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NLPWESSEX, natural law publishing |
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| PEAK OIL AND ENERGY CRISIS NEWS | ||
| Introduction To Go Direct To Current News Reports - Click Here |
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Peak Oil and Energy Crisis News Archives |
'Highlights' 2005 - 2010 "Christophe de Margerie, CEO of the French oil giant Total...[says]
oil supplies will soon run seriously short, and until we come up with something better we
need to make sure we suck every last drop from every last nook and cranny on the planet.
'We don't know everything,' he says. 'But on oil reserves and production we know a lot.
And it's our duty to speak out.'....In an industry famous for being opaque, de Margerie
speaks openly about the nightmare scenario — oil shortages — that most energy
firms prefer to avoid or deny. De Margerie says the possible effects on the world economy
of dwindling oil supplies are so great 'I am not prepared to shut my mouth.' Shortly after
taking over at Total, he jolted oil executives at a London conference by stating the
industry would be unlikely to produce more than 100 million barrels a day, far below the
120 million or so the International Energy Agency estimates the world could produce by
2030, and which will be needed for Asia's galloping growth. De
Margerie now says 90 million barrels a day is 'optimistic.' Audiences regularly ask him when he thinks we might use earth's last drop
of oil, and de Margerie says that date is decades off. But it's important to realize, he
says during an interview with TIME, 'what will happen very soon is that oil supplies will
not cover demand. That won't mean there is no oil. There
are oil reserves, but you will need to invest billions and billions to get it.'" "Moves made to address carbon emissions are varied,
but many governments seem to be prioritizing low-carbon energy programs as an alternative
to fossil fuels. Fatih Birol [IEA Chief Economist]
recently told the US Council on Foreign Relations of his certainty that developing states
are interested in climate negotiations – and in reducing emissions – far more
for energy security reasons than
for climate ones. Diplomatically, he did not suggest
that major industrial states might be acting for much the same reasons." "The world will never be able to produce more than 89m barrels a day of oil, the head of
Europe’s third largest energy group has warned
....Christophe de Margerie, chief executive of Total, the French oil and gas company, said
he had revised his forecast for 2015 oil production
downward by at least 4m barrels a day because of the current economic crisis and the
collapse in oil prices....Delays and cancellations
in projects to extract oil from Alberta’s tar sands and Venezuela’s Orinoco belt
– both expensive and environmentally difficult operations in which Total is active
– will cut 1.5m b/d of supply that would have come on stream had oil prices remained
strong. ...Meanwhile, Mr de Margerie now expects a
faster decline in production at older fields, such
as those in the North Sea. At lower price levels, companies will find it harder to justify
the greater cost of keeping such fields pumping." "Opec has made a scathing attack on a report from the
International Energy Agency which says that the world's existing oil producers face a
'huge challenge' to keep up with a projected rise in global demand. The report from the IEA, the respected Paris-based energy advisor
to the Organisation for Economic Co-operation and Development (OECD) club of wealthy
nations, said that to compensate for the depletion of existing oilfields, by 2030 the
world would need to find new production equivalent to 45 million barrels per day, or the
output of four Saudi Arabias, to maintain present levels of supply. It added that
additional production equivalent to six Saudi Arabias would be required if a projected
rise in oil demand from 85 million barrels a day to 106 million was taken into account. The IEA, which based its findings on a landmark study of decline rates at
800 of the world's largest oilfields, said that there was, in theory, enough oil left in
the ground to meet demand. However, it would require investment of about $450 billion
(£300 billion) a year, with the bulk of this spent in the 13 member states of Opec, where
most of the world's remaining supplies lie.... The
dispute between the IEA and Opec goes to the heart of the debate over 'peak oil and how
much of the world's energy needs its existing oilfields can supply in the years ahead.
