tuesday. For natural gas, the decline is expected to be even more pronounced, with the share dropping from 27 percent to 22 percent. Volumes will also continue to shrink in absolute value until 2030, when they are expected to begin rising again. The researchers attributed the decrease to the boom of unconventional oil and gas sources, such as shale gas in North America, and growing conventional gas production in the Middle East -- two sources that are significantly cheaper to exploit than Arctic oil and gas. According to the US Geological Survey (USGS), the Arctic could be home to 13 percent of the planet's undiscovered oil reserves and 30 percent of its undiscovered gas reserves."
Study throws cold water on Arctic oil, gas dreams
AFP, 4 September 2012

"Shell Oil Co. already has scaled back its Arctic oil drilling program this summer amid major setbacks, and now Statoil is following suit. The Norwegian company is delaying its own plans to search for black gold in icy U.S. waters north of Alaska by at least one year, to 2015 at the earliest. The delay affects Statoil’s Amundsen prospect in the Chukchi Sea, about 100 miles northwest of Wainwright, Alaska. Statoil had been preparing to begin boring an exploration well there in 2014....It could be a decade or longer before any oil discovered in the Chukchi Sea could make it to market via a pipeline running from the remote waters and through the National Petroleum Reserve- Alaska to the Trans Alaska Oil Pipeline system. Shell already has begun environmental studies that would be necessary for any such pipeline project. Statoil’s new wait-and-see approach to U.S. Arctic waters contrasts with its plan to keep drilling in other Arctic areas, including several wells in the Barents Sea in 2013. The Barents Sea is a less forbidding environment than the Chukchi and Beaufort seas, because it is ice-free year-round, rather than just a few months each year."
Statoil delays start of Chukchi drilling until at least 2015
Fuelfix (Blog), 4 September 2012

"Nestl�, the world's largest food company, has added its weight to calls by the UN and development groups for the US and EU to change their biofuel targets because of looming food shortages and price rises. 'We say no food for fuel," said Paul Bulcke, chief executive of Nestl�, at the end of the World Water Week conference in Sweden. 'Agricultural food-based biofuel is an aberration. We say that the EU and US should put money behind the right biofuels.' Under laws intended to reduce foreign oil imports, 40% of US maize (corn) harvest must be used to make biofuels, even though one of the deepest droughts in the past 100 years is expected to reduce crop yields significantly. In addition, EU countries are expected to move towards drawing 10-20% of their energy supply for transport from biofuels to reduce carbon emissions. But Nestl�, which has 470 food factories around the world and 25% of the world's bottled water market, says clean economy and US energy independence should not be pursued at the expense of food supplies or massive price increases. '[Using biofuels] was well-intentioned at the time, but when you have better information then you have to be coherent,' said Bulcke. 'You have to know when to say: 'Stop here'. Now we see, too, that the carbon [reduction] element of biofuels is not as clear as it was intended to be.'"
US and EU must change biofuel targets to avert food crisis, says Nestl� chief
Guardian, 4 September 2012

"Saudi Arabia, the world’s biggest crude exporter, risks becoming an oil importer in the next 20 years, according to Citigroup Inc. Oil and its derivatives are used for about half of the kingdom’s electricity production, which at peak rates is growing at about 8 percent a year, the bank said today in a an e-mailed report. A quarter of the country’s fuel production is used domestically, more per capita than other industrialized nations, as the cost is subsidized, according to the note. 'If Saudi Arabian oil consumption grows in line with peak power demand, the country could be a net oil importer by 2030,' Heidy Rehman, an analyst at the bank, wrote. The country already consumes all its natural-gas production and plans to develop nuclear power, which pose execution risk amid a lack of available experts, safety issues and cost overruns, Rehman said."
Saudi Arabia May Become Oil Importer by 2030, Citigroup Says
Bloomberg, 4 September 2012

"A prediction that the price of oil could rise 50 percent this decade as global demand exceeds supply left no shortage of opinions from people with professional interest in the matter. A Barclays research report issued last week asserted that oil produced from shale and other formations won't be sufficient to meet growing global demand as production from older fields declines. Barclays forecast that the shortfall could push prices for Brent crude, the global benchmark, to $125 a barrel sometime next year and possibly to $180 by 2020. Brent rose $1.23 to $115.80 a barrel in Monday trading on the London-based ICE Futures Europe exchange. U.S. benchmark crude finished at $96.47 in Friday trading. U.S. markets were closed Monday for Labor Day. Challenging the notion that 'sluggish economic performance plus shale oil must equal a rapidly loosening market,' Barclays argued that 'while oil output is strong in the U.S., it has slumped elsewhere.' While some analysts concur with Barclays assessment that supply will decline, others say its projections underestimate the effects of shale technology that has made once-inaccessible oil and gas economic to produce. 'It's a hard thing to predict out 10 years - we are not sure how the shale is going to play out,' said Amy Myers Jaffe, a fellow at Rice University's Baker Institute. She also cited fuel efficiency and possibly slower growth in China as factors that could reduce oil demand. 'How China's going to move forward is looking a lot less certain than it was two years ago, and the possibility of breakthroughs in car technology is looking good,' Jaffe said. Others questioned the report's assessment of the potential of new fields and of the industry's ability to integrate them into the supply chain. 'That report totally ignores all the new crude oil being found in the U.S., Brazil and in places like Africa,' said Ben Brockwell, director of data pricing for the Oil Price Information Service. 'It also ignores the incredible ability of the oil industry to adapt its infrastructure to demand. They are changing real fast and it is going to change the global market.' Barclays said production is declining each year by close to 4 million barrels per day, while annual global daily demand is rising by more than 1 million barrels, even in the weak economic environment. It added that political tensions in the Middle East could disrupt supplies further, worsening the shortfall in the coming years. Art Berman, a Sugar Land geologist and energy consultant who has long voiced skepticism about the long-term prospects for the much-touted shale boom, shares Barclays' view on global demand. 'Many of the countries that have historically supplied exported oil have become net importing countries,' Berman said, mentioning the United Kingdom and Indonesia as examples. 'Meanwhile, countries like China and India have not only a tremendously growing appetite for oil, but they have the cash to pay for it.' Ed Hirs, an energy economics professor at the University of Houston, also concurs with Barclays' assessment about the growing imbalance between production and demand, which Barclays says will start pushing prices aggressively higher in the third quarter of this year. 'One percent decrease in supply of oil could lead to a 10 percent increase in price,' Hirs said. 'Any inelasticity of demand makes this extremely important.' Berman and Hirs said Barclays' projections may be about right; Jaffe and Brockwell said long-term projections are unreliable because of unforeseeable effects on prices. Barclays is less bullish on natural gas than on oil, citing discoveries of additional potential shale production fields around the world."
Report kicks up debate on how high oil will go
Houston Chronicle, 3 September 2012

"In 2011, after nearly nine years of war and occupation, US troops finally left Iraq. In their place, Big Oil is now present in force and the country's oil output, crippled for decades, is growing again. Iraq recently reclaimed the number two position in the Organization of the Petroleum Exporting Countries (OPEC), overtaking oil-sanctioned Iran. Now, there's talk of a new world petroleum glut. So is this finally mission accomplished? .... In the period before and around the invasion, the Bush administration barely mentioned Iraqi oil, describing it reverently only as that country's 'patrimony'. As for the reasons for war, the administration insisted that it had barely noticed Iraq had one-tenth of the world's oil reserves. But my new book reveals documents I received, marked SECRET/NOFORN, that laid out for the first time pre-war oil plans hatched in the Pentagon by arch-neoconservative Douglas Feith's Energy Infrastructure Planning Group (EIPG). In November 2002, four months before the invasion, that planning group came up with a novel idea: it proposed that any American occupation authority not repair war damage to the country's oil infrastructure, as doing so 'could discourage private sector involvement'. In other words, it suggested that the landscape should be cleared of Iraq's homegrown oil industry to make room for Big Oil. When the administration worried that this might disrupt oil markets, EIPG came up with a new strategy under which initial repairs would be carried out by KBR, a subsidiary of Halliburton. Long-term contracts with multinational companies, awarded by the US occupation authority, would follow. International law notwithstanding, the EIPG documents noted cheerily that such an approach would put 'long-term downward pressure on [the oil] price' and force 'questions about Iraq's future relations with OPEC' - the Organization of the Oil Exporting Countries. At the same time, the Pentagon planning group recommended that Washington state that its policy was 'not to prejudice Iraq's future decisions regarding its oil development policies'. Here, in writing, was the approach adopted in the years to come by the George W Bush administration and the occupation authorities: lie to the public while secretly planning to hand Iraq over to Big Oil. There turned out, however, to be a small kink in the plan: the oil companies declined the American-awarded contracts, fearing that they would not stand up in international courts and so prove illegitimate. They wanted Iraq first to have an elected permanent government that would arrive at the same results. The question then became how to get the required results with the Iraqis nominally in charge. The answer: install a friendly government and destroy the Iraqi oil industry. In July 2003, the US occupation established the Iraqi Governing Council, a quasi-governmental body led by friendly Iraqi exiles who had been out of the country for the previous few decades. They would be housed in an area of Baghdad isolated from the Iraqi population by concrete blast walls and machine gun towers, and dubbed the Green Zone. There, the politicians would feast, oblivious to and unconcerned with the suffering of the rest of the population. The first post-invasion oil minister was Ibrahim Bahr al-Uloum, a man who held the country's homegrown oil expertise in open contempt. He quickly set about sacking the technicians and managers who had built the industry following nationalization in the 1970s and had kept it running through wars and sanctions. He replaced them with friends and fellow party members. One typical replacement was a former pizza chef. The resulting damage to the oil industry exceeded anything caused by missiles and tanks. As a result the country found itself - as Washington had hoped - dependent on the expertise of foreign companies. Meanwhile, not only did the Coalition Provisional Authority (CPA) that oversaw the occupation lose US$6.6 billion of Iraqi money, it effectively suggested corruption wasn't something to worry about. A December 2003 CPA policy document recommended that Iraq follow the lead of Azerbaijan, where the government had attracted oil multinationals despite an atmosphere of staggering corruption ('less attractive governance') simply by offering highly profitable deals. Now, so many years later, the corruption is all-pervasive and the multinationals continue to operate without oversight, since the country's ministry is run by the equivalent of pizza chefs. The first permanent government was formed under Prime Minister Maliki in May 2006. In the preceding months, the American and British governments made sure the candidates for prime minister knew what their first priority had to be: to pass a law legalizing the return of the foreign multinationals - tossed out of the country in the 1970s - to run the oil sector. The law was drafted within weeks, dutifully shown to US officials within days, and to oil multinationals not long after. Members of the Iraqi parliament, however, had to wait seven months to see the text. The trouble was: getting it through that parliament proved far more difficult than Washington or its officials in Iraq had anticipated..... On this issue, the Democrats, by then increasingly against the Iraq War but still pro-Big Oil, lent a helping hand to a Republican administration. Having failed to end the war, the newly Democrat-controlled congress passed an appropriations bill that would cut off reconstruction funds to Iraq if the oil law weren't passed. Generals warned that without an oil law Prime Minister Maliki would lose their support, which he knew well would mean losing his job. To ramp up the pressure further, the US set a deadline of September 2007 to pass the law or face the consequences. It was then that things started going really wrong for Bush and company. In December 2006, I was at a meeting where leaders of Iraq's trade unions decided to fight the oil law. One of them summed up the general sentiment this way: 'We do not need thieves to take us back to the Middle Ages.' So they began organizing. They printed pamphlets, held public meetings and conferences, staged protests, and watched support for their movement grow. Most Iraqis feel strongly that the country's oil reserves belong in the public sector, to be developed to benefit them, not foreign energy companies. And so word spread fast - and with it, popular anger. Iraq's oil professionals and various civil society groups denounced the law. Preachers railed against it in Friday sermons. Demonstrations were held in Baghdad and elsewhere, and as Washington ratcheted up the pressure, members of the Iraqi parliament started to see political opportunity in aligning themselves with this ever-more popular cause. Even some US allies in parliament confided in diplomats at the American embassy that it would be political suicide to vote for the law. By the September deadline, a majority of the parliament was against the law and - a remarkable victory for the trade unions - it was not passed. It's still not passed today. Given the political capital the Bush administration had invested in the passage of the oil law, its failure offered Iraqis a glimpse of the limits of US power, and from that moment on, Washington's influence began to wane. Things changed again in 2009 when the Maliki government, eager for oil revenues, began awarding contracts to them even without an oil law in place. As a result, however, the victory of Big Oil is likely to be a temporary one: the present contracts are illegal, and so they will last only as long as there's a government in Baghdad that supports them. This helps explain why the government's repression of trade unions increased once the contracts were signed. Now, Iraq is showing signs of a more general return to authoritarianism (as well as internecine violence and possibly renewed sectarian conflict)."
Mission accomplished for Big Oil?
Asia Times, 30 August 2012

"Russian state-controlled gas company OAO Gazprom has indefinitely postponed development of its giant Shtokman gas field, the latest delay to its yearslong efforts to tap the Arctic field with France's Total SA and Norway's Statoil ASA . The decision comes after disagreements between the companies over investment terms have repeatedly stalled development of the field, located in the challenging Arctic environment of Russia's Barents Sea and estimated to hold almost 4 trillion cubic meters of gas. 'All parties have come to the conclusion that financing is too high to be able to do it for the time being,' said Vsevolod Cherepanov, head of Gazprom's production department, through a spokesman. 'We are collecting new data. We have extensive gas resources. We shouldn't take hasty decisions.' The viability of the project has been dented in recent years by the shale gas revolution in the U.S., originally considered an export market for its gas. Gazprom is also facing challenges to exports to its main market in Europe from flagging demand and the growth of liquefied natural gas. The Economy Ministry said Tuesday it sees 'serious' risks posed by shale gas to Gazprom's revenue beginning in 2014, as higher supply from the nontraditional hydrocarbons may hurt prices and demand for its pipeline gas."
Gazprom Postpones Development of Shtokman Field
Wall St Journal, 30 August 2012

"One of the many ways to think about peak oil is the point in time when our gasoline and other petroleum-fueled endeavors, such as air travel, become too expensive for casual use. As the use of petroleum products slows (US consumption is down by 4.4 percent from last year), our economy activity gradually drops to a slower pace. This year, the price of crude dropped about $35 a barrel between April and June as tensions in the Middle East seemed to be easing. Since July, however, it has climbed $25 higher despite gloomy economic prospects for much of the industrialized world. More important however, is that the price of gasoline in the US is now up to the highest level ever for this time of year. Despite lower gasoline consumption, we seem to be setting a new record for the amount of money going into our gas tanks and not available for other uses. Some of this price increase is due to transient factors: hurricanes, refinery fires, and saber rattling in the Middle East; however, underlying all this is the simple fact that the production of conventional oil, which powers most of our transportation, has hardly risen in the last 8 years. Don't be fooled by the increases in bio-fuels, and natural gas liquids production. While we may be mixing a lot of corn-based ethanol into our gas tanks at the minute, ethanol and natural gas liquids do not power 18-wheelers, airplanes, ships, or pave roads – conventional oil does and it is the production of this fuel which is not growing at the pace we need for robust economies. Moreover, don't be fooled by the hype about fracking for oil in Texas and North Dakota. Production from these wells, is very expensive, lasts only a few months and will someday be recognized as but a small blip in the 30 billion barrels of oil the world consumes each year."
The Peak Oil Crisis: Summer's End
Falls Church News-Press, 29 August 2012

"The most important facts about Iran go unstated because they are so obvious. Any glance at a map would tell us what they are. And these facts explain how regime change or evolution in Tehran -- when, not if, it comes -- will dramatically alter geopolitics from the Mediterranean to the Indian subcontinent and beyond. Virtually all of the Greater Middle East's oil and natural gas lies either in the Persian Gulf or the Caspian Sea regions. Just as shipping lanes radiate from the Persian Gulf, pipelines will increasingly radiate from the Caspian region to the Mediterranean, the Black Sea, China and the Indian Ocean. The only country that straddles both energy-producing areas is Iran, stretching as it does from the Caspian to the Persian Gulf. In a raw materials' sense, Iran is the Greater Middle East's universal joint.... just as Iran straddles the rich energy fields of both the Persian Gulf and the Caspian Sea, it also straddles the Middle East proper and Central Asia. No Arab country can make that claim (just as no Arab country sits astride two energy-producing areas).... as its nuclear program attests, is one of the most technologically advanced countries in the Middle East (in keeping with its culture and politics), and as such has built hydroelectric projects and roads and railroads in these Central Asian countries that will one day link them all to Iran -- either directly or through Afghanistan. Moreover, a natural gas pipeline now connects southeastern Turkmenistan with northeastern Iran, bringing Turkmen natural gas to Iran's Caspian region, and thus freeing up Tehran's own natural gas production in southern Iran for export via the Persian Gulf. (This goes along with a rail link built in the 1990s connecting the two countries.) Turkmenistan has the world's fourth-largest natural gas reserves and has committed its entire natural gas exports to Iran, China and Russia. Hence, the possibility arises of a Eurasian energy axis united by the crucial geography of three continental powers all for the time being opposed to Western democracy.14 Iran and Kazakhstan have built an oil pipeline connecting the two countries, with Kazakh oil being pumped to Iran's north, even as an equivalent amount of oil is shipped from Iran's south out through the Persian Gulf. Kazakhstan and Iran will also be linked by rail, providing Kazakhstan with direct access to the Gulf. A rail line may also connect mountainous Tajikistan to Iran, via Afghanistan. Iran constitutes the shortest route for all these natural resource-rich countries to reach international markets. So imagine an Iran athwart the pipeline routes of Central Asia.... "
The Geography of Iranian Power by Robert D. Kaplan
Stratfor, 29 August 2012

"Gazprom has admitted it might yet adjust its attitude towards shale gas, as Russian policy makers assess new dangers to the country’s petro-dollar economy. First, Russia’s Economic Ministry warned that the increasing supply of shale gas on world markets will start hurting Gazprom’s pipeline sales to Europe in 2014. And it seems Gazprom might now be weighing the pros and cons of jumping onto the shale gas bandwagon. 'Gazprom had undervalued the importance of shale gas, but is starting to look at it seriously,' Dow Jones quoted Deputy Economy Minister Andrei Klepach as saying last week. Gazprom's top managers have for years said that shale gas production would never threaten demand for Russian gas. Now, they’re not so sure. 'Shale gas production in the U.S. is already having a negative impact on gas prices in Europe and on Gazprom,' Chris Weafer, Chief Strategist at Troika Dialog, told Oil&Gas Eurasia. 'Even though there is as yet no actual U.S. gas imports to Europe, the high domestic (U.S.) gas production has displaced coal as a major fuel source and that coal is finding its way into Europe and other world markets. The greater availability of cheap coal has already very significantly undermined the gas market and Gazprom’s ability to price gas. That is why Gazprom is under pressure to negotiate existing contracts and also why it is in a hurry to build Nord Stream and South Stream,' Weafer said. 'It wants to at least lock in the customer base before European and/or U.S. shale gas arrives; at least then it will be an issue of price bartering rather than market share.'”
Gazprom Rethinks Shale as European Gas Prices Sink
Oil&Gas Eurasia, July - August 2012

"If the looming global oil crunch has been postponed for another decade or two as widely alleged, this is far from obvious in today’s commodity markets. Brent crude jumped to $115 a barrel last week. Petrol costs in Germany and across much of Europe are now at record levels in local currencies. Diesel is above the political pain threshold of $4 a gallon in the US, hence reports circulating last week that the International Energy Agency (IEA) is preparing to release strategic reserves. Barclays Capital expects a 'monster' effect this quarter as the crude market tightens by 2.4m barrels a day (bpd), with little extra supply in sight. Goldman Sachs said the industry is chronically incapable of meeting global needs. 'It is only a matter of time before inventories and OPEC spare capacity become effectively exhausted, requiring higher oil prices to restrain demand,' said its oil guru David Greely. This is a remarkable state of affairs given the world economy is close to a double-dip slump right now, the latest relapse in our contained global depression. Britain, the eurozone, and parts of Eastern Europe are in outright recession. China has 'hard-landed', the result of a monetary shock and real M1 contraction last winter. The HSBC manufacturing index fell deeper into contraction in July. The CPB World Trade Monitor in the Netherlands show that global trade volumes have been shrinking for the last five months. Container shipping volumes from Asia to Europe fell 9pc in June. Iron prices have fallen by 30pc since April to $103 a tonne. So we face a world where Brent crude trades at over $100 even in recession. Fears of an Israeli strike on Iran may have spiked the price a bit, though Intrade’s contract for an attack is well below levels earlier this year. Iranian sanctions may have cut supply by more than the extra 900,000 bpd pumped by Saudi Arabia. Japan’s increased reliance on oil since switching off most of its nuclear reactors has played its part. Yet the deeper force at work is the relentless fall in output from the North Sea and the Gulf of Mexico, endless disappointment in Russia because of Kremlin pricing policies, and the escalating cost of extraction from deep sea fields. Nothing has really changed since the IEA warned four years ago that the world must invest $20 trillion in energy projects over the next 25 years to feed the industrial revolutions of Asia and head off an almighty crunch. The urgency has merely been disguised by the Long Slump. We learned in the 2006-2008 blow-off that China is now the key driver of global oil prices, with consumption rising each year by 0.5m bpd -- now a total 9.2m bpd in a world market of 90m bpd. Demand is broadly flat in Europe and America. So what will happen when China latest spending blitz gains traction? The regions have unveiled a colossal new spree on airports, roads, aeronautics, and industrial parks: a purported $240bn each for Tianjin and Chongqing, $160bn for Guangdong, $130bn for Changsha, and so forth. Sleepy Guizhou has trumped them all with $470bn. .... World opinion has swung a little too cavalierly from the Peak Oil panic four years ago to a new consensus that America’s shale revolution -- and what it promises for China, Argentina, and Europe -- has largely solved the problem. Much has been made of 'Oil: The Next Revolution' by Harvard’s Leonardo Maugeri, who forecasts an era of bountiful supply and cheap oil as global output capacity rises by almost 18m bpd to 110m bpd by 2020. Sadad al-Huseini, former vice-president of Saudi Aramco, has a written a testy rebuttal, arguing that Dr Maugeri assumes a global decline rate of 2pc a year from oil fields compared to the IEA’s estimate of 6.7pc. There alone lies the gap between crunch and glut. 'Much as all the stakeholders in the energy industry would like to be optimistic, it isn’t an oil glut by 2020 that is keeping oil prices as high as they are. It is the reality that the oil sector has been pushed to the limit of its capabilities and that this difficult challenge will dominate energy markets for the rest of the decade,' he said. The US turn-around has certainly been astonishing. The country now meets 94pc of its natural gas needs. It may ultimately become an exporter. Oil output from North Dakota’s Bakken field and other basins in Texas and Pennsylvania may push US shale/tight oil output to near 5m b/d by 2020, greatly reducing US reliance on imports.... The shale revolution has profound implications for America’s role in the world and the global balance of power, but let us not get carried away. Oil experts noticed how many crews in the Bakken field were told to stand down when crude prices dipped earlier this summer. 'Supposedly cheap shale turned out to be rather expensive shale in that, as soon as Brent fell to $90 per barrel, a large proportion of US shale oil in key regions seemed to lose all its rent,' said Paul Horsnell from Barclays Capital. Early hopes of a shale bonanza in Poland have been dashed. Exxon has pulled out of the country. China has more promise but exploration has barely begun and the government fears that leaks from the Sichuan basin could contaminate the Yangtze River that feeds so many of the great Chinese cities. One might add that some of Brazil’s non-shale fields are so far offshore in the Atlantic that helicopters have to be refuelled in the air. The drilling is through layers of salt that blind the imaging technology. Extraction is even harder and more costly than the task that overwhelmed BP at Macondo. The proper conclusion is to thank our lucky stars that US shale has helped the world avert an immediate crunch. It buys us a little more time to build a new generation of nuclear power stations -- preferably based on thorium -- and to achieve the Holy Grail of unsubsidised grid parity in solar technology."
Peak cheap oil is an incontrovertible fact
Telegraph, 26 August 2012

"BP plans to begin deep-sea drilling off the coast of Libya next year after it halted those plans in February 2011 following the rebel uprising that led to the overthrow of long-time dictator Moammar Qaddafi."
BP To Start Libya Oil Drilling in 2013
Fox News, 24 August 2012

"The Japanese government is likely to decide to eliminate all nuclear power over the next two decades in a new long-term energy plan that comes amid strong public opposition to atomic energy and ahead of national elections expected in the next few months, said government officials familiar with policy discussions. Following the Fukushima Daiichi nuclear-plant accident in March 2011, Prime Minister Yoshihiko Noda set up a council to recommend a long-term energy strategy based on three scenarios: phasing out nuclear power completely by 2030, reducing dependence to 15%, or keeping it at current levels of about 20% to 25%. All the scenarios aim to increase the use of renewable energy to at least 20% from the current 10%. The government is expected to announce a final decision in September, ahead of general elections for parliament expected by the end of the year. While it had been widely expected to choose the middle option, government officials said Tuesday that the council is now most likely to select the zero-nuclear option.'Zero nuclear is our hope and goal,' one of the officials told Dow Jones Newswires. 'We are moving toward it, and I don't think others will be aggressively against it.'"
Tokyo Ponders an End to Nuclear Power
Wall St Journal, 21 August 2012

"After four decades of decline, US oil production turned in 2005 and has generated the bulk of the global supply growth since then. But to brand this a 'paradigm-shifter', as Maugeri does, is wrong. He forecast that this boom will lead to an astonishing 4 mb/d of additional US shale production capacity by 2020. By contrast, the US Department of Energy, usually optimistic, predicts total US shale oil production will peak at just 1.3 mb/d in 2027. One reason Maugeri's forecast is so high is that he assumes production from existing shale wells will decline by just 15 per cent per year. Industry consultant Art Berman puts decline rates at around 40 per cent. Analysis by Bob Bracket of US market analysts Bernstein Research shows similarly steep declines, and also that the average shale well takes just six years to become a 'stripper well' - producing just 10 to 15 barrels a day. Such declines are far higher than for conventional wells, effectively meaning the industry must drill furiously just to stand still. It is this factor that will limit future production growth. It is distressing that Maugeri's report - which appears to contain glaring mathematical mistakes - got so much attention, but he insists the gist of his report is right. In contrast, an excellent International Monetary Fund working paper in May received much less attention. The IMF's paper sets out to test the idea that the recent 10-year rise in the oil price - it hit a low of $10 a barrel in the late 1990s - can be explained by geological constraints. The team took an approach which expresses mathematically the idea that oil becomes harder to produce, the less there remains to be produced - the basis of peak oil theory. This is clearly right: why would we be scraping out tar sands if there were easy oil left? When they combined this with the impact of global GDP and oil price, the results were striking. By testing their model against historical data, they found their production forecasts were more accurate than those of both peak oilers, who are traditionally too pessimistic, and authorities such as the US Energy Information Administration, which is generally far too optimistic. Their price forecasts were also far more accurate than traditional economic models that take no account of oil depletion, predicting a strong upward trend that closely fits what has happened since 2003. 'When you look at the oil price [over the past decade], the trend is almost entirely explained by the geological view,' said Michael Kumhof, one of the authors, when I interviewed him earlier this year. The IMF paper also slays the belief that rising oil prices will liberate vast new supplies and vanquish peak oil. The team found that production growth has halved since 2005, and forecast that even the lower rate of growth will only be sustained if the oil price soars to $180 by 2020. 'Our prediction of small further increases in world oil production comes at the expense of a near doubling, permanently, of real oil prices over the coming decade,' write the authors. In this context, shale oil is not a 'game-changer' but a sign of desperation. 'We have to do these really expensive and really environmentally messy things just in order to stand still or grow a little,' says Kumhof. It is true that global oil production has not yet peaked, but that is almost beside the point. The people who fixate on this need to wake up and smell the fumes we are reduced to running on. The IMF paper shows clearly we are supply-constrained. The oil price itself ought to be a clue: persistently above $100 per barrel, 10 times higher than it was at the eve of the 21st century. Price spikes in recent years and recessions are the inevitable outcome of rising competition from fast-growing developing economies for limited supplies. Domestic consumption among major producers such as Saudi Arabia is also soaring, reducing supply to others. While global production rose in the five years to 2010, global net exports fell by 3 mb/d, according to independent US geologist Jeff Brown. How much worse would you like it?"
We're still on the slippery slope to peak oil
New Scientist, 20 August 2012

"The United States is increasing its dependence on oil from Saudi Arabia, raising its imports from the kingdom by more than 20 percent this year, even as fears of military conflict in the tinderbox Persian Gulf region grow. The increase in Saudi oil exports to the United States began slowly last summer and has picked up pace this year. Until then, the United States had decreased its dependence on foreign oil and from the Gulf in particular. This reversal is driven in part by the battle over Iran’s nuclear program. The United States tightened sanctions that hampered Iran’s ability to sell crude, the lifeline of its troubled economy, and Saudi Arabia agreed to increase production to help guarantee that the price did not skyrocket. While prices have remained relatively stable, and Tehran’s treasury has been squeezed, the United States is left increasingly vulnerable to a region in turmoil. The jump in Saudi oil production has been welcomed by Washington and European governments, but Saudi society faces its own challenges, with the recent deaths of senior members of the royal family and sectarian strife in the eastern part of the country, making the stability of Saudi energy and political policies uncertain. The United States has had a political alliance with the Saudi leadership that has lasted for decades, one that has become even more pivotal to Washington during the turmoil of the Arab spring and rising hostilities with Iran over that nation’s nuclear program. (Saudi Arabia and Iran are bitter regional rivals.) The development underscores how difficult it is for the United States to lower its dependence on foreign oil — especially the heavy grades of crude that Saudi Arabia exports — even as domestic oil production is soaring. It is a development that has alarmed conservative and liberal foreign policy experts alike, especially with oil prices and Mideast tensions rising in recent weeks. 'At a time when there is a rising chance of either a nuclear Iran or an Israeli strike on Iran’s nuclear facilities, we should be trying to reduce our reliance on oil going through the Strait of Hormuz and not increasing it,' said Michael Makovsky, a former Defense Department official who worked on Middle East issues in the George W. Bush administration.... Many oil experts say that the increasing dependency is probably going to last only a couple of years, or until more Canadian and Gulf of Mexico production comes on line. 'Until we have the ability to access more Canadian heavy oil through improved infrastructure, the vulnerability will remain,' said David L. Goldwyn, former State Department coordinator for international energy affairs in the Obama administration. 'The potential for an obstruction of the Strait of Hormuz therefore poses a physical threat to U.S. supply as well as a potential price shock on a global level.' Obama administration officials said they were not overly worried for several reasons. In the event of a crisis, the United States could always dip into strategic petroleum reserves; domestic production continues to climb; and Gulf of Mexico refineries could be adjusted to use higher-quality, sweeter crude oil imported from other countries.... In the United States, several oil refining companies have found it necessary to buy more crude from Saudi Arabia and Kuwait to make up for declining production from Mexico and Venezuela, insufficient pipeline connections between the United States and Canadian oil sands fields, and the fallout from the 2010 BP disaster, which led to a yearlong drilling moratorium in the Gulf of Mexico.... The United States imported a daily average of more than 1.45 million barrels of Saudi crude over the first five months of this year, compared to a daily average of roughly 1.15 million billion barrels over the same period last year, according to Energy Department estimates. Similar increases have come from Kuwait and Iraq, even while total OPEC and non-OPEC imports declined. The United States has imported little Iranian oil in recent years. In recent years, United States oil imports have been trending lower, although total imports are little changed from the end of last year. But the big change came in imports from the Persian Gulf, spiking to 2.6 million barrels a day in May from 1.9 million barrels a day last December, now roughly 23 percent of total imports, compared with about 17 percent before. Domestic oil production has been surging the last three years and is up 10 percent this year. But most of the new production is coming from shale oil fields in North Dakota and Texas that produce high-quality sweet grades. Many of the refineries on the Gulf of Mexico coast are designed to refine the heavier oils that the United States has traditionally imported from Venezuela, Mexico and Canada. Mexican and Venezuelan production has been sliding the last few years, and much of that oil has been replaced by Canadian oil from oil sands. While Canadian production has been increasing rapidly in recent years, there is not enough pipeline capacity. There are also echoes from the disastrous BP Gulf of Mexico well explosion and spill in 2010, which led to a federal moratorium on Gulf drilling. Before the accident, Gulf oil production was 1.75 million barrels a day, and it was projected to increase to 2.2 million barrels a day by this year. Instead, because of the yearlong halt on new drilling, production is about 700,000 barrels a day lower than forecast. Much of that oil is heavy and is being replaced by Saudi imports, experts said. The boost in Saudi shipments to the United States also represents a swing for the kingdom, which had been shifting exports to China in the wake of the 2008 financial crisis and recession. 'The U.S. market for sour crude is looking very good for Saudi Arabia this year while the Chinese market is looking pretty bad,' said Edward Morse, Citigroup global head of commodity research. He noted that demand for crude in China grew by less than 1 percent over the first half of the year. Saudi oil experts said the kingdom was merely following the markets. 'This is strictly, totally business,' said Sadad Al Husseini, a former executive at Saudi Aramco, the state oil company. 'Saudi production is flat out. Where you send it is a matter of where you make the best profit.'"
US Reliance on Saudi Oil Heads Back Up
CNBC/New York Times, 17 August 2012

"At one point last week, Britain’s 3,500 turbines were contributing 12 megawatts (MW) to the 38,000MW of electricity we [in the UK] were using. (The Neta website, which carries official electricity statistics, registered this as '0.0 per cent'). It is 10 years since I first pointed out here how crazy it is to centre our energy policy on wind. It was pure wishful thinking then and is even more obviously so now, when the Government in its latest energy statement talks of providing, on average, 12,300MW of power from 'renewables' by 2020. Everything about this is delusional. There is no way we could hope to build more than a fraction of the 30,000 turbines required. As the windless days last week showed, we would have to build dozens of gas-fired power stations just to provide back-up for all the times when the wind is not blowing at the right speed. But, as more and more informed observers have been pointing out, the ministers and officials of the Department of Energy and Climate Change (DECC) seem to live in a bubble of unreality, without any practical grasp of how electricity is made, impervious to rational argument and driven by an obsession that can only end in our computer-dependent economy grinding to a halt. The latest attempt to get them to face reality is by Prof Gordon Hughes, a former senior adviser on energy to the World Bank, now a professor of economics at Edinburgh, whose evidence to the Commons committee on energy and climate change has now been published on the website of the Global Warming Policy Foundation. His most shocking finding is that the pursuit of our Climate Change Act target – to reduce Britain’s CO2 emissions by 80 per cent by 2050 – would cost us all �124 billion by 2020, or �5,000 for every household in the land: not just to build tens of thousands of absurdly subsidised wind turbines, but also for the open-cycle gas-fired power stations needed to provide back-up. To guarantee the same amount of power from combined-cycle gas-fired plants would cost �13 billion, barely a tenth as much."
Christopher Booker - The great wind delusion has hijacked our energy policy
Telegraph, 11 August 2012

