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Former Shell Scientist M. King Hubbert Speaks On Peak Oil in 1976
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What Happened To The $11 Oil?

"The chairman of Royal Dutch/Shell, Mark Moody-Stuart, three months ago unveiled a five-year plan that assumed a price of $14 a barrel. He has since publicly mused about oil at $11. Sir John Browne, chief executive of BP-Amoco, is now working on a similar assumption. Consumers everywhere will rejoice at the prospect of cheap, plentiful oil for the foreseeable future. Policymakers who remember the pain of responding to oil shocks in 1973 and in 1979-80 will also be pleased."
The next shock?
Economist, 4 March 1999

".... today's $11-a-barrel price [is].... [the] lowest inflation-adjusted oil prices of the past half-century ...   Even if consumption rises dramatically over time, most analysts believe prices should remain in check because of advanced technology and because OPEC nations need to sell as much as they can to maintain their incomes..... Low oil prices are excellent news, of course, for big energy consumers. A sustained $10-per-barrel drop in the price of oil cuts about 0.7 points from the annual U.S. inflation rate over five years and adds about 0.3 points to the U.S. economy's growth.... [I]f you're still operating under the assumption that the earth's petroleum--or at least the cheap stuff--is about to run out, you're not going to thrive in the new oil era. Technology is making it possible to find, produce, and refine oil so efficiently that its supply, at least for practical purposes, is basically unlimited."
TREMORS FROM CHEAP OIL
Businessweek, 14 December 1999

Conventional Crude Oil Production Has Peaked
As Predicted By M.King Hubbert

"While the oil forecasters were pumping out bearish calls, the market itself has stuck to its triple-digit price outlook. Oil buyers apparently know the Western world’s economic recovery will boost consumption, since growth and oil use are aligned. That’s not all. They also know that the math doesn’t work: Prices can’t go into gradual, long-term decline, or even stay flat, when the world’s conventional oil fields are in fairly rapid decline. Exotic production – oil sands, biofuels, natural gas liquids – are supposed to fill the gap. But this so-called unconventional production is highly expensive and quite possibly insufficient to cover the drop off in cheap, conventional production. Prices will rise to the point that demand will have to level off or fall. The 'peak oil' and 'peak demand' theories are really opposite sides of the same coin. A few days ago, Richard Miller, the former BP geochemist turned independent oil consultant, delivered a sobering lecture at University College London that laid out the case for dwindling future oil supply. His talk was based on published data from the U.S. Energy Information Agency, the International Energy Agency, the International Monetary Fund and other official sources.The data leave no doubt that the inexpensive oil is vanishing quickly. Conventional oil production peaked in 2008 at about 70 million barrels a day and is declining by about 3.3 million barrels a day, every year. Saudi Arabia pumps about 10 million barrels a day. The math says a new Saudi Arabia has to be found every three years to offset the conventional oil drop off. "
Inexpensive oil vanishing at alarming rate
Globe and Mail, 13 December 2013

2014

"It is now generally accepted by those actually studying the issue that production of 'conventional oil,' which is what the early 'peakists' were talking about 10 or 15 years ago, really did stop growing back in about 2005-2008. Since then official 'oil' production numbers have continued to climb slowly, but included in the 'official' numbers as put out by the US and international agencies is not all your grandfather’s oil. Instead the compilers of our oil statistics have learned to lump all sorts of liquid hydrocarbons of varying utility together and tell us that oil in the form of 'all liquids' continues to grow. Now these hydrocarbons such as natural gas liquids, biofuels, tar sands, and shale oil have uses, but they either cost considerably more to produce than conventional oil, or do not have the same energy content as conventional oil. In at least one case, 'refinery gains' which are sort of like whipping up a pint of cream into gallons of whipped cream, have no additional energy in their expanded state at all. They simply fill more barrels and let us pretend we have more energy to use than we actually do. While the financial press continues to chatter endlessly about the technological breakthroughs that have brought us millions of barrels of new shale oil, sadly they have the basics of the story wrong. It is the high prices that 'oil' has been selling for in the last ten years, not the decades-old fracking technology that has allowed very expensive shale oil to be produced that is new. Even with the recent $40 per barrel price decline, oil is still selling for four times what it was going for 12 or 13 years ago. It is the surge in prices to circa $100 a barrel has allowed very expensive oil such as that from fracked shale wells, the Canadian tar sands, and deep offshore oil wells to be produced; now with oil selling for closer to $70 a barrel the question is how long oil that is no longer economic to produce will keep being extracted. The other question is just how much of our oil supply is in danger of being mothballed until prices climb again as they surely will. The reason for the current fall in prices is still in debate. The 'oil' supply has continued to creep up in recent years, but starting last June the demand for $100+ oil was no longer there. While demand in the 'rich' OECD countries has been down since the 2008 oil price spike, this year it seems to be the slowing Chinese economy and its reduced demand for raw materials that has been behind the sinking demand. Many of the developing economies have been growing and using more oil each year due to growing trade with the Chinese. Someday conventional wisdom will conclude that oil at circa $100+ a barrel was simply too much to sustain high rates of economic growth and so the growth fell taking oil demand along with it. "
The Peak Oil Crisis
Falls Church News-Press, 31 December 2014