This year's World Energy Outlook report slashed its assessment of how much oil the world
would be able to produce by 2030 by ten million barrels to 106 million per day and placed
more emphasis than ever before on the need to develop alternatives. Opec has traditionally
adopted a much rosier view of the prospects for future global oil production growth. For
years, it has also been accused of overstating its reserves for political reasons and to
discourage the development of alternatives. The IEA's report also gave warning that the
present economic slowdown could have damaging consequences for the world's energy supplies
by undermining crucial investment. 'We cannot let the financial and economic crisis delay the policy
action that is urgently needed to ensure secure energy supplies and to curtail rising emissions of greenhouse gases,' Mr Tanaka [IEA
executive director] said. 'We must usher in a global energy revolution by improving energy
efficiency and increasing the deployment of low-carbon energy.” "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." "The world will have to suffer a deep economic
downturn before serious attempts are made to kick the oil habit, according to the chairman
of PFC Energy, the Washington based oil consultancy. In an interview with lastoilshock.com and Global Public Media, Robin West
said it would be very difficult for the oil industry ever to produce more than 95-100
million barrels per day, and that when output growth stops the oil price will go 'through
the roof'. This will cause 'massive demand
destruction, a huge recession, and only then will
you see very substantial substitution'. Mr West was in London to deliver a presentation at
the IP Week oil conference entitled 'Dances with Wolves', about the dwindling power of the
international oil companies....Asked if he agreed
with IEA chief economist Fatih Birol, who said last year that Iraq must increase its output exponentially if the world is to avoid a supply
crunch by 2015, Mr West said 'I think we're going to get into a nasty crunch at some
point, one way or another. If Iraq comes on, the crunch can be deferred for a while – but it's coming'." "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." Interview with David Strahan, ASPO 6, September 2007 "Oil ruled the 20th century; the shortage of oil will rule the 21st....
Last Tuesday the
lead story in The Financial Times was the latest report from the International Energy
Agency. The FT quoted the IEA as saying: 'Oil looks extremely tight in five years’
time,' and that there are 'prospects of even tighter natural gas markets at the turn of
the decade'. For an international agency, that is inflammatory language.... 27 of
the 51 oil-producing nations listed in BP’s Statistical Review of World Energy
reported output declines in 2006. One projection of world crude oil production actually
forecasts a 10 per cent reduction in total world output between 2005 and 2015. That would
be a revolution..... Some analysts think that the peak oil
moment has already been reached; some still think that it will not come until 2020 –
which is itself only 12 years away. Market trends and the statistics both support the
IEA’s view that consumption is accelerating and supplies falling faster than
expected. Of course, if the 'crunch' point is only five years’ away for oil, and
closer for natural gas, it has, for practical purposes, already arrived....The shortage of
oil and natural gas, relative to demand, had already changed the balance of world power. Historians may well conclude that the US decision to invade Iraq
was primarily motivated by the desire to gain physical control of Iraq’s oil and to
provide defence support to other Middle Eastern oil powers. Political
motivations are always mixed, but oil is an essential national interest of the United
States. If the US is now deciding to withdraw from Iraq, the price will have to be paid in
terms of loss of access to oil.... The world is coming to
the end of the age of oil, which produced its own technology, its balance
of power, its own economy, its pattern of society. It does not greatly matter whether the
oil supply has peaked already or is going to peak in five or 12 years’ time. There is a huge adjustment to be made. There will
be some benefits, including higher efficiencies and perhaps a better approach to global
warming. But nothing will take us back towards the innocent expectation of indefinite
expansion of the first months of the new millennium." London Times, 16 July 2007 "If Iraqi production does not
rise exponentially by 2015, we have a very
big problem, even if Saudi Arabia fulfills all its promises. The numbers are very simple,
there's no need to be an expert.... Within 5 to 10 years, non-OPEP production will reach a peak and begin to decline, as reserves run out.