"The United Nations (UN) food agency has called on the United States to suspend its production of biofuel ethanol. Under US law, 40% of the corn harvest must be used to make biofuel, a quota which the UN says could contribute to a food crisis around the world. A drought and heatwave across the US has destroyed much of the country's corn crop, driving up prices. The US argues that producing much of its own fuel, rather than importing it, is good for the country."
US biofuel production should be suspended, UN says
BBC Online, 10 August 2012

"Not so long ago, it used to be the opponents of nuclear generation who argued that the economics did not add up. Nowadays, at least one of the industry’s more influential proponents seems to agree. In a Financial Times interview this week, Jeff Immelt, chief executive of GE, said nuclear power was 'really hard' to defend financially, when compared both with gas-fired generation and certain renewables. 'At some point, really, economics rule,' he added. Mr Immelt is not some disinterested bystander. GE, one of the pioneers of civil nuclear power in the 1950s, still produces reactors through a joint venture with Hitachi of Japan."
Nuclear winter
Financial Times, 3 August 2012

"Russian oil output, the world's largest, rose to 10.34 million barrels per day (bpd) in July from 10.32 million bpd in June, keeping it just ahead of its nearest rival, Saudi Arabia, Energy Ministry data showed on Thursday. Saudi Arabia pumped 10 million bpd in July, a Reuters survey showed. Russia's post-Soviet record was 10.36 million bpd. In tonnes, the ministry said total crude production stood at 43.74 million in July. Output growth was less than one percent compared to July 2011, and Russian oil companies are struggling to maintain even these lacklustre growth rates as their main fields in West Siberia, the workhorse of the Soviet oil industry, decline. Russian oil firms raised output by nearly 50 percent between 2002 and 2010, and are experimenting with expanded horizontal drilling and multi-stage hydraulic fracturing - technologies which aided the shale boom in the United States - to squeeze more barrels out of the old province, in addition to development of new fields. Daily gas production stood at 1.45 billion cubic meters (bcm) in July, down from 1.54 bcm in June. Total output for the month was 45 bcm, down 4.5 percent from July 2011 as Russian export monopoly Gazprom faces weak demand in its main export market, Europe."
Russia's July oil output up to 10.34 mln bpd
Reuters, 2 August 2012

"A California oil field thought to be one of the biggest in the U.S. has been producing much less oil than hoped, according to a report by Alliance Bernstein analyst Bob Brackett. The field, a formation of rock known as the Monterey Shale, was thought to have 15 billion barrels of 'technically recoverable' reserves, according to government estimates. That's triple the amount of oil found in huge and newly prolific fields in North Dakota and Texas. The formation lies under the San Joaquin Valley in central California. Most of the locations probed so far have been northwest of Bakersfield. Drillers trying to tap the formation include Occidental Petroleum Corp., Plains Exploration & Production Co., Venoco Inc. and Berry Petroleum Co. But drillers haven't been able to get the Monterey Shale to produce oil at high rates. Brackett suggests that there are a few characteristics of the geology that could make the field more difficult to develop. There are lots of natural faults in the rock, which means drillers can't easily control the flow of oil through faults they create. Also, the rock is not under enormous pressure, so there is less force pushing the oil to the surface. And the oil may be relatively thick and sticky, which slows its flow. If the Monterey had performed as well as the Bakken field in North Dakota or the Eagle Ford in Texas, it would be delivering an additional 300,000 barrels of oil per day by now, Brackett says. Instead, production in California is flat."
Analyst: Calif. shale oil field results disappoint
Associated Press, 31 July 2012

"Politicians are finally admitting that our 'carbon' targets and our energy needs are incompatible. It is not often our Government lets on that it is intending to commit a very serious breach of the law – even if it does so in such opaque fashion that it hopes no one will notice. But that is what we can read between the lines of last week’s statement by Ed Davey, Secretary of State for Energy and Climate Change, which revealed just what a catastrophic shambles he is making of Britain’s energy policy. .... Everything about this statement betrayed that Mr Davey and his officials have begun to realise that they are impaled on two wholly irreconcilable hooks. On one hand, they are under two legal obligations: a commitment to the EU that we will generate 32 per cent of our electricity from 'renewables' by 2020; and, under the Climate Change Act, that we will cut our 'carbon emissions' by 80 per cent within 40 years. On the other hand, it is their duty to ensure that we produce enough electricity to keep our lights on. Hidden in the small print of Davey’s statement are two passages of particular significance. One, so obscurely phrased that it seems to have passed everyone by, is that by 2017 we hope to be generating '79 terawatt hours' (TWh) of electricity a year from renewables, rising by 2020 to the '108 TWh needed to meet the UK’s 2020 renewable energy target'. To make sense of this, one must look at the section of DECC’s website showing that, in 2010, the last year for which we have figures, we used 378 TWh of electricity, of which only 10 TWh, or 2.6 per cent, came from wind. Slightly more than this came from other renewables, such as hydro. But to meet that 32 per cent target within eight years, almost all the increase would have to come from new wind turbines. If 3,000-odd turbines produced 2.6 per cent in 2010, then to meet the EU target would require something like the '32,000 turbines' mentioned by Davey’s predecessor Chris Huhne just before he resigned. This would require us to build about 10 giant turbines every day for the next eight years. Regardless of how many billions of pounds of subsidy might be thrown at this, in practical terms it is quite out of the question. The first thing we might thus learn from Davey’s statement is that we will miss that legal target by a country mile. An even more revealing passage, however, is one that concedes that we are going to need more gas-fired power stations. Gas, says Davey, will remain 'an important part of the energy mix', not just to provide back-up for all those wind turbines when the wind isn’t blowing, but also to meet our 'everyday demands' to 2030 and beyond. It is all very well for Davey to throw in limp references to how this will 'meet our carbon budget' with the aid of 'carbon capture and storage'; but as he and his officials well know, piping off CO2 from power stations to bury it under the North Sea is just a pipe-dream. It is still an 'unproven technology', as Davey admits, for the simple reason that it can never be made to work.... not the least telling feature of last week’s statement was that it made no reference to the shale gas revolution which has already halved US gas prices in five years, and which could solve our own energy problems by providing cheap gas for centuries. One day we will have our shale gas and we will see the Climate Change Act repealed. These things will happen because the penny is finally dropping that the only alternative is economic suicide. But as yet, our politicians are unable to admit openly the enormity of the mess they have landed us in."
The Government plans to break its own climate change law
Telegraph, 28 July 2012

"If Montana is a microcosm of the world, one message to glean is that we are not in the midst of a decades-long flood of oil supply in the United States, as many suggest. Instead, the red lights are blinking across the exuberant U.S. oil patch. As you recall, much has been made in recent months about the momentous prospects for U.S. oil and gas, which are said to be leading a global fossil fuel revolution, with meaningful implications for fortune-hunters and geopolitical players alike: North America will be independent of outside oil producers, the U.S. will experience an industrial revolution, and OPEC will drift into laggardly inconsequence. So what to think about the latest news from folks approaching the punch bowl with bad intentions? Let's start with Montana, and the now-legendary Bakken shale oil formation. Bob Brackett, an analyst with Bernstein Research, studied a dozen years of shale oil drilling data for this mountainous state bordering Canada. What he found was a steep oil production increase through 2006 -- surpassing 100,000 barrels a day -- followed by a fast, 40 percent decline to about 60,000 barrels a day today. The plummet is counterintuitive because the time frame coincides with a capital spending binge by the industry -- tens of billions of dollars poured into the new innovations and technology that have opened up the Bakken and other shale plays. So why has Montana's production dropped? 'Resource plays,' Brackett writes in a note to clients today, 'have limited/finite drilling locations. The best locations get drilled early, the less economic ones later, and once they are drilled, operators move on.' In other words, Brackett told me in a followup email, 'industry drilled the low hanging fruit first, and now can't find the same quality of opportunity.' But surely this is just Montana, right Bob? You don't mean to suggest that the entire Bakken formation, including North Dakota -- on which so many North American projections centrally rely -- is in trouble, too? Sadly, that is precisely what Brackett means. In fact, he has quantified the Bakken's production trajectory. The key number is six - that is the longevity of a Bakken well before it turns into a 'stripper,' industry argot for a worn-out nag producing just 10 or 15 barrels a day, from 400 barrels a day at its peak. Right now, just 200 modern Bakken wells are strippers. But in roughly six years, there will be 4,000 of them, Brackett says. 'All good things in the oil patch come to an end,' Brackett told me. 'In the case of North Dakota, that is a long time -- years -- off, but even that too will suffer the same fate' as Montana.'"
Steve LeVine: The Weekly Wrap - July 27, 2012
Foreign Policy (Blog), 27 July 2012

"Power station operator Drax will kick off its multi-million pound conversion into a mainly biomass-fired plant after the Government confirmed new subsidies for renewable power. The Department of Energy and Climate Change (DECC) revealed long-awaited subsidies for large-scale green power generation through so-called Renewables Obligation Certificates (ROCs). But shares in Drax lost as much as 25 per cent yesterday as the subsidy level underwhelmed investors. Its shares eventually recovered some of their losses but closed down 76.5p at 442p, a 14.8 per cent fall. Drax, whose coal power station in Selby, North Yorkshire, is the UK’s single-biggest emitter of carbon dioxide, will forge ahead with converting three of its six units into burning organic plant-based material. It expects this to cost �650m to �700m. It will take a decision on converting the other three at a later date, but said it could be mainly biomass-fuelled within five years."
Subsidies set Drax on path to burning biomass
Yorkshire Post, 26 July 2012

"Oil prices fall and the industry turns cannibal: big energy companies hunt out bargains among overstretched producers and promising explorers. It's the season for takeovers and asset deals again. Only this time, there are no easy pickings for the U.S. and European heavyweights such as Exxon (XOM.N), BP (BP.L), Shell (RDSa.L) and Chevron (CVX.N). The oil 'majors', which report second quarter results in the next few days, have rarely looked so threatened. All the obvious cost-saving mega-deals have already been done, and an upsurge in resource nationalism that has dogged them for years in the big producing countries shows no sign of retreating. Now state-backed competitors from energy-hungry Asian nations are elbowing them out of deals and new prospects, paying prices that the majors cannot justify to their investor owners. For instance Shell lost out last week on bid target Cove Energy (COVE.L) to Thailand's state oil company, PTT Exploration and Production PTT.BK.... A much bigger surprise came this week. Chinese state oil company CNOOC (0883.HK) bid $15.1 billion for Canadian group Nexen (NXY.TO) - offering a 61 percent premium to the market price for a company weakened by drilling and production troubles. This will mark the biggest foreign takeover by a Chinese company if it succeeds. Nexen is the kind of victim that might have been snapped up by one of the big Western players in past downturns. The same day, fellow Chinese oil company Sinopec bought some North Sea assets for $1.5 billion. It was all so different at the turn of the millennium, when Western firms had it their own way. Exxon bought Mobil, BP acquired Amoco and Arco, Chevron (CVX.N) took over Texaco, and Total (TOTF.PA) gobbled up both Fina and Elf, as the Western majors enjoyed a feeding frenzy. The huge growth in demand for oil and gas since then from China, India and other emerging markets are a factor in the new order, but some bankers believe the era of super-giant takeover deals is probably over too.... There's nothing new about governments letting foreign companies develop their resources, then snatching back the profits and the assets. It happened repeatedly to Shell, BP, Exxon and others in the Middle East throughout the 20th century. But a new cycle is underway, distracting management from the task of getting oil out of the ground, eroding profit margins and, in some cases, confiscating large chunks of business. Witness BP's constant political troubles in Russia with its 10-year old TNK-BP joint venture, Spanish group Repsol's (REP.MC) loss of its Argentine division to nationalization this year, and the struggle all the big Western companies are having to get a profitable foothold in postwar Iraq. Developed nations play the same game. The United States, Australia and Canada have all blocked foreign resource industry takeovers on national interest grounds, and there are few governments that have not slapped extra taxes on oil companies without much warning.... Data suggests that in exploration at least, the majors are pedaling fast to stand still - and on ever more costly bicycles. Analysts at Wood Mackenzie predict that conventional oil and gas industry exploration spending will top $80 billion in 2012, up from $20 billion 10 years ago. The oil majors - defined by WoodMac as BP, Chevron, ConocoPhillips (COP.N), ENI (ENI.MI), ExxonMobil, Shell, Statoil (STL.OL) and Total - will account for about $25 billion of that, up from around $8 billion in 2002. Yet their total reported production in the period has not grown at all, remaining at around 7.5 billion barrels a year.... However, it might not be all bad news for the old guard. The shale revolution has delivered cheap, localized energy in the United States, but significant oil and gas finds are still being made in the ever-more inhospitable, dangerous and costly places the majors have made their own. Offshore discoveries in deep water since 2002 account for about 40 percent of the total, WoodMac says, with the Arctic a growing theme. It puts the majors' exploration spending per barrel found at $3 in 2012, up from only $1 10 years ago, but this compares with between $5 and $10 on average among the pure exploration and production companies."
Big oil on the back foot in changing energy world
Reuters, 25 July 2012

"For the second time in five months, the U.S. government is being sued to overturn a law that forces oil refiners to use a scarce biofuel. Under the federal Renewable Fuel Standard, refineries were required by the Environmental Protection Agency to use 6.6 million gallons of cellulosic biofuels - a fuel made from non-grain sources such as wood chips - in 2011. The U.S. oil industry's leading lobby group, The American Petroleum Institute filed a lawsuit in federal court in Washington saying no commercial quantities of the biofuel were available. The industry is penalized if it does not buy the fuel.... Ethanol made from corn was to eventually give way to cellulosic fuel. But because of high costs, technical difficulties and the end of federal subsidies, the industry has failed to take off and the EPA has been forced to drastically reduce the cellulosic requirement. In 2012, the EPA said 8.7 million gallons of the advanced fuel must be blended into gasoline, which is down from the original proposal for 2012 of 500 million gallons. Brooke Coleman, executive director for the Advanced Ethanol Council, said the sector has been hard hit by the recession but the oil industry was targeting the sector just as the first commercial plants were coming on line..... The entire EPA mandate for biofuels is also under attack from the livestock industry and other groups who believe the dependence on corn-based ethanol is exacerbating a looming shortage of the grain as the country suffers its worst drought in more than half a century. Corn-based ethanol consumes more than 40 percent of the huge U.S. corn crop, although the industry recycles some byproducts of the distillation process into feed for livestock."
Oil group sues over law on scarce biofuel
Reuters, 25 July 2012

"The U.K. government granted tax relief for natural gas drillers and cut subsidies for renewable energy, signaling more reductions in the months ahead as it balances demand for cheaper power against a goal to lower pollution from fossil fuels. The Department of Energy and Climate Change cut subsidies for onshore wind 10 percent, offered less financial support than expected for biomass and said it may cut solar further. Drax Group Plc (DRX), owner of the U.K.’s largest power station and biomass consumer, fell by a record. Gas drillers get a tax credit worth 500 million pounds ($776 million). The decision caps weeks of debate within Prime MinisterDavid Cameron’s coalition government over the scale of support for renewables after Conservatives called for a 25 percent cut in the wind subsidy. The Renewable Energy Association said it’s concerned the government’s decision to review wind and solar support levels will hold back investment."
U.K. Boosts Gas While Cutting Support for Wind, Biomass
Bloomberg, 25 July 2012

"China has made a dramatic swoop on the North Sea oil industry, buying up assets that account for more than 8pc of the UK's entire oil and gas production. Chinese state-controlled group CNOOC agreed a $15.1bn (�9.7bn) offer to buy Canada’s Nexen, which is the second biggest oil producer in the UK North Sea. Its net UK production of both oil and gas is 114,000 barrels of oil equivalent per day (boepd). In a separate deal, China’s Sinopec splashed out $1.5bn on a 49pc stake in the UK unit of Canada’s Talisman Energy, which produced an average of 71,500 boepd last year. Talisman said its joint venture with Sinopec would 'invest more in the UK than Talisman would have on its own'. Both Nexen and Talisman rank within the top 10 oil and gas producers in the UK North Sea. The UK’s entire oil and gas output stood at 1.8m boepd in 2011, according to industry body Oil & Gas UK. ... CNOOC will require approval not only from Nexen’s shareholders but also from Canadian regulators, who can block foreign takeovers if they deem them not to be in Canada’s best interests. CNOOC has pledged to seek a listing in Toronto if the deal is approved."
China dives into UK’s North Sea oil industry
Telegraph, 24 July 2012

"Treasury intervention, unnecessary increases in costs and the risk to badly needed investment are cited by the Energy and Climate Change Select Committee as the result of a catalogue of blunders made in the draft Energy Bill. ...The renaissance of nuclear power has been threatened by the withdrawal of RWE and EON, the two big German utilities, from planned new developments. Government attempts to encourage nuclear investment through long-term price agreements without direct subsidies have caused confusion and have drawn scathing criticism from MPs in their report. Discussions with Chinese state companies have raised hopes that new foreign partners will be formed, possibly to build five plants, representing investment of �35bn to fill the nuclear gap."
Government energy plan 'unworkable', MPs warn
Telegraph, 23 July 2012

"Leonardo Maugeri's recent paper Oil: The Next Revolution on the presumed future abundance of oil supplies rejects the pessimistic outlook of limited increases in oil capacity over the next decade. It suggests global oil capacity will exceed 110 million barrels per day by the end of the decade, putting an immediate end to concerns regarding constrained long-term oil supplies. This conclusion is based on an assessment of new projects with a reported capacity of 49 million b/d before a downward adjustment to 29 million b/d to allow for completion risks and reserves depletion. Maugeri holds two PhDs, one in Political Science and one in Economics, and has extensive executive experience with ENI in strategies and developments and in petrochemicals. In putting forth this optimistic thesis, Maugeri apparently sets aside a variety of technical realities, including the difference between natural gas liquids (NGLs) and conventional oil, reserves depletion versus capacity declines, and proven reserves as opposed to speculative resources.... The report mixes NGLs, which feed petrochemicals and domestic or industrial fuel applications, with conventional oil, which is the main source for transportation fuels. When fractionated, NGLs yield propane, butane and light naphtha. These products cannot replace oil distillates such as gasoline, diesel or jet fuel. For example, NGLs grew from 7 million b/d in 2003 to an estimated 12 million b/d in 2011 but provided no relief to the demand for transportation fuels, which was surging across those years. The growth in NGLs is now forecast by the IEA to reach an ambitious 20 million b/d by 2030. Impressive as this may be, NGLs will remain at best marginally relevant to transportation applications until widespread changes occur in the technology and infrastructure of the auto and trucking industries. Given cost and complexities, there is no evidence that this is likely to happen within this decade. In regard to capacity declines, the report appears to confuse oil reserves depletion with capacity declines. In the world of petroleum engineering, depletion quantifies residual reserves in the ground, while declines define a reservoir's ability to sustain a given level of production over time. Incremental reserves in modern discoveries are added early in a discovery's life while production declines are a subsequent development related to reservoir factors including changing fluid compositions and diminishing reservoir energy. Maugeri's suggestion that incremental reserves may offset capacity declines mixes up speculative exploration variables with reservoir engineering realities. The report takes exception to the IEA's 2008 estimate of an average 6.7% global oil capacity decline and offers an equivalent estimate of less than 2% per year. This low estimate is apparently based on the observation of historical production rates from major oil producing countries. It is not clear how the author extracted the convoluted effects of offsetting market volatility, spare capacity utilization, natural production declines, and ongoing new capacity investments from such historical trends. The IEA’s 2008 study, on the other hand, applies well-established petroleum engineering principles to 800 post-peak fields that make up the majority of global oil supplies. The natural decline rates of these fields were reported to average 3.4% for 54 supergiant fields, 6.5% for scores of giant fields and the 10.4% decline rate for hundreds of large fields. At the IEA's 6.7% level of capacity declines, the current 74 million b/d of conventional oil supplies (which exclude NGLs, biofuels, nonconventionals and various other liquids) would require 5 million b/d of supplemental new capacity annually just to maintain a flat level of supply. Based on these assessments, Maugeri’s 29 million b/d of "risked" new capacity would only replace declines through 2017. Even the full 49 million b/d of new projects would only extend current liquids production on a flat trajectory to 2021. In regard to global oil reserves, the Maugeri report highlights the opportunity to convert trillions of barrels of unconventional oil resources into proven reserves. This is hardly a simple process, as he points out, given the realities of technical, environmental and economic challenges. Industry studies based on the IEA's published upstream oil and oil equivalent projects have shown that the capital cost of Canadian bitumen and Qatari GTL projects have averaged $97,000 per barrel of capacity. Had these prohibitive economics been otherwise, the resources alluded to in the Maugeri report would have entered into widespread development many years ago."
Sadad al-Huseini, petroleum consultant and formerly executive vice president of Saudi Aramco for exploration and production
Don't Count on Revolution in Oil Supply
Petroleum Intelligence Weekly, 23 July 2012

"Since the impostion of sanctions China has been taking more than half of Iran's oil exports. You probably hear about the Syria uprising every day. News agencies run stories of human atrocities and pontificate about Western intervention, but these stories don't tell you the endgame. The U.S. has left Iraq, and Iran is ready to fill the resultant power vacuum and raise its stature in the region. Syria is the current battleground for this wider struggle. Turkey, Saudi Arabia and the United States want to add Syria to the coalition of states counterbalancing Iran. Iran, on the other hand, needs to keep Syria as a strong ally in the Levant as a check on Israel. Then there are the Russians, whose relationship with the Syrians grants them access to the Mediterranean Sea and gives them leverage on the West. What happens in Syria matters."
Syria - small but strategic
Stratfor, 20 July 2012

"Offshore operators racing to extract more oil from under deep waters have a vision of one day running wells remotely from land, reducing the need for multibillion dollar offshore production platforms. That will take lots of electric power, though, and while the companies don’t have technology to generate electricity underwater, they are developing new ways to get it there from shore or from generators on the ocean’s surface. Siemens is working on subsea transmission equipment that could deliver 100 megawatts at a distance of more than 70 miles from a generation facility – a dramatic increase from the 3 to 4 megawatts maximum transmitted now through cables from platform generators to the deep-water wells below.... Siemens hopes to bring its technology to the commercial market by 2014. It includes a seafloor grid of switches, control gear, and transformers along with equipment to process the hydrocarbons. The big challenge is making it all work in the deep sea. 'It is a hostile environment – corrosive, dynamic and high pressured,' said Michael Webber, a professor of mechanical engineering at the University of Texas at Austin. 'Any equipment on the seafloor will have to be able to survive those conditions, along with marine life chewing on it or mussels growing on it.' It also must be repairable. 'At 5,000 feet, it’s hard to send a mechanic down,' said Brad Beitler, vice president of technology for FMC Technologies. 'You have to be able to pull the plug on it at that depth and disconnect it. All the things you put on the seabed have to be retrievable back to the surface.' Companies are moving forward with underwater grids despite these challenges, motivated both by the steep costs of building and staffing offshore platforms and the high price oil brings once it’s produced. Chevron subsea specialist Rick Kopps said having more power available on the seafloor could extend the life and productivity of wells by allowing the use of more powerful pumps and other equipment. Additional subsea power also could allow operators to move compressors, separators and other production equipment from surface platforms to the sea floor nearer the wells. 'Oil recovery from the next generation of deep-water wells is about 10 percent with current technology,' said Neil Holder, vice president of technology and head of subsea operations for Aker Solutions, a Norwegian subsea technology company. 'With a subsea grid powering new compression and separation technology, you could double that to about 20 percent.'”
Power grid in sea reaches for new depths
Fuel Fix (Blog), 19 July 2012

"Chancellor Angela Merkel’s government said it may have to scrap some of its targets for shifting the source of its electricity supply, a move that would water down a commitment to bolster renewable energy in Europe’s biggest economy. Economy Minister Philipp Roesler told today’s Bild newspaper that Germany may readjust targets linked to the plan to exit nuclear energy-generation by 2022 if jobs are threatened. The comments came a day after Environment Minister Peter Altmaier told Bild the coalition may fail to reach a goal to cut power consumption 10 percent by 2020. Merkel said July 14 that Germany probably won’t use carbon capture and storage facilities after passing the required bill in parliament.... Germany plans to close its remaining nine nuclear stations by 2022, build offshore wind farms that will cover an area six times the size of New York City and build or upgrade as much as 8,200 kilometers (5,100 miles) of power lines. The nuclear exit is coupled with goals to increase energy efficiency and raise the share of renewable-energy output in its power mix to at least 35 percent by the end of this decade."
Germany May Scrap Energy-Source Goal as Overhaul Stumbles
Bloomberg, 17 July 2012

"Iran is set to arrest a slide in oil shipments in July as China increases imports to a record high to amount to more than half Iran's crude exports, an industry report said. Iran is set to arrest a slide in oil shipments in July as China increases imports to a record high to amount to more than half Iran's crude exports, an industry report said. Iran's oil exports are expected to average 1.084 million barrels a day in July, little changed from 1.094 million bpd in June, in what Geneva-based consultancy Petrologistics said was a preliminary report. Tehran's oil exports halved in the four months from February to June because of U.S. and European Union sanctions aimed at discouraging what the West fears is an Iranian programme to develop nuclear weapons. Only four countries are expected to import Iranian oil in July -- China, India, Japan and Taiwan, Petrologistics said, although it is possible a cargo could be diverted to Turkey. An EU embargo on oil purchases and shipping insurance came into force at the start of July, and non-EU Turkey has also cut back sharply on Iranian oil. China is now easily Iran's biggest customer and has negotiated big price discounts. It is expected to increase imports to 587,000 bpd in July, or 54 pct of Iran's total exports, from 428,000 bpd in June and 478,000 bpd on average on 2011, the Petrologistics report said. India's Iran oil purchases in July are also expected to rebound to 335,000 bpd from 264,000 bpd in June, a little above its average imports last year of 326,000 bpd. Petrologistics said privately held Essar Oil was responsible for the bulk of the import increase. Essar is not restricted by the Indian government's shipping and insurance regulations on Iran. Taiwan will take one cargo, equivalent to 65,000 bpd, having imported nothing since March. It averaged only 28,000 bpd on average in 2011. The increases by China and India contrast with Iran's two other big Asian importers in previous years, Japan and South Korea. Japan is expected to import 98,000 bpd this month or little more than a third of last year's purchases. South Korea cut imports from Iran to zero in July after failing to secure shipping insurance. The sanctions have forced Tehran to store crude in tankers at sea to avoid steep cuts in oil production."
Iran arrests oil export decline as China buys more
Reuters, 17 July 2012

"It’s reasonable to treat small quantities of NGLs as equivalent to crude oil. But as NGL production grows relative to crude oil output, that equivalence should progressively break down. How much, how quickly, and where we are on that spectrum isn’t clear to me. It’s something, though, that some careful quantitative analysis should be able to help us understand."
Michael Levy - Are Natural Gas Liquids as Good as Oil?
Council On Foreign Relations (Blog), 9 July 2012

"Everyone knows that world oil production has been running between 88 and 89 million barrels per day (mbpd) this year because government, industry and media sources tell us so. As it turns out, what everyone knows is wrong. It's wrong not because the range quoted above can't be found in official sources. It's wrong because the numbers include things which are not oil such as natural gas plant liquids [NGPL] and biofuels. If you strip these other things out, then world oil production has been running around 75 mbpd this year. The main thing you need to know about the worldwide rate of production of crude oil alone is that it has been stuck between 71 and 75 mbpd since 2005 (calculated on a monthly basis). And, that has already had huge negative effects on the world economy and world society through high energy prices that are partly responsible for our current economic stagnation. But because natural gas plant liquids production has been growing rather rapidly due to recent intensive drilling for natural gas and because those liquids are misleadingly lumped in with oil supplies, people have been mistakenly given the impression that world oil production continues to grow. ... What's growing is a category called 'total liquids' which encompasses oil, natural gas plant liquids, biofuels and some other minor fuels. Total liquids are growing only because of large gains in natural gas plant liquids and minor gains in biofuels. And, this is why it is so important to understand what natural gas plant liquids are.... Usually, when people refer to NGL [natural gas liquids], what they really mean is natural gas plant liquids (NGPL). NGPL are hydrocarbons other than methane that are separated from raw natural gas at a processing plant. They include ethane, propane, butane and pentane. The amounts vary. For example, raw natural gas extracted off the coast of Malaysia contains 11 percent ethane, 5 percent propane, 2 percent butane and about 2 percent of something called natural gasoline or drip gas, a low-octane fuel that is used today primarily as a solvent. Raw natural gas from the North Slope of Alaska contains a higher percentage of methane and correspondingly smaller percentages of ethane (7 percent), propane (4 percent), butane (1 percent) and other components including carbon dioxide and pentanes (2 percent). In these two cases you can see that ethane makes up about half of the NGPL, propane makes up about a quarter, butane makes up 10 percent of Malaysian NGPL and 7 percent of Alaskan slope NGPL. So what is ethane used for? It's major use is as feedstock for the production of ethylene, one of the most widely used chemicals. Polyethylene is the world's most widely used plastic and found in such things as packaging film and trash bags. Other processes turn ethylene into automotive antifreeze. Yet others turn it into polystyrene which is used in insulation and packaging. Some ethane remains in the natural gas piped to our homes and factories, but not much. So far, it's hard to see how ethane, the most plentiful of the NGPLs, is a good substitute for petroleum-based liquid fuel products. How about propane? Everyone is familiar with propane use in backyard barbeques and camping stoves. It's also used to heat rural homes. In addition, the Green Truck Association reports that there are 270,000 propane-powered vehicles in the United States. That's about one-tenth of one percent of the roughly 250 million vehicles registered in the country. Some claim that 17.5 million vehicles worldwide run on propane. If true, that would be about 1.7 percent of the billion vehicle worldwide fleet. Yes, propane is a viable substitute for petroleum-based fuels in transportation. But a lot more vehicles would have to be converted to propane for that substitution to be meaningful. And, then there is a ceiling on how much propane could actually be made available because as we've seen, it makes up only 4 to 5 percent of all raw natural gas production. To the extent that propane displaces heating oil, it is a good substitute for oil. But again, limits on its production prevent it from being a panacea. Of course, natural gas itself is often a substitute for heating oil, especially given its comparatively low cost. So there can be a limited substitution effect where natural gas infrastructure is feasible. How about butane? Everyone recognizes butane as the fuel for butane lighters. When it is mixed with propane, it is called liquified petroleum gas or LPG which is used for space heating. It's also used as a propellant in aerosol sprays. But no one can put butane into a vehicle. It's not a suitable liquid fuel for transportation..... Pentanes have industrial and laboratory uses, but aren't used as liquid fuel. The case for lumping NGPL with oil supply is not very strong. In fact, given that little substitution is possible and the growth in the substitutes that are available is limited, the merging of NGPL with oil seems more like a facing-saving gesture on the part of those who have consistently been wrong on oil supplies and prices in the last decade. And, it seems to be a move of desperation by an industry that has been having trouble in recent years replacing its oil reserves. If investors caught on to the idea that oil companies are now essentially self-liquidating enterprises, valuations would be cut drastically. And that, of course, means that stock options and stock holdings for top executives would be devastated as would positions held by big investors. NGPL currently constitutes about 9 mbpd of so-called total liquids. Biofuels, some coal-to-liquids, and a tiny amount of (natural) gas-to-liquids constitute another 2 mbpd.... America is already approaching the current limit of its ability to absorb the supply of ethanol. Most cars can only run with a 10 percent mixture. Above that engine parts in the vast majority of vehicles start to degrade. Of course, we could continue to increase the ability of automobiles to burn ethanol. But the scale problem is the deciding factor. In North America it would take 1.8 billion acres to grow enough corn to supply enough ethanol to run the North American vehicle fleet. That's four and one-half times the amount of arable land available. And besides, corn ethanol takes more energy to produce than it provides. It's not an energy source so much as an energy carrier. Similar limitations apply to biodiesel which is made from vegetable oil. The remaining volume of total liquids production, about 2 mbpd, is what is called refinery gain. Simply put, the total volume of crude oil increases once it is separated into its various fractions. This is not a source of oil so much as a consequence of spending energy to refine it. Even when non-oil products are considered, total liquids have barely budged, up just 3.5 percent for the entire period from 2005 to 2011. Even if these liquids were interchangeable with oil, they would be making very little headway in substituting for it..... But because few of the non-oil products now being lumped in with oil supplies are genuine substitutes and the ones that are have serious limitations on the volume they could provide, we should consider the truth about oil. Its supply is stagnant which accounts for the record prices of recent years. And, the promise that high prices would bring on copious new supplies has proven to be nothing more than wishful thinking. The limitations on oil supplies are now upon us. The salient issue is the rate of production, not the supposedly huge resources that optimists may conjure up in their imaginations. How much oil you can get out out of the ground on a daily basis is what counts, and it's getting harder and harder to extract the amount of oil we desire from the Earth's crust each day. We extracted the easy stuff first. We cannot now expect to extract the difficult stuff at the same high rates as the easy stuff. And, we cannot expect that total percentage recoveries from the smaller, more complex and challenging reservoirs which we are now forced to exploit will be as high as those we've gotten from large, simple, straightforward reservoirs in the past. Facing up to this reality will be difficult because it will require so many changes in our thinking and our society. And, it would require the immediate markdown of the value of one of the world's largest and most powerful industries because it now faces contraction in the not-too-distant future. No wonder the powers that be decided to change the definition oil instead of accepting reality."
How changing the definition of oil has deceived both policymakers and the public
Resource Insights, 8 July 2012

"Huge amounts of energy are wasted every day in our gas, coal and nuclear power stations. Over half of the energy in gas and around two thirds of the energy in nuclear and coal used to produce electricity is lost as waste heat. Information is Beautiful has created a graphic for Friends of the Earth that illustrates just how much energy is lost in production and compares it to renewables sources, which lose less than 1%.... This graphic was produced using Government figures and also shows how electricity is used in the home as well as some information on how much money can be saved by taking some simple actions to reduce electricity use."
Up in smoke: how efficient is electricity produced in the UK?
Guardian (Datablog), 6 July 2012