2013

"The critical measure here is EROEI (the Energy Return On Energy Invested). The days of 100:1 energy returns are long gone. The ratio for new oil projects has declined from 30:1 to barely 10:1 since the 1970s. For global energy overall, the EROEI has declined from about 37:1 in 1990 to less than 14:1 now. The flip-side of EROEI is the real cost of energy. The cost ratio at an EROEI of 37:1 in 1990 was 2.6 per cent, but this has risen to 6.8 per cent today. The global EROEI may fall to 10:1 by 2020, increasing the energy cost 'levy' on the economy to 9 per cent. In blithe ignorance of this increasing levy, we have continued to grow the claims value of the financial system on the assumption of perpetual growth. These 'excess claims' show up as unsustainable debt, undeliverable welfare commitments, and unrealisable expectations for returns on investment. My calculations suggest that the system now owes $90 trillion (£55 trillion) more than it can deliver. For individuals, this is being manifested in the escalating real costs of fuel, power, food, water and physical infrastructure. Globally, it is visible in 'energy sprawl', as the energy-delivering infrastructure expands (both in scale and in cost) in response to the weakening in efficiency resulting from a deteriorating EROEI. As well as crimping disposable incomes and destroying returns on investment, this process is curbing our ability to invest in other things. The essential point is that the economy is not a monetary system governed by the theoretical 'laws' of economics, but an energy dynamic determined by the all-too-real laws of thermodynamics. Once we understand this, the squeeze on household prosperity becomes far less of a mystery."
Tim Morgan - The global economy sinks under its debts as the real cost of energy rises
City.AM, 24 October 2013

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

2011

"...we are entering an era of scarce resources. Apart from the atomic bomb, this is the most dangerous development in two centuries..... New powers such as China and India are rising, not yet risen, mixing emphasis on their 'developing' status with assertiveness."
David Miliband, British Foreign Secretary, 2007-10
'It was not bin Laden who defined this decade'
London Times, 7 September 2011, Print Edition, P28

2010

"Bankers and the financial sector may have displaced energy from the front pages of the newspapers right now, but Energy Security remains at the top of the global political and economic agenda....The need to balance energy security, jobs and economic development while addressing the problem of climate change all contributed to the challenge politicians faced in Copenhagen. And that challenge means that energy security will dominate politics and policy for the next 12 months and considerably beyond.... Reliable and affordable supplies of hydrocarbon energy were taken for granted through much of the 20th century and laid the foundation for the world’s extraordinary economic progress. When concerns arose, it tended to be at times of war or turbulence, notably in the Middle East, or, closer to home, with industrial action. What’s different now is that energy security has become a defining issue for the 21st century, as one element in a complex energy challenge with strategic, economic and environmental dimensions.... Opening access to a range of potential operators encourages the most efficient solutions, and often involves partnerships that provide new combinations of skills. Iraq is a very good example. BP is teaming up there with CNPC of China and Iraq’s South Oil Company to drive a major investment programme that will nearly triple production from the super-giant Rumaila field. With this and the other agreements concluded with national and international oil companies in the last six months, Iraq has the potential to contribute 10mmb/d to global supplies in the next 10-15 years. That’s a big piece of the additional resource we need....The current debate about Copenhagen and sustainability add new urgency and importance to the broader discussion of energy security.  The challenge of creating a low-carbon economy is far from easy, requiring the wholesale re-engineering of the global economy over time."
Tony Hayard, Chief Executive of BP
The Challenge of Energy Security
Speech at London School of Economics, 4 February 2010

2009

"The most important contributors to the world’s total oil production are the giant oil fields....The evolution of decline rates over past decades includes the impact of new technologies and production techniques and clearly shows that the average decline rate for individual giant fields is increasing with time. These factors have significant implications for the future, since the most important world oil production base – giantfields –will decline more rapidly in the future, according to our findings.... By 2030 the production from fields currently on stream could have decreased by over 50% in agreement with IEA (2008) . The struggle to maintain production and compensate for the decline in existing production will become harder and harder. Our conclusion is that the world will face an increasing oil supply challenge, as the decline in existing production is not only high but also increasing."
Giant oil field decline rates and their influence on world oil production
Energy Policy Volume 37, Issue 6, June 2009