There are new proofs of that fact every day. At the same we'll see the peak of China's
economic growth. The two events will coincide: the explosion
of Chinese growth, and the fall in non-OPEP oil production. Will the oil
world manage to face that twin shock is an open question.... I really hope that consuming
nations will understand the gravity of the situation
and put in place radical and extremely tough policies to
curb oil demand growth." "The world is consuming oil at a rate that will result in oil production
peaking in 15 to 25 years, a group of geoscientists told the American Association of
Petroleum Geologists' annual convention in Long Beach, Calif. When world oil production
reaches the peak by 2020-30, the rate will be 90-100 million
b/d, only 10-20% higher than it was in 2005. Depending on the level of
world oil resources, which is highly uncertain, that peak is likely to last 20-30 years
before production begins its ultimate decline. The estimates are released for the first
time following an AAPG Hedberg
Research Conference held in November 2006 in Colorado Springs.... Unconventional
resources-tar sands and extra-heavy oil, oil shale, and oil from mature source
rocks-provide a massive in-place resource. Each is known to have at least 3-4 trillion
bbl. The problem with these unconventional resources is
recoverability. Each faces a major challenge, whether poor quality oil (extra-heavy oil),
poor quality reservoirs (oil from source rocks), or both (oil shale). Production of extra
heavy oils and oil shale also requires substantial energy, enough so that oil shale
production may be severely constrained by being mostly uneconomic due to a low net energy
gain. The 75 Hedberg conference participants came from 18 countries on all
six populated continents. " Oil And Gas Journal, 4 April 2007 ".... 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..." The Energy Challenge Of The Obama Period "In the 21st century, we know that the future of our
economy and national security is inextricably linked with one challenge: energy. In the
next few years, the choices that we make will help determine the kind of country and world
that we will leave to our children and our grandchildren. All
of us know the problems that are rooted in our addiction to foreign oil. It constrains our economy, shifts wealth to hostile regimes, and leaves
us dependent on unstable regions.... For over three decades, we've listened to a growing
chorus of warnings about our energy dependence. We've heard president after president
promise to chart a new course. We've heard Congress talk about energy independence, only
to pull up short in the face of opposition from special interests. We've seen Washington
launch policy after policy, yet our dependence on foreign oil has only grown, even as the world's resources are disappearing. This time has to be different. This time we cannot fail, nor can we be
lulled into complacency simply because the price at the pump has for now gone down from $4
a gallon. To control our own destiny, America must develop new forms of energy and new
ways of using it. And this is not a challenge for government alone; it's a challenge for
all of us. The pursuit of a new energy economy requires a sustained all- hands-on-deck
effort, because the foundation of our energy independence is right here in America, in the
power of wind and solar, in new crops and new technologies, in the innovation of our
scientists and entrepreneurs and the dedication and skill of our workforce. Those are the
resources that we have to harness to move beyond our oil addiction and create a new hybrid
economy. As we face this challenge, we can seize boundless opportunities for our people.
We can create millions of jobs, starting with a 21st- century economic recovery plan that
puts Americans to work building wind farms, solar panels, and fuel-efficient cars. We can
spark the dynamism of our economy through a long-term investment in renewable energy that
will give life to new businesses and industries with good jobs that pay well and can't be
outsourced....The team that I have assembled here today is uniquely suited to meet the
great challenges of this defining moment.....Dr. Steven Chu [nomination for Energy
Secretary] is a Nobel Prize-winning physicist who has been working at the cutting edge of
our nation's efforts to develop new and cleaner forms of energy. He blazed trails as a
scientist, teacher, and administrator, and has recently led the Berkeley National
Laboratory in pursuing new alternative and renewable energies. Steven is uniquely suited
to be our next secretary of energy as we make this pursuit a guiding purpose of the
Department of Energy, as well as a national mission. The scientists at our national labs
will have a distinguished peer at the helm." "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." "(Steven Chu, Obama Secretary
of Energy) was my boss. He knows all about peak oil, but he can't talk about it. If the
government announced that peak oil was threatening our economy, Wall Street would crash.