"The government is under intensifying pressure over its wind energy policy with a lobby group threatening legal action and a key investor warning that a planned �200m facility could be at risk. Renewable UK, the wind power lobby group, said it would consider a judicial challenge if ministers caved in to Tory backbenchers and implemented a major cut in onshore wind subsidies. Meanwhile, Siemens, one of the last turbine makers still wanting to construct a new blade factory and port complex for the North Sea, has warned that it cannot wait for ever for longterm Whitehall plans to be 'clarified'. The Department of Energy and Climate Change is putting the finishing touches to a new Renewable Obligation support system but that only runs until 2017."
Renewable UK threatens legal action as Tory MPs call for wind policy U-turn
Guardian, 5 July 2012

"Whether motivated by convenience, cost or other phenomena, Americans are driving less and traffic is easing up, a growing number of studies show. According to the Federal Highway Administration's '2011 Urban Congestion Trends' report, there was a 1.2 percent decline in vehicle miles traveled (VMT) last year compared with 2010. The drop follows years of stagnant growth in vehicle travel following a peak in 2007, before the economic downturn."
Has the U.S. Reached "Peak Car"?
Scientific American, 5 July 2012

"China has started stockpiling rare earths for strategic reserves, a state-backed newspaper said Thursday, in a move that may raise more worries over Beijing's control of the coveted resources. China has already started the purchase -- using state funds -- and storage of rare earths for strategic reserves, the China Securities Journal said, but did not specify exactly when the initiative was launched. 'This is China's start of work for state strategic buying and storage of rare earths,' the newspaper said. The country produces more than 90 percent of the world's rare earths, which are used in high-tech equipment ranging from iPods to missiles, and it has set production caps and export quotas on them. Major trading partners last month asked the World Trade Organization (WTO) to form a panel to resolve a dispute over China's export limits on rare earths after earlier consultations through the global trade body failed. The European Union, the United States and Japan accuse China of unfairly choking off exports of the commodities to benefit domestic industries.....China has so far granted companies the right to export 21,226 tonnes of rare earths this year. In 2011, the government granted rare earth export quotas of 30,200 tonnes but only 18,600 tonnes were exported."
China starts stockpiling rare earths: report
Physorg, 5 July 2012

"Japan ended two months without nuclear power on Thursday when the No. 3 unit at Kansai Electric Power Co's Ohi plant became the first reactor to resume supplying electricity to the grid since a nationwide safety shutdown after the Fukushima disaster. Japan's last working reactor was idled in early May, leaving the country without nuclear power for the first time since 1970. The rest of the 50 reactors had already been halted for maintenance and safety checks to see if they could withstand an earthquake and tsunami similar to the disaster that devastated Tokyo Electric Power's Fukushima Daiichi plant in March 2011, causing the worst atomic crisis since Chernobyl in 1986."
Japan regains nuclear power as first reactor resumes operations
Reuters, 4 July 2012

"Until recently George 'Reverse-Cassandra' Monbiot [of the Guardian]was very, very worried about Peak Oil.... Some people might find themselves feeling sorry for George as his belief system continues to collapse about his ears. But they really shouldn't. I've no doubt that George is agonisingly sincere and principled in everything he does, but his Weltanschauung is the philosophy of the devil. George is the embodiment of the phenomenon I describe in Watermelons – one of those bitter, misanthropic, control-freak kill-joys, green on the outside but red on the inside, the true purpose of whose 'environmentalism' is not so much to save the planet as to end Western industrial civilisation. And over the last couple of decades, the watermelons have made a pretty good job of it too. They've driven up energy prices and squandered scarce resources with their vainglorious quest for renewables. They've driven up food prices with biofuels. They've hamstrung economies with higher taxes and greater regulations. They've generated a climate of fear and excessive caution which makes it harder for businesses to do business."
Monbiot: wrong again – 'Peak Oil' this time
Telegraph, 3 July 2012

"The Iraqi Pipeline in Saudi Arabia (IPSA), laid across the kingdom in the 1980s after oil tankers were attacked in the Gulf by both sides during the Iran-Iraq war, has not carried Iraqi crude since Saddam Hussein invaded Kuwait in 1990. Saudi Arabia confiscated the pipeline in 2001 as compensation for debts owed by Baghdad and has used it to transport gas to power plants in the west of the country in the last few years. In the meantime, The United Arab Emirates is nearing completion of a pipeline through the mountainous sheikdom that will allow it to reroute the bulk of its oil exports around the Strait of Hormuz at the mouth of the Gulf, the path for a fifth of the world's oil supply. With the Emirates' new pipeline, oil from fields deep in the Abu Dhabi desert would travel 236 miles (380 kilometers) overland and across the barren Hajar Mountains to this fast-growing port on edge of the Indian Ocean."
Saudi Arabia reopens oil pipeline with Iraq to counter Iran Hormuz threat
Trend (Azerbaijan), 29 June 2012

"Output rose across all technology types, with the report confirming that increases in onshore wind capacity meant output climbed 51 per cent to 3.6TWh, while output from offshore wind farms similarly rose 50 per cent to 1.49TWh. High levels of rainfall meant that output from hydro plants rose 43 per cent year-on-year to 1.86TWh, and bioenergy outputs rose 21 per cent largely as a result of the conversion of the Tilbury B power plant to biomass. There was also good news for microgeneration and marine energy technologies as output rose by 877 per cent, primarily as a result of the popularity of the feed-in tariff incentive scheme and soaring demand for solar panels. However, the sectors still provide relatively low levels of energy output, delivering just 0.17TWh during the first quarter. The report also provided updated figures for 2011, confirming that last year renewable energy output rose 33 per cent to a record 34,410GWh. The performance will be seen as a major boost to the government's renewable energy policies, which have been widely criticised for failing to drive more investment into the sector."
Government reveals surge in UK renewable energy generation
BusinessGreen, 28 June 2012

"Rising crop costs are squeezing biofuel margins and may see production fall or stagnate in the United States for the first time since 1996, adding to challenges in Brazil and Europe. A long-run correlation between U.S. corn and crude oil broke down this month, stemming from new fears for the world economy coupled with harsh conditions in key corn growing areas. The changing dynamic illustrates challenges for the sector. U.S. corn ethanol production margins are driven by oil markets and costs driven by corn markets: correlation between the two is net neutral for biofuel margins, but they are now diverging and driving grain-based ethanol further in the red. In Brazil, meanwhile, ethanol is made from sugar where high prices have also made ethanol uncompetitive with subsidised gasoline. In Europe, a long-run over-capacity in biodiesel continues."
Biofuels caught in price squeeze
Reuters, 27 June 2012

"Even energy titan Exxon Mobil Corp. is showing signs of strain from low natural-gas prices. On Wednesday Exxon Chief Executive Rex Tillerson broke from the previous company line that it wasn't being hurt by natural gas prices, admitting that the Irving, Texas-based firm is among those hurting from the price slump. 'We are all losing our shirts today.' Mr. Tillerson said in a talk before the Council on Foreign Relations in New York. 'We're making no money. It's all in the red.'"
Exxon: 'Losing Our Shirts' on Natural Gas
Wall Street Journal, 27 June 2012

"Feel like you're driving an old car? You're not alone. In fact, the average age of vehicles in the U.S. has hit a new all-time high. Experian Automotive says the average age of the 245 million vehicles registered in the U.S. in the first quarter of this year was 11 years. That's an increase of just over 2 months compared the first quarter of last year. What's behind the increase? Part of it is because the recession and sluggish recovery forced many people to put off buying or trading-in for a new or used car. Another factor is the fact cars and trucks are built to run longer. That quality improvement picked up momentum in the early '90s. Now, many of those cars and trucks are 13 to 22 years old, and yes there are millions of them still on the road. In fact, Experian says more than 52 million cars and trucks in America are 16 years or older."
America Sets a New Record for Old Cars
CNBC, 27 June 2012

"Global oil supplies are growing so fast that they could outstrip demand and lead to a collapse in world prices, a former energy executive who is now a Harvard research fellow said on Tuesday. 'Most analyses today are still marked by this obsession with oil running out,' Leonardo Maugeri, formerly a senior manager at Italy-based oil and gas giant Eni SpA (ENI.MI), said at a discussion at the Center for Strategic and International Studies think tank in Washington. In analyzing capacity at more than 1,000 oil fields around the world, he found that depletion of oil supplies was occurring 'much more slowly and gently than expected.' He estimated that world oil production capacity could go up by 17.6 million barrels per day between now and 2020. 'Contrary to what most people believe, oil supply capacity is growing worldwide at such an unprecedented level that it might outpace consumption,' he wrote in his analysis, published as a policy brief by Harvard's Belfer Center for Science and International Affairs. 'This could lead to a glut of overproduction and a steep dip in prices.' Production capacity is expected to grow the most in Iraq, the United States, Canada, Brazil and Venezuela, while it could decline in Norway, the United Kingdom, Mexico and Iran, his analysis found. Much of the surge in U.S. capacity is due to the boom in shale oil. Unless oil demand grows at a sustained yearly rate of 1.6 percent -- compared with a bit less than 1 percent now -- overproduction and price collapse are possible, Maugeri said."
Oil supply surge could risk price collapse: Harvard analysis
Reuters, 26 June 2012

"The natural-gas boom reshaping America is rocking Russia, where state producer OAO Gazprom (GAZP) is slow to react and at risk of becoming the world’s biggest loser from the new technology to drill shale rock. The U.S. no longer needs Russia’s gas, leaving PresidentVladimir Putin fighting to salvage Gazprom’s $20 billion Shtokman project in the Arctic. China, the biggest energy consumer, is exploring its own shale reserves and hesitating to accept a pipeline from Russia. Gazprom’s shipments fell about 14 percent so far in 2012, and the stock has lost 9.6 percent. Russia, with about $13 trillion of gas deposits, has the most at stake in the energy revolution that’s blasting shale from Pennsylvania to China in rocks impossible to drill just a decade ago. While Gazprom remains the gas biggest producer, the export monopoly is set for its toughest market since the Soviet Union’s fall in 1991 after letting rivals like Exxon Mobil Corp. (XOM)take the lead in a technology that’s eroding its sales. 'Gazprom is taking what seems to be a ‘head in the sands’position on shale gas,' said Andy Flower, a former BP Plc (BP/)executive who’s now a consultant on the global gas market based in Surrey, England. Putin in April urged Russia’s energy companies to 'rise to the challenge' of shale. Afterward he coaxed partners in the Arctic Shtokman project to move forward, in comments before the start of this week’s St. Petersburg Forum of global executives. Gazprom Chief Executive Officer Alexey Miller yesterday held talks there with chiefs of France’s Total SA (FP) and Statoil ASA (STL) of Norway as the partners in the Shtokman project aim to reach a new shareholder accord and decide on its fate by month end. Total and Statoil hold 49 percent of the project.... Shale production allowed the U.S. to overtake Russia as the largest gas-producing nation in 2009 after explorers began employing hydraulic fracturing, a technique using pressurized water with chemicals and sand to open cracks in rock for freeing gas. The subsequent collapse in prices, which touched a 10-year low in New York in April, killed the U.S. as an export market for Shtokman and other liquefied natural gas projects. The U.S. will even become a gas exporter as early as 2015. Gazprom can’t look to Europe for relief. It supplies about 25 percent of gas demand by pipeline, though the market is shrinking as the economic crisis undermines demand. Shipments are down 14 percent this year. Nations dependent on Russian gas, such as Ukraine and Poland, are starting to assess their own shale gas potential. 'There is always the possibility that the shale gas revolution may, in the long run, produce less gas than some are now forecasting, but I think the probability is very low,' Flower said. Shale gas output in China and the U.S., and to a lesser extent Europe, 'creates strategic challenges for existing gas exporters,' the International Energy Agency said in a report on May 29. The share of Russian and Middle Eastern producers in the international gas trade may decline to 35 percent in 2035 from about 45 percent in 2010, the IEA said in a report on unconventional gas."
Gazprom Biggest Loser as Shale Gas Upends World Markets
Bloomberg, 22 June 2012

"Sir Paul McCartney and Greenpeace want to turn the Arctic into a no-go area for oil companies – but there are already signs that the City financial groups are getting cold feet about polar drilling. Shell, which wants to lead the exploration charge off Alaska, has repeatedly declined to say what the potential cost of an oil spill would be, but some lenders are voting with their feet. WestLB, a key German bank for the energy sector, has quietly changed its lending policies to exclude operations in the far north. It says the 'risks and costs are simply too high'. And the Lloyd's of London insurance market has just issued a report warning that offshore drilling in the Arctic would 'constitute a unique and hard-to-manage risk'. It urged companies to 'think carefully about the consequences of action' before exploring for oil in the region."
City investors are getting cold feet about Arctic oil prospecting
Guardian, 21 June 2012

"Oil in New York tumbled below $80 a barrel and Brent crude fell under $90 as reports signaling a global economic slowdown added to concern that demand will slow amid rising supplies. Futures dropped 4 percent, the most this year, as manufacturing slumped in the U.S., China and Europe,applications for U.S. unemployment benefits exceeded estimates and sales of existing homes were lower than expected. Oil stockpiles rose last week to the most since 1990, the Energy Department reported yesterday. .... 'Fears about the economy are making people very leery,'said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. 'The jobless claims, the manufacturing data and all the economic data are coming together to push almost everything down.'”
Oil Futures Drop Below $80 for First Time in Eight Months
Bloomberg, 21 June 2012

"Norwegian oil giant Statoil ASA (STO) expects global oil demand to peak at 103 million barrels a day around 2030, the company said in a report Thursday, adding it expects increasing complexity to push production costs for marginal barrels higher. The company estimated the current cost of marginal oil barrels to be in the range of $75 to $90 a barrel, up from only $30 to $35 a barrel in the early 2000s. The most expensive barrels come from Canadian oil sands projects, the company said. 'The steep rise in marginal full cycle costs which started in 2004 were primarily driven upwards by the tightening of all supplier markets, but rising complexity of reservoirs and projects has also contributed to the higher cost level,' Statoil said, adding that increased complexity would 'most likely' push costs higher in the long term."
Statoil: Sees Global Oil Demand Peak At 103 Million B/D Around 2030
Dow Jones Newswires, 21 June 2012

"The United States is planning a significant military presence of 13,500 troops in Kuwait to give it the flexibility to respond to sudden conflicts in the region as Iraq adjusts to the withdrawal of American combat forces and the world nervously eyes Iran, according to a congressional report. The study by the Senate Foreign Relations Committee examined the U.S. relationship with the six nations of the Gulf Cooperation Council - Saudi Arabia, Kuwait, Bahrain, Qatar, the United Arab Emirates and Oman - against a fast-moving backdrop. In just the last two days, Saudi Arabia's ruler named Defense Minister Prince Salman bin Abdul-Aziz as the country's new crown prince after last week's death of Prince Nayef, and Kuwait's government suspended parliament for a month over an internal political feud. The latest developments inject even more uncertainty as the Middle East deals with the demands of the Arab Spring, the end to U.S. combat operations in Iraq at the end of 2011 and fears of Iran's nuclear program. 'Home to more than half of the world's oil reserves and over a third of its natural gas, the stability of the Persian Gulf is critical to the global economy,' the report said. 'However, the region faces a myriad of political and security challenges, from the Iranian nuclear program to the threat of terrorism to the political crisis in Bahrain.'.... As it recalibrates its national security strategy, the United States is drawing down forces in Europe while focusing on other regions, such as the Middle East and Asia. Defense Secretary Leon Panetta has said he envisions about 40,000 troops stationed in the Middle East region after the withdrawal from Iraq. By comparison, a cut of two Army combat brigades and the withdrawal of two other smaller units will leave about 68,000 troops in Europe."
US plans significant military presence in Kuwait
Associated Press, 19 June 2012

"Energy obtained from renewable sources is estimated to have contributed to 12.4% of the European Union's (EU) overall energy consumption in 2010, up from 11.7% in 2009, according to latest figures published this week. Sweden had the highest share of renewable energy in total consumption at 47.9% in 2010. Latvia, Finland and Austria all recorded results of over 30%. Malta, Luxembourg, the UK and the Netherlands lagged behind with the lowest shares in 2010.The estimates by Eurostat, released during the EU Sustainable Energy Week (18 to 22 June 2012) which promotes energy efficiency and renewable energy, show how far some countries have still to go to reach their individual targets."
Renewable energy in the EU: which countries are set to reach their targets?
Guardian, (DataBlog) 19 June 2012

"Japan approved on Monday incentives for renewable energy that could unleash billions of dollars in clean-energy investment and help the world's third-biggest economy shift away from a reliance on nuclear power after the Fukushima disaster."
Japan approves renewable subsidies in shift from nuclear power
Reuters, 18 June 2012

"Europe's most ambitious shale gas plans were in disarray on Monday after U.S. major ExxonMobil announced it would pull out of exploration projects in Poland. Poland's lucrative reserves had spurred hopes of transforming Europe the way a shale boom has left the United States brimming with supplies, potentially turning the Poles into net gas exporters. That was until March, when a government report revealed the country's likely reserves were about one-tenth the size of previous estimates. At the weekend, Exxon, which earlier this year cautioned that commercial production of Polish shale was at least five years away, said it would not go forward with exploration. 'The move is not surprising given that Poland's shale potential is still unclear,' JBC Energy analysts said in a note on Monday...Russian gas export monopoly Gazprom has repeatedly played down the threat and on Monday Sergei Komlev, head of contract structuring and price formation at Gazprom Export, told a conference in London that Polish gas would struggle to achieve the low prices of U.S. shale rivals. 'In Poland the price for shale gas will be above $15 per million British thermal units, over three times than in the U.S. where prices will rise to $5-10 (from a current $2.50) once they export gas,' Komlev said."
Europe shale push shaken by Exxon's Poland pullout
Reuters, 18 June 2012

"European Union support for biofuel production could force the price of food crop staples up by as much as 36% by the end of the decade, a report has warned. Development charity ActionAid warned that the allocation of ever-growing acres of farmland to producing crops for fuel was already a 'major contributor to world hunger' and could make the problem worse in the years to come. But the subject will not be on the table at next week's summit of the G20 group of major economic powers in Mexico, said the charity's policy adviser Clare Coffey. ActionAid urged leaders including David Cameron to rethink Europe's mandatory target of 10% renewable energy in transport by 2020, which has made the EU the world's biggest producer and consumer of biodiesel. In a report, the charity cited estimates that EU biodiesel use could push oil seed prices up by as much as 20% and vegetable oils 36% by 2020, while EU ethanol consumption could lift maize prices by 22% and sugar by 21%. Already, 66% of vegetable oils from crops grown in the EU are used for biofuels, said the report. Global production of biofuels has increased from 16 billion to 100 billion litres between 2000 and 2010 and is forecast to grow strongly."
EU BIOFUEL AID 'INFLATES FOOD COST'
Express, 14 June 2012

"The world's store of oil jumped 8.3 percent last year, as exploration rose and record crude prices made marginal projects commercially viable, yet supplies will struggle to meet demand due to political factors, oil giant BP (BP.L) said on Wednesday. BP said in its annual calculation of global oil and gas reserves, considered the industry's most comprehensive, that oil reserves totalled 1,653 billion barrels at the end of 2011. That was up from 1,526 billion barrels of extractable oil in the ground at the end of 2010, according to BP's Statistical Review of World Energy last year. 'One perennial question is whether there are enough energy resources for our needs?' Chief Executive Bob Dudley said as he unveiled the report. 'The answer from this review is certainly ‘yes': At today's consumption rates, the world has proved reserves sufficient to meet current production for 54 years for oil.'.... The reserves upgrades are not significantly impacted by shale gas and oil finds, BP said. Though shale gas and oil have led to a turnaround in U.S. oil and gas production, BP Chief Economist Christophe Ruhl said it would take time to say confidently how large the resource base was. Nonetheless, increasing comfort around the economics of Canada's oil sands, bitumen soaked soil from which crude can be squeezed, has encouraged BP to include Canada's oil sands as part of its main oil reserves measure for the first time. This puts Canada in third position in the world reserves rankings, with 175 billion barrels, up from 32 billion last year which excluded all non-producing oil sands. Heavy oil is also behind the top-ranking reserves base, that of Venezuela, which was rated as having 297 billion barrels. Many analysts have questioned whether the heavy oil reserves in the Orinoco belt are as large as Venezuela claims. Saudi Arabia is the second-largest reserves holder with 265 billion barrels, mainly made up of conventional crude, which is much cheaper to produce than heavy oil."
World oil reserves up 8 percent, supply fears persist
Reuters, 13 June 2012

"Cheaper gas has yet to cause consumers to spend enough on other goods to boost the slumping economy. Americans barely increased their spending at retail businesses this spring, leading economists to predict slower economic growth in the April-June quarter.... If gas prices stay low, Americans are likely to spend more freely this summer on other goods, from autos and furniture to electronics and vacations, that fuel economic growth. Gasoline purchases tend to provide less benefit for the U.S. economy because some of the money goes to oil-exporting nations. 'The continued fall in gasoline prices should support consumption by freeing up cash to be spent on other items,' said Paul Dales, senior U.S. economist at Capital Economics."
Lower gas prices not enough to lift US economy
Bloomberg, 13 June 2012

"'Brent oil prices would again hit $50 (�32) a barrel' in a worst-case scenario, according to analysts Jan Stuart and Stefan Revielle. 'Oil demand would deflate sharply following acute crises of confidence.'.... The analysts said that all potential negative scenarios involved Europe 'to some degree' with the starting point of collapse coming over the summer. However, Brent crude rose $1.06 to $98.20 yesterday after the US Energy Department said the country’s stockpiles had seen a surprise fall of 191,000 barrels to 384.4m barrels last week. Comparing the situation in 2008 and today, Mr Stuart and Mr Revielle noted that 'global imbalances are worse and much of the available political and real capital has merely been squandered in the interim.'”
Oil price could plunge to $50, says Credit Suisse
Telegraph, 13 June 2012

"The International Energy Agency said the oil market is better supplied than at the start of this year amid concern that slowing growth will curb crude demand. The IEA reduced its forecast for 2012 crude consumption to 89.9 million barrels a day, the Paris-based energy adviser said. That’s revised down by 100,000 barrels from May and reflects an increase of 820,000 barrels from last year. Brent crude futures have lost 23 percent since March, trading at about $97.50 a barrel today, amid rising oil production and growing concern that Europe’s debt crisis will affect global economic recovery and dent demand for energy. 'Market fundamentals have eased since early 2012,' the IEA said in its latest monthly oil market report. 'The springtime slump in oil markets accelerated in May in the wake of the deepening euro zone crisis, mounting concern over a slowdown in Chinese growth and rising global oil supplies.'.... Worldwide oil production rose by 200,000 barrels to 91.1 million barrels a day in May as Canada and the U.S. increased output, the agency said.... Demand for OPEC crude is estimated to increase to 30.9 million barrels a day in the second half of this year from 29.8 million in the first six months of 2012, according to the IEA. ”
IEA Sees Economic Growth Risks in Better-Supplied Oil Market
Bloomberg, 13 June 2012

"China's oil imports will likely surge past last month's record in either June or July as falling prices and expanding storage capacity encourage the world's second-largest buyer to boost its emergency stockpiles. Higher overseas purchases by China would be a bright spot in an otherwise grim outlook for oil demand amid uncertainty about the strength of the Chinese economy and the euro zone debt crisis, which pushed oil prices down in May by the most in more than three years."
China oil imports to top May record on low prices, stockpiling
Reuters, 12 June 2012

"The costs of offshore wind power generation could be brought down by one-third by the end of the decade, making this form of renewable energy commercially viable in the UK, according to new reports by the wind industry and government. The findings are the latest salvo in the fierce battle over wind power, as critics tussle with wind proponents, ministers and environmental campaigners over the role it plays in UK's energy mix, with billions of pounds of investment at stake. If realised, the steep drop in price would reduce the cost of using offshore wind by more than �3bn a year, and to generate one-fifth of the UK's electricity – in line with government targets. Ministers have said about 18GW of offshore wind capacity should be built by 2020, more than an eight-fold increase on today's capacity. But at present, offshore wind is still one of the most expensive forms of renewable power, costing up to three times higher than onshore windfarms. Offshore generation costs – of about �140/MWh today – could drop to about �100/MWh by 2020, according to the reports published on Wednesday by the Crown Estate, which sells licences to build offshore wind farms, and from the Offshore Wind Cost Reduction Task Force, set up by the Department of Energy and Climate Change with the wind industry. The high cost of offshore wind generation has been used by critics, particularly on the right of the Tory party, who have decried plans for more turbines at sea in favour of a new "dash for gas" to build a large new fleet of gas-fired power stations around the country. Gas power that started operation in 2021 would cost around �88/MWh, according to government figures. David Cameron has come under pressure to cut subsidies for both onshore and offshore wind energy generation."
Offshore wind power cost 'could fall one-third by 2020'
Guardian, 12 June 2012

"European airlines could post a record loss of $1.1bn (�711m) this year, nearly double the forecast three months ago, the aviation industry warned yesterday. The International Air Transport Association's (Iata) forecast reflects dampened demand as recessions in the UK and Spain and turmoil in Greece and elsewhere in Europe have seen would-be travellers stay put."
Europe's airlines 'face record loss'
Independent, 12 June 2012

"With Tesco reporting a 1.5 decline in sales, former chief executive Sir Terry Leahy tells Channel 4 News a doubling in the price of oil has hit UK consumers 'more than anything else'. In an interview with Channel 4 News's Cathy Newman, Mr Leahy said that all companies were experiencing a bit of 'wear and tear' and backed his successor Phil Clarke's decision to carry out a �1bn revamp of its UK operations. 'If we could get a bit of a relief from high energy prices I think I would see a little recovery in the shops,' said Mr Leahy, who also backed Mr Clarke's offer to give up his bonuses if sales do not improve. Mr Leahy claimed that while the UK's reliance on the financial services sector and the problems in the eurozone had contributed to the UK having a slower economic recovery than eurozone counterparts, the doubling of the price of oil in two years had been a major factor in this. 'There has also been an oil shock,' he said. 'The oil price has virtually doubled since 2010 and at a time when sterling depreciated, so actually the price of energy going into the UK rose whereas it didn't in Europe. Actually, that has hit consumers more than anything else. It has taken money out of their weekly wages. The economy was recovering quite well at the end of 2010 and it slowed really because of the energy crisis, I think.'"
'Oil shock' hitting demand, says former Tesco boss
Channel 4 News, 11 June 2012

"The Japan Nuclear Energy Safety Organization said Monday data, including on the Fukushima Daiichi nuclear crisis, have been leaked via personal computers infected with malicious programs. But the data amounting to 1,000 pages were mostly already published and did not include sensitive data relating to the protection of nuclear materials, the organization said. The data, including press releases prepared by the Nuclear and Industrial Safety Agency, were sent to servers in the United States by five infected personal computers used by organization officials between mid-March and mid-July last year."
Japan nuclear agency data leaked via infected computers
Kyodo News (Japan), 11 June 2012

"China, the world's second-biggest oil consumer, increased crude imports in May to a record high as refineries raised processing rates and oil prices declined. The country bought a net 25.3 million metric tons, or 5.98 million barrels a day, more than it exported last month, according to data published today on the website of the Beijing-based General Administration of Customs. That compares with the previous high of 5.87 million barrels a day in February. The jump in oil purchases helped spur a 12.7 per cent gain for the nation's imports last month, exceeding economists' estimates. Refineries boosted processing rates last month as some facilities resumed operations after scheduled maintenance while Brent oil in London entered a so-called bear market on June 1 after sliding more than 20 percent from this year's peak."
China boosts crude imports to record high as prices decline
Gulf News, 10 June 2012

"David Cameron will pave the way for an increase in British imports of Norwegian gas and oil when he signs a new energy agreement with one of the world's largest exporters of fossil fuels on Thursday. As the International Energy Agency warns of a threat to the climate from a new 'golden age of gas', the prime minister will sign what Downing Street is describing as a landmark deal with Norway to strengthen energy links with Britain's historical ally. Cameron became the first British prime minister in 26 years to visit Norway when he arrived in Oslo on Wednesday night for dinner with his Norwegian counterpart, Jens Stoltenberg. The two leaders will sign the new agreement over breakfast with executives from 10 leading energy companies. Cameron and Stoltenberg will later fly to Berlin for a town hall meeting with Angela Merkel, the German chancellor."
UK signs 'landmark' energy agreement with Norway
Guardian, 6 June 2012

"Natural-gas consumption may rise 17 percent by 2017 from last year as demand surges in Asia and the U.S., according to the International Energy Agency. China’s use of the fuel will double while Europe’s will remain below the level of 2010, it said. Demand worldwide will climb by 576 billion cubic meters to 3.937 trillion, the Paris-based adviser to oil-consuming nations said today in its first Medium-Term Gas Market Report. That’s an average increase of 2.7 percent a year, which is similar to the growth during the last decade, the e-mailed report showed. Emerging nations will account for 69 percent of the gain.... The rate of growth in China’s gas use depends on the nation’s construction of infrastructure to handle imports and domestic distribution and storage, the report shows. Wholesale and retail gas prices also need to be high enough to attract more expensive supplies such as liquefied natural gas, according to the agency. Gas imports are expected to rise to 85 billion cubic meters from total consumption of 223 billion cubic meters in 2015, the report shows. About 47 billion cubic meters will be delivered as LNG, while 35 billion will be piped from Central Asia and 3 billion from Myanmar. That’s still less than the 120 billion cubic meters that the nation may be able to receive from overseas by 2015, the IEA said. China has 26 billion cubic meters of LNG-receiving capacity under construction in addition to the 29 billion already operating, it said. A 12 billion cubic-meters-a-year link from Myanmar will start in 2013, and the annual capacity of the Central Asia pipeline is expected to reach as much as 60 billion by 2015. Russian piped supplies to China remain an uncertainty, according to the IEA. While deliveries aren’t expected before 2017, imports from the nation will make up a significant part of Chinese purchases in the longer term unless China ramps up its production of shale gas rapidly, it said. 'There are no doubts that China will become a major importer of gas,' the IEA said. 'The question for external suppliers is how much pipeline gas and LNG China will need in five or 10 years.' Power generation will account for 66 percent of the increase in gas use in the Americas as utilities switch to the lower-cost fuel from coal, according to the report.... The volume of gas traded internationally may increase 35 percent from 2011 to 2017, including a 31 percent rise for LNG to 426 billion cubic meters in 2017, the IEA estimates. Growth will slow through mid-2014 before accelerating because only 25 billion cubic meters of a total 114 billion of liquefaction capacity under construction will come online during 2012 and 2013, according to the report."
Gas Demand to Rise 17% by 2017 on Asia, U.S., IEA Says
Bloomberg, 5 June 2012

"The Argentine foreign ministry on Monday declared 'illegal and clandestine' the activities of Desire Petroleum, Falkland Oil and Gas, Rockhopper Exploration, Borders and Southern Petroleum, and Argos Resources on the grounds that they are drilling in Argentine waters. President Cristina Fernandez de Kirchner said the companies were operating 'in a sovereign area of the Argentine nation and as such fall within its specified laws and rules'. The companies 'are not authorised by the Argentine government under law 17.319 on hydrocarbons', she added. According to the Argentine foreign ministry, her declaration opened the way for the 'immediate launch' of criminal proceedings."
Argentina to 'immediately launch' criminal proceedings against UK oil firms operating off Falklands Islands
Telegraph, 4 June 2012

"Most commodities slid on Friday as weak jobs data reinforced fears over slowing European and Asian economic growth... Oil prices sank, with Brent crude dropping below $100 a barrel to a near 16-month low as the jobs data, poor Chinese manufacturing figures and the euro zone's debt crisis prompted a cross-market selloff. Brent fell as much as 4 percent. It had dropped 14.7 percent in May, the biggest monthly decline since 2008. U.S. payrolls growth stumbled and the unemployment rate rose for the first time in 11 months, data from the Labor Department showed, with nonfarm payrolls up only 69,000 jobs last month, the fewest additions in a year. Analysts took a uniformly grim stance on the worsening jobs picture."
Slower jobs growth hits oil, metals; lifts gold
Reuters, 1 June 2012

"WTI crude hit a high for the year of just over $110/barrel in February. WTI closed at just under $88/barrel last night. The price for Brent crude has fallen from near $127/barrel to around $103/barrel, a drop of 19%. There are two primary causes for the drop, neither of which is particularly welcome. The slowly growing global economy has cut the demand for oil even as OPEC and the US produce at near-record levels. OPEC wants to drive the price of Brent to around $100/barrel to prevent what it sees as demand destruction when prices are substantially higher. The cartel is producing at about 2 million barrels/day above its official quota. The crude market is essentially over-supplied. Whether or not OPEC wants to or can continue to produce at this level is one issue. The other is whether or not global economic activity will pick up. Both the US and Europe consume far less oil than the emerging countries of Asia, particularly China and India. While the European financial mess commands a lot of US attention, Europe’s economy won’t affect demand for oil much one way or the other. China’s slowdown is another story. The US price for July delivery of WTI remains higher than the price of WTI for delivery in July 2013. That market condition, known as backwardation, typically indicates that further price drops are in store. Some analysts see WTI falling to $80/barrel or lower, while Brent prices fall to around $95/barrel."
Crude Price Down 20% from 2012 Peak, Pump Price Drop Lags
24/7 Wall St, 31 May 2012

"A boom in unconventional natural gas over the next 20 years could see the United States and others benefit from cheaper energy while the importance of the Middle East declines, the International Energy Agency (IEA) said on Tuesday.... The share of Russia and countries in the Middle East in international gas trade declines from around 45 percent in 2010 to 35 percent in 2035,' the report said. For Europe, where shale gas production is expected to play a smaller role than elsewhere, Birol said that unconventional gas growth could still be enough to offset an ongoing decline in conventional gas output. 'The main benefit for Europe will that there will be lower gas import prices, putting pressure on oil-indexation of traditional gas supply contracts,' Birol said..... Production of unconventional gas, primarily shale gas, more than triples to 1.6 trillion cubic feet in 2035,' the IEA said. 'The share of unconventional gas in total gas output rises from 14 percent today to 32 percent in 2035.' It noted the majority of the gas production increases would come after 2020 as producers needed time to develop a commercial unconventional gas sector.... Yet should the industry fail to implement strict enough rules, the IEA said a lack of public acceptance would likely mean that only a small share of unconventional gas resources would become available for development. 'As a result, unconventional gas production rises only slightly above current levels by 2035, from 21 percent in 2010 to 22 percent in 2035, remaining well behind coal.'"
World to gain from gas glut if regulation right
Reuters, 29 May 2012