2008

"The global economy is tanking, U.S. forces remain tied up in Iraq, Afghanistan is on a downward spiral -- one might wonder why anyone would want to be U.S. president during these trying times. Recently, the nation's chief intelligence officer weighed in, painting an even more somber picture of a far more complicated world. National Intelligence Director Mike McConnell looked beyond the immediate future, focusing on what his analysts are telling him about the challenges the world community is likely to face by 2025. It isn't pretty. Speaking to an annual conference of intelligence officials and contractors, McConnell said demographics, competition for natural resources and climate change will increase the potential for conflict. President-elect Barack Obama may get a glimpse of some of those challenges on Thursday. McConnell is expected to lead Obama's first top-secret intelligence briefing, according to U.S. officials familiar with the process. According to McConnell's outlook, economic and population growth will strain resources. 'Demand is projected to outstrip the easily available supplies over the next decade,' he said at the annual conference. The intelligence community's forecast indicates oil and gas supplies will continue to dwindle and production will be concentrated in unstable areas, he said. And there appears to be no relief at hand. McConnell said studies have shown that new energy technologies -- such as biofuels, clean coal and hydrogen -- generally take 25 years to become commercially viable and widespread."
New president faces increased risk of conflict, intel chief says
CNN, 5 November 2008

2007

"If you speak to people in the industry, they will conceed that whatever my company may say publicly, we understand that we are facing decline in our own production and worldwide, we are not going to be able to produce more fuel liquids or crude oil in the near future... I was recently at a conference in New Mexico, sitting next to one of the recent CEOs of a major oil company and he, in response to a question from the audience, said 'of course I am a peakist, it is just a question of when it is coming' and I think that that is illustrative of once one is retired as a CEO, one is freer than one was in position to say I am a peakist. And what you hear privately from almost all people is we are coming to it.... I think that many of these politicians will ultimately find that the public blames them for its failure to warn them. Of course in a sense the public is responsible because it is the present public attitude to which politicians play up, and tell them what they want to hear but when the view of the world changes, what the public wanted to hear some time ago is no longer what they want to hear in the future."
James Schlesinger, former US Energy Secretary
Interview with David Strahan, ASPO 6, September 2007

2006

"The scarcity of energy supplies and the energy imbalance between nations is a threat to our prosperity and national security. As resources contract, oil-hungry economies will compete for dwindling supplies of hydrocarbons. Competition for fossil fuels will increase.... Energy resources have long been a major strategic concern: access to secure sources, control over supply lines: these are issues of national security.... The energy challenge is now more pressing than ever.... Global oil production is apparently nearing its peak.... current estimates seem to be converging on some point between 2010 and 2020.... [there] are five factors which are changing the energy landscape: rising demand; dwindling supply; greater concentration of resource in the hands of a few; limited spare capacity; and the environmental impacts of energy use.....This is not a problem that can wait ten years."
Sir David Manning, British Ambassador To The United States Of America
Speech at Stanford University, 13 March 2006

2005

".... a series of crises in oil supply is likely over the coming decades. The first, related to the peak and decline of non-OPEC production, is practically upon us and underpins the currently high oil prices...... The imminent inability of non-OPEC production to meet incremental demand and its decline after 2010 precipitates the second crisis as OPEC’s diminishing spare capacity (even with Iraq’s production back to preinvasion levels) becomes less and less able to accommodate short-term fluctuations.....The third crisis, due to OPEC’s incremental supply being unable to meet incremental demand, follows in the first half of the next decade. This assumes that OPEC’s reserves are as published. .....These crises will have global economic and geopolitical significance: The oil price will be high and volatile, and demand growth will have to be curtailed..."
Oil Supply Challenges - 2: What Can OPEC Deliver?
Oil and Gas Journal, 7 March 2005


The Energy Challenge Of The Post 9/11 Period

"The U.S. needs energy — lots and lots of energy — and 37.1% of it is currently supplied by oil. As the population expands and the policy decisions and technological innovations needed to make the switch to green, renewable energy sources lag, thirst for the stuff is only going to grow. Critics have long lamented that when it comes to energy policy, 9/11 was an opportunity for the country to have an honest debate about the choices it needs to make if it's ever going to break its addiction to oil. 'We need to address the underlying issue,' says Lisa Margonelli, director of the New America Foundation's Energy Policy Initiative, 'and that's our dependence on oil.' Having a national conversation now — an adult one — is the only way forward."
The Far-Ranging Costs of the Mess in the Gulf
TIME, 6 May 2010

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2015

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 


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

BBC Radio 4, 'Start The Week', 30 April 2007

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Academy Award Winning Film Producer David Lynch (Elephant Man, Blue Velvet, etc)
David Lynch Foundation

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