He just can't say anything about it." Cheer Up, It's Going to Get Worse Bohemian.com, 17 June 2009 |
|
| MORE ENERGY INFORMATION 'ENERGY UPDATE' BULLETINS SOLAR ENERGY NEWS |
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| PEAK OIL AND ENERGY CRISIS NEWSBITES |
| 2010 |
"Russia crude production neared
a post-Soviet record in February as TNK-BP, the
venture owned by BP Plc and a group of billionaires, raised output at new fields in both
western and eastern Siberia. Crude production reached almost 10.08 million barrels a day,
a gain of 3.3 percent from a year earlier and 0.2 percent from the previous month,
according to preliminary data from the Energy Ministry’s CDU-TEK unit. Output, which has exceeded 10 million barrels a day for six months in a
row, was slightly below November’s record. Oil exports
slumped to 5.21 million barrels a day, down 1.3 percent from
January and 5.7 percent on the year, as the export
tax climbed following the price of Urals, Russia’s benchmark blend. TNK-BP boosted output to 1.42 million barrels day after ramping up new
projects, such as the Uvat and Kamennoye fields in western Siberia and Verkhnechonsk in
the east. Production advanced 4.5 percent from a year earlier and 0.5 percent from the
previous month, not including its OAO Slavneft venture." |
"Asian buyers are taking record
volumes of West African crude oil this year as fuel consumption rises in India, China and
other East Asian countries, a Reuters survey of
trade sources showed on Monday. Imports of cargoes of unrefined oil from Nigeria, Angola
and other African producers via Atlantic ports averaged around 1.79 million barrels per
day (bpd) in the first quarter, up from about 1.53 million bpd in the fourth quarter and
close to 1.1 million bpd a year ago. In the first three months of this year, Asia consumed
about 40 percent of all the West African crude produced, up from around 25 percent in Q1
2009, the Reuters survey shows. Asian buyers have so far taken 52 cargoes of West African
crude oil due to load in March, compared with around 50 in February and at least 59
cargoes loading in January." |
"The oil supply challenge is often summarized in terms of the
production volume equivalent of Saudi-Arabia’s that needs to be replaced. This
popular metric is based on in-depth studies of global
decline rates that show a decline range between 4.5 and 6 percent over the current 73
million barrels of crude oil produced per day. By
using such literature values for all types of production, it can be shown that: |
"Using fossil fuel in vehicles is better for the environment than
so-called green fuels made from crops, according to a government study seen by The Times.
The findings show that the Department for Transport’s target for raising the level of
biofuel in all fuel sold in Britain will result in millions of acres of forest being
logged or burnt down and converted to plantations. The study, likely to force a review of
the target, concludes that some of the most commonly-used biofuel crops fail to meet the
minimum sustainability standard set by the European Commission. Under the standard, each
litre of biofuel should reduce emissions by at least 35 per cent compared with burning a
litre of fossil fuel. Yet the study shows that palm
oil increases emissions by 31 per cent because of the carbon released when forest and
grassland is turned into plantations. Rape seed and soy also fail to meet the standard. The Renewable Transport Fuels Obligation this year requires 3¼ per cent
of all fuel sold to come from crops. The proportion is due to increase each year and by
2020 is required to be 13 per cent. The DfT commissioned E4tech, a consultancy, to
investigate the overall impact of its biofuel target on forests and other undeveloped
land. The EC has conducted its own research, but is refusing to publish the results. A
leaked internal memo from the EC’s agriculture directorate reveals its concern that
Europe’s entire biofuels industry, which receives almost £3 billion a year in
subsidies, would be jeopardised if indirect changes in land use were included in
sustainability standards....Last year, 127 million litres of palm oil was added to diesel
sold to motorists in Britain, including 64 million litres from Malaysia and 27 million
litres from Indonesia. Kenneth Richter, biofuels campaigner for Friends of the Earth,
said: 'The billions of subsidy for biofuels would be better spent on greener cars and
improved public transport.'" |
"The Canadian Oil Sands Trust
has announced it will increase synthetic crude oil production capacity at its Syncrude
project near Fort McMurray, Alberta. The
company said that, based on preliminary scoping and design work by Syncrude and
ExxonMobil, the existing Mildred Lake upgrading facility has latent capacity that can be
'unlocked' through a series of steps, allowing
synthetic crude oil production to grow to approximately 425,000 barrels per day (bpd) by the end of the decade. The projects include accessing excess
coking capacity, modifying facilities, and potentially adding new ancillary units. Alberta
tar sands project will increase production." |
"Shell Oil Co. said Tuesday it is abandoning its quest for water
rights from the Yampa River in northwest Colorado to develop oil shale production, citing
delays in the project due to the global economic downturn. The Yampa is the last
free-flowing river in Colorado, uninterrupted by dams or other diversions. It winds
through Dinosaur National Monument and is a popular rafting spot for the region's boaters.
Colorado, Wyoming and Utah are thought to hold 800 billion barrels of recoverable oil in
shale. But critics of a federal management plan for developing oil shale on public lands
say the process would use too much of the region's scarce water. Though Shell dropped its
bid for Yampa water this week, the company left open the possibility of pursuing the
oil-shale project in the future. 'The exact scale and timing for development will depend
on a number of factors, including progress on our technology development, the outcome of
regulatory processes, market conditions, project economics and consultations with key
stakeholders'” the company said in a statement. Shell was seeking a conditional water
right to take up to 375 cubic feet per second, about 8 percent of the Yampa's average
April-to-June flow. The company would have pumped the water into a new reservoir covering
1,000 acres and holding 45,000 acre-feet of water, or about 15 billion gallons." |
"A survey of 70 active companies by industry body Oil & Gas UK
shows that there are more projects under consideration than at this time last year.