"BP (BP.L) is to resume exploration activities in Libya that it suspended because of last year's uprising, re-starting a relationship which under ousted Libyan leader Muammar Gaddafi landed the firm in the centre of a political storm. BP's return is a milestone in the recovery of Libya's energy sector, though this was tempered by an announcement from Royal Dutch Shell (RDSa.L) that it would pull out of fields in Libya on the grounds that they were not worth developing. BP closed down operations in Libya and withdrew its expatriate workers in February last year, days after protests broke out in eastern Libya which with help from NATO warplanes and missiles eventually forced Gaddafi from power. The oil firm follows other majors, including Eni (ENI.MI) and Total (TOTF.PA) in restarting Libya operations, despite lingering worries about security and the possibility the new authorities will try to re-negotiate contracts signed under Gaddafi."
BP to resume operations in Libya
Reuters, 29 May 2012

"Royal Dutch Shell PLC (RDSA) Monday became the first major to exit oil and gas exploration blocks in post-war Libya, amid concerns over insecurity and contracts. The Anglo-Dutch giant insisted it was still interested in the country, which holds Africa's largest oil reserves. But the move casts a cloud on Libya's oil recovery as Shell had originally planned sizable investments in the blocks. Shell 'intends to suspend and abandon drilled wells and stop exploration in [its] Libyan licenses,' a company spokesman said, confirming an internal e-mail seen by Dow Jones Newswires. Libya's oil production has fast recovered since the toppling of strongman Moammar Gadhafi last year. But foreign companies complain of tough contracts and of persistent insecurity. The deals, which the new government says it won't change, had already led to the exit of several companies under the old regime."
Shell Is First Major To Exit Oil Blocks In Post-War Libya
Dow Jones Newswires, 28 May 2012

"Devastating nuclear reactor meltdowns like those at Chernobyl and Fukushima could happen every decade, according to a disturbing new study. Scientists at the Max Planck Institute for Chemistry in Mainz, Germany, fear similar catastrophes could occur around the world every ten to 20 years - 200 times more frequently than previously thought. And they said people in Western Europe have a higher risk than anybody else in the world of being affected by radioactive fallout from such a disaster."
Catastrophic nuclear reactor meltdowns like Chernobyl or Fukushima could happen every ten to 20 years, scientists warn
Mail, 24 May 2012

"Western Europe is likely to be contaminated once every 50 years, according to the research team led by Jos Lelieveld, director of the Max Planck Institute for Chemistry. The International Atomic Energy Agency designates an area as 'contaminated' if it has a reading of more than 40 kilobecquerels of caesium-137 per square metre. Prof Lelieveld said Germany needed to carry out an 'in-depth and public analysis of the actual risks of nuclear accidents'....And he added: 'In light of our findings I believe an internationally coordinated phasing out of nuclear energy should also be considered.'"
Catastrophic nuclear reactor meltdowns like Chernobyl or Fukushima could happen every ten to 20 years, scientists warn
Mail, 24 May 2012

"The biggest reforms to the UK energy sector in two decades were set out on Tuesday, prompting warnings from consumer groups and green campaigners that they would raise bills and penalise renewable energy while boosting nuclear power. The sweeping reforms, detailed in the draft energy bill, grant the government powers to intervene in the market on a scale not seen since the industry was privatised. Under the changes, low-carbon generators including nuclear companies will receive a fixed price for their energy that should be higher than they can sell it for on the open market, and ministers will create a 'capacity market' to ensure a reliable supply of power and prevent blackouts. There will be a minimum price for carbon dioxide emissions, and an emissions performance standard that will in effect stop any coal-fired power stations being built without technology to capture carbon. The reforms will mean major changes to the way the market is regulated, and the way utilities and their smaller rivals operate. Ed Davey, the secretary of state for energy and climate change, said the reforms would help to bring forward the estimated �110bn in private-sector investment that will be needed for new low-carbon energy capacity, and that they could generate as many as 250,000 new jobs.... Charles Hendry, the minister of state for energy, said the government had to intervene: 'The market did a good job keeping down [energy] prices to the lowest in Europe, but it did not bring forward enough new investment. If we are going to keep the lights on in an affordable way, this is not a luxury – it's absolutely essential.'"
Government announces biggest energy reforms in 20 years
Guardian, 22 May 2012

"Britain's ageing nuclear reactors, which were due to close in the next decade, are set to be kept open under a plan approved by the industry's regulator. In a move that could have far-reaching implications for the government's energy policy, the Office for Nuclear Regulation has told the Guardian it is working with the country's dominant nuclear operator, the French-owned company EDF, to extend the life of its eight nuclear power stations in the UK, and that it is 'content for the plants to continue to operate', as long as they pass regular safety tests.'"
Nuclear reactor reprieve puts UK energy plans in doubt
Guardian 22 May 2012

"The Government has rejected shale gas technology as a solution to Britain's energy crisis, conceding it will do little to cut bills or keep the lights on. Supporters of the fracking technology – which blasts water, sand and chemicals at extreme pressures to release gas trapped deep in rock – argue it could be the single greatest factor in transforming Britain's energy market, reducing our reliance on foreign imports and dramatically reducing costs. But The Independent on Sunday has learned that industry experts made clear at a meeting attended by senior ministers, including David Cameron and Ed Davey, the Lib Dem energy secretary, that the UK's reserves were smaller than first thought and could be uneconomical to extract. Now senior coalition figures have agreed that shale gas has the potential to be deeply controversial without securing major benefits in lowering carbon emissions or reducing energy costs.... The Prime Minister convened the Downing Street summit to hear from companies including Shell, Centrica and Schlumberger, which have been working on shale gas projects in America and exploring the potential of supplies in Ukraine and China. The ministers were told Britain was not in a position to exploit vast amounts of its own shale gas stores. 'The reserves aren't absolutely huge compared with the likes of America, Ukraine and North Africa,' said a senior government source. 'And we are relatively densely populated. It is a question of how much we can get out, and at what cost. There is a not-insignificant amount of domestic supply, but not a game-changing amount.'"
Government backtracks on fracking
Independent, 20 May 2012

"Afghanistan will start pumping oil for the first time within five months, an official said yesterday, as part of the nation's efforts to tap underground treasures estimated to be worth billions. China's National Petroleum Corporation (CNPC) and its Afghan partner the Watan Group will initially produce 5,000 barrels a day, mining ministry spokesman Jawad Omar told AFP. This would be the first extraction of oil in Afghanistan, a mineral-rich country that is still one of the poorest in the world after three decades of war. The extraction will start in the 'Afghan-Tajik Zone', one of the major oil deposits along the Amu Darya river border in relatively peaceful northern Afghanistan, the spokesman said. Under a deal signed last December, the oil will be processed in refineries already being built within Afghanistan, with Kabul taking 70 percent of the net profits on top of a 15 percent corporation tax. The Afghan-Tajik deposit is estimated to contain about 87 million barrels of oil, relatively small globally but significant for a poverty-stricken country heavily dependent on Western aid. Afghanistan currently imports all its oil and most of its gas, mostly from Central Asian countries and Iran..."
Afghanistan to pump oil for the first time
AFP, 17 May 2012

"Now, as it bemoans steep costs and moves its rigs out of the Bakken shale oil fields, some analysts wonder if the company has lost its clairvoyance. After two years of unyielding gains, costs are bound to fall, they say. The California-based energy giant is beset by escalating labour costs in North Dakota, which has the lowest unemployment rate in the country. Other material costs have surged and new environmental regulations could add to the burden. The cost of bringing one Bakken well into production has grown from an average $6.5 million (4.1 million pounds) in 2010 to $8.5 million in the first quarter this year, data from company reports and the state regulator show. 'We got a lot better places to put money right now than the Bakken,' Occidental CEO Stephen Chazen said on a conference call with analysts late last month. 'That's why I'm slowing it down.' But if some analysts are right, Occidental's pullout may prove ill-timed. The costs to complete a well by injecting it with water, sand and other chemicals -- the hydraulic fracturing or 'fracking' process -- is falling as natural gas firms pare back on new drilling. Pressure pumping prices, which cover a range of costs associated with fracking a well, have already dipped by up to 25 percent in natural gas-rich basins, with signs of a knock-on effect emerging in the Bakken, according to Barclays analysts. Within the next six months, these costs could fall by as much as 10 percent in the Bakken shale, analysts at Bernstein Research estimate. Efficient forms of fracking are also helping companies extract more oil from each well, lowering the break-even cost of production, now estimated between $55 and $70 a barrel. The push and pull of production costs in the world's fastest-growing oil frontier is adding uncertainty to the outlook for U.S. oil prices."
Peak, pause or plummet? Shale oil costs at crossroads
Reuters, 17 May 2012

"Royal Dutch Shell is in talks with Iraq to cut its output target for the giant Majnoon oilfield, a move that could prompt other companies to seek similar revisions. The European oil major won the rights to develop the giant oilfield in 2009, and is contractually obliged to increase production to 1.8 million barrels per day (bpd). But in a meeting held with government officials last month, the company proposed to cut the target to 1 million bpd, reduce spending, and extend the period under which peak production will be sustained, documents seen by Reuters show. 'Shell proposed to extend Majnoon's plateau time to more than 20 years from seven years and to cut required total development costs by US$10 billion [Dh36.73bn],' a document from the oil ministry reads. The talks could prompt other international oil companies in Iraq to seek changes to their service contracts, which stipulate an overall production capacity increase to 12 million bpd by 2017, versus 3 million today. This target would make Iraq the second-largest oil producer in the world, but it has been proved unrealistic because of export bottlenecks and a precarious security situation. The government is now believed to be targeting a capacity of 8 million bpd in five years, but some experts believe even that to be unfeasibly high. Given the huge investment needed to add to capacity, analysts say Baghdad may be willing to agree to Shell's proposal, and allow other companies to follow suit."
Shell seeks to cut targets in Iraq
The National (United Arab Emirates), 14 May 2012

"The International Monetary Fund (IMF) has been warned by its internal research team that there could be a permanent doubling of oil prices in the coming decade with profound implications for global trade. 'This is uncharted territory for the world economy, which has never experienced such prices for more than a few months,' the report warns. The new IMF 'working paper' come as the value of crude on world markets remains at the historically high level of $113 a barrel and just after the International Energy Agency reported that consumption would accelerate for the rest of this year in line with a wider economic recovery. Undertaken amid mounting concerns about 'peak oil', the IMF study does not presume that there is a constraint on how much oil can be taken out of the ground. It prefers to believe that extraction rates will depend on the price that will be able to be charged for the final product. 'While our model is not as pessimistic as the pure geological view that typically holds that binding resource constraints will lead world oil production on to an inexorable downward trend in the very near future, our prediction of small further increases in world oil production comes at the expense of a near doubling, permanently, of real oil prices over the coming decade,' argues the report, entitled The Future of Oil: Geology v Technology. The paper, which contains a warning that it should not be reported as representing the views of the IMF itself was nevertheless prepared by several authors including Jaromir Benes, a former head of macroeconomic modelling in the Czech National Bank but now employed by the IMF in Washington. It says that its oil market 'models' have been significantly more accurate than others in a world where predictability has been historically low. But it adds: 'Our empirical results also indicate that if the model's predictions continue to be accurate as they have been over the last decade… the future will not be easy.'"
Oil prices could double by 2022, IMF warned
Guardian, 13 May 2012

"On May 9, the government of Alberta released a study into the extra carbon emitted by crude produced using oil sands instead of more conventional sources. The study, by a unit of California-based Jacobs Engineering Group, found that emissions from oil-sand crude are just 12 percent higher than from regular crude. But the report was not just about the science. It also sent a political signal to Europe: Canada's fight over oil sands is not done yet. As part its ambitious efforts to cut carbon emissions, the European Union has proposed classifying crude produced from oil sands, or tar sands as environmentalists and others call them, as much dirtier than other fuels. A 2011 study for the EU by Stanford University academic Adam Brandt found that oil-sand crude was as much as 22 percent more carbon intensive. Canada, whose oil sands have helped it become an energy power, fears such a ruling could imperil a resource it estimates will add more than C$3 trillion to its economy over the next 25 years. Which is why Ottawa has waged a concerted lobbying campaign against Brussels' proposal over the past three years. An examination of hundreds of pages of documents obtained under access to information legislation in both Brussels and Ottawa, some dating back to 2009, as well as interviews with leading officials in both Canada and Europe show just how extensive that effort has been."
Insight: Canada's oil sand battle with Europe
Reuters, 10 May 2012

"The Czech Environment Ministry is planning to put up to a two-year moratorium on granting licences for shale gas exploration until new legislation is put in place, the ministry said. During the moratorium, the ministry would look at preparing geological and mining legislation that is clear for potential exploration companies. 'Existing Czech legislation is not prepared for such technically complicated research like there is in the case of shale gas,' the ministry said on its website."
Czechs eye moratorium on shale gas exploration
Reuters, 7 May 2012

"Germany has put the brakes on plans to use hydraulic fracturing, commonly known as fracking, to extract natural gas in places where it is difficult to access, such as shale or coal beds. Environment Minister Norbert R�ttgen and Economy Minister Philipp R�sler have agreed to oppose the controversial process for the time being, SPIEGEL has learned. Sources in the German government said that the ministers were 'very skeptical' about fracking, which injects chemicals as well as sand and water into the ground to release natural gas. 'There are many open questions which we will first have to carefully examine,' R�sler told close associates."
German Government to Oppose Fracking
Der Spiegel, 7 May 2012

"Oil is the great success story of the Libyan uprising but post-war achievements are being overshadowed by disputes over security and unpaid wages. Restoration of production to pre-war levels just four months after Col Muammar Gaddafi was killed in the desert has been hailed by the Western backers of the new government. However recent developments have provoked warnings that mismanagement could force the industry into long-term decline. Arabian Gulf Oil Co, the country's largest producer with a near monopoly over the eastern oilfields, spent last week in a battle of wills with Tripoli's transitional government. Its management threatened to shut down crude production unless armed protesters who were blockading its Benghazi offices were persuaded to leave. The 50 gun-toting men at its gates have been barring employees from entering the facility for two weeks. The company produces 375,000 barrels of crude a day of the 1.4m pumped nationwide. A stoppage would derail attempts to raise its output to 425,000 barrels a day in mid-May. Libya has the largest oil reserves in Africa, according to BP estimates, making its the continent's third-biggest producer. ... Foreign experts on Libya's oil industry believe only a minority of expatriate personnel have returned to the country, mostly to staff headquarters in relatively safe Tripoli. Most cite security concerns for not returning personnel to the oilfields. The logistics of even visiting the desert camps in the Sirte or Murzug basins involves negotiations with multiple militia commanders to secure safe passage. Until a national government is installed most companies are likely to defer large scale deployments for new projects. 'I don't think we'll see much momentum until the election fallout is known,' said Henry Smith, a regional analyst at Control-Risks, the business risk consultants. 'Security issues are still pronounced and the fragility of the current situation is significant. A lot of what we see is maintaining the existing infrastructure but no plans to expand until there is more clarity.' With former revolutionaries demanding jobs in the country's main industry, a scheme to absorb fighters into an oilfield's protection force is exposing damaging turf wars.... A Repsol joint venture was last month stormed by fighters seeking payment for six months work guarding its premises during the uprising. A report from Barclay's warned that output was poised to stagnate as the scope for 'temporary fixes' is exhausted. Feedback from the first oil industry investment conference held in Tripoli since the war last week was 'mixed' with participants reporting that officials could not provide assurances for new investors."
Libya's vast oil potential is still in the grip of flux
Telegraph, 6 May 2012

"'Oil fell below $100 a barrel for the first time since February as U.S. employers added fewer workers than forecast, stoking concern that demand won't be enough to cap inventories at their highest level in 21 years.... We're now focused on weak demand and high inventory levels,' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. 'Sobriety has returned to the market with Iran tension easing. Oil above $100 is not sustainable with the economy in this condition.'"
Oil Tumbles Below $100 as U.S. Payroll Growth Trails Forecasts
Bloomberg, 4 May 2012

"Bernstein’s energy analysts have looked at the upstream costs for the 50 biggest listed oil producers and found that — surprise, surprise — 'the era of cheap oil is over': 'Tracking data from the 50 largest listed oil and gas producing companies globally (ex FSU) indicates that cash, production and unit costs in 2011 grew at a rate significantly faster than the 10 year average. Last year production costs increased 26% y-o-y, while the unit cost of production increased by 21% y-o-y to US$35.88/bbl. This is significantly higher than the longer term cost growth rates, highlighting continued cost pressures faced by the E&P industry as the incremental barrel continues to become more expensive to produce. The marginal cost of the 50 largest oil and gas producers globally increased to US$92/bbl in 2011, an increase of 11% y-o-y and in-line with historical average CAGR growth. Assuming another double digit increase this year, marginal costs for the 50 largest oil and gas producers could reach close to US$100/bbl. While we see near term downside to oil prices on weaker demand growth, the longer term outlook for higher oil prices continues to be supported by the rising costs of production.'"
Marginal oil production costs are heading towards $100/barrel
FT Alphaville (Blog), 2 May 2012

"The National Iranian Oil Company (NIOC) has started developing Iran's biggest offshore oil field in the Persian Gulf which is shared with Saudi Arabia. A report published by Mehr News Agency said the operation has begun by sending the first jacket related to the development of Forouzan oil field to the Persian Gulf on Sunday, April 29. The huge structure made by a special jacket manufacturing yard in Iran's southwestern port city of Khorramshahr, weighs about 4,000 tons and is carried by a special vessel. If climatic conditions are good, it will be installed by late May, the report added. The second jacket related to the Forouzan oil field development project will be sent to the offshore field within the next few weeks. The main goal of the Forouzan oil field development project is to extract more than 300 million barrels of crude oil in the next 25 years. The field will also yield about 250 million cubic feet per day of natural gas which will be transferred to Kharg Island via an undersea pipeline. Forouzan oil field, in the Persian Gulf, is shared with Saudi Arabia. Extraction of oil from the field started in the early 1970s and the field produced about 550 million barrels of oil by the end of 2002. The field experienced its peak production in late 1978 when it produced 180,000 barrels per day of crude oil. The development of Forouzan oil field is a priority project for Iran's Oil Ministry and the field is expected to yield 5,000-10,000 barrels per day of crude oil by the middle of the next Iranian calendar year (starts March 20, 2013)."
Iran to develop biggest joint oil field with Saudi Arabia
Tehran Times, 30 April 2012

"Exxon Mobil failed to benefit from a rally in oil prices in the first quarter of the year as production at the world's biggest energy company fell. The amount of oil the Texas-based company produced in the first three months of the year dropped 7.7pc compared with a year earlier. Oil prices, meanwhile, averaged 12pc higher in the quarter as hopes for the global economy strengthened and tensions over Iran's nuclear programme escalated.... Analysts said that the drop in production underlined the challenge the world's biggest energy companies face in tapping new reserves of oil to meet rising global demand. Rex Tillerson, Exxon's chairman and chief executive, said that the company is working on several new fields that will drive production up by between 1pc and 2pc a year over the next four years. Last year Exxon struck a $3.2bn deal with Russia's Rosneft that will allow the US company to drill for oil in the Arctic Ocean."
Exxon Mobil profits hit by lower oil production
Telegraph, 26 April 2012

"Controversial 'fracking' for shale gas should only take place at least 600 metres down from aquifers used for water supplies, scientists said on Wednesday. A new study revealed the process, which uses high-pressure liquid pumped deep underground to split shale rock and release gas, caused fractures running upwards and downwards through the ground of up to 588 metres from their source. The research, published in the journal Marine and Petroleum Geology, found the chance of a fracture extending more than 600 metres upwards was exceptionally low, and the probability of fractures of more than 350 metres was 1%. Researchers said the study showed it was "incredibly unlikely" that fracking at depths of 2km to 3km below the surface would lead to the contamination of shallow aquifers which lie above the gas resources."
Restrict shale gas fracking to 600m from water supplies, says study
Guardian, 25 April 2012

"ExxonMobil has run ads stating that we won’t see a global production peak for decades to come, while Daniel Yergin tells us that the worst case is an 'Undulating Plateau' many decades from now. Unfortunately, since global annual crude oil production has been flat to down since 2005, the 'Undulating Plateau' seems to arrived slightly ahead of schedule. Global annual (Brent) crude oil prices doubled from $55 in 2005 to $111 in 2011, an average rate of increase of one percent per month, although actual prices have of course been above and below this trend line. The available production data over this time frame, from the EIA and BP, show that global crude oil production and global total petroleum liquids production have been virtually flat, with a slight increase in total liquids production of about 0.5%/year (inclusive of low net energy biofuels). A study of the top 33 net oil exporters in the world, which account for 99% plus of total global net exports, and which we define as Global Net Exports of oil (GNE), shows that GNE fell from 46 mbpd (million barrels per day) in 2005 to 43 mbpd in 2010 (BP & minor EIA data, total petroleum liquids). Furthermore, China and India ('Chindia') have been consuming an increasing share of this declining volume of GNE. At the 2005 to 2010 rate of increase in Chindia’s combined net oil imports as a percentage of GNE, the Chindia region alone would consume 100% of GNE by the year 2030, 18 years from now."
An update on global net oil exports: Is it midnight on the Titanic?
Energy Bulletin, 24 April 2012

"An estimated 96 reactors will come online across the world by 2021. The likely result will be a full-blown uranium shortage, which Drolet & Associates expects by 2016 (We touched on this supply dynamic in “The Uranium Supply Crunch.”). When this crunch occurs, majors will have to increase their reserves significantly through exploration and development. The chart below foreshadows the coming disconnect, where supply hits the wall and begs the question that Cameco’s Rim Gitzel has asked for some time—'where is this production going to come from?."
Got Uranium? Looming Supply Crunch & Junior Activity Heat Up Athabasca
GotProspecting, 23 April 2012

"As the developed-world economy tries to gain momentum, it faces a persistent headwind. The oil price remains stubbornly over $100 a barrel, acting like a tax on Western consumers. Some blame the high price on evil speculators—Barack Obama unveiled plans to increase penalties for market manipulation on April 17th. But there is a simpler explanation: that supply is inadequate to keep up with rising demand.... oil is still the main fuel for cars and trucks. And crude output (as opposed to alternatives such as biofuels and liquids made from gas) has been flat since 2005.... A number of countries (including Britain, Egypt and Indonesia) have turned from net oil exporters into importers in recent years. And although rich countries have curbed their energy-guzzling a little, demand continues to surge in emerging markets. This has left the oil market very vulnerable to temporary supply disruptions, such as the war in Libya. Speaking at a conference in Dublin this week, organised by the Institute of International and European Affairs and the Association for the Study of Peak Oil and Gas, Chris Skrebowski, a consulting editor of Petroleum Review, argued that spare capacity in the oil market could be eroded by 2015.... Even if the world can find more oil—in the Arctic or tar sands, say—the longer-term question is whether the era of 'cheap energy' is over and how the world can adjust if it is. Developed economies are built on easy access to cheap energy, importing goods that are transported from around the world, with consumers driving many miles to work in air-conditioned offices and then flying off to sunny climes for their annual holidays..... some potential substitutes for, or new sources of, oil (such as biofuels and tar sands) are a lot less efficient, in the sense that they require significant amounts of energy simply to produce. To the extent that this equation (energy return on energy invested, or EROI) is deteriorating, that must surely have an effect on economic growth..... 'What is the minimum EROI that a modern industrial society must have for its energy system for that society to survive?' ask Carey King and Charles Hall in a recent paper. The academics’ answer: 'Complex societies need a high EROI built on a large primary energy base.' This issue is not much considered by mainstream economists, who are too busy focusing on monetary policy, the impact of fiscal austerity or the need for labour-market reforms. But just as the industrial revolution was built on coal, the post-second-world-war economy was built on cheap oil."
Feeling peaky
Economist, 21 April 2012

"Serious doubts have been raised over the prospects for carbon capture and storage in the UK in the first comprehensive investigation into the technology, just two weeks after the government launched a �1bn competition to build the first demonstration CCS plant. The finding by the government-funded UK Energy Research Council endangers many of the government's assumptions on tackling climate change, because ministers' long-term plans rely heavily on making the untried technique work on a massive scale. CCS is designed to lower the carbon emissions of fossil fuel power stations. The design of the new competition is flawed, and the UK is already falling far behind other countries such as the US in its attempts to commercialise the expensive technique, according to the lead author of the study, which took two years to compile. The technique has never been demonstrated at scale on a working power station. Jim Watson, lead author of the report, said: 'People assumed that CCS would be straightforward, but it has not been. It is a particularly challenging technology – it's actually very, very difficult.' The question of the future of CCS is a crucial one because all of the government's assumptions about how the UK can meet its long term target of cutting emissions by 80% by 2050 require a massive use of CCS technology. If it cannot be made to work commercially, and at a reasonable cost, then the UK would have to spend much more on renewable energy, nuclear power and other economic transformations, and would face having to make enormous cuts in areas such as emissions from air travel.... Long delays have already plagued attempts to get CCS off the ground in the UK. The Treasury's initial plan for companies and consortiums to compete for a �1bn funding pot for a first demonstration plant was set out more than five years ago – but late last year it collapsed when the final potential entrant withdrew."
Carbon capture in UK under threat as study raises doubts
Guardian, 19 April 2012

"Carbon emissions from goods imported and consumed in the UK are rising faster than the domestic fall in greenhouse gases, MPs say. 'Outsourcing' of pollution overseas will tarnish the UK's record on carbon emissions, experts warned. The UK's carbon dioxide emissions fell by 19% between 1990 and 2008, but its carbon footprint, based on what the UK consumes, grew by 20%."
MPs warn UK pollution outsourcing
BBC Online, 18 April 2012

"In his presentation to Montana Energy 2012, Michael Economides told Montanans, 'You are already a superpower in oil production. You have already defied the trends and once again showed the can-do attitude of this industry, smashing the myth of the 'peak oil'. 'You have redefined and defied the trends suggesting strongly the future of energy is oil and gas and not solar and wind,' said Economides. Economides is professor at Cullen College of Engineering in Houston, consultant and author. The reason places like Montana and Canada stand at the leading edge of the industry is because of conditions that exist in other countries, which are mostly hostile to the US. Many of these countries are 'a shambles,' 'corrupt,' and unstable. 'It is hard to produce oil when people are shooting at you,' said Economides. 'You are making the whole myth of peak oil a shambles.'... The reason is because of increases in price, said Economides. Economides expressed disappointment with the US Geological Survey and the degree to which they fail to take increasing prices into account in making their projections regarding supply. Increased prices increase the amount that producers can afford to invest, which puts into production resources that they previously considered uneconomical to recover.....'Economides predicted that $100 a barrel oil is the new norm. The price will be held because of the unprecedented demand for oil in China. The situation with China is 'bizerk,' said Economides, 'Never before has there been a country where their demand for oil increased 20 percent per year.'"
Making 'Shambles' of 'Oil Peak Myth'
Big Sky Business Journal, 18 April 2012

"Two small earthquakes near Blackpool last year were caused by 'fracking', the controversial drilling method used to extract shale gas, an official report has found. An independent panel commissioned by the government said the controversial method of obtaining natural gas should no longer be permitted unless a strict new system is set up to detect warning tremors in the rock. The controversial drilling method is now likely to be given the green light with Ministers set to accept the advice that it could be extended with new controls. But campaigners called for the practice to be banned outright after the report confirmed that an operation by Cuadrilla, an energy company, was responsible for two tremors last spring. It backed up an inquiry by Cuadrilla late last year, after which the company admitted culpability for the small earthquakes, which measured 2.3 and 1.5 on the 'local magnitude' system under which three is classed as 'moderate'. "
Fracking: drilling method 'to be extended' despite causing Blackpool earthquakes
Telegraph, 17 April 2012

"The oil conflict between Sudan and newly independent South Sudan is flaring dangerously after the infant state accused the Khartoum regime of building an illegal pipeline into its oilfield and the north declared a general mobilization. There have been frequent clashes between the Christian and animist south and the northern Muslim Arab regime in Khartoum, which fought a three-decade war up to 2005, since South Sudan became independent last July."
Sudan oil war heats up, north mobilizes
United Press International, 11 April 2012

"For the past nine years, the world has been waiting for Iraq's oil. Ever since Saddam Hussein was toppled from power in 2003, politicians in Baghdad and Washington have been announcing that the country would soon double, triple or perhaps even quintuple its oil exports. After all, former US Deputy Secretary of Defense Paul Wolfowitz, one of the architects of the Iraq war, had promised that the country would finance its reconstruction on its own. They were empty promises. For years, neither the Iraqis nor the occupying forces succeeded in developing the country's neglected oil fields, plugging the holes in the pipelines, or repairing the pumping stations and storage tanks. Twelve years of sanctions, the invasion, the sectarian fighting that followed, and the terror attacks on workers, engineers and facilities have set back the reconstruction of the oil industry by years. Even today, Iraq produces barely more than the nearly 2.5 million barrels per day that it was already exporting before the Iraq war. And, even now, the country has still failed to introduce binding legislation for the oil and gas sector. Arabs and Kurds, Sunnis and Shiites are wrangling just as bitterly over the distribution of future resources as they did five years ago, when the parliament debated the law for the first time.... Iraq is currently the only country in the region that has the resources to meet the demand for oil in the coming years virtually by itself: Deep underground lie 115 billion barrels of proven reserves and as many as 200 billion barrels of estimated reserves, which have remained largely untouched over the past two decades. .....Just how much the country will actually produce depends on the demand and the price of oil, says Shahristani. If Baghdad were to produce merely 8 million barrels a day, it would still amount to gross daily revenues of nearly $1 billion at today's crude oil prices -- more money than the war-torn country would even be able to absorb in its current state. Although such figures had hardly been worth the paper they were printed on in the years following 2003, now there are signs that work is actually progressing on Iraq's oil fields. In the palm groves a few kilometers east of Baghdad, an area where for years foreigners would only venture in heavily armed convoys, Raymond Mallia from Malta is now drilling for the heavy oil of the East Baghdad field, with its stench of sulfur. With over 8 billion barrels of extractable oil, East Baghdad is what's known as a super-giant oil field. There are only a few dozen oil fields of this size in the world, and even in this exclusive club East Baghdad is an exception: Part of the field lies under the city of Baghdad, with its 7 million residents -- specifically, under the Shiite district of Sadr City, which was the scene of particularly brutal sectarian fighting......"
Iraq Progresses toward a Future Built on Oil Wealth
Der Spiegel, 10 April 2012

"Scientists in a New Jersey laboratory say they are close to a major breakthrough in the field of fusion that they predict will soon allow for an unlimited source of the cheapest, cleanest and safest energy ever. Researchers at Lawrenceville Plasma Physics in Middlesex, NJ have published the results of their recent work in the Physics of Plasmas journal last week, and expect one of their next rounds of testing to finally tackle an issue of energy procurement that would rival anything already available. In their latest breakthrough, fusion researchers at the lab say that they’ve successfully heated and confined an ionized gas at record temperatures which would be high enough to allow for the nuclear fusion of certain elements, including hydrogen and boron. Those elements double as aneutronic fuels — that is, they produce no neutrons during the fusion process — and could thus be quickly converted to electricity without using the expensive and dangerous conversion measures currently available. Scientists say they believe they are close to a breakthrough that will allow them to harness energy from the elements and thus work with an energy source more marketable than anything now available. According to the scientists, they have identified and emulated two of the three conditions necessary to show energy production with aneutronic fuels. Eric Lerner, a chief scientist for Lawrenceville Plasma Physics, says that figuring out the temperature and confinement necessary for the fusion have been established in their research, and that once the team can determine the necessary conditions for the third variable — density — they will be able to harness energy from plasma. 'We are still far from having sufficient density in the tiny hot regions to get net energy, but that is our next goal,' Lerner says in a press release on the research. To RT, fellow Lawrenceville researcher Derek Shannon adds, 'We are working on the third criterion, density, now, with the goal of demonstrating full scientific feasibility this year.' Shannon also predicts that the research coming out of the New Jersey lab could put the groups as far as decade ahead of competing projects that aim to introduce manageable fusion fuels."
Plasma fusion becomes a reality?
RT, 3 April 2012

"A report released in February by the Independent Investigation Commission on the Fukushima Daiichi Nuclear Accident stated that the storage pool of the plant's No. 4 reactor has clearly been shown to be 'the weakest link' in the parallel, chain-reaction crises of the nuclear disaster. The worse-case scenario drawn up by the government includes not only the collapse of the No. 4 reactor pool, but the disintegration of spent fuel rods from all the plant's other reactors. If this were to happen, residents in the Tokyo metropolitan area would be forced to evacuate."
In light of further nuclear risks, economic growth should not be priority
The Mainichi (Japan), 2 April 2012

"Iraq's crude exports in March were the highest monthly figure in more than two decades and should continue to rise, oil ministry spokesman Assem Jihad said on Sunday. Iraqi oil exports in March reached a level not seen since 1989, Jihad told AFP by telephone. An oil ministry statement had earlier put the monthly figure as the highest since 1980, but Jihad said the year given was incorrect. The oil ministry statement said that Iraq exported a total of 71.827 million barrels of oil last month, equating to an average daily rate of 2.317 million barrels per day and generating $8.475 billion in revenues. Average oil prices for the month were $118 per barrel, the statement said. Iraq has vast untapped crude reserves and depends on oil sales for the majority of government income. Officials in Baghdad have said the country could have the ability to produce up to 12 million bpd by 2017, though the IMF has said this target is too ambitious."
Iraq march oil exports highest since 1989: ministry
AFP, 1 April 2012

"Nuclear power is no longer an economically viable source of new energy in the United States, the freshly-retired CEO of Exelon, America’s largest producer of nuclear power, said in Chicago Thursday. And it won’t become economically viable, he said, for the forseeable future. 'Let me state unequivocably that I’ve never met a nuclear plant I didn’t like,' said John Rowe, who retired 17 days ago as chairman and CEO of Exelon Corporation, which operates 22 nuclear power plants, more than any other utility in the United States. 'Having said that, let me also state unequivocably that new ones don’t make any sense right now.' Speaking to about 5o people at the University of Chicago‘s Harris School of Public Policy, Rowe presented a series of slides comparing the economic viability of various energy portfolios, including the 'King Coal' scenario favored by Republicans, the 'Big Wind' scenario favored by Democrats, and a 'Playing Favorites' scenario that shuffles and selects from various energy sources. All were trumped by a portfolio that relies heavily on America’s sudden abundance of natural gas, which has flooded the market since the boom in hydraulic fracturing of shale gas. Natural gas futures dropped to a 10-year low today—$2.15 for 1,000 cubic feet—on abundant supply, the Associated Press reported. 'I’m the nuclear guy,' Rowe said. 'And you won’t get better results with nuclear. It just isn’t economic, and it’s not economic within a foreseeable time frame.' Nuclear power remains a favorite of the Obama Administration, particularly in the form of small and modular new reactors. But Rowe’s pessimism about nuclear power reinforces statements made by other nuclear experts since the Fukushima nuclear accident in Japan."
Exelon's 'Nuclear Guy': No New Nukes
Forbes, 29 March 2012

"UK greenhouse gas emissions dropped seven per cent last year as warmer temperatures slashed demand for gas and nuclear and renewable energy increased, government data revealed today. The country emitted a total of 549 million tonnes carbon dioxide equivalent (MTCO2e) of the six greenhouse gases covered by the Kyoto Protocol, down from 590MTCO2e in 2010. Carbon dioxide, which makes up around 84 per cent of UK emissions, fell eight per cent year on year to 456MT. This decline was accompanied by a rise in renewable energy production to make up a record 9.5 per cent of the UK's total energy mix, compared to 7.5 per cent the previous year, while nuclear increased by three percentage points to make up 19 per cent."
UK emissions fall seven per cent as renewable energy soars
BusinessGreen, 29 March 2012

"UK oil production fell more than 17 percent to average 1.04 million barrels per day (bpd) in 2011, government figures released on Thursday showed, underlining the difficulty in slowing down a decade-long fall in output. Output fell 17.4 percent compared with 2010 to average 52 million tonnes (381.2 million barrels), the Department of Energy and Climate Change (DECC) said in a statement, the lowest level of production since the 1970s. 'This decrease stems from a number of unexpected slowdowns....as well as a general decline in UK production from established fields,' the statement said. Keen to ensure Britain's remaining oil and gas reserves are tapped, the government last week unveiled plans to boost North Sea investment. UK oil output peaked at more than 2.7 million bpd in 1999 and has been on a downward trend since 2000. As well as the drop in oil output, the DECC figures also showed production of natural gas in 2011 fell even more sharply than oil output, declining by 20.8 percent. As a result, gross imports of natural gas were greater than gross production for the first time since 1967. Britain has earned billions of dollars in oil and gas revenue over the last 35 years and the UK's high quality grades of crude oil have become a benchmark used in international trading. But a number of offshore oil installations underwent unplanned maintenance in 2011, including Nexen's Buzzard field, the UK's largest oilfield, adding to the impact of natural decline in reducing supplies. With production in the UK past its peak, in recent years larger companies such as BP Plc have been scaling back in the North Sea, selling fields to smaller companies who tap the remaining reserves."
UK oil output in 2011 falls to lowest since 1970s
Reuters, 29 March 2012

"Two giant German firms, E.On and RWE, are to pull out of building new nuclear power stations in the UK. It's the first fallout from the Japanese Fukushima disaster to hit Britain's nuclear industry. The joint venture run by the two firms, Horizon, was planning to build new nuclear plants at Wylfa on Anglesey, and Oldbury-on-Severn in Gloucestershire. The companies blamed the scarcity of capital in an economic crisis, the ‘significant ongoing costs’, and the fact that their home country has turned its back on nuclear power. The German chancellor Angela Merkel said 'Atomkraft nein danke' in the wake of last year's disaster at the Japanese nuclear power station at Fukushima. 'That is effectively a treble whammy for our organisations,' said Volker Beckers, chief executive of RWE NPower. 'We had to close power stations in a very short time frame, and we have a now much accelerated decommissioning programme.' Half the country’s German nuclear power stations have closed already, and the rest will close by 2022 – robbing the E.On and RWE of a revenue stream and replacing it with a huge bill for decommissioning. The consequences of this decision have now been felt in Britain. The withdrawal leaves two nuclear operators still interested in the UK. EDF, partly owned by the French state, owns five sites across England, including Hinkley Point, (where planning permission has already been requested), as well as Bradwell, Heysham, Hartlepool and Sizewell. A further site at Moorside, near the Sellafield nuclear plant in Cumbria, is owned by the Nugen consortium, comprised of the Spanish energy company Iberdrola and the utility GdF Suez, also part-owned by the French government. ..... But it is unlikely that a new bidder will step forward to take up the two sites which the German companies are now selling. 'Realistically, it’s likely to be one of the two consortia which are considering nuclear build in the UK,' says Malcolm Grimston, nuclear expert at Chatham House. 'There may be other players out there, but most of the big European utilities were already involved in one of the three bids, so there isn’t a lot of capital around in Europe.' The future of the UK’s nuclear programme now rests heavily on the French, with EDF holding exactly the dominant position the government had hoped to avoid."
Two major firms pull out of nuclear new build
Channel 4 News, 29 March 2012

"Oil consumer nations are set to pay a record $2 trillion this year for oil imports if crude prices do not fall, the International Energy Agency (IEA) said on Tuesday, undermining economic recovery. Crude hit $128 a barrel this month, only $20 short of its 2008 peak, and is up more than 15 percent since January, largely because of sanctions against oil producer Iran. 'For the first time the world will pay $2 trillion of oil import bills,' the IEA's chief economist Fatih Birol told Reuters. Birol said the bill for importing nations had risen from $1.8 trillion in 2011 and $1.7 trillion in 2008. If crude were to stay at current levels for the rest of the year - about $125 a barrel for Brent and $107 for U.S. crude - oil import bills would cost 3.4 percent of GDP, up from 3.1 percent in 2011, Birol said. He said the European Union was the hardest-hit of industrialized regions on oil import costs because, when converted into euros, the average EU oil price this year was running higher than in 2008. Dollar-denominated oil costs mean European consumers pay more when the euro weakens against the dollar. The euro has fallen from $1.49 in May at its peak in 2011 to $1.33 now."
World oil import bill heading for record $2 trillion
Reuters, 27 March 2012

"Bank of England officials showed increased concern about oil prices and future wage inflation when they left policy steady in March, the minutes of the latest Monetary Policy Committee meeting show. .... The MPC focused particularly on the risk to the economy posed by a recent rise in oil prices, which they said was not fully reflected in February's quarterly economic forecasts.The scale of the impact of higher oil prices was hard to judge, due to opposing effects on inflation and growth. Echoing comments by BoE chief economist Spencer Dale in a speech on Tuesday, the minutes also showed that the MPC were concerned about whether wage inflation would continue to be kept in check by high unemployment. 'There was a risk that this might be a less powerful restraining force in the future, especially if another round of energy price rises were to materialise,' policymakers said."
Bank of England split on more quantitative easing as oil price worries increase
Telegraph, 24 March 2012

"Amid rising gasoline prices at filling stations across the US, energy prices are still too cheap to force dramatic changes in consumption, Shell's chief executive said recently. Peter Voser told Silicon Valley investors at a dinner held by the Churchill Club: 'For certain things energy prices need to go up otherwise the behavior will not change. We have hit the cheap oil peak. So the cheap oil is over. It's going to be more expensive and energy in general is going to be more expensive.' Voser said that oil prices would continue to hover at around the $100/barrel mark. 'If you look at world prices today I would say that they are too high because they reflect geopolitical issues. But I would also say it will not go down too much because it will not otherwise allow the industry to develop enough to supply' ... Voser said that he would drive an electric car, but not in the US if the electricity came from coal-fired power stations. Advancing emerging technologies to commercial scale needed to happen more quickly and innovation was needed to accelerate progress, he said. 'If you look at new technologies and how long they took to get to 1% global energy market share, you're taking between 20-30 years. This is not the six-month mobile phone type of change.'... Although China's energy demand was fast accelerating, the government had grasped the need to prioritise energy efficiency to bring the majority of its population out of poverty, but growth in energy demand could come at a very high price, he said. 'As people come out of energy poverty they will go through the most intense energy phase when they buy cars, fridges, air conditioning. The next 20-25 years will be a very energy intensive phase and therefore as we have no solution on the very low carbon energy side there will be more [demand] for fossil fuels unless we do not allow those countries to get out of energy poverty. We estimate that the energy demand will double from now until 2050 - 90% of that will be in non-OECD countries and half of that will be in China. This doubling will only happen if we can solve some of the energy efficiency problems."
Shell Chief: Energy Prices Too Cheap to Change Consumption
AOL Energy, 23 March 2012

"The price for filling a large family car with petrol went up to nearly �100 yesterday as motorists faced more misery at the pumps. The price of petrol broke through the 140p-a-litre barrier for the first time yesterday – with motoring groups predicting it will hit 150p by summer. The rise provoked yet more fury from the UK’s 34million motorists, coming just days after the Chancellor confirmed a controversial fuel tax rise that will add nearly 4p to the cost of a litre from August 1. Filling a family car with a 70-litre tank with unleaded petrol will now set motorists back a staggering �98, a �6 increase since the beginning on 2012. �100 to fill the family car: Motorists' misery as price of petrol smashes through the 140p-a-litre barrier for first time... Chancellor George Osborne announced in this week’s Budget that the fuel duty rise planned for August, which with VAT included will add 3.62p to the cost of a litre, would be going ahead."
�100 to fill the family car: Motorists' misery as price of petrol smashes through the 140p-a-litre barrier for first time
Mail Online, 23 March 2012

"Norwegian oil giant Statoil ASA (STO) expects oil prices to stay high, due to increasing demand from emerging economies, resource scarcity, and the complexity of new resources coming on stream."
Statoil Chief Economist: Statoil Sees Structural Upward Shift In Oil Prices
Wall St Journal, 22 March 2012

"The chancellor fired the starting gun on a new 'dash for gas' in a budget that was light on green pledges but contained boosts for fossil fuel companies. Green groups reacted with dismay, arguing that the government had missed the chance to create green jobs and a low-carbon economy. George Osborne told MPs: 'Gas is cheap, has much less carbon than coal and will be the largest single source of our electricity in the coming years. And so the energy secretary will set out our new gas generation strategy in the autumn to secure investment. I also want to that ensure we extract the greatest possible amount of oil and gas from our reserves in the North Sea."
Budget 2012: chancellor fires starting gun on dash for gas
British Gas, 21 March 2012

"In January 2012, oil production in North Dakota hit 546,000 b/d, up from 342,000 b/d in January 2011, 253,000 b/d in 2010, and 187,000 b/d in 2009. With more drilling crews on the way, it is easy to see why optimists are projecting that millions of barrels per day will come from the various US shale deposits by the end of the decade. If we were talking about conventional oil coming from conventional oil fields, the optimists would probably be right --- but we aren't. It took the production from 6,617 wells to produce North Dakota's 546,000 b/d in January. Divide the daily production by the number of wells and you get an astoundingly low 82 b/d from each well. I say 'astounding' because a good new offshore well can do 50,000 b/d. BP's Macondo well which exploded in the Gulf a couple of years ago was pumping out an estimated 53,000 b/d before it was capped. Now a North Dakota shale oil well is not in the cost class of a deepwater offshore platform which can run into the billions, but they do cost about three times as much as a classic onshore oil well as they first must be drilled down 11,000 feet and then 10,000 horizontally through the oil bearing layer before the fracturing of the rock can take place. The 'fracking' involves at least 15 massive pumps that inject water and other chemicals into the well. Take a Google Earth flight over northwestern North Dakota. The fracked wells are hard to miss as there are now about 9,000 of them and they are each the size of a football field. There is still more -- fracked wells don't keep producing very long. Although a few newly fracked wells may start out producing in the vicinity of 1,000 barrels a day, this rate usually falls by 65 percent the first year; 35 percent the second; and another 15 percent the third. Within a few years most wells are producing in the vicinity of 100 b/d or less which is why the state average for January is only 82 b/d despite the addition of 1300 new wells in 2011.... As we have seen with the Bakken and the various natural gas bearing shales we have been drilling of late, it takes an awful lot of expensive wells and environmental disruption to get the oil out. One estimate of the Energy Returned on Energy Investment (EROEI) for the Bakken shale suggests that the EROEI is six. This means that it may take one oil barrel's worth of energy to produce six barrels of Bakken shale oil. This is getting very close to the theoretical point at which it really is not worth the effort and all the economic disruption. The aspect of this 'energy independence' story that the optimists continue to ignore is that, while oil production from shale may be climbing, depletion of our other sources of oil continues apace. Alaskan oil production is falling rapidly as is shallow offshore production in the Gulf and at least some of the offshore platforms are not turning out to be anywhere near as productive as planned. For its part, the EIA forecasts that U.S. shale oil production will reach a peak of about 1 million b/d around 2020, and deepwater production will increase by about another 500,000 b/d before peaking. This would put total US oil production in 2020 around 6.5 million b/d, far below the current demand of 18 million b/d."
Tom Whipple - The Peak Oil Crisis: Parsing the Bakken
Falls Church News-Press, 21 March 2012

"Poland’s recoverable shale gas reserves are probably as much as 768 billion cubic meters, or 85 percent less than a U.S. Energy Department estimate from last year, according to the Polish Geological Institute. The deposits are enough to cover as many as 65 years of demand and are equal to as much as 200 years of the country’s production, Deputy Environment Minister Piotr Wozniak said today in Warsaw at a presentation of the institute’s data....The forecast is still 'substantial,' said Arkadiusz Wicik, a director at Fitch Ratings’ energy, utilities and regulation team for Europe, the Middle East and Africa. 'Shale gas in Poland could still be a game changer for the country’s energy sector despite the disappointing shale gas reserve estimate,' he said in a statement today."
Poland Says Shale Reserves May Be 85% Below U.S. Estimate
Bloomberg, 21 March 2012

"It will be impossible for the UK to meet its long-term carbon reduction target without reusing the nation's stockpile of plutonium, the former government chief scientist has warned. He predicts that global supplies of uranium will begin to run out in 2023 so the UK will need to rely on a domestic supply of nuclear fuel. Sir David King told the Guardian: 'You have to look at our stretching long-term targets, and we will need to generate more electricity while reducing emissions – you will need to look at plutonium in order to do that. I don't see any other way.'... King said it would be needed to fuel new power stations, because stocks of uranium are being rapidly depleted, and only a fraction of the mined supplies are suitable for use in generating power. According to a new report from King, if all the nuclear power stations that are planned around the globe are built, then the world will start to run out of uranium by 2023..... King favours a Mox – mixed oxide – plant, which would reprocess the plutonium into usable fuel, and generate electricity. 'This would be the most efficient way,' he said. But his views are controversial. Last year, the government said the UK's only Mis plant was a money-wasting failure. Richard George, energy campaigner for Greenpeace, said: 'Mox plants have already failed, and one report isn't going to do anything to change that. The government just closed our only Mox plant because it was eye-wateringly inefficient and succeeded only in hoovering up almost one and a half billion pounds of taxpayers' money.'... A rival proposal is to use the plutonium to fuel a thorium nuclear plant. This technology has also been in development for decades, but work was discontinued by governments focused on developing nuclear technology that would also have a military use. However, thorium development has recently been revived and proponents say the plutonium stockpile could be safely used for this. But King warned that the UK should not rely on untested technology. 'We should not be guinea pigs here,' he said."
Use nuclear waste to power UK, says top scientist
Guardian, 15 March 2012

"The International Energy Agency cut forecasts for oil supplies from outside OPEC this year because of lower exports from Sudan and Syria, cautioning that reduced spare output capacity raises the risk of a price surge. Producers not in the Organization of Petroleum Exporting Countries will provide 53.5 million barrels a day this year, or 200,000 a day less than the IEA forecast last month. The agency kept estimates for global oil demand in 2012 unchanged, predicting fuel use will remain 'stunted' by the economic slowdown and higher prices. Disappointing non-OPEC output will make the market more reliant on a 'slim buffer' of spare production capacity from a few OPEC nations, the IEA said."
IEA Predicts Bumpy Ride for Oil Amid Non-OPEC Supply Cuts
Bloomberg, 14 March 2012

"Iran's recent move to accept gold as payment for its oil instead of dollars underlined its uncompromising response to international sanctions, stoking concerns around supply from the oil-rich state. As holder of the world’s third-largest oil reserves, Iran is naturally the focus of worries about the dangers politicians pose to global energy chains, with no end in sight to the row over its push to develop nuclear power. Still, better get used to biting your nails is the message from a new report, which argues that similar threats to global energy prices are widespread. Close to half (44pc) of global oil production is taking place in countries with a high risk of resource nationalism, according to risk analysts Maplecroft. The phenomenon, which describes the growing trend for states to try to realise greater gain from their natural resources, comes as no great surprise given the rise in commodity prices. Maplecroft thinks a state trying to leverage political gain from its natural resources, as Iran is, should fall into this category, as well as the nationalisations or tax rises which would typically spring to mind."
Iran is far from the only threat to oil prices
Telegraph, 14 March 2012

"Since last week's eurozone 'grand summit', the headlines have been positive and, in the official photos anyway, the main players appear to be smiling. As such, the global equity rally goes on....Despite the eurozone's overwhelming ability to set the tone in terms of global investor sentiment, other economic indicators deserve attention – not least the price of oil. Brent crude hit a nine-month high on Friday, breaking through $125 (�79) a barrel. While the black stuff remains $24 below the all-time nominal peak of July 2008, it is now above those levels in terms of both sterling and the euro. Oil prices are up 14pc since the start of the year. That's obviously bad news for the big Western energy-importers, the UK included, that are struggling to generate sustainable economic recovery. Oil is soaring, we're told, because the International Atomic Energy Agency (IAEA) has just issued a report on the nuclear ambitions of Iran, the world's third-biggest crude exporter. Responding to European and US sanctions on its oil exports, due to bite in July, Iran refused inspectors access to the Parchin military complex where the IAEA has 'reason to believe' a nuclear detonation device has been tested. As such, the risk of near-term anti-Iranian military action has apparently just risen sharply, not least because a US presidential election is looming into view.... In 2001, the world consumed 76.6m barrels of oil a day. Last year, just a decade on, global oil use was a hefty 89.1m barrels daily, 16pc higher. In 2011, the world economy was sluggish, with global GDP growth of 3.8pc, down from 5.2pc the year before. Yet world oil use still rose almost 1pc in 2011, with crude averaging $111 a barrel, more than 40pc up on 2010. The International Energy Agency (IEA), the energy think-tank funded by oil-importing Western governments, tells us that crude demand is 'declining remorselessly throughout the OECD [countries]'. Given that the Western economies remain weak and the eurozone is heading for recession, the 'advanced economies' are consuming less crude. The fine print shows, though, that even IEA demand projections, which tend to be under-estimates, show OECD oil use falling just 0.9pc in 2012. Demand among the non-OECD countries, meanwhile, including the emerging giants of the East, is forecast to rise 2.8pc. Total global crude consumption, then, is still set to increase by another 1pc this year, mimicking the trend of 2011. The 'demand destruction' thesis is useful for Western governments desperate for cheaper oil – and it used to be true. Not so long ago, OECD oil use was so important that a Western demand slow-down was enough to lower global crude prices, so helping us recover. But rampant non-OECD demand now accounts for half the world total – and rising. Chinese oil consumption has recently surged at an astonishing 7pc-8pc per annum and the People's Republic is now second only to the US in terms of overall oil use. Misguided Western attempts to print our way out of trouble using QE are also boosting crude demand and pushing up prices, as savvy investors seek an 'anti-debasement' hedge. On the supply side, while attention focuses on geopolitical flare-ups, the important trends relate to geology and finance. Since the 1960s, the discovery rate and size of new oil and gas fields has fallen markedly. More than four-fifths of the world's major fields are beyond peak production. The output of the world's largest 580 oil fields is declining at a 5.1pc annual average. Strategic oil traders now worry aloud about falling pressure at Saudi's Ghawar, Cantarell in Mexico and other giants fields. The credit-crunch, meanwhile, severely cut investment in exploration and well development, which is likely to have long term supply implications. While there's lots of hype about tar sands and shale fuels, these new technologies often expend more energy than they create, while causing horrendous environmental and water-supply problems. Conventionally-produced crude will remain absolutely critical, and demand for it will spiral, until mankind bans the internal combustion engine, outlaws ammonium-based fertilisers, dismantles the global pharmaceutical industry and learns to live without plastic. I can't see that happening anytime soon. Geo-political issues are important, of course. A major Gulf conflict would obviously see oil prices spike. But crude is now expensive not due to political argy-bargy but because of the fundamental truths of demand and supply."
Soaring oil prices will dwarf the Greek drama
Telegraph, 14 March 2012

"Brazil is struggling to make enough ethanol to satisfy domestic demand just as the U.S. scraps restrictions on imports for the first time since 1980. The U.S., the world’s largest market for the biofuel, on Jan. 1 cut a 45 cent-a-gallon tax credit and a 54 cent-a-gallon tariff that protected local companies from foreign competition. Brazil, the world’s No. 2 producer, is unlikely to be able to take advantage after output dropped 19 percent this season. Investment in new sugar-cane assets and plantations in Brazil plummeted to $700 million last year, from $7.84 billion in 2008, according to Salim Morsy, an analyst at Bloomberg New Energy Finance in New York. Biofuel investors in Brazil are suffering from bad weather, poor infrastructure and government bureaucracy, said Gerson Carneiro Leao, head of the National Sugar Cane Commission at the CNA agricultural confederation. .... Even a projected increase of ethanol production by 2 billion liters for the next harvest in the Center-South, the main growing region, won’t be enough to meet domestic demand, according to Consultoria Idea, a Sao-Paulo-based consultancy. Brazil’s fast-growing fleet of flex-fuel cars, which burn any mix of gasoline and ethanol, will cause domestic demand for the distilled sugar cane juice to rise to 50 billion liters per year by 2018, a government study shows. ... Brazil would require an average of 15 new distilleries per year to reach the government’s target of producing 60 billion liters by 2021. Last year three new plants came on line."
Brazil Ethanol Drive Falters on Domestic Supply Shortage
Bloomberg, 13 March 2012

"The US, Japan and the European Union have filed a case against China at the World Trade Organization, challenging its restrictions on rare earth exports. US President Barack Obama accused China of breaking agreed trade rules as he announced the case at the White House. Beijing has set quotas for exports of rare earths, which are critical to the manufacture of high-tech products from hybrid cars to flat-screen TVs. It is the first WTO case to be filed jointly by the US, EU and Japan. They argue that by limiting exports, China, which produces more than 95% of the world's rare earth metals, has pushed up prices."
US, EU and Japan challenge China on rare earths at WTO
BBC Online, 13 March 2012

"Oil at $110 a barrel is taking only half as big a bite out of Americans' pocketbooks as it did in 1981, the last time Iranian shipments were disrupted. The cost of a barrel of crude in the U.S., adjusted for total disposable income, was $107.92 in January of this year, compared with a peak of $213.44 in the same month in 1981, according to data compiled by Bloomberg and the Energy and Commerce Departments. Oil consumption was 4.8 percent of income in 2010, compared with 9.7 percent in 1981, the data showed.... Declining fuel use compared with past decades may also be helping Americans cope with increased prices at the pump. Household consumption of energy as a share of total spending was 5.6 percent this year, down from 8.9 percent in 1980, according to Riccadonna of Deutsche Bank.... Retail gasoline rose to $3.793 a gallon in the week ended March 5, the highest level at this time of the year in records going back to 1990, according to the Energy Department. Futures on the Nymex have advanced 23 percent this year, settling at $3.314 a gallon yesterday. Prices may average $4 a gallon this summer and as much as $5 in some East Coast areas, Stephen Schork, president of the Schork Group, an energy-consulting firm in Villanova, Pennsylvania, said in an interview. Confidence as measured by the Bloomberg Consumer Comfort Index was minus 36.7 in the week ended March 4, the highest since April 2008, up from minus 38.8 in the prior period, according to figures released yesterday..... Bloomberg's numbers use the Energy Department's monthly average price that refineries pay for imported oil, adjusted to reflect data on disposable income from the Commerce Department's Bureau of Economic Analysis. Even taking into account population growth, oil is cheaper today than it was three decades ago. Adjusted for per capita disposable income, prices peaked at $156 in January 1981....The Iranian Revolution, which began in late 1978, resulted in a drop in Iran's oil production of 3.9 million barrels per day from 1978 to 1981, according to the Energy Department. That's about 6.4 percent of 1981's world oil production, standing at 60.6 million barrels a day, department data showed. Production dropped further during the Iran-Iraq War, which started in 1980. By the following year output from the Organization of Petroleum Exporting Countries declined to 22.8 million barrels per day, 7 million barrels below its level for 1978, according to the department."
Oil Price Distant From 1980s Agony When U.S. Income Adjusted
Bloomberg, 9 March 2012

"Some shale formations in Europe and China are impervious to drilling techniques that opened vast reserves of natural gas and oil from Texas to Pennsylvania, said Rex Tillerson, Exxon Mobil Corp. (XOM)’s chief executive officer. New methods and tools will need to be invented to tap many of the shale fields that energy companies and governments expect eventually to yield a bonanza of fuel, Tillerson said during a meeting with analysts in New York today. .... Some parts of U.S. shale formations also have proven impervious to hydraulic fracturing, or fracking, he said. The company is studying whether using different fluids, proppants or pumping techniques will be successful, Tillerson said. Proppants are tiny granules of sand or ceramic used to hold open fissures that allow oil and gas to flow through rock."
Fracking Failing to Crack China, Europe Shale, Exxon Says
Bloomberg, 8 March 2012

"The number of new nuclear power stations entering the construction phase fell dramatically last year compared with previous years, in the aftermath of the incident at the Fukushima nuclear plant in Japan last March. From 2008 to 2010, construction work began on 38 reactors around the world, but in 2011-12, there were only two construction starts, according to Steve Thomas, professor of energy studies at the University of Greenwich. The fall was interpreted by some as evidence of rapidly waning interest in nuclear power after the forced shutdown of the Fukushima reactor a year ago, in which no one was killed but thousands of people were forced to flee their homes. But others argued it was merely a temporary pause, and predicted the 'nuclear renaissance' would continue."
Dramatic fall in new nuclear power stations after Fukushima
Guardian, 8 March 2012

"The declaration of an autonomous region in Cyrenaica in eastern Libya, which contains most of the country's oil, is the most serious threat to central authority in post-revolutionary Libya and could disrupt oil flows already threatened by the Persian Gulf crisis.Tuesday's declaration by a congress of some 2,000 eastern political and tribal leaders in Benghazi, Libya's second largest city and the crucible of the eight-month uprising against Gadhafi in 2011, is a potentially serious blow to the shaky and fractious National Transitional Council, Libya's interim government based in Tripoli in the west. The gathering declared Ahmad al-Zubair al-Senussi, a member of the NTC, as head of the governing council of a region that encompasses all of Libya from the Gulf of Sidra to the Egyptian border. He is a great-nephew of Libya's last monarch, King Idris, overthrown by Gadhafi in September 1969. The defiance of the eastern elders, six months after Gadhafi was overthrown and killed, graphically underlined the traditional rivalry between their long-restive region and the western half of the country, a fissure that deepened during the Gadhafi era. Events in Cyrenaica reflect a growing demand for federalism in a major African oil producer with reserves of 46.4 billion barrels of oil, the largest on the continent, and 55 trillion cubic feet of gas. Cyrenaica contains the country's two biggest oil fields, Mesala and Saraya. 'Regardless of what plan is eventually adopted, it is increasingly likely that a strong central authority will not exist in the future Libyan governing system,' the U.S. global security consultancy Stratfor observed. 'A power a struggle over the amount of authority possessed by the country's respective autonomous regions will ensue.' That will be bad news for Libya's oil industry, which is struggling to recover from the ravages of eight months of conflict. If Cyrenaica does break away with most of Libya's oil reserves and infrastructure, the rest of the country will be left with little economic base. It's not clear whether existing contracts between international oil companies with a central government in Tripoli would remain intact or have to be renegotiated, a process that could well disrupt production and exports. The Cyrenaica challenge to the authority of the internationally recognized NTC came only a few weeks after local tribesmen took control of the central town of Bani Walid, population 150,000, by wresting it from pro-NTC forces Jan. 23. That followed similar incidents in the western city of Misurata, which has long existed as a de facto city-state of its own, and the mountain city of Zintan."
Libya's oil-rich east declares autonomy
UPI, 8 March 2012

"Growing domestic energy demand could put Saudi Arabia in a bind by 2030, caused largely by oil subsidies, an expert told an audience during IHS CERA Week in Houston on Tuesday. 'A lot of this is being driven in the region by the sharp growth in domestic consumption of oil,' Brad Bourland, chief economist for the Jadwa Investment Company, of Saudi Arabia, said during a panel discussion on the Middle East. While Saudi Arabia produces about 10 million barrels of oil per day, it consumes about 2 million barrels a day domestically, with demand increasing, Bourland said. The problem is that the country heavily subsidizes the oil, at an effective cost of about $10 per barrel domestically, he said. Much of those subsidies come from what amount to energy giveaways to the nation’s electric company and airline, he said."
CERA panel on Middle East touches on challenges for Saudi Arabia and Iran
Fuel Fix (Blog), 7 March 2012

"For the past couple of years executives from French oil giant Total have espoused a belief that the world is pretty close to a peak in oil supply. Today in a speech at the CERAWeek energy conference in Houston, Yves-Louis Darricarrere, president of the company’s oil and gas exploration division, said, 'We think it will be difficult to produce more than 95 to 97 million barrels per day in the foreseeable future.' This volume of oil is not far away from the 91 million bpd or so expected by the International Energy Agency this year. Getting to 97 million bpd would entail supply growth of just 600,000 bpd a year for 12 years – that’s about what China’s demand growth has averaged in recent years. Thus, says Darricarrere, oil’s share of the global energy supply will fall, with the slack to be picked up mostly by natural gas, which he says will increase in supply from 320 billion cubic feet now to 450 billion cf per day by 2030. He admits that his view seems 'paradoxical' when considering the amazing growth of supplies from shale fields; further, he says that the 95-97 million number excludes potential growth from biofuels and the manufacture of liquid fuels from coal. Still, he says, by 2030, '25 to 45 million bpd will need to be supplied from fields that are not online today.' That’s akin to the creation of two new Saudi Arabias. Total’s view is unusual among big oil company execs. Even if they might agree with Total, oil execs are loathe to admit peak oil concerns publicly for fear that the countries that still hold large untapped resources (like Venezuela, Iran, and Russia — all places where Total has played) will extract higher rents from drillers who want in."
CERAWEEK: Total's Upstream Chief Says Peak Oil Is Around The Corner
Forbes, 6 March 2012

"Oil production in Nigeria, Africa’s biggest producer, is down by about 1 million barrels a day because of violence and theft in the Niger River delta, according to the state oil company. Output is yet to be restored at 40 onshore oil fields mostly operated by Hague-based Royal Dutch Shell Plc (RDSA), San Ramon, California-based Chevron Corp. (CVX) and smaller producers more than two years after a government amnesty led to the disarming of thousands of militants and a decline in attacks on oil companies, according to data obtained from the Nigerian National Petroleum Corp."
Nigerian Delta Unrest Cuts Oil Output by 1 Million Barrels
Bloomberg, 5 March 2012

"Most drivers are familiar with the nagging refrain of 'Are we there yet?' But with gasoline heading back to $4 a gallon on average, it takes on more urgency: Oil can't go much higher without derailing the economy. Brent crude oil is back above $120 a barrel. Looked at on a 12-month rolling average, it is now 6% above its prior 2008 peak. U.S. gasoline demand is down almost 7% year-on-year. This year, Europe is forecast to consume 10% less oil than it did in 2008. Global demand is still forecast to rise, but only in emerging markets. Oil's high price greases this transfer of demand from the West to the rest. While mature economies are forced to brainstorm efficiencies, emerging markets offset the pain with faster economic growth and, often, consumer subsidies. At some point, though, oil prices overwhelm everyone. Efficiencies take time to develop: The faster way to lower consumption is recession. In emerging markets, high oil prices stoke inflation and make subsidies unmanageable. There are signs of this already. Weak European economies importing oil, such as Greece's, suffer most. Priced in euros, Brent has breached its earlier 2008 peak already. The U.S. shows more resilience, helped by cheap natural gas and rising domestic oil output. Industry, notably auto makers and airlines, have also retooled for a world of high oil prices. But the U.S. also has its limit. According to RBC Capital Markets, at $4 a gallon, the average driver's 2012 gasoline bill would be the highest in real terms since 1980. Based on gasoline's current price structure, $4 a gallon implies an oil price of $128 a barrel. That is very close to BofA Merrill Lynch's estimate of the $130 tipping point for the world economy. At that level, says strategist Francisco Blanch, energy costs would equate to 9% of global gross domestic product, a point also reached in the dire years of 2008 and 1980."
Oil Gives Economy Both Barrels
Wall St Journal, 5 March 2012