However, difficulties raising finance and the fact
that the easiest – and therefore cheapest – reserves to extract have already
been exploited means fewer projects are actually being developed. This will lead to a fall
in the UK's domestic oil production and increase the need for imports. There are 11bn barrels of oil and gas in existing projects, up 15pc from
the previous year – enough to meet half the UK's demand in 2020. However, companies
will need to raise £60bn of capital expenditure to extract this oil. Oil companies are
planning to extract only 5.25bn barrels from approved projects, up from a target of 6bn
barrels at this time last year. Mike Tholen, the industry group's economics director and
author of the report, said confidence had improved, but the investment climate was still
not good." |
| "Five years ago, when oil prices were climbing steadily and
economists were stoking fears about peak oil and gas, it seemed that major energy
producers like Russia were holding all the cards. Then-president Vladimir Putin spoke of
his country as an 'energy superpower' and used energy supplies as a blunt instrument of
Kremlin foreign policy. Gas cutoffs to Ukraine caused panic in Europe, while Western
energy companies fell over each other to get a slice of Russia's oil and gas fields. But
all that is over. Today, the super-giant Shtockmann
natural-gas field under the Arctic sea—Russia's only big hydrocarbon discovery since
Soviet times—has just been mothballed due to the towering cost of extracting the
undersea gas. At the same time, worldwide demand for Russia's gas has plummeted. And
meanwhile, the government has punctured investor confidence by pressuring BP, one of the
few major foreign investors left in Russia's energy sector, to hand over a giant Siberian
gas field to a government-owned rival. It's time for Moscow to kiss goodbye those dreams
of energy hegemony. One problem is that the recession has eviscerated European demand for
Russian natural gas (consumption dipped by 7 percent in 2009). Another is that demand in
the United States for imported natural gas has fallen off too. Thanks to shale gas and
other unconventional sources like tar sands, the U.S. is now close to self-sufficient in
natural gas. It's a nightmare for Shtockmann, where
the business plan hinged on freezing the product into liquified natural gas, or LNG, for
export to the United States....The $20 billion cost of extracting the deep-buried gas in
the harsh conditions of the Arctic has proved prohibitive for Gazprom and its minority
partners, Total of France and Statoil of Norway....Now the European market seems
oversupplied. More worrying still, Gazprom's traditional suppliers (gas fields in the
Central Asian nations of Turkmenistan and Kazakhstan) have begun opening their own direct
pipelines to China, where gas consumption has a future. And though Gazprom still controls
about 17 percent of the world's proven natural-gas reserves, many of its existing fields
are beginning to run dry. Getting at the remainder—for instance at the Bovanenkovo
field in the remote Yamal Peninsula in Siberia—will need massive investment of cash
and know-how. Who wants to sink in that kind of money with no guarantee of returns?....Russia remains the largest exporter of oil and gas in the
world—bigger even than Saudi Arabia. But unlike the Gulf nations, Russia is fast
pumping its existing wells of both oil and gas dry.