"Oil spikes usually metastasize once energy costs reach 9pc of global GDP. The longer they stay there, the greater the damage. That proved to be the pain barrier in the 1970s and again in 2008, and we are just shy of that level right now. Oil is already capturing a higher level of European GDP than in 2008,' said Francisco Blanch from Bank of America. The rule of thumb is that a 10pc rise in crude cuts US growth by 0.2pc four quarters later, but the science is flabbily soft and nobody knows where the inflexion point lies. The effect is famously 'non-linear'. Nothing much seems to happen until confidence suddenly snaps. What is deeply troubling is that Brent crude should have reached fresh records in sterling (�79) and euros (€94) - with a knock-on effect on US petrol prices, mostly tracking Brent - even though the International Monetary Fund has sharply downgraded its world growth forecast to 3.25pc this year from 4pc in September, and even though International Energy Agency (IEA) has cut its oil use forecast for this year by 750,000 barrels per day (bpd). Oil is not supposed to ratchet defiantly upwards in a downturn, which is what we have with the Euro zone facing a year of contraction in 2012, and much of the Latin bloc sliding into full depression. Japan‘s economy shrank in the fourth quarter. Asia’s emerging powers of Asia - the key force driving the commodity boom of the last decade - are in various stages of “soft-landings” after hitting the monetary brakes last year to check property bubbles and curb inflation. China’s manufacturing has been bouncing along near contraction levels through the winter. So what happens when it recovers? The unpleasant fact we must all face is that the relentless supply crunch - call it `Peak Oil’ if you want, or `Plateau Oil’ - was briefly disguised during the Great Recession and is already back with a vengeance before the West has fully recovered. The IEA said non-OPEC production stalled in 2010 and 2011. There was no net increase. While there was a boost from Canada’s tar sands, and America’s shale-oil, and Brazil’s offshore rigs, this was offset by the relentless erosion of the North Sea fields and Mexico’s operations, a collapse in the Sudan, and Libya’s woes. Meanwhile OPEC spare capacity has fallen to 2.5m barrels a day (bpd), compared to 3.7m this time last year during the Arab Spring, the event that caused a comparable spike in crude prices and arguably triggered the sharp global slowdown a few months later. The chain of causality is hotly disputed. A young professor Ben Bernanke no less wrote the definitive paper in 1997 - 'Systematic Monetary Policy and the Effects of Oil Price Shocks' - arguing that policy-makers themselves are the villains because they over-react. 'The majority of the impact of an oil price shock on the real economy is attributable to the central bank’s response to the inflationary pressures engendered by the shock', he wrote, though he forgot the lesson himself in 2008 when Fed rhetoric turned hawkish just as the M3 money supply was crashing. Oil spikes act as a tax and are deflationary. You should 'look through' the meaningless jump in headline inflation. Yet the European Central Bank rose to the bait in 2008 and again in 2011, lifting rates into the teeth of the crisis, with sadly predicable results. 'The ECB is likely to be less trigger happy under Mario Draghi,' said Bank of America. Be that as it may, Saudi Arabia has reportedly cranked up output to 11.5m barrels a day. If so, it may be near its feasible limits. No other country can step in. Which leaves us very naked as brinkmanship with Iran nears its denouement...Yes, the shale-gas revolution has revived America’s fortunes. The US may overtake Russia to become to the biggest producer of hydrocarbon fuels in the world within eight years, according to PFC Energy. But that is chiefly a North American story for now. Exploration in Poland, Hungary, and Sweden has yielded less than hoped. While China claims the world’s largest shale-gas reserves - and implicit shale-oil as well - but development has barely begun and China may lack the water needed for hydraulic fracturing. So we have a remarkable situation. China alone will be adding 125m cars to its roads over the next five years, with auto production targets of 30m annually by 2016. India is spending $1 trillion on infrastructure projects over the next five years. Variants of this are happening across Asia and Latin America. The picture is by now well-known to Telegraph readers. Two billion people in the emerging world are joining the global economy and competing toe-to-toe for scare resources with the West. Their rising demand - not our declining demand - will set oil prices."
Plateau Oil meets 125m Chinese cars
Telegraph, 4 March 2012

"Concerns over the surging cost of Brent crude are growing as analysts warn that Europe could be at the center of an oil-price shock. Rising oil prices have leapt ahead of the long-running euro-zone debt crisis as the most pressing problem facing the global economy, according to some analysts. HSBC labeled oil's remorseless climb 'the new Greece,' in a nod that worries over global contagion from Europe have receded for now."
For Europe, Costly Oil Could Be 'the New Greece'
Wall St Journal, 4 March 2012

"If you want a recipe for falling global oil prices, you would think this would do the trick. The 17-country euro zone, which includes three Group of Seven countries, is back in recession. The shale deposits in the United States are gushing oil. Libyan supplies are coming back with a vengeance. Iran has not been bombed and, if the blathering Beltway pundits are right, will not be bombed before the U.S. election. The Strait of Hormuz is wide open. The latest generation of cars makes the fuel economy of your dad’s old banger look like the Exxon Valdez’s. European austerity-related taxes on gasoline and diesel are pushing down demand. 'Natural gas is now flowing so fast into U.S. pipelines that the big question seems to be what to do with it all: Engineer cars to run on methanol? Reopen shuttered chemical plants that rely on gas for feedstock? Export liquefied gas by tanker? Why, then, are oil prices so high, to the point they threaten the tentative economic recoveries in debt-bombed Europe and elsewhere? This week, oil prices went to their highest level since mid-2008, just before the collapse of Lehman Bros. triggered the same response in oil prices. Propelled partly by dubious rumours of a pipeline explosion in Saudi Arabia, Brent crude (the better global proxy than West Texas intermediate CL-FT) went above $128 (U.S.) a barrel on Thursday. On Friday, oil was at $124. In the first two months of 2012 alone, prices have climbed by almost a third, after a 21-per-cent rise last year. In early 2009, when investors seemed convinced that only planetary annexation by cash-rich Martians with MBAs would save us, the price went as low as $34 from a pre-crisis peak of $147. In spite of the sharp price increase, there is no shortage of economists and analysts who think that sinking prices are more likely than the opposite. Their theory is that the euro zone debt crisis, which has already put three countries on life support and could end with the eradication of the common currency, still has ample potential to take down the global economy. Sorry United States and China, Europe is still the world’s biggest economy and if it fails, the repercussions would be ugly. What they forget, or at least play down, is that global demand is rising in spite of sluggish demand in tapped-out Europe. But that’s not really the point; the point is that it’s rising when oil producers themselves seem close to tapped out. Spare production capacity is razor thin. Production in the non-OPEC countries has been hugely disappointing. The American shale deposits are overhyped. And we haven’t even talked about potential supply disruptions in Iran and Iraq. Given the tight balance between supply and demand, any disruption could send the price soaring. The capable oil analysts at Barclays Capital in London have put their Brent forecast at $115 a barrel this year. But they think quarterly averages as high as $150 'are distinctly possible' even if the Persian Gulf doesn’t turn into a pool of blood and oil. Oil has been climbing pretty much steadily since early 2009, one of the strongest sustained rallies on record, in good part driven by relentless demand in Asia and the former Soviet Union states. When the commodity price chart takes off at a 45-degree angle for that long, you normally get a compelling supply response – more of the commodity is produced. In the oil markets, that response has not come, at least globally speaking. To be sure, it has in the United States, where surging shale oil production, combined with rising imports from Canada, home of the Alberta oil sands, have pushed down offshore imports as a share of consumption to about 45 per cent from a high of 60 per cent in 2005. Why hasn’t the high price triggered a production surge? The biggie, it seems, is that the non-OPEC countries are simply not up to the job. As Barclays points out, non-OPEC supply last year landed at a full one million barrels a day less than forecast by the International Energy Agency. The North Sea (whose production is shared by Britain and Norway) continued its terminal decline. Brazil and Azerbaijan were also the scenes of production disappointments. Meanwhile, OPEC, dominated by Saudi Arabia, is sweating exceedingly hard. OPEC production volumes are at three-year highs, to the point that the cartel has only about 1.6 million barrels a day of spare capacity, and still prices are climbing."
All the signs point to a falling oil price – except supply
Globe & Mail (Canada), 2 March 2012

"Saudi Arabia is deploying the most oil rigs in four years as it prepares for possible shortages caused by tension with Iran, giving President Barack Obama one less reason to answer calls to curb prices by releasing supplies from America’s emergency reserves. The number of rigs used in the desert kingdom more thandoubled in January from a year earlier, the biggest annual increase on record, data from Houston-based Baker Hughes Inc. (BHI)showed. As much as 1 million barrels a day of Iranian crude exports may be lost as the U.S. and Europe tighten sanctions against President Mahmoud Ahmadinejad’s government over its nuclear program, the International Energy Agency said Feb. 10."
Saudi Oil-Rig Use Soars as Obama Pressed on SPR: Energy Markets
Bloomberg, 1 March 2012

"Growth in the UK's manufacturing was weaker than expected in February as rising oil costs drove up prices at their fastest rate in more than 19 years. The Markit/CIPS survey, where a reading above 50 represents growth, showed the sector grew at 51.2, down from 52 the previous month and weaker than City expectations of 52.1. Manufacturers battled the sharpest monthly rise in input prices for more than 19 years and the second sharpest in the survey's history after three months of declines. Rising oil prices, which have been driven as high as 109 US dollars a barrel in recent week amid tensions over Iran's nuclear programme, pushed up the cost of chemicals, metals, plastic and transport for businesses. The rising prices threaten to derail the sector's recent rebound amid signs that new work from domestic and overseas clients stagnated."
Rising oil costs hit growth figures
Press Association, 1 March 2012

"Poland’s estimated shale gas reserves, believed to be the largest in Europe, may be cut once data is analyzed from the country’s first wells, the Polish Geological Institute said. 'Core logs from Polish wells are being analyzed with the help of U.S. technology,' Miroslaw Rutkowski, a spokesman for the institute, said by phone. 'As result, we’re expecting that our estimates will be lower than those of the EIA,' he said, in a reference to the Energy Information Administration. Drilling horizontal wells and using so-called hydraulic fracturing to open fissures in shale rock has made the U.S. the world’s largest gas producer. While Poland was identified as the European country with the best shale-gas potential, initial results from drillers including Exxon Mobil Corp. and 3Legs Resources Plc have disappointed."
Poland May Cut Shale Gas Estimates After Data From Wells
Guardian, 1 March 2012

"For more than a decade, questions have lingered about the possible role of the Saudi government in the attacks on Sept. 11, 2001, even as the royal kingdom has made itself a crucial counterterrorism partner in the eyes of American diplomats. Now, in sworn statements that seem likely to reignite the debate, two former senators who were privy to top secret information on the Saudis’ activities say they believe that the Saudi government might have played a direct role in the terrorist attacks. 'I am convinced that there was a direct line between at least some of the terrorists who carried out the September 11th attacks and the government of Saudi Arabia,' former Senator Bob Graham, Democrat of Florida, said in an affidavit filed as part of a lawsuit brought against the Saudi government and dozens of institutions in the country by families of Sept. 11 victims and others. Mr. Graham led a joint 2002 Congressional inquiry into the attacks. His former Senate colleague, Bob Kerrey of Nebraska, a Democrat who served on the separate 9/11 Commission, said in a sworn affidavit of his own in the case that 'significant questions remain unanswered' about the role of Saudi institutions. 'Evidence relating to the plausible involvement of possible Saudi government agents in the September 11th attacks has never been fully pursued,' Mr. Kerrey said."
Saudi Arabia May Be Tied to 9/11, 2 Ex-Senators Say
New York Times, 29 February 2012

"With about two-thirds of U.S. states thought to hold natural gas reserves, many take President Barack Obama seriously when he calls the United States the 'Saudi Arabia of natural gas.' But just how much natural gas does the United States have? A close look at the assessments shows that even the experts disagree. Most dramatically, the U.S. Energy Information Administration (EIA), the government's own analytical team, last month slashed in half its estimate for a key and large subset of reserves: the amount of gas in shale rock formations across the country. Although the government's new estimate for total U.S. natural gas resources—2,214 trillion cubic feet (tcf)—is a third higher than its 2008 estimate, the shale gas markdown underscores the uncertainties around this new supply source. In an interview with National Geographic News, the EIA has offered a sneak preview of the more detailed explanation it will publish in April on why its shale gas estimate plummeted. But with other geologists convinced that EIA's new numbers are too conservative, it is certain that there will be plenty of debate ahead on the size of the energy windfall from shale gas.... New doubts seemed to emerge on January 23, when the EIA issued the 'early release' of its Annual Energy Outlook. A key estimate, the amount of natural gas in 'unproved reserves'—areas that have not yet been drilled—was lowered dramatically. EIA's new estimate for how much gas these areas might yield was just 482 tcf, a bit more than half the 2011 estimate of 827 tcf. What happened? The most drastic change was for the Marcellus shale formation, underlying Pennsylvania, New York, and West Virginia. The EIA used the new analysis from the U.S. Geological Survey (USGS), along with the known histories of production from wells in the area, to create a new estimate. The 2011 estimate figured 'unproved reserves' in the Marcellus were 410 tcf, but the new estimate plummeted by two-thirds, to 141 tcf. Because shale gas production in the Marcellus is still relatively new, having catapulted to prominence only in the past few years, researchers are still working to understand just how much gas each well might produce over the long run. In the 'core area' of the Marcellus—where most of drilling activity has taken place so far—the EIA had assumed before that each well would, in time, produce 3.5 billion cubic feet of gas. But with new data on how much gas wells have produced to date, the EIA's calculation came out lower, with each well expected to produce about 2 billion cubic feet, a drop of about 40 percent. And the issue is more complicated still. There is a bewildering array of classifications for energy reserves and resources, with no standard methods or terminology for most types of estimates. Of all the types of reserves, the most certain class of reserves are known as 'proved reserves,' which publicly traded natural gas producing companies in the United States have to estimate and report to the U.S. Securities and Exchange Commission (SEC). There are strict rules about how these reserves must be estimated, since these numbers are often taken as a measure of a company's success-and so can affect their stock prices. According to the EIA's latest data, in 2011 the U.S. had 60 tcf of proved reserves of shale gas. (There may be room for doubt even over this figure, since the SEC is investigating whether companies overstated their proved reserves.) On top of these 'proved reserves' are a variety of other types of estimates from the EIA, the USGS, and nongovernmental groups, which include 'inferred reserves' and 'unproved reserves,' as well as 'undeveloped discovered resources' and 'undiscovered resources.' 'We've gotten a lot of questions in the past about these different estimates,' said energy analyst John Staub of the EIA. 'We're trying to make it more intuitive,' using a simpler system, he added. Instead of using a variety of different estimates, 'we've switched this year to just talking about proved reserves and 'unproved' being everything else.' In addition to the changes in the Marcellus estimate, to estimate the 'unproved reserves' for four of the other major shale gas regions—the Eagle Ford, Haynesville, Fayetteville, and Woodford formations—the EIA used estimates published last year by the USGS, which led to some drops compared to the EIA's 2011 estimate. For these four areas, the EIA used the USGS estimates straight off the shelf, Staub said. Although the two government bodies use different language, the EIA's 'unproved reserves' are 'essentially the same as the 'undiscovered resources' that the USGS talks about,' he said. With the new assessments from the USGS, the EIA estimates that, outside of the Marcellus, the 'unproved reserves' are lower than it estimated in 2011, dropping from 417 to 341 tcf. Adding up all the proved and unproved reserves around the country, the EIA now estimates there is 542 tcf of shale gas available—roughly half what it estimated in 2011."
Estimates Clash for How Much Natural Gas in the United States
National Geographic, 29 February 2012

"Electricity produced by wind turbines in the UK may be cheaper than that generated by burning gas within five years, even if the climate-warming pollution from the latter is allowed to be pumped straight into the air. That is one startling implication of a comprehensive analysis produced for the Guardian by experts at Imperial College London and the UK Energy Research Centre. The chart, which is from preliminary analysis, reveals the folly of betting the UK's energy future on the hope of cheap gas, the preferred option of many of the critics of reneweable energy. This is not because wind power, or any other energy source, is certain to be cheaper. Instead, says Dr Robert Gross at Imperial College, it is because the principle of targeting subsidy to create viable new energy sources is well founded and the notion of gas as a cheap and relatively low-carbon energy source is not. Look at the range of gas cost forecasts from 2020 onwards: they are much wider than those for wind. The oil and gas industries, and the nuclear industry, all benefited from far greater public subsidies in their formative years than renewable industries do now. Such is the grip of fossil fuels on national economies that they benefit from five times the amount of taxpayer support than that of green energy, both in the UK and globally. Subsidies for oil and gas drove down their cost and founded global industries in the UK, and the chart shows the same is possible for wind, especially for offshore. However, even if the subsidies for renewables are small in a historical context, the prospect of a glut of cheap gas remains tempting in these austere times. There are two problems with this. First the glut may never appear, as the giant shale gas boom in the US is unlikely to be replicated in Europe, according to the International Energy Agency and Deustche Bank, neither reknowned treehuggers. Secondly, even if it did, burning gas releases carbon dioxide which drives global warming."
Analysis reveals folly of betting UK's energy future on cheap gas over wind
Guardian, 29 February 2012

"North Sea oil production collapsed by a record 18 per cent last year – the biggest fall since black gold started flowing four decades ago – as the Chancellor’s controversial tax hike shook investor confidence. The slump was caused mainly by a combination of platform shutdowns for essential maintenance on ageing installations and a low number of discoveries being brought on stream. But prospecting for new oil and gas reserves was also hit by a 50 per cent reduction in exploration drilling as George Osborne’s oil tax-grab hit investment plans, according to the latest activity survey by Oil & Gas UK. The pan-industry trade body’s report, published today, reveals that only a small number of large projects are continuing to drive UK offshore oil and gas investment in the short term."
North Sea oil supply slumps as tax grab bites deep
Scotsman, 28 February 2012

"Britain is involved in a secret high-stakes dash for oil in Somalia, with the government offering humanitarian aid and security assistance in the hope of a stake in the beleaguered country's future energy industry. Riven by two decades of conflict that have seen the emergence of a dangerous Islamic insurgency, Somalia is routinely described as the world's most comprehensively 'failed' state, as well as one of its poorest. Its coastline has become a haven for pirates preying on international shipping in the Indian Ocean. David Cameron last week hosted an international conference on Somalia, pledging more aid, financial help and measures to tackle terrorism. The summit followed a surprise visit by the foreign secretary, William Hague, to Mogadishu, the Somali capital, where he talked about 'the beginnings of an opportunity'' to rebuild the country. The Observer can reveal that, away from the public focus of last week's summit, talks are going on between British officials and Somali counterparts over exploiting oil reserves that have been explored in the arid north-eastern region of the country. Abdulkadir Abdi Hashi, minister for international cooperation in Puntland, north-east Somalia – where the first oil is expected to be extracted next month – said: 'We have spoken to a number of UK officials, some have offered to help us with the future management of oil revenues. They will help us build our capacity to maximise future earnings from the oil industry.'... The state-owned China National Offshore Oil Corporation has tried to acquire an interest in Somalia's reserves. Senior officials from the Somali transitional government are adamant that the imminent extraction of oil in Puntland next month would kickstart a scramble from the multinationals."
Britain leads dash to explore for oil in war-torn Somalia
Observer, 25 February 2012

"Traders in U.K. natural gas are grappling with the most changeable prices in more than two years as investors weigh Britain’s growing dependence on imports and a waning ability to respond to surges in demand. Price swings in day-ahead gas, as measured by 30-day historical volatility, more than tripled to 156 percent in the two weeks to Feb. 13, the highest since October 2009, broker prices compiled by Bloomberg show. A cold snap strained the U.K. storage network this month and exposed its reliance on liquefied natural gas from the Middle East, according to Sabine Schels, a commodity strategist at Bank of America Corp. Rising volatility signals a risk to utilities and power generators, including Centrica Plc (CNA) and Electricite de France SA, as they seek to ensure supplies at stable prices amid dwindling North Sea reserves and competing demand for the fuel from Asia. LNG imports to Japan rose 12 percent last year, while shipments to the U.K. dropped 20 percent in the final quarter of 2011. 'There is a misperception that the U.K. will continue to receive high LNG imports,' Schels said in a Feb. 21 interview from London. 'We’ve seen them decline and we expect them to continue to go down, because demand in Asia is so strong.' Next-winter gas prices need to rise in order to attract enough LNG to meet Britain’s needs, she said. ..... Natural-gas imports into the U.K., Europe’s biggest market for the fuel, more than doubled since 2006 as production from the North Sea fell almost 50 percent, according to government data. At the same time, the country’s ability to deliver gas from storage has fallen 12 percent as LNG tanks, which can distribute fuel faster but are costlier, have been shut. That’s left Britain with a smaller buffer against surges in demand at times of colder-than-average weather. 'Risk is rising in the U.K. gas market,' Trevor Sikorski, director of European energy-market research at Barclays Plc in London, said in a telephone interview. 'There is limited U.K. storage compared with other European markets such as Germany.'”
Gas Swings at Two-Year High Expose U.K.’s LNG Dependence: Energy Markets
Bloomberg, 23 February 2012

"Brent crude rose for a fourth day, hitting a fresh nine-month high and a record in euro terms on Thursday, creating renewed concerns for cash-strapped Europe on heightened tensions between Iran and the West On a euro basis, Brent futures hit a record 93.60 euros per barrel in early trade, exceeding the previous peak of 93.46 euros hit on July 3, 2008, prompting concern that high oil prices would hit the shaky economic recovery and further dent demand."
Brent crude hits record high in euros
Reuters, 23 February 2012

"China’s energy use rose at the fastest pace in four years in 2011 and efficiency improved, according to the National Bureau of Statistics. Consumption climbed 7 percent to 3.48 billion metric tons of standard coal equivalent, a report on the bureau’s website showed today. That’s the fastest rate since 2007, when it was 7.8 percent, according to data compiled by Bloomberg. Consumption per unit of gross domestic product fell 2.01 percent from 2010, the bureau said, without elaborating. The data underscore China’s increasing share of world energy demand even as the nation attempts to curb the cost of powering its factories and reduce pollution. The government wants to cut energy use per unit of gross domestic product by 16 percent in the five years through 2015."
China Energy Consumption Rises at Fastest Pace in Four Years
Bloomberg, 22 February 2012

"Each well [shle oil well] produces a mere 150 barrels or so per day on average, and like shale gas wells, their output declines rapidly after initial production. As LeVine learned from a Bakken executive, the decline rate can be over 90 percent in the first year, then gradually tapers off. After seven or eight years, wells will have produced over 60 percent of their recoverable reserves. Therefore, you have to keep drilling like hell just to maintain production, and drill even more to increase it. Per LeVine’s source, 'if the rate of drilling stays constant for a long time, the growth rate of field production will decrease, then plateau, then begin to drop.' But at around $7 million per well, these wells are not cheap. As Laherr�re’s chart shows, it takes about 1,200 wells to increase production by 150 thousand barrels a day on the Bakken tight oil treadmill. Compare that to the deepwater Gulf of Mexico, where a single gusher can produce 250 thousand barrels per day. By this metric it would take another 16,000 Bakken wells to achieve Citigroup’s projection of an additional 2 mbpd from shale oil, or five times the existing 3,200 Bakken wells. Initial production rates from the next-biggest shale oil producer, the Eagle Ford play, appear to be substantially higher at around 350 barrels per day (including both oil and gas) over the first month, but then they decline to less than 100 barrels per day over the first year. The costs in the Eagle Ford are also substantially higher: as much as $10 million per well. Fracking the Eagle Ford is also challenged by the enormous requirements for water, an increasingly scarce resource in drought-ravaged Texas. To see what happens to a shale oil play over time, we can look at one of the older portions of the Bakken. The Elm Coulee field in Montana, one of the Bakken 'sweet spots' and the first commercially successful Bakken field in the entire Williston Basin, was discovered in 2000 and quickly ramped up to become the highest-producing onshore field in the Lower 48 by 2006. But after about five years of drilling, it was pretty well tapped out and the rigs moved on. It gave Montana a quick bump, then production fell off rapidly. Laherr�re finds that Montana production is now falling by 1 percent per month. The Saskatchewan portion of the Bakken likewise peaked in 2008. And although the North Dakota portion of the Bakken is far larger, it will eventually follow suit. A ten-fold increase in rigs since 2001 made North Dakota the envy of the country, but that can’t go on forever. It takes an enormous leap of faith to see shale oil production rising another 2 mbpd from here, along with several leaps of logic, which the Citigroup report had in abundance. The EIA projects that all onshore tight oil production will only rise a little, to a total 1.3 mbpd by 2030, or about one-third the growth that Citigroup forecasts by 2020. In short, increasing our already-frenetic rate of drilling for tight oil requires sustained high oil prices. At today’s $105 a barrel for West Texas Intermediate, that’s no problem. But if prices were to fall to $70 a barrel, LeVine’s source says, drilling in the Bakken would become unprofitable and would cease, causing production to fall rapidly. At the same time, the last few years have shown us that $100 oil translates to roughly $4 gasoline, and that’s the pain tolerance limit for most of America. Gasoline demand in the U.S. tends to fall off beyond $4, as does economic activity in general. This is what analyst Steven Kopits of Douglas-Westwood call the 'narrow ledge' of oil prices, as I detailed in 2009. Given the extremely volatile global marketplace for oil, influenced by everything from geopolitical aggression, to climate change, to the headline risk of Greece defaulting and being forced out of the Eurozone, it will be very difficult for the oil industry to cling to that ledge for a sustained decade or more as the Citi analysts breezily project. They simply wave away cost inflation, and don’t acknowledge a price ceiling at all. The narrow ledge isn’t a problem for the surging developing economies of the world, however. China alone has replaced all of the oil demand lost in the U.S., and more, and it’s still growing fast with an 8.2 percent growth rate projected for this year by the IMF. This point was highlighted in a fascinating debate last week,... between former Shell Oil president John Hofmeister and Tad Patzek, professor and chairman of the Department of Petroleum and Geosystems Engineering at the University of Texas at Austin. China, Hofmeister noted, is 'on a journey, ladies and gentlemen, to go from 9 mbpd consumption today—a year ago it was 8, now it’s 9—to 15 mbpd by 2015. India from 4 to 7 mbpd in the same time frame. There’s not enough oil out there to meet that demand.' These nations use oil far more efficiently than we do, and derive far more economic value from it. As I like to say, picture three guys and a chicken burning one gallon of gas on a scooter to go to the market each day in India, versus a soccer mom in the American suburbs burning three gallons a day to run errands without generating any economic gain. Asia can outbid the West for the declining available net exports for a long, long time, and that demand will continue to pull prices above our pain threshold. Hofmeister waxed apoplectic in frustration over U.S. policymakers’ failure, for four decades straight, to do something about our oil dependency. 'We are in an oil shock, and we are facing impending shortages,' he warned, and went on to recall what those shortages were like here in 1973-4. His solution? To create a federal board that would assume control of the nation’s energy strategy... Meanwhile, the treadmill continues to speed up. As Patzek notes, incremental new oil production per rig in the U.S. was about 1,000 to 1,500 barrels per day in 2005. In 2011, it was one-tenth that, at 100 barrels."
Energy independence, or impending oil shocks?
SmartPlanet, 22 February 2012

"U.S. oil group Exxon Mobil sought to cool predictions of a European shale gas revolution, saying commercial production was at least five years away and dismissed forecasts offered by other industry players as 'highly speculative'. Kevin Biddle, Exxon's exploration director for Europe, also downplayed the prospects for Poland -- believed by many to have the continent's largest reserves -- leading the shale gas charge, saying on Monday that Germany was more likely to be the first shale gas producer. 'Five years is possible for some areas -- we have to be working at a pretty good clip to get any significant production online in that time,' he told the International Petroleum Week conference in London. Exxon, the largest oil company in the world by market capitalisation, is one of the most active drillers for shale gas on the continent, and is exploring in Poland and Germany. Yet it has tended to make less noise about its operations than some smaller groups, which have boosted talk that Europe could experience the 'shale gale' that rocked the United States. 'The high resource numbers that some people quote are highly speculative,' Biddle said."
Exxon tempers European shale gas enthusiasm
Reuters, 20 February 2012

"Saudi Arabia, OPEC’s largest crude producer, reduced oil output and exports in December from November when it produced the most in more than 30 years, according to the Joint Organization Data Initiative. The country reduced output by 237,000 barrels a day or 2.4 percent to 9.81 million barrels a day of crude compared with 10.047 million in November, statistics posted today on JODI’s website show. The kingdom’s exports were cut 7.36 million barrels a day from 7.8 million barrels, according to the figures, which include condensates and exclude natural-gas liquids.... The Paris-based agency estimated Saudi Arabia’s spare capacity for December at 2.15 million barrels a day, which makes about 75 percent of OPEC’s effective spare capacity during the month."
Saudi Arabia Cut Oil Output, Exports in December, JODI Says
Bloomberg, 20 February 2012

"A major transformation of the global market for natural gas is under way. Fresh international supply routes are being drawn, new exporters are emerging and established trade patterns are being turned on their heads. Yet Europe, the world's second-largest natural-gas market behind the U.S., stands apart from much of this change. It looks likely that new sources of internationally traded natural gas will be largely gobbled up by Asia, leaving both the U.K. and Europe stuck in their codependency with Russia.... The International Energy Agency calls this a 'Golden Age of Gas' that will reshape the energy landscape. Yet it looks increasingly probable that many of the trade routes laid down by this new supply—most of which will be exported as liquefied natural gas carried in large oceangoing tankers—will skirt Europe. This isn't surprising for LNG produced in Australia, which will naturally go to booming Asian economies. However, industry analysts say Asia's growing appetite may also draw supplies that might have served Europe from Africa, North America and the Middle East. On the U.S. Gulf Coast, LNG export terminals planned to start operations by the middle of this decade would appear to be pointing at Europe. However, 'the expansion of the Panama Canal by 2014 will allow for LNG tankers to traverse the isthmus…potentially allowing for an even shorter shipping route [to Asia] than from the gulf coast to the U.K.,' said a report from the Brookings Energy Security Initiative. LNG from projects planned on Canada's west coast also seem destined to ship to Asia. Companies that have discovered gas off of East Africa have said India is a likely market. 'This leaves Angola and Algeria as the most likely suppliers of new uncontracted LNG' to Europe, said a report from analysts at Deutsche Bank."
Natural-Gas Glut Could Bypass Europe
Wall St Journal, 20 February 2012

"Gasoline prices have never been higher this time of the year. At $3.53 a gallon, prices are already up 25 cents since Jan. 1. And experts say they could reach a record $4.25 a gallon by late April. 'You're going to see a lot more staycations this year,' says Michael Lynch, president of Strategic Energy & Economic Research. 'When the price gets anywhere near $4, you really see people react.' Already, W. Howard Coudle, a retired machinist from Crestwood, Mo., has seen his monthly gasoline bill rise to $80 from about $60 in December. The closest service station is selling regular for $3.39 per gallon, the highest he's ever seen. 'I guess we're going to have to drive less, consolidate all our errands into one trip,' Coudle says. 'It's just oppressive.' The surge in gas prices follows an increase in the price of oil. Oil around the world is priced differently. Brent crude from the North Sea is a proxy for the foreign oil that's imported by U.S. refineries and turned into gasoline and other fuels. Its price has risen 11 percent so far this year, to around $119 a barrel, because of tensions with Iran, a cold snap in Europe and rising demand from developing nations. West Texas Intermediate, used to price oil produced in the U.S., is up 4 percent to around $103 a barrel. That's 19 percent higher than a year earlier. Higher gas prices could hurt consumer spending and curtail the recent improvement in the U.S. economy."
Gas prices are highest ever for this time of year
Associated Press, 18 February 2012

"Conventional oil fields typically see a drop in output of about a 5 percent to 8 percent rate per year. But, as some companies working in the Bakken field in North Dakota are now discovering, shale oil can dwindle far more rapidly than that. One oil executive tells Foreign Policy’s Steve LeVine that oil wells in the Bakken field can decline by more than 90 percent in the first year, leveling off at 8 percent per year thereafter. Once a well dries up, the company has to move over to a nearby spot in the field. That’s a lot of new drilling. And all that drilling is pricey. Which means, the executive notes, that if the price of oil were to suddenly drop, a lot of companies could quickly go bust and production could dry up in short order."
Has the United States beaten peak oil? Not so fast.
Washington Post (Blog), 17 February 2012

"Saudi Arabian Oil Co. plans to re-open the Gulf kingdom’s oldest oil field and produce there for the first time in 30 years as the company boosts output of heavy crude, the Economist Intelligence Unit said. The state-owned producer, known as Saudi Aramco, may revive a plan from 2008 to restore production at the mothballed Dammam field, the EIU said in a report. Dammam contains some 500 million barrels of oil and may yield as much as 100,000 barrels a day of Arabian Heavy crude, according to the report. 'Dammam field including Dammam Well 7 can operate easily with current technology and Saudi Aramco conducted a 3-D seismic survey over the entire area almost 10 years ago,' Sadad al- Husseini said today by e-mail. Al-Husseini was executive vice president for exploration and development at Saudi Aramco. .... Aramco, the world’s largest oil exporter, is considering redeveloping the onshore field in response to 'tight market conditions,' the London-based researcher said in the report issued yesterday. It shut Dammam, and several small fields, in the early 1980s due to low demand. Officials at Aramco’s headquarters in Dhahran, Saudi Arabia, didn’t answer phone calls seeking comment today, the first day of the Saudi weekend."
Saudi Aramco to Re-Open Oldest Field to Tap Heavy Oil, EIU
Bloomberg, 16 February 2012

"Rising oil prices are emerging once again as a threat to the U.S. economic recovery just as it appears to be gaining momentum. Oil prices have climbed sharply in recent weeks as mounting tension with Iran has raised the threat of a disruption in global supplies. On Wednesday, oil futures on the New York Mercantile Exchange rose $1.06 to $101.80 a barrel on reports that Iran had cut off sales to six European countries in response to the European Union's newly stepped-up sanctions. Iran's oil ministry later denied the report. Pricier oil comes at a delicate time."
Oil Rise Imperils Budding Recovery
Wall St Journal, 16 February 2012

"The International Energy Agency said revenue disputes between Sudan and South Sudan means overall production estimates are down 25 percent. South Sudan gained control of most of the oil reserves when Sudan was split into two countries last summer, though landlocked South Sudan depends on Sudan for access to export facilities....The IEA said this disruption is 'bad timing' for Asian markets, which the agency said are expected to tighten as a result of the Sudanese crude oil production disruption. The IEA said China in particular could feel the pinch from the estimated production reduction of around 100,000 barrels per day for 2012."
IEA frets over Sudanese oil dispute
Inter Press Service, 15 February 2012

"Car use in Wales has decreased dramatically since the start of the economic crisis in 2007, latest figures show. The data suggests that rising fuel costs are driving motorists away from using their car and instead looking to cheaper alternatives – with cars travelling 517 fewer miles each year than before the downturn began. Car use was increasing year on year up to 2007 but has been falling ever since. In 2007 motorists drove 13.9bn miles on Welsh roads, by 2010 this had fallen to 13.3bn, according to figures from the Department for Transport. The figures are similar to the pattern across Britain, which has seen car use fall by 3% while cycling is up by 15%. Lee Waters, director of travel charity Sustrans Cymru, said: “The rise in fuel prices over the last few years has meant we are all having to think twice before using our cars and that’s not going to change....'."
Hard times see motorists to leave keys at home with car usage falling as cost cutting commuters seek cheaper alternatives
WalesOnline, 14 February 2012

"Drawing lessons from this year's cold snap, the Russian export monopoly Gazprom has announced it will double its underground gas storage capacity in Europe, raising concerns that it might abuse its dominant position. Russia has maintained stable deliveries to European customers despite 'abnormally cold weather conditions in Russia and in Europe,' said Alexander Medvedev, deputy chairman of Gazprom's management committee and director general of Gazprom Export. This was largely due to new underground gas storage facilities, or UGSF, he said. During the peak demand period, Gazprom has been extracting natural gas from storage facilities located in Europe at the maximum rate - more than 38 million cubic meters per day."
Gazprom to double its European gas storage capacity
Euractiv, 14 February 2012

"The latest monthly report of the International Energy Agency contained the usual update on oil supply and demand numbers, but it also revealed a striking fact: the maximum production capacity of Saudi Arabia is lower than we thought. In its February report released last week, the Paris-based watchdog reduced its estimate of the kingdom’s maximum output to 11.88m barrels a day, a notch below the previous assumption of 12m b/d, which the IEA used in its January report. Saudi Aramco, the country’s oil company, puts its maximum output at 12.5m b/d. The IEA’s downgrade, even if arguably small, matters for two reasons. First, Saudi Arabia holds virtually all the spare production capacity of the global oil industry. As such, the kingdom would be the only cushion in the event of a supply disruption involving a large producer such as Iran. A lower figure for the maximum production capacity also assumes a smaller cushion. Second, the IEA has lowered its estimate of Saudi Arabia’s maximum production capacity only on rare occasions over the past 15 years. In the past ten years, the IEA has steadily raised its estimate of Saudi Arabia’s maximum production capacity from 10.5m b/d to 11m b/d as the country brought new oilfields on stream in an expansion programme of more than $100bn. The revision of the Saudi numbers comes weeks after Ali Naimi, the country’s oil minister, offered the most detailed overview of the kingdom’s potential. Mr Naimi told CNN in an interview that Saudi Arabia could 'easily get up to 11.4m, 11.8m b/d almost immediately, in a few days ... all we need is to turn valves.' Mr Naimi added that Riyadh could pump another 700,000 b/d to reach 12.5m b/d, but it would need 90 days to achieve the target. Because the IEA bases its estimates on maximum output on a narrow definition of 'capacity levels [that] can be reached within 30 days and sustained for 90 days' it does not count those 700,000 b/d. The revision of the IEA numbers follows Mr Naimi’s comments, but Diane Munro, senior Opec analyst at the IEA, says that the reduction is the result of the agency’s internal model that looks at the natural decline in the kingdom’s oilfields output. That rate alone, running at roughly 2-5 per cent per year, accounts for the reduction in the maximum output estimate. The natural decline of Saudi Arabia’s oilfields has been masked over the past few years by the extensive expansion programme of the kingdom. But the last significant oilfields were added in 2010 with the 1.7m b/d expansion projects of Khurais and Khursaniyah. The next new big oilfields would not come on stream until 2013, when Saudi Aramco anticipates reaching maximum production on its 900,000 b/d Manifa oilfield."
IEA downgrades Saudi Arabia’s output capacity
Financial Times, 14 February 2012

"They have been heralded as the environmentally friendly solution to getting around, especially in towns and cities. But new research in China shows that electric cars have an overall impact on pollution that could be more harmful to health than conventional vehicles. A study of pollution in 34 Chinese cities has found that the electricity generated by power stations to drive electric vehicles leads to more fine particle emissions than petrol-powered transport. Chris Cherry, assistant professor in civil and environmental engineering, and graduate student Shuguang Ji, analyzed the emissions and environmental health impacts of five vehicle technologies, focusing on dangerous fine particles. They found that the electricity generated to power electric cars caused more particulate matter pollution than that caused by an equivalent number of petrol driven vehicles. Particulate matter comes from the combustion of fossil fuels and includes acids, organic chemicals, metals, and soil or dust particles. Professor Cherry said: 'An implicit assumption has been that air quality and health impacts are lower for electric vehicles than for conventional vehicles. 'Our findings challenge that by comparing what is emitted by vehicle use to what people are actually exposed to.'...In terms of air pollution impacts, they found, electric cars are more harmful to public health per kilometre traveled in China than conventional vehicles. 'The study emphasizes that electric vehicles are attractive if they are powered by a clean energy source,' Professor Cherry said."
Proof electric cars DO cause more pollution than normal ones: Study shows impact is worse than petrol-powered vehicles
Mail, 14 February 2012

"Exxon Mobil is being shut out of bidding on the next round of oil and gas exploration contracts in Iraq because of its decision to sign an exploration deal with Kurdistan's regional government in the northern part of that country. Iraq's decision, confirmed by a spokesman for Deputy Prime Minster for Energy Hussein al-Shahristani on Monday, is not a surprise. Iraq has plans to increase its oil production capacity to about 12 million barrels a day by the end of 2017 from current capacity of just over 3 million barrels a day. But so far it has not been willing to share the profits with the western oil companies doing business in Iraq, limiting their take to about $2 a barrel, no matter the market price, said Fadel Gheit, oil analyst with Oppenheimer.... A couple of years ago, the newly formed Iraqi government began awarding big contracts to the world's major oil companies including France's Total, England's BP, China's CNPC and Russia's Lukoil, as well as Royal Dutch Shell, Occidental, and Marathon, in an effort to boost its nascent production. 'Nobody is making money there,' Gheit said. 'They all hope to make a lot of money, but so far they have seen only the appetizer, not the full meal.'"
Iraq Blocks Exxon Mobil Exploration Bids
CNN, 13 February 2012

"In the past month, three major peer-reviewed journals have published articles relating to limited world oil supply: 1. In Science, Technology is Turning U. S. Oil Around But Not the World’s, by Richard A. Kerr; 2.In Nature, Climate Policy: Oil’s Tipping Point has Passed, by James Murray and David King; and 3. In Energy, Oil Supply Limits and the Continuing Financial Crisis, by Gail Tverberg. 4. The fact that these articles have been published is significant, because articles in the mainstream press, such as Bloomberg’s recent article, Peak Oil Scare Fades as Shale Deepwater Wells Gush Crude, seem to suggest that our oil problems are past. While the US oil supply situation may be a little better, the world supply situation is still very bad, and oil prices are still very high around the world. Furthermore, high oil prices tend to have a recessionary effect, and can lead to debt defaults. These issues are described in both the second and third articles above. Thus, there is a substantial chance that high oil prices are contributing to the debt default problem in Europe, and to forecast low world economic growth."
Our Finite World, 12 February 2012
Three Major Journals Publish Articles on Limited World Oil Supply

"The policy chief of Europe's electricity industry association has told EurActiv that Europe will have to slow down its integration of renewable energies or risk power cuts and systems instability because of the slow pace of cross-border grid improvements."
Grid blackout threat weighs on renewables take-up
Guardian, 10 February 2012

"Political constraints and concern production gains at shale fields aren’t sustainable will hinder the development of liquefied natural gas export plants in the U.S., former Exxon Mobil Corp. (XOM) chief Lee Raymond said. 'There is going to be a big debate in the U.S. as to whether or not they’re going to permit the export of liquefied natural gas,' Raymond said in an interview in Oslo yesterday.'Even if you get past the politics, you have to test whether or not the resource base is sufficient.' ...Some gas-industry players are confident the U.S. will become a major exporter. BG Group Plc (BG/) said yesterday that the U.S. will be able to supply about 9 percent of global liquefied natural-gas output by the end of the decade. The U.K.’s third-largest gas producer said the U.S. will have the capacity to export about 45 metric million tons of LNG a year from 2020. ...Politicians including Democrats Senator Ron Wyden of Oregonand Representative Edward Markey of Massachusetts have said exports may raise domestic gas prices. In allowing exports, the U.S. may be 'trading away the enormous economic advantage of having large, low-cost domestic natural gas supply,' Wyden said in an e-mailed statement on Jan. 6. 'It’s going to be a little while before people are really confident that there is going to be a sufficient amount of gas for 30 years to support the construction of an LNG plant,' said Raymond, who stepped down in 2005. 'I’m frankly not sure that we have enough experience with shale gas to make the kind of judgment you’d have to make.'....'If you build any LNG, from a producer’s point of view, you can only do that from an economic point of view if you’re assured that you have a long-term competitive supply because these are huge investments,' Raymond said. Exxon, the world’s largest energy company by market value, is pursuing shale exploration in Argentina, Poland and the U.S. The company said earlier this month that two exploratory wells drilled in a Polish shale formation last year weren’t commercially viable. The gas discovered failed to flow in sufficient quantities Texas-based Exxon said Feb. 1. 'There’s lots of shale around the world, but just because it has the name shale on it doesn’t mean it’s something that would be economic to try to develop by the technique being used largely in the U.S.,' Raymond said."
U.S. Shale Gas Exports Face Hurdles, Former Exxon CEO Says
Bloomberg, 10 February 2012

"Royal Dutch Shell has said it will launch a major investment drive in an effort to boost falling production. The oil giant said it would spend $30bn (�19.4bn) on new oil and gas projects this year, compared with $24bn in 2011.... Shell's latest strategic plan is targeting $30bn of new investment this year..... Shell will also increasing spending on exploration for new oil reserves - in places such as the Arctic - by 35% to $5bn. Production from Shell's oil and gas fields in 2011 fell 3% compared with the previous year."
Shell plans production expansion as profits rise
BBC Online, 2 February 2012

"Exxon Mobil Corp. (XOM)’s failed shale-gas wells in Poland may hobble the nation’s effort to become one of the world’s major energy sources and dismantle Russian dominance of Eastern European natural-gas markets. ... Exxon’s setbacks suggest Poland’s shale poses unique challenges that may increase costs and delay output, said Gianna Bern, founder of Brookshire Advisory & Research in Chicago. ... 'Poland is cited among Europe’s best shale prospects, but Exxon’s result supports our caution on achieving material near-term volumes,' Oswald Clint, a London-based analyst at Bernstein, said in a note today. Even so, it may be too early to draw any firm conclusions from Exxon’s drilling failure, said Pawel Poprawa, who specializes in shale at the Polish Geological Institute in Warsaw. ... The Polish shale results come after Exxon encountered a dry hole in Hungary in late 2009 drilled in a tight-sand deposit similar to shale. Exxon walked away from the $75 million project after striking more water than gas. Exxon and other major North American energy producers have been lured to explore shale prospects from Germany to Argentina after largely missing out on the boom in shale extraction in the U.S. that began in the middle of the last decade. ... Shale formations were ignored by much of the energy industry for most of the past century because the rocks were considered too hard to crack using traditional drilling techniques. That began to change in the late 1990s with the development of new horizontal drilling practices and more-intensive hydraulic fracturing that succeeded in unlocking gas and crude from shale and similarly dense geologic deposits. "
Exxon Shale Failure in Poland May Lengthen Gazprom’s Shadow
Bloomberg, 1 February 2012

"In his new book The Quest: Energy, Security and the Remaking of the Modern World, Pulitzer-winning energy analyst Daniel Yergin declares that the latest version of the peak oil thesis is just more handwringing by long-discredited Malthusians. Higher prices and new technologies will bring vast quantities of new oil to market.... But there’s a nagging issue: Oil prices remain stubbornly high. The North American benchmark price of West Texas Intermediate is hovering around $100 a barrel. The world benchmark price for Brent crude is currently about $110. Sure, the possibility of war with Iran has created a risk premium that explains a portion of this high price. But the fact remains that oil has been trading around $100 a barrel for about a year, despite chronic weakness in the world economy and on-again, off-again concerns about Iran. In fact, as University of California energy economist James Hamilton shows in a new paper, except for brief periods in the late 1970s, early 1980s and in 2008, oil is far costlier in constant dollars today than at any time since the beginning of the modern oil age in the 19th century. Last week, in a commentary in the scientific journal Nature, James Murray of the University of Washington and David King, former chief scientific adviser to the British government, showed how slack in global oil markets has largely vanished. Since 2005, when oil was about $50 a barrel, global conventional crude production, which is about 80 per cent of total crude supply, has stayed roughly constant at around 74 million barrels a day – despite average annual gains of 15 per cent in price. Unconventional sources of oil – from Canada’s oil sands and U.S. shale oil, from biofuels and from natural gas production – boosted total liquids output to about 89 million barrels a day in 2011. But these unconventional sources are very expensive, averaging between $50 and $90 a barrel. Professors Murray and King show that since 2005, world oil supply has become far less responsive to increasing demand – in econo-speak, its price elasticity has fallen sharply. 'As a result,' they write, 'prices swing wildly in response to small changes in demand.' Oil optimists like Mr. Yergin are good at creating straw men. For instance, they often claim that analysts concerned about oil supply believe the world will soon run out of oil. But no one makes such a silly claim. Instead, concerned analysts usually point to two basic facts. First, each year, the world’s mature conventional fields produce about four million barrels a day less oil than the previous year, a gap that has to be filled just to keep global output constant. In only five years, that gap grows to 20 million barrels a day of production – equivalent to twice Saudi Arabia’s output, which is mammoth. Second, the world’s cheap and easy-to-get oil is disappearing fast. So, on average, each additional barrel requires more work, more complex technology, more environmental risk to get and refine than the last. These two facts mean that humankind will have to invest staggering resources – many trillions of dollars – to find and produce new oil if global output is to grow steadily for decades into the future. The International Energy Agency in Paris and other analysts have been warning for years that current investment isn’t nearly enough to ensure such a supply. The result is likely to be a critical supply crunch, perhaps within this decade, which could cripple global economic growth. The petroleum economist Chris Skrebowski defines peak oil as the point at which 'the cost of incremental supply exceeds the price economies can pay without destroying growth.' We’re likely much closer to that kind of peak than most people, including Mr. Yergin, acknowledge."
Our peak oil premium
Globe and Mail (Canada), 1 February 2012

"Natural gas is roiling global geopolitics, but the latest news -- a bad result in Europe -- is that the tsunami is still very much solely U.S.-based. The U.S. shale gas boom has shaken up geopolitical presumptions by challenging Russia's gas-led hold on Europe, and threatening to crush far-dirtier rival fuels such as coal around the world. The thinking has been that Europe -- specifically Poland-- might be next in unleashing big, new shale gas supplies, an event that would make life even more difficult for Russia's petro-ruler, Vladimir Putin. But ExxonMobil yesterday announced that its Polish drilling efforts (pictured above, drilling in the eastern Polish village of Grzebowilk) thus far have failed, reports Bloomberg's Joe Carroll. Exxon, the world's largest publicly owned producer of natural gas, said two exploratory wells in eastern Poland failed to produce sufficient gas to be profitable. This comes on top of a slew of bad signs about Europe's gas prospects: Over the last two years, drilling by three wildcatters -- Lane Energy, 3Legs Resources and BNK Petroleum -- produced only small volumes in northwest Poland, Bernstein Energy said in a note to clients this morning. Last year, Shell announced similar negative results in Sweden, and in 2010 Exxon declared its Hungarian shale-gas efforts a failure. On top of this, France and Bulgaria have banned hydraulic fracturing, the method used to produce shale gas. The Poland story may not be over -- estimates are that it has 187 trillion cubic feet of recoverable shale gas, and Warsaw is offering enticing profit terms to keep companies at the drill. Bloomberg's Carroll quotes Gianna Bern of Brookshire Advisory in Chicago: 'Shale exploration is a very high-cost and high-risk business and the Polish shale market is still in its infancy. It's early in the game for Poland, and they have significant potential reserves over there.' The drumbeat of negative drilling news -- last week, the U.S. Energy Information Administration pushed down its estimate of potentially recoverable U.S. shale gas by 40 percent -- is a reality check for the irrational exuberance that's surrounded the shale gas play. One must keep one's eye on China, which is now pushing hard to get shale-gas drilling going. As for Europe, to the degree that Poland may possess no commercially producible shale gas, the European story would shift east to Ukraine, a place whose corruption and vulnerability to Russia have kept it from tapping almost any of its gas and oil. Which means that, at least for many, many years to come, there is unlikely to be any shale gas from Europe. It also means that the challenge to Putin and Russia's Gazprom is contained for the time being."
The shale gas reality check out of Europe
Foreign Policy (Blog), 1 Feburary 2012

"The world is running out of time to make sure there is enough food, water and energy to meet the needs of a rapidly growing population and to avoid sending up to 3 billion people into poverty, a U.N. report warned on Monday. As the world's population looks set to grow to nearly 9 billion by 2040 from 7 billion now, and the number of middle-class consumers increases by 3 billion over the next 20 years, the demand for resources will rise exponentially. Even by 2030, the world will need at least 50 percent more food, 45 percent more energy and 30 percent more water, according to U.N. estimates, at a time when a changing environment is creating new limits to supply. And if the world fails to tackle these problems, it risks condemning up to 3 billion people into poverty, the report said. ... Although the number of people living in absolute poverty has been reduced to 27 percent of world population from 46 percent in 1990 and the global economy has grown 75 percent since 1992, improved lifestyles and changing consumer habits have put natural resources under increasing strain."
World lacks enough food, fuel as population soars-UN
Reuters, 30 January 2012

"Shortages of a handful of rare minerals could slow the future growth of the burgeoning renewable energy industries, and affect countries' chances of limiting greenhouse gas emissions, business leaders were told at the World Economic Forum in Davos this week. Last year, prices of many scarce minerals exploded, rising as much as 10 times over 2010 levels before dropping back, said PricewaterhouseCoopers (PwC). Terbium, yttrium, dysprosium, europium and neodymium are widely used in the manufacture of wind turbines, solar panels, electric car batteries and energy-efficient lightbulbs. But because these 'rare earths' are mined almost exclusively in China, it is becoming increasingly difficult and expensive to source them in the required quantities. In a survey of some of the largest clean energy manufacturers, 78% told PwC said they were already experiencing instability of supply of rare metals, and most said they did not expect shortages to ease for at least five years. Currently, 95% of the rare earth minerals needed by clean tech industries come from China which has set strict export quotas. Last year China reserved most for its own for its domestic wind, solar and battery industries, shifting costs to the US and Europe which do not mine any of the minerals.... None of the minerals is likely to physically run out, but it can take 10 years for countries to open new mines. In the US there has been growing concerns that China dominates the supply of the materials considered crucial for the expansion of the US defence, computer and renewable energy sectors. A series of US government reports have urged an immediate increase in production of rare minerals. By mid-2012, US mining company Molycorp Minerals aims to produce 20,000 tonnes a year of nine of the 17 rare minerals, or about 25% of current western imports from China."
Rare minerals dearth threatens global renewables industry
Guardian, 27 January 2012

"The last ten years have brought a structural change to the world oil market, with changes in demand increasingly playing a role in maintaining the supply/demand balance. These changes will come at an increasingly onerous cost to our economy unless we take steps to make our demand for oil more flexible. We’re not running out of oil. There’s still plenty of oil still in the ground. Oil which was previously too expensive to exploit becomes economic with a rising oil price. To the uncritical observer, it might seem as if there is nothing to worry about in the oil market. Unfortunately, there is something to worry about, at least if we want a healthy economy. The new oil reserves we’re now exploiting are not only more expensive to develop, but they also take much longer between the time the first well is drilled and the when the first oil is produced. That means it takes longer for oil supply to respond to changes in price. In economic terms, the oil supply is becoming less elastic as new oil supplies come increasingly from unconventional oil. Elasticity is the term economists use to describe how much supply or demand responds to changes in price. If a small change in price produces a large change in demand, demand is said to be elastic. If a large change in price produces a small change in supply, then supply is said to be inelastic.... The reduction in fuel use that comes from people losing their jobs and no longer commuting to work also contributes to the elasticity of demand, and I mention it to highlight the point that while reductions in fuel use can be benign (properly inflated tires, for instance), they can also be harmful to the economy. Reductions in demand due to high prices are often called demand destruction, and it’s just as unpleasant as it sounds. Since our options for reducing oil demand in response to rising prices range from inconvenient to expensive, to downright painful, it’s clear why the media and politicians focus so much attention on the other half of the equation: When supply adapts to changes in demand, voters don’t have to make uncomfortable choices. But there are also limits to the ability of oil supply to adjust. Most OPEC nations, including Saudi Arabia, need at least a $100/bbl for oil to keep their budgets in balance, so why would they increase production to reduce the price below that? In fact, as (subsidized and hence inelastic) OPEC domestic consumption continues to increase faster than supply, OPEC net exports will continue to fall, further raising the price needed to balance exporters’ budgets. While fiscal issues constrain OPEC’s elasticity of supply, geology and politics constrain oil supply elsewhere. Brazil’s giant pre-salt fields, like deep water discoveries in the Gulf of Mexico and elsewhere, are much more expensive and slow to develop than were past discoveries. Canada’s tar sands are large mining operations, and are similarly slow and expensive to develop. Put simply, if the oil were quick and easy to get at, we’d have gotten it already. All these factors mean that the elasticity of oil supply is falling, so oil demand has to adjust more in response to changes in price than in the past.... If what we care about are the effects on the economy, it does not matter how much oil is in the ground. Over the last ten years, we have see a structural change in the oil market which will continue to have far-reaching effects on the economy even if we manage to increase the amount of oil produced. Before 2000, oil supply did the heavy lifting when it came to balancing supply and demand in the oil market. That is no longer the case, and the oil price signal has grown significantly stronger in order to elicit a response in demand. With 2% of the world’s oil reserves, changes in the US supply of oil will remain insignificant in the world oil supply demand picture, developments in the Bakken shale and cheer leading from political leaders notwithstanding. On the other hand, as the consumer of a quarter of the world’s oil supply, we can have a significant effect on the world oil market by making sure that our economy can adjust quickly and easily to changes in the oil price. What measures can we take to increase the elasticity of oil demand, and reduce the pain of demand destruction?.... we need to make the market for transportation services more efficient by encouraging new entrants (mass transit, bikes, trains) and competition with the incumbent car/internal combustion engine infrastructure. Competition within the car infrastructure should also be encouraged by sending price signals such as the slowly and predictably increasing gas tax mentioned above to better reflect the dangers to our economy posed by the new oil market regime."
The End of Elastic Oil
Forbes, 26 January 2012

"Thanks to new shale oil drilling in North Dakota and offshore production in Alaska and the Gulf of Mexico, U.S. production has picked up recently and is at about 6 million barrels of oil per day. But that’s still way down from 1970, when production peaked at 10 million barrels per day...The United States has historically been able to increase oil production by finding new areas to drill. First there were Pennsylvania and New York in the 1850s and ’60s, then Ohio, then West Virginia, then big plays in Texas, the Gulf of Mexico and Alaska, and so on. Eventually, however, production from all those locations peaked and went into decline. Companies have now moved on to North Dakota and deepwater exploration. Right now, North Dakota is the only state setting all-time records for production — in the wake of new fracking techniques for recovering oil from the Bakken shale formation. But while that development is hugely important for North Dakota, it’s modest in the larger scheme of things. 'The 138 million barrels produced in North Dakota and Montana in 2010,' Hamilton writes, 'is about half of what the state of Oklahoma produced in 1927 and a fifth of what the state of Alaska produced in 1988.' Obama has also proposed opening up the Outer Continental Shelf in the Atlantic and Pacific oceans for further oil exploration, but, according to an Energy Information Administration analysis, that would boost oil production by just 182 million barrels in 2030 — again, less than Oklahoma produced in 1927. That doesn’t mean the recent uptick in oil production has no benefit. As the EIA’s Energy Outlook 2012 noted, the recent boom is helping the United States curb its dependency on foreign crude. But that’s mainly because Americans are also reining in their oil use. The EIA projects gasoline consumption to be flat in the years ahead, thanks to new fuel-economy standards on cars and light trucks. The fact that Americans are using less oil is a key part of the dynamic here."
Oil production is booming — but for how long?
Washington Post (Blog), 26 January 2012

"The global production of oil has remained relatively flat since 2005 and peaked in 2008, declining ever since even as demand has continued to increase. The result has been wild fluctuations in the price of oil as small changes in demand set off large shocks in the system. In Wednesday’s issue of Nature, James Murray of University of Washington and David King of Oxford University argue this sort of volatility is what we can expect going forward, and we’re likely to face it with other fossil fuels as well. The notion of peak oil is fairly simple: Oil is a finite resource and at some point we simply won’t be able to extract as much as we once did. There is no getting around that limit for any finite resource. The issue that has made peak oil contentious, however, is the debate over when we might actually hit it. Murray and King are not the first to conclude that we’ve already passed the peak. Even as prices have climbed by about 15 percent per year since 2005, production has remained largely flat. The strongest argument against this being a real peak is the increasing volume of petroleum reserves many countries are reporting. Even assuming those estimates were reliable (which Murray and King aren’t certain of), those reserves clearly have not brought increased production. In the United States, for example, production as a percentage of total reserves has dropped from 9 percent to 6 percent during the last three decades. 'We are not running out of oil,' the authors argue, 'but we are running out of oil that can be produced easily and cheaply.' This creates significant delays before new reserves can be tapped, and limits the amount of oil that can be economically extracted from them. Non-conventional sources like oil sands have the potential to contribute to the global supply but so far haven’t done so and current production estimates indicate they won’t anytime soon. The struggle to mobilize supplies has taken place against a backdrop of falling production and rising demand. Most established sources of oil are seeing declines in the area of 5 percent annually. Given that decline, it will be extremely difficult to meet demands projected for 2030 — in fact, we’d have to add the equivalent of our total current production. In a fit of understatement, the authors deem this 'very unlikely to happen.' What are the consequences of being stuck at or near peak oil? The authors have produced a graph showing that, while supply is elastic enough to meet demand, prices stay stable. Once demand consistently exceeds supply, prices swing wildly. Murray and King term this a 'phase transition' and suggest we’ll be in the volatile phase from here on out. That has some significant consequences. Of the 11 recessions the United States has experienced since World War II, 10 have been preceded by a sudden change in oil prices. The United States isn’t alone, either. Italy’s entire trade deficit, which has contributed to its financial troubles, can be accounted for by the rise in imported oil. The world, it seems, has allowed its economies to become entirely dependent upon fossil fuels. 'If oil production can’t grow, the implication is that the economy can’t grow either,' the authors write. 'This is such a frightening prospect that many have simply avoided considering it.' And it’s not just oil that poses problems. U.S. coal production peaked in 2002, and the global peak has been predicted to hit as soon as 2025. The last time global coal reserves were evaluated, in 2005, the total was cut by more than half compared to previous estimates. Fracking has boosted the production of natural gas dramatically, but even here the authors find reasons for concern. Recent reports suggest shale gas reserves have been overestimated, and many fields that have been in production awhile have experienced large declines in production. The commentary concludes that we simply can’t rely on any fossil fuel to provide a stable and economic source of energy for more than a couple of decades. And, given the economic shocks that result from rapid changes in energy prices, that’s a serious problem. 'Economists and politicians continually debate policies that will lead to a return to economic growth,' the authors note. 'But because they have failed to recognize that the high price of energy is a central problem, they haven’t identified the necessary solution: weaning society off fossil fuel.' This weaning will require a large deployment of efficiency measures, nuclear power and renewable energy sources. This will take time, which is why efforts need to be started now, the authors argue. (Not mentioned, but equally true, is the probability that taking these measures will smooth out the impact of reaching peak fossil fuel production.) Unfortunately, since most governments are unwilling to admit the prospect of indefinite economic stagnation due to our reliance on fossil fuels, they’ve been unable to generate the political will to even begin these efforts. Murray and King clearly hope their commentary will help get the ball rolling."
Researchers Argue Peak Oil Is Here, Bringing Permanent Volatility
Wired, 26 January 2012

"... the refineries that make our gasoline, diesel, heating oil, etc. are dropping like flies. In today's economy, these refineries are simply losing so much money that their owners who are not major oil companies that make billions from oil production are having put them up for sale or close them down. In recent years we lost refineries in Westville, NJ, and Yorktown, Va. A large refinery in southeastern Pennsylvania was shut down in December as was one in New Jersey. A third large Philadelphia refinery is up for sale and will be closed in July if no buyer can be found....When refinery closings come together with the traditional winter-spring increase in gasoline prices we could be looking at some never-before-seen gasoline prices in the $4-5 a gallon range before the year is out. Five dollar gasoline means diesel could be well north of $5 when the effect of the global diesel shortage is considered. This will certainly not do much for economic recovery later this year and would certainly roil the political pot. Alternatively, the EU may encounter such serious problems later this year that gasoline prices will go down."
The Peak Oil Crisis: On Closing Our Refineries
Falls Church News-Press, 25 January 2012

"In his State of the Union address last night, President Barack Obama spoke of the United States' unaccustomed new impact on global energy-- in addition to its habitual role as a world-class oil glutton, the U.S. is delivering a growing volume of oil and natural gas that has already shaken assumptions, and looks likely to roil geopolitics in a way favorable to Americans. The speech put a spotlight on a new trend of plenty in the U.S. oil patch: On Monday, the U.S. Energy Information Administration reported thatthe U.S. is in the midst of a dramatic turnaround -- by the year 2035, U.S. demand for imported oil will have fallen by 18 percent, to some 7.36 million barrels a day, or a respectable 1.6 million barrels a day less than last year's volume....For its part, the EIA skips the politics and the glad assertion of freedom from Middle East oil. It lays out in cool language a more modest yet remarkable U.S. energy reversal of fortune. It says that U.S. oil production will rise by 21 percent over the next decade -- from a current 5.5 million barrels a day to 6.7 million barrels a day in 2020; then production will fall off to 6.1 million barrels a day, and stay there through 2035. This includes 1 million barrels a day from the various new sources, such as oil shale and new Gulf of Mexico production, adjusted for natural depletion; plus an additional 1 million barrels a day of biofuels (the more optimistic scenarios suggest some 4 million barrels a day in additional biofuel production, mainly corn and sugar ethanol). U.S. oil demand will rise a bit over the period, the EIA says, yet by 2035, net imports will fall to 36 percent of total U.S. consumption from 49 percent in 2010."
Obama's speech and some sober talk about the oil patch
Foreign Policy, 25 January 2012

"Just as hydraulic fracturing is transforming the outlook for oil and gas supplies in coming decades, it is also revolutionising the context for emissions control policies and climate change. In the mid-2000s, policymakers could draw on the prospect of shrinking oil reserves, medium term shortages, and rising prices to make the case for aggressive action to promote efficiency, clean energy and behavioural changes to cut energy consumption. Now policymakers must make the same case in a world where supplies have been substantially enhanced and prices could be flat or even falling in the medium term.... The best way to appreciate the magnitude of the problem is to examine how market expectations for medium-term oil and gas prices have shifted in the last four years. In July 2008, five-year forward oil futures contracts implied that the market expected prices to be around $140 per barrel in 2013. Obviously that expectation looks unlikely, barring geopolitical upheaval. In the short term it has been mostly invalidated by the recession. But profound shifts in both consumption (from ethanol blending and efficiency) and supply (fracking and deepwater drilling) have done more to change the medium-term outlook. Mostly as a result of the fracking revolution, the market now expects oil prices to be as low as $90 in 2017 based on five-year forward prices. The shift in expectations for North American natural gas has been even more dramatic. Five-year forward gas prices have more than halved from $10.50 per million British thermal units (mmBtu) in 2008 to just under $5. There is no guarantee the market's current five-year forecasts will prove any more accurate than those in 2008. However, neither markets, nor policymakers, now expect serious shortages of oil and gas in the next decade.... By taking away the spectre of peak oil and gas, fracking has cruelly undercut one of the most important (complementary) arguments for curbing carbon emissions. Policymakers can no longer hide behind the market to tackle emissions. In future, they will have to make the case for curbs directly, based on climate effects. Past experience suggests it is difficult to catalyse sustained and aggressive reductions in emissions based on climate effects alone but fracking means politicians and environmental campaigners have no other choice."
Fracking complicates the climate debate: John Kemp
Reuters, 25 January 2012

"A nuclear expert gave uranium supply three more years - at most - before it seriously falls behind demand from the nuclear power industry. '2016: We have to have supply in the market or the lights will gradually go out in the nuclear system,' said Thomas Drolet, the president of Drolet & Associates Energy Services, during a presentation at Cambridge House's Vancouver Resource Investment conference on Monday. A uranium supply crunch is widely anticipated to hit the nuclear industry starting next year as Cold War era sources of uranium dry up. To illustrate the severity of the shortage that the nuclear industry faces, Drolet highlighted 2010 uranium production from mining - 118 million pounds - versus consumption: 190 million pounds. 'You can do the delta difference yourself,' Drolet said, referring to how much of a supply gap miners will have to make up for in coming years. That uranium is 'going to have to come from somewhere,' he said. The Fukushima nuclear disaster in Japan, Drolet argued, only delayed the onset of the coming pinch on uranium supply. But even in his 'downside' analysis the uranium deficit still comes by 2015. While Japan has idled most of its 50 nuclear reactors in the wake of Fukushima, Drolet wagered that the country would have no choice but to bring online at least 30 of the reactors or suffer brutal economic consequences."
Uranium supply crunch by 2016 - nuclear expert says
Mineweb, 24 January 2012

"The International Energy Agencyexpects nominal crude prices to reach $247 a barrel by 2035, almost twice the $133 assumed by the Organization of Petroleum Exporting Countries, even as expectations for demand converge....The IEA expects nominal Brent crude to fall from $109 a barrel in 2011 to $91 a barrel in 2016, while OPEC predicts oil will remain at $85 to $95 a barrel to 2020."
IEA Sees 2035 Crude at $247 Barrel, Almost Twice OPEC’s Forecast
Bloomberg, 24 January 2012

"Natural gas prices have declined to below $3.00/mcf, levels not seen for years, yet the EIA posted the highest gas production ever in October, 2011. U.S. gas production is growing despite annual well completion rates that are half that at the peak of the drilling boom in 2008, when gas price topped $12.00/mcf. Proponents of shale gas as a 'game changer' suggest that, despite the well known high decline rates of shale gas wells, their productivity is sufficient to grow production with far fewer wells at historically low prices. Others, such as Arthur Berman, claim that shale gas plays require much higher prices to be economic. The answer may lie in the gas produced in association with oil drilling, which is near all-time historical highs....U.S. natural gas production has reached production levels of 4.6 percent above the previous 1973 peak, and nearly 16% above the recent 2001 peak. While some of this increase is likely due to delayed tie-ins from the 2008 drilling boom, and some due to the high initial productivities of shale gas wells, these are not likely the whole story. Hydraulic fracturing has certainly changed the game with respect to gas production from shales and tight rocks, albeit with widely reported collateral damage including methane leakage into groundwater, pollution from produced frackwater disposal on the surface, induced earthquakes from frackwater injection into disposal wells and the environmental footprint of industrialized landscapes. Equally important is the game changing nature of applying hydraulic fracturing to producing oil from shales..... Large amounts of natural gas are produced in conjunction with the production of hydraulically fractured shale oil and in association with conventional oil drilling. Given the price differential between oil and gas at present many companies have changed their focus to shale oil or liquids rich shale gas to enhance economic returns. Although much associated gas in the production of shale oil is simply flared, as in the Bakken play in North Dakota, much is also produced into the market even at current low prices. Thus the apparent 'too- good-to-be-true' statistics showing growing gas production with declining drilling are simply that – too- good-to-be-true. The record drilling for oil, and its contribution to gas production, is masking the high drilling rates required to grow gas production in the EIA statistics (which classify a well as either 'oil' or 'gas' depending on its principal product).... Production decline rates in both shale gas and shale oil wells are very high – first year declines in Barnett shale gas wells are in the order of 65% and are higher in Haynesville wells. Similar decline rates are observed in shale oil plays. Thus new wells must continually be drilled to offset depletion in existing wells. ... footage drilled is near all-time historical highs. And it can be argued that a hydraulically fractured foot, drilled in 2012, required much higher inputs of energy and capital investment than a foot drilled in 1980, as the deposits targeted are so much more challenging (or marginal, depending on your perspective). In addition, the average depth of a well is 40 percent deeper than it was in 1990. This reflects the declining EROEI ['Energy Return On Energy Invested'] associated with domestic U.S. oil and gas production, which can only be expected to decline further going forward. So, despite vocal industry proponents to the contrary, there is no such thing as a free lunch. Growing, or even maintaining, U.S. oil and gas production will require an increasing level of inputs in terms of the number of wells drilled, the footage drilled, the capital investments required, and, likely, the large amounts of collateral environmental damage incurred."
Why Does Gas Production Remain so High Whilst the Price is so Low?
OilPrice.com, 23 January 2012