To tap its reserves—and to maintain Russia's status as an 'energy
superpower'—Russia needs to stop ripping off its investors just because a demand
falloff has hurt its bottom line. Gas consumption will come back. But Russia's superpower
aspirations won't also rise if Russia has alienated its partners. Without them, its new
reserves—like the Shtockmann field—will remain buried in the ground." So Long, Salad Days Newsweek, 24 February 2010 |
"Forget global warming – the more pressing problem is that the
lights are about to go out. Look at the projections, and you will see why Ed Miliband, the
Cabinet minister responsible for energy (there have been eight since 1997), should be up
at night worrying. Over the next seven years, all the assumptions about where our power
comes from will be overturned. Five years ago,
Britain became a net importer of fossil fuels. The depletion of North Sea oil and gas
means that we are depending increasingly on foreign supplies. In 2000, we imported just
one per cent of our natural gas supplies; now it's nearly half, and the National Grid
expects it will reach 70 per cent by 2018. On Tuesday, Oil & Gas UK, which represents
the industry, issued a warning that without more investment in the North Sea, its
contribution towards our energy needs will continue to dwindle. At the same time,
generating capacity is set to drop off sharply, as ageing coal, gas and nuclear power
stations are taken out of service. As so often,
Europe is playing its part, in the shape of the EU Large Combustion Plant directive, which
says that they should be cleaned up at vast cost or closed. The
Government admits that by 2020 the lost capacity will be vast – 22.5 gigawatts, or
almost a third of our total requirements....the
present Government has done to address the looming blackout. It has stuck to a policy
designed for an age of plenty, when what is needed is one to deal with the insecurities of
the 21st century. How, for example, should we protect
ourselves against the prospect of rising oil prices at a time when economic growth
elsewhere will drive up demand for ever scarcer supplies? How do we insure against political instability abroad? When Russia
tightened the tap on its natural gas pipelines last year in a dispute with Ukraine,
Britain suffered, because we are at the other end of that network and have far smaller
stockpiles than our European counterparts. Argentina's sabre-rattling over oil exploration
in the Falklands may be comical today, but what about a nuclear-armed Iran blockading the
Strait of Hormuz, through which much of the world's oil supplies must pass? Last year, the
Government admitted that by 2017, demand will at times exceed supply, and that we could
expect the first power outages since the rationing of the 1970s. That would mean up to 16
million households sitting in the dark for an hour. Charts from Mr Miliband's own
department show that the situation will be even worse a decade later....Energy security – or our lack of it – is where those on
either side of the [climate change] debate can find common ground....We face a looming
crisis that has inescapable parallels with the banking disaster that nearly brought the
world's money system to a halt." |
"Spare capacity, the market term for difference in supply and demand
of crude, has remained constrained despite recession and a massive reduction in oil demand
in 2009, Francisco Blanch, Global Head of commodities research at Bank of America Merrill
Lynch, said in his latest report. Blanch cited the decline in supply from non-Opec
suppliers for the reduction in spare capacity without giving a figure. He warned
geopolitics and protectionism may play spoilsport for the oil markets. 'Last year, we
estimated that global non-Opec production decline rates averaged 4.8 per cent for fields
producing between 2003 and 2008. When adding 2009, we find non-Opec
decline rates have increased from 4.8 per cent to 4.9 per cent. This step up shaves one
million barrels a day by 2015 from our non-Opec supply projections,' Blanch wrote in his report. The global demand for oil will rise two
million barrels a day this year with emerging economies accounting for three-fourth of
this rise, Blanch had told Emirates Business earlier. 'While the demand in emerging
economies will rise by 1.5 million barrels a day, it will rise by 0.5 million barrels a
day in the OECD economies.' Oil will average at $85 a barrel this year, Blanch said. 'It
will potentially get close to $90 a barrel by the third quarter. It will break into a
hundred in the first quarter of the next year,' the analyst credited for forecasting $147
a barrel price for oil almost on the nose in 2008 had told this newspaper earlier. For
most industries around the world the crisis was exceptional, but not for oil, Blanch's new
report said adding that the commodity has fared the crisis with strength. Oil had already
suffered two back-to-back recessions in the 80s and 90s, where utilisation rates dropped
to very low levels. The first recession in oil occurred in the early 80s as increased
North Sea crude production and a major switch in OECD oil demand towards natural gas and
nuclear power forced Saudi Arabia to cut output by 6.7 million barrels a day. In the early
90s, the oil industry suffered a second large recession, as the economic collapse of the
Soviet Union left five million barrels a day of spare capacity. Blanch has predicted that the non-Opec supply will peak by 2011. 'We conclude that non-Opec supply,