"The U.S. Energy Department cut its estimate for natural gas reserves in the Marcellus shale formation by 66 percent, citing improved data on drilling and production. About 141 trillion cubic feet of gas can be recovered from the Marcellus shale using current technology, down from the previous estimate of 410 trillion, the department said today in its Annual Energy Outlook. About 482 trillion cubic feet can be produced from shale basins across the U.S., down 42 percent from 827 trillion in last year’s outlook. 'Drilling in the Marcellus accelerated rapidly in 2010 and 2011, so that there is far more information available today than a year ago,' the department said. The estimates represent unproved technically recoverable gas. The daily rate of Marcellus production doubled during 2011. The estimated Marcellus reserves would meet U.S. gas demand for about six years, using 2010 consumption data, according to the Energy Department, down from 17 years in the previous outlook....Shale gas will probably account for 49 percent of total U.S. dry gas production in 2035, up from 23 percent in 2010, the Energy Department said today.... The department also said the U.S. may become a net exporter of liquefied natural gas in 2016 and a net exporter of natural gas in 2021...U.S. LNG exports may start with a capacity of 1.1 billion cubic feet a day in 2016 and increase by an additional 1.1 billion cubic feet per day in 2019, the department said."
U.S. Cuts Estimate for Marcellus Shale Gas Reserves by 66%
Bloomberg, 23 January 2012

"Growth in shale oil and gas supplies will make the US virtually self-sufficient in energy by 2030, according to a BP report. In a development with enormous geopolitical implications, the country's dependence on oil imports from potentially volatile countries in the Middle East and elsewhere would disappear, BP said. BP's energy outlook forecasts a growth in unconventional energy sources, 'including US shale oil and gas, Canadian oil sands and Brazilian deepwater, plus a gradual decline in demand that would see [the US] become almost totally energy self-sufficient' in two decades. The chief executive of BP, Bob Dudley, said: 'Our report challenges some long-held beliefs. Significant changes in US supply and demand prospects, for example, highlight the likelihood that import dependence in what is today's largest energy importer will decline substantially.' The report said the volume of oil imports in the US would fall below 1990s levels, due to rising domestic shale oil production and ethanol replacing crude. The US would also become a net exporter of natural gas. Overall, global energy demand will surge in the next 20 years, fuelled by economic and population growth in China and India, but at a slowing annual rate, due to advances in energy efficiency and growth of renewables. China will leapfrog the US to become the biggest energy importer. By 2030, China and India will be the world's largest and third-largest economies and energy consumers, accounting for about 35 per cent of global population, gross domestic product and energy demand. World energy demand is likely to grow by 39 per cent over the next two decades, or 1.6 per cent annually, almost entirely in non-Organisation for Economic Co-operation and Development countries. Consumption in OECD countries is expected to rise by just 4 per cent.... Global carbon dioxide emissions are likely to rise by about 28 per cent by 2030 - slower than the current rate of energy demand growth, due to the rapid expansion of renewables and natural gas. If more aggressive policies are introduced, global carbon dioxide emissions could begin to decline by 2030."
US will break free from oil dependence by 2030: BP report
Sydney Morning Herald, 21 January 2012

"The huge reserves of coal, oil and gas held by companies listed in the City of London are 'sub-prime' assets posing a systemic risk to economic stability, a high-profile coalition of investors, politicians and scientists has warned Bank of England's governor, Sir Mervyn King. In an open letter on Thursday, they tell King that the global drive to reduce carbon emissions could mean billions of pounds of fossil fuel reserves will rapidly lose value and cause a 'major problem' for institutional investors and pension funds. At the most recent UN climate change summit in December, 194 of the world's nations agreed to enact legally binding curbs on greenhouse gas emissions within three years to limit global warming to 2C. But meeting this limit would mean just 20% of existing fossil fuel reserves could be burned, according to recent research. 'These high-carbon assets pose significant strategic challenges for the future prosperity of Britain that just can't be ignored,' said investment manager James Cameron, who is a member of the prime minister's business advisory group. 'Investors continue to pour cash into unsustainable assets without understanding the risks associated with these investments, such as climate change, local pollution, fossil fuel price volatility, political risk and catastrophes such as Deepwater Horizon.' The letter is also signed by the government's former chief scientific adviser Sir David King, Zac Goldsmith MP, former environment minister John Gummer and 17 others. It urges action to investigate the risk of the 'carbon bubble'."
Fossil fuels are sub-prime assets, Bank of England governor warned
Guardian, 19 January 2012

"Saudi Arabia’s endorsement of an oil price of $100 a barrel increases OPEC unity over a triple-digit price aspiration, making agreement on policy easier and adding support for the market. Ali al-Naimi, oil minister for the world’s top oil exporter, said in an interview with CNN last week that he hoped to stabilize oil prices at 'around $100' for an average of crudes worldwide. Other members of the Organization of Petroleum Exporting Countries (OPEC) such as price hawks Iran and Venezuela have long called for prices to be at or above $100 -- but not Saudi Arabia, its largest producer and most influential member. 'All in all, all OPEC countries will be more than happy with a $100 price,' said Shokri Ghanem, the head of Libya’s OPEC delegation for many years until he defected in May 2011. 'This is a change in the Saudi view.' Brent oil prices were trading around $111 a barrel last Thursday, down from a 2011 peak of $127 and an all-time high of $147 reached in 2008. Last year’s annual average for Brent around $111 was the highest ever.... Before last Monday, Riyadh had not specified a preferred price level since it said it favored $75 a barrel in November 2008, although Mr. Naimi later said that was no longer valid....Oil revenue needs in OPEC countries have risen sharply following announcements of increased social spending on their growing populations as they seek to counter Arab Spring unrest. And oil industry costs are rising as companies work on more complex projects. BP Plc Chief Executive Bob Dudley said in October more people were pencilling in $90 to $100 when asked what price BP needed to make money from new ventures."
OPEC consensus on $100/barrel oil broadened by Saudi comments
Reuters, 23 January 2012

"Bulgaria has become the second European country after France to ban exploratory drilling for shale gas using the extraction method called 'fracking'. Bulgarian MPs voted overwhelmingly for a ban on Wednesday, following big street protests by environmentalists. Bulgaria has revoked a shale gas permit granted to US energy giant Chevron. Critics say shale gas drilling can poison underground water and even cause earth tremors. Industry experts say correct drilling is safe."
Bulgaria bans shale gas drilling with 'fracking' method
BBC Online, 19 January 2012

"Oil demand is falling for the first time since the global economic crisis of 2008-2009, the International Energy Agency said, warning that mild weather, high oil prices and a rising likelihood of a global recession will depress demand in 2012. Although worries about disruptions to Iranian oil exports have supported prices, consumption fell in the last quarter of 2011 year-on-year due to mild winter weather in the northern hemisphere and the overriding fears about an impending recession in the euro zone, the IEA said in its monthly report on Wednesday.... The IEA reduced its 2012 demand growth forecast by 220,000 barrels per day (bpd) from its previous monthly report to 1.1 million bpd. Further downgrades to global GDP estimates will trigger cuts in estimates of global oil consumption, it said, adding that a one-third cut to GDP growth would see this year's oil consumption unchanged at 2011 levels."
Oil demand falling as recession fears mount: IEA
Reuters, 18 January 2012

"Leaders of BP and ConocoPhillips called Wednesday for greater access to and development of oil and natural gas fields, as a BP report showed fossil fuels will continue to dominate the world's energy needs for at least the next 20 years. Renewable energy is growing faster than other sources, at about 8.2 percent annually, but will make up only 6 percent of energy use by 2030, according to the forecast released Wednesday by BP. Oil, natural gas and coal will still account for 80 percent of global energy use.... Technology improvements have allowed drillers to access natural gas in deep, dense shale rock economically for the first time. That has led to a rush on North America's shale gas fields, leaving a glut of low-priced natural gas in the U.S. market. 'Our entire understanding of North American energy potential is changing,' Mulva said. 'Everyone is having to cast aside some old assumptions, such as the one about domestic fossil fuels being in short supply. They are not.' He said the technology that fueled shale gas production has begun driving a rapid increase in the development of domestic oil fields, too. With natural gas prices low, producers are moving more rigs into fields containing higher-priced crude and natural gas liquids, including the Eagle Ford shale in South Texas and the Bakken shale in North Dakota. BP said that the increase in world energy demand will occur mostly in emerging nations such as China and India as they look to cheap fossil fuels to power their growth.... Globally, coal's share of the fuel market will continue growing for a few more years, but the trend will start to reverse by 2020, as a significant portion of power generation shifts from coal to cleaner-burning natural gas, BP said."
Fossil fuel forecast: a huge role
Houston Chronicle, 18 January 2012

"Four out of 10 people are worried they cannot afford their next energy bill, according to research commissioned by Citizens Advice. The charity, which helped clients with more than 96,000 fuel debt problems in 2011, also found that one in three people do not know that energy companies are offering support to insulate homes. It released the findings at the start of its Big Energy Week, which aims to help people save money on their bills. In recent days, four of the six major energy companies have announced price cuts, but the reductions, some of which do not come into effect until March, do not reverse the double-digit increases seen in 2011. Citzens Advice's chief executive, Gillian Guy, said: "Day in day out our bureaux help people who can't afford their fuel bills. 'We are worried that some people are struggling unnecessarily because they are not on the best deal, live in homes that haemorrhage heat, or are not getting all of the financial help available to them.' The study found that 43% of people are worried they cannot afford their next fuel bill, while one in two say energy bills will put a strain on their finances this year....The charity said that in November 2011 eight times as many people visited its website for advice on cutting their fuel bills compared to the previous November."
Citizens Advice: 43% of people worried they can't afford next fuel bill
Guardian, 16 January 2012

"The Government has been accused of 'appalling complacency' after it emerged that not a single minister has met with the Environment Agency's experts to discuss the hugely controversial gas exploration technique known as fracking. Despite earthquakes in Blackpool, growing concerns about poisoning of the water supply and demonstrations around the world, the Government still appears not to be taking the potential dangers of fracking seriously enough, critics said. At the weekend, anti-fracking demonstrations were held in London, Paris, Copenhagen and Bulgaria. The extent of the Government's failure to prioritise the issue came in the answer to a parliamentary question tabled following The Independent's revelations last month that the US environment agency had established the first clear link between fracking and water poisoning."
Exclusive: Ministers slammed over fracking
Independent, 16 January 2012

"In what Riyadh calls 'the largest expansion by any oil company in the world', Sinopec's deal on Saturday with Saudi oil giant Aramco will allow a major oil refinery to become operational in the Red Sea port of Yanbu by 2014. The $8.5 billion joint venture, which covers an area of about 5.2 million square meters, is already under construction. It will process 400,000 barrels of heavy crude oil per day. Aramco will hold a 62.5 percent stake in the plant while Sinopec will own the remaining 37.5 percent. The deal 'represents a strategic partnership in the refining industry between one of the main energy producers in Saudi Arabia and one of the world's most important consumers', said Aramco president and CEO Khalid Al-Falih. Sinopec, the largest producer and supplier of oil products in Asia, is already Aramco's top crude oil customer, according to Al-Falih. Sinopec Group chairman Fu Chengyu said the project propels the two companies' strategic cooperation and contributes to enhancing the partnership between China and Saudi Arabia."
Saudi oil refinery deal shows close ties
China Daily, 16 January 2012

"The world's biggest oil exporter, Saudi Arabia has signed an agreement with China for cooperation in the development and use of atomic energy for peaceful purposes, which will help to meet the Kingdom's increasing demand for energy and cut its growing dependence on depleting oil resources. The deal was signed in the Saudi capital Riyadh on Sunday in the presence of King Abdullah and visiting Chinese Prime Minister Wen Jiabao."
Saudi Arabia, China Ink Nuke Cooperation Deal
RTTNews, 16 January 2012

"The European Union’s long-term energy plans to abate global warming while still burning fossil fuels hinge on proposals to capture carbon dioxide emissions and store them in deep underground rock formations. Yet weak support for the untested technology is putting Europe in the rear ranks of its development. Two carbon capture and storage projects in Germany and Britain were canceled last quarter, and many of the remaining projects will probably share that fate this year, imperiled by a mix of regulatory objections, a lack of money, public opposition to the possible geological risks and broader uncertainty about strategies to slow climate change. By 2020, Europe will have at most six, and more probably four, of the 12 demonstration plants that were supposed to be running by 2015, experts and officials say."
Growing Doubts in Europe on Future of Carbon Storage
Guardian, 16 January 2012

"Saudi Arabia, the world’s largest oil exporter, is able to boost production to its officially-announced peak of 12.5 million barrels a day, according to PFC Energy. Proposed European Union sanctions to block imports from Iran have raised the prospect that other suppliers may need to make up any shortfall. Oil Minister Ali al-Naimi, who has said the kingdom can reach a level of 12.5 million, said last month that it’s pumping at about 10 million a day. 'The market always questions how much spare capacity Saudi Arabia actually has,' Jamie Webster, an analyst at the consulting company, said by phone from Washington. 'Their total productive capacity including the neutral zone is around 12.5 million barrels.' Saudi Arabia’s sustainable oil production capacity was estimated by the International Energy Agency, in its December 13 Monthly Oil Market report, at 12.04 million barrels a day. The agency defines this as capacity levels that 'can be reached within 30 days and sustained for 90 days.'”
Saudis have 2.5m barrels spare oil capacity, PFC says
Bloomberg, 14 January 2012

"Starting Feb. 1, drilling operators in Texas will have to report many of the chemicals used in the process known as hydraulic fracturing. Environmentalists and landowners are looking forward to learning what acids, hydroxides and other materials have gone into a given well. But a less-publicized part of the new regulation is what some experts are most interested in: the mandatory disclosure of the amount of water needed to “frack” each well. Experts call this an invaluable tool as they evaluate how fracking affects water supplies in the drought-prone state."
Unlocking the Secrets Behind Hydraulic Fracturing
New York Times, 14 January 2012

"The government's flagship green policy to transform the energy efficiency of 14m homes and create 65,000 jobs appears doomed to fail, with the revelation of its own figures showing the number of lofts being lagged is set to plummet by 93%. The green deal is at the heart of the government's ambition to be the 'greenest ever' as it will deliver large cuts in climate-warming carbon emissions, as well as curbing high energy bills by making houses warmer and less expensive to heat. The disclosure is the most startling yet about the green deal programme, which starts in October and has been billed by ministers as the most ambitious national refurbishment scheme in the world. Britain's homes are old and leaky by international standards and millions of lofts and cavity walls remain poorly insulated. These home energy efficiency measures are seen as the cheapest way to cut bills and carbon emissions....But the new data, obtained by Building magazine and from Department of Energy and Climate Change's (Decc) own impact assessment, throws the government's grand ambition into serious doubt. Current government schemes that subsidise insulation have resulted in just over 1m lofts a year being lagged in recent years, yet this will plunge to just 70,000 a year under the green deal, according to Decc figures. This is also far below the 2m per year required to meet climate targets. For cavity walls, the current 510,000 a year being filled will fall to 170,000, a drop of 67%, and again far below the 1.4m a year required. Existing insulation schemes subsidise the cost of insulation with, for example, energy company E.on this week offering free loft and cavity wall insulation plus a �100 incentive. The funding comes from a levy of �25 a year on all bills and from government coffers. The green deal, by contrast, offers no subsidy for these measures and instead provides a loan enabling the up-front costs to be paid back using the savings made on heating bills. However, the new Decc figures show that the take-up of the green deal is expected to be very low. In December, in an unprecedented intervention, the government's official independent advisers warned in an open letter that the green deal was set to fail, reaching just 2-3m households of the 14m targeted.... The government's plans, currently undergoing a public consultation, do include an Energy company obligation, funded by a levy on all bills. But as it stands that will only be available to so-called 'hard-to-treat' homes, in effect those with no cavity wall and hence needing solid wall insulation."
Green deal suffers setback as loft insulations set to plummet
Guardian, 13 January 2012

"British oil and gas tax revenues could rise by billions of pounds this year as high oil prices boost earnings and tempt operators into opening new fields after a decade of sharp declines, industry data and Reuters research showed. The past two years of investment have set the stage for a landmark shift in the North Sea, following exceptionally dismal data in 2011 when oil and gas production in the third quarter slumped at the fastest rate since records began in the mid-1990s, research by consultancy Wood Mackenzie suggested.... 'As of 2012 we expect production declines to halt for liquids (including crude oil) and gas, and we expect that to continue for a few years until the decline starts again,' Lindsay Wexelstein, an analyst at energy consultancy Wood Mac, told Reuters....Analysts said the main downside risk for government revenues is that a renewed recession could pull down energy prices. They also said the halt in declining North Sea production would only be for a few years. North Sea oil and gas output passed its peak at the start of the last decade as the larger and easier-to-tap deposits were pumped out. That peak remains out of reach to this day, Wexelstein said."
UK oil and gas decline to halt as investment booms
Reuters, 13 January 2002

"China tripled its solar energy generating capacity last year and notched up major increases in wind and hydropower, government figures showed this week, but officials are still struggling to cap the growth in coal burning, which is the biggest source of carbon dioxide emissions in the world. The latest evidence of China's promotion of renewable energy has been welcomed by climate activists, but they warn that the benefits are being wiped out by the surge in coal consumption. After burning an extra 95m tonnes last year, China will soon account for half the coal burned on the planet.... coal continues to account for close to 70% of the nation's power supply. The government is trying to bring this proportion down below 65%, but it is not making progress fast enough."
China's renewables surge dampened by growth in coal consumption
Guardian, 12 January 2012

"UK North Sea oil and gas investment is set to mark an all-time high in 2012 as high oil prices entice investors to boost production, showing that the government's surprise tax on output introduced last year has not jeopardised profitability. Edinburgh-based consultants Wood Mackenzie said in a report on Tuesday that energy company investments were expected to exceed last year's record of 7.5 billion pounds in 2012, which also found that investments should stay consistently high until at least 2014. The findings reflect increasing appetite for UK exploration acreage after Britain awarded 46 new oil and gas exploration licenses in December, surpassing some earlier licensing rounds and helping counter a decade-long decline in production. Oil and gas production in the UK North Sea has passed its peak as the larger and easier-to-tap deposits have been pumped out. But geologists say there are still billions of barrels left to produce in smaller accumulations....Wood Mackenzie's annual North Sea investment report also found that the economic crisis setback development programs in 2011, with just five new fields starting production."
UK N.Sea oil, gas investment set for record year
Reuters, 10 January 2012

"While the US military has formally ended its occupation of Iraq, some of the largest western oil companies, ExxonMobil, BP and Shell, remain. On November 27, 38 months after Royal Dutch Shell announced its pursuit of a massive gas deal in southern Iraq, the oil giant had its contract signed for a $17bn flared gas deal. Three days later, the US-based energy firm Emerson submitted a bid for a contract to operate at Iraq's giant Zubair oil field, which reportedly holds some eight million barrels of oil. Earlier this year, Emerson was awarded a contract to provide crude oil metering systems and other technology for a new oil terminal in Basra, currently under construction in the Persian Gulf, and the company is installing control systems in the power stations in Hilla and Kerbala. Iraq's supergiant Rumaila oil field is already being developed by BP, and the other supergiant reserve, Majnoon oil field, is being developed by Royal Dutch Shell. Both fields are in southern Iraq. According to the US Energy Information Administration (EIA), Iraq's oil reserves of 112 billion barrels ranks second in the world, only behind Saudi Arabia. The EIA also estimates that up to 90 per cent of the country remains unexplored, due to decades of US-led wars and economic sanctions. 'Prior to the 2003 invasion and occupation of Iraq, US and other western oil companies were all but completely shut out of Iraq's oil market,' oil industry analyst Antonia Juhasz told Al Jazeera. 'But thanks to the invasion and occupation, the companies are now back inside Iraq and producing oil there for the first time since being forced out of the country in 1973.' Juhasz, author of the books The Tyranny of Oil and The Bush Agenda, said that while US and other western oil companies have not yet received all they had hoped the US-led invasion of Iraq would bring them, 'They've certainly done quite well for themselves, landing production contracts for some of the world's largest remaining oil fields under some of the world's most lucrative terms.'"
Western oil firms remain as US exits Iraq
Al-Jazeera, 7 January 2012

"Gas prices are the highest ever for this time of year, and analysts predict that motorists will be digging deep in 2012 to fuel their vehicles. Not only are we worrying about the end of the world in 2012 — thanks, Maya calendar makers — but this also may be the year of the gas-pocalypse, analysts warn. That's because gasoline prices are the highest ever for the start of the year, and they're on the rise, supercharged by expensive oil and changes in refinery operations. In California, the average price of a gallon of regular gasoline was $3.666 on Thursday, up 8.1 cents from a week earlier and up 33.1 cents from a year earlier, which had been a record price for this time of year, according to the AAA Fuel Gauge Report. Nationally, a gallon of regular was averaging $3.319, up 6.5 cents from a week earlier. That topped 2011's record-setting start by 24.2 cents a gallon.... And 2011 showed that when prices start out high, it doesn't take a huge percentage increase to add to consumer woes. Average prices rose 29% nationally in 2011, a jump of 89.5 cents a gallon to the year's peak of $3.965. California prices also rose 29% last year, for a 95-cent rise to the high of $4.257."
Gasoline prices start the year at a high — and rising
Los Angeles Times, 6 January 2012

"The returns are in and we now know that world price of a barrel of oil averaged $111 in 2011. This was up 14 percent from last year and well above the previous high of $100 set in 2008. The average barrel of oil that we bought last year cost $15 more than the year before. Here in America, we burn about 6.7 billion barrels of the stuff each year. Therefore, our collective oil bill for 2011 was about $100 billion higher for the same amount of energy that we burned in 2010. This $100 billion created few new jobs here in the USA. Much of it went overseas and into the coffers of people who don't like us very much. Last year's news was dominated by the Arab spring and its derivatives which spread from Wall Street, to Moscow, to villages in China as the revolution in communications technology coalesced in the hands of a new generation making dissidence against governments everywhere far easier to organize. By the way, the latest count of cell phones shows that in excess of 5 billion have been produced. Not all of these are still active, of course, but for a world of 7 billion people, many of whom are too young to talk much less carry a mobile phone, that is an impressive number. It is clear the world is changing in ways we cannot yet comprehend. The peak oil story changed little last year. Global oil production hung in around 88 million barrels a day (b/d) despite the Libyan uprising which took nearly 1.6 million b/d out of production for several months. For much of last year global oil production was below consumption resulting in a gradual drawdown of world reserves. With OECD stockpiles of about 2.6 billion barrels, plus the new reserves being accumulated in China, a slight shortfall in production is not a problem for the time being. During 2011 it became apparent that the demand for diesel is becoming a worldwide problem. While the demand for gasoline has been falling, at least in the OECD nations, the demand for diesel has been increasing. As electricity production falters around the world mainly due to droughts, aging equipment, and unaffordable fuel prices, the demand for diesel generated backup electric power has surged. Vital uses for electricity such as in hospitals, public safety, and water pumps will continue no matter what the cost. It should be noted that much of the increase in 'oil' production in recent years has been made up of natural gas liquids and ethanol which are not commonly used to produce diesel, leaving the quantity of feedstock for diesel production stagnant. The year ended with little change in the assessment for the prospects for global oil supplies. Despite all the hype concerning new oil finds and technological breakthroughs in oil production, these developments still are not contributing enough new oil to offset the annual decline of 3 million b/d from existing fields and the annual increase of circa 1 million b/d of new demand. The bottom line among those following this issue is that global oil production likely will start to decline in the next one to five years as depletion gets ahead of very-costly-to-produce new sources of 'oil.' Keep in mind the phenomenon of falling net exports. As oil exporting countries grow larger and wealthier, they are consuming an increasing share of their own oil production leaving less and less to export. Most of us really don't care how much oil in produced in the world; the real issue for most countries is how much is available that can be imported for domestic use. Jeffrey Brown, a Texas geologist and one of the leading students of net exports, notes that if you leave out the oil going to two growth powerhouses - China and India - then for the last five years the oil available for import by the rest of the importing nations has been dropping at the rate of 2.8 percent each year. Brown estimates that if current trends continue, the oil available for import by most of the world will fall by 5 to 8 percent each year for the rest of the decade. Much of the burden of this decline in exports is falling on poorer nations, many of which are already being priced out of purchasing some of the fuel necessary to run their electric power stations. In a certain sense, oil available for import has already peaked. Note the 14 percent increase in price last year. In America, we still seem to be able to import as much as we need, but an increasing share of our refined products are now being exported as domestic consumption is falling."
The Peak Oil Crisis: Closing Out the Year
Falls Church News-Press, 4 January 2012

"Russian oil production rose 1.25 percent in 2011 to a record level for the post-Soviet era, as companies in the world’s largest crude-producing nation took advantage of higher prices and boosted output at new projects. Production grew to an average of 10.27 million barrels a day, according to preliminary data from the Energy Ministry’s CDU-TEK unit. Output in December slipped to 10.32 million barrels a day from 10.35 million in November, the data showed. Prime Minister Vladimir Putin, who will seek re-election as president in March, has called for Russia to pump more than 10 million barrels a day for at least the next decade. Taxes on oil and exports are the biggest contributor to the national budget. The average price for Urals crude, Russia’s benchmark grade, for delivery to Northwest Europe jumped 40 percent to $109.30 a barrel, according to data compiled by Bloomberg. Demand for Urals rose after the revolution in Libya halted crude exports from that nation and the Fukushima nuclear disaster inJapan led many countries to reconsider use of atomic energy."
Russian Crude Oil Production Rose to Post-Soviet High in 2011
Bloomberg, 2 January 2012

"NY crude closed out the year quietly at $98.83 a barrel, eight percent higher than where it opened 12 months earlier. For 2011, NY crude averaged $95 a barrel as compared with $79 in 2010 and $62 in 2009. Brent crude averaged $111 for the year, $11 a barrel more than the previous high set in 2008."
Peak oil review
ASPO USA, 2 January 2012

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Peak Oil and Energy Crisis News Current Earlier Peak Oil And Energy Crisis News 2015 2014 2013 2012 2011 2010 2009 2008 2007	Selected News Extracts 2012 "US Energy Information Administration (EIA) data confirms that despite the US producing a 'total oil supply' of 10 million barrels per day (up by 2.1 mbd since January 2005) world crude oil production and lease condensate – conventional production – remains on the largely flat, undulating plateau it has been on since it stopped rising in around that very year at 74 million barrels per day (mbd). According to John Hofmeister, former President of Shell Oil, 'flat production for the most part' over the last decade has dovetailed with annual decline rates for existing fields of about '4 to 5 million bpd.' Combined with 'constant growing demand' particularly from China and emerging markets, he argues, this will underpin higher oil prices for the foreseeable future. The IEA’s WEO actually corroborates this picture – but the devil is in the largely overlooked details. Firstly, the main reason US oil supply will overtake Saudi Arabia and Russia is because their output is projected to decline, not rise as previously assumed. So while US output creeps up from 10 to 11 mbd in 2025, post-peak Saudi output will fall to 10.6 mbd and Russia to 9.5 mbd. Secondly, the report’s projected increase in 'oil production' from 84 mbd in 2011 to 97 mbd in 2035 comes not from conventional oil, but 'entirely from natural gas liquids and unconventional sources' (and half of this from unconventional gas including shale) – with conventional crude oil output (excluding light tight oil) fluctuating between 65 mbd and 69 mbd, never quite reaching the historic peak of 70 mbd in 2008 and falling by 3 mbd sometime after 2012. The IEA also does not forecast a return to the cheap oil heyday of the pre-2000 era, but rather a long-term price rise to about $125 per barrel by 2035....world conventional oil production is already on a fluctuating plateau and we are now increasingly dependent on more expensive unconventional sources. The age of cheap oil abundance is over." The Great Oil Swindle: why the new black gold rush leads off a fiscal cliff Ceasefire, 20 December 2012 "More than half of chief executives regard energy and raw material costs as a major threat to their growth prospects, according to a new survey of nearly 800 corporate bosses from around the world. Preliminary findings from PwC's Annual Global CEO Survey reveal concerns over energy costs and resource scarcity are at a three-year high, with 53 per cent of chief executives claiming the issues have overtaken sluggish consumer spending as one of the top threats to future growth, a seven percentage point increase on last year. The company said concerns over rising energy prices and raw material price shocks were most pronounced in developing economies in Asia and Africa, but high numbers of chief executives in all geographies regard environmental issues as a growing risk. For example, a quarter of European chief executives identified energy and resource costs as a problem, while a third said increasing natural disaster risks could have a negative impact on their operations.... 'With a much more challenging environment for growth, businesses can ill afford price shocks in energy and resource costs for business, so it's no surprise they are rising up the list of threats to their future growth prospects,' said Richard Gledhill, partner at PwC's sustainability and climate change division. He added that, despite the global economic slowdown and the gas boom in the US, the long-term trend for energy prices remained upwards due to 'demand from emerging markets, regulatory pressures and the scale of energy investment that's required'." Bosses' fears over energy and resource costs hit new high BusinessGreen, 10 December 2012 "On 12 November the IEA’s World Energy Outlook report for 2012 (WEO-2012) was presented by the chief economist of that organisation, Dr Fatih Birol. .... [From the report] We see that conventional oil production continues to decline but that unconventional oil production, estimated at around 2 million barrel of oil equivalents per day (Mboe/d) in 2010, will continue to increase. Together they give an estimated total oil production of over 10 Mboe/d in 2020. It is then that the USA will reportedly be producing more oil than Saudi Arabia. Dr Birol mentions nothing about 2035.... Eight years ago, when I began to criticise the WEO projections, WEO-2004 predicted oil production in Saudi Arabia of 22.5 Mb/d in 2025. Now WEO-2012 paints a completely different picture. In 2011 Saudi oil production was 11.1 Mb/d and the IEA now predicts this will decline to 10.6 Mb/d by 2020 before growing to 10.8 Mb/d in 2025! Then production will continue to grow to reach 12.3 Mb/d by 2035. In the criticism that I advanced in 2004 I said that 22.5 Mb/d for Saudi Arabia in 2025 was completely unrealistic. The IEA’s current prediction of 10.8 Mb/d in 2025 shows that I was correct. .. The New York Times writes that the USA, 'will become a net oil exporter by 2030'. There is no evidence for this in WEO-2012. Instead, the IEA shows in Figure 2.17 (below) that very significant improvements in the efficiency of oil use are required for the USA to reduce its import requirements to somewhat over 3 Mb/d by 2020. ..... The critical sentence from WEO 2012 is the following: 'In 2011, 12 billion barrels were discovered, equal to 40% of the oil produced during the year.' Since we are using 30 billion barrels per year we see as a fact that the available resources are shrinking.... . .The majority of the oil we consume is crude oil and this statement from WEO-2012 should be noted by all: 'Crude oil output from those fields that were in production in 2011 falls by close to two-thirds, to only 26 mb/d by 2035 (Figure 3.15). Thus, the projected production of 65 mb/d in 2035 requires almost 40 mb/d of new capacity to be added over the projection period. Of this capacity, 26 mb/d, or 66%, comes from discovered fields yet to be developed, most of which are in OPEC countries, and the remaining 13 mb/d from fields that have yet to be found, mainly in non-OPEC countries.' .... In 2004 when I for the first time said that the WEO-2004 was wrong they were stating that crude oil production in 2030 would be 108 Mb/d. The IEA has lowered the scenario output for 2030 by 42 Mb/d down to 66 Mb/d. That is a change of 40% in 8 years!" An analysis of World Energy Outlook 2012 by Professor Kjell Aleklett ASPO International, 29 November 2012 "The most common misconception about peak oil is that it means the world is running out of oil. Many articles that seek to debunk the notion of peak oil start with that premise, and then they proceed to tear down that straw man. Peak oil is about flow rates, and the overall flow rate will begin to decline while there is still a lot of oil left in the ground. Another misconception is that peak oil beliefs are homogeneous. The beliefs among people who are concerned about the impacts of peak oil cover a wide span. There are those who believe that a peak is imminent, to be followed by a catastrophic decline....... A more mainstream peak oil position is that the real threat is much higher oil prices, leading to stagnant economies.... The points of contention are the timing, the steepness of the decline, the impact on the global economy and the ability of other energy sources to fill the supply gap. Some believe we will smoothly transition to alternatives, and some people believe peak oil will be catastrophic." Peak Oil: Misconceptions and Realities Investing Daily, 26 November 2012 "Saudi Arabia, the world’s biggest crude exporter, risks becoming an oil importer in the next 20 years, according to Citigroup Inc. Oil and its derivatives are used for about half of the kingdom’s electricity production, which at peak rates is growing at about 8 percent a year, the bank said today in a an e-mailed report. A quarter of the country’s fuel production is used domestically, more per capita than other industrialized nations, as the cost is subsidized, according to the note. 'If Saudi Arabian oil consumption grows in line with peak power demand, the country could be a net oil importer by 2030,' Heidy Rehman, an analyst at the bank, wrote. The country already consumes all its natural-gas production and plans to develop nuclear power, which pose execution risk amid a lack of available experts, safety issues and cost overruns, Rehman said." Saudi Arabia May Become Oil Importer by 2030, Citigroup Says Bloomberg, 4 September 2012
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