including non-conventional oil, NGLs and biofuels, will likely peak by 2011 at around 52.3
million barrels a day. Thereafter we see steady declines in production, reaching 51
million barrels a day by 2015. The world will thus become more reliant on Opec and we see
utilisation rates reaching 95 per cent by 2014,' he
said.... Reliance on Opec crude will only grow from
now to 2015, Blanch said. 'We see Opec utilisation
rates reaching 94 per cent by 2014 despite large investments in Saudi Arabia, Angola and
Algeria.' Blanch reiterated his opinion that the emerging markets (EMs) will drive the
demand for oil until 2015....With Opec capacity utilisation rates now running at around 81
per cent, any return to the recent demand growth path will likely eat into spare capacity
sooner rather than later, Blanch said.....As a result, large fluctuations in prices will
likely remain the norm to bring medium-term supply and demand trends into balance. 'In
line with this view, we see the band for oil prices widening from $70-$85 per barrel at
present, to $65-105 barrel the next year. By 2014, the range could expand again to the
$50-150 barrel band observed in 2008,' Blanch wrote in his report..... Following two decades of exceptionally high spare productive
capacity in the 80s and 90s, the global oil market tightened at a very rapid pace in the
2000s as robust demand from emerging economies stumbled against limited supply growth, said Blanch. However, the recession brought about a substantial
contraction in OECD oil demand, forcing Opec cartel members to cut supply by 3.1 million
barrels a day in early 2009 and late 2008. 'While oil demand has started to recover again,
the medium-term outlook for oil and the global economy remains extremely uncertain. What
does oil have in store for the 2010s. A potential four-fold surge in Iraqi production,
dramatic increases in oil efficiency and substitution or a demand bubble in the emerging
economies could all create large swings in global oil supply and demand balances. But the
departure point matters, suggesting that oil the oil markets could be very tight again by
2014,' said Blanch. He sees large fluctuations in oil prices after 2014....Taking the Iraqi government's announcement of raising its oil
production capacity from 2.5 million barrels a day to 10-12 million barrels a day over the
next decade with a pinch of salt, blanch said that
such a development would keep oil prices below $100 a barrel. 'While we remain sceptical that these large increases in volumes can be
achieved, a four-fold increase in Iraqi production
over the coming years could be sufficient to keep oil prices from rising above $100 a
barrel for much of this decade,' said Blanch." |
"BP Plc and Royal Dutch Shell Plc may falter in their campaigns to save billions in
oil and gas project costs as a resurgence in drilling and demand for engineers threaten to
revive inflation in the industry. Crude prices doubled to near $80 a barrel in the past
year, prompting producers to resume projects put on hold during the recession. Oil and gas
industry spending will rise 11 percent this year to $439 billion, according to Barclays
Capital. 'Oil price inflation and cost inflation are highly correlated, albeit with some
delay,' said Paul Wheeler, a London-based managing director in the oil and gas group at
investment bank Jefferies International Ltd. 'The oil
industry is always people constrained. It’s one of the biggest challenges: a lack of
young engineers and geologists.'” |
"When world oil producers and consumers convened in Jeddah for an
emergency summit in June 2008, Samuel Bodman, then US energy secretary, had a simple
message for Saudi Arabia: pump more oil now. As Steven Chu, his successor, flies to the
kingdom this week, the agenda instead has a heavy focus on research and technology. The
different messages underscore the fact that crude prices have fallen from $130 a barrel in
June 2008 to $80 a barrel. They also reflect a further tilt in the balance of demand
growth from west to east. While the US's thirst for
oil still leads the world, demand fell in 2008-09 and most analysts expect that efficiency
measures and bad memories of the recent price spike will keep a lid on any rebound. The US
has also been diversifying its sources of oil. Canada has overtaken Saudi Arabia as the
top supplier amid aggressive investment in its tar sands region. Angola, Nigeria and Brazil have also contributed. More important, these
producers are competing for a smaller market. US crude imports peaked above 10m barrels a
day in 2005, and in the past two years have fallen 9 per cent as recession thinned traffic
and pared industrial activity. China's crude imports, meanwhile, rose about 14 per cent
last year. Purchases from Saudi Arabia, its largest supplier, rose faster and reached a
record 1.2m b/d in December. Saudi imports averaged 843,000 b/d last year, still lower
than the US average in the first 11 months for which data are available. Jim Burkhard,
managing director of global oil at IHS Cambridge Energy Research Associates, the
consultant, said: 'This is a reflection of the global economy. China has been growing. The
US hasn't. We've seen that reflected in oil demand figures.' For Saudi Arabia, in need of
stable markets for 264bn barrels in oil reserves, China promises reliable demand as slower
economic growth and efficiency measures take hold in the west. Analysts do not expect the
shift in oil flows to undermine the strong political relationship between the US and the
kingdom. Mr Chu's office said his visit is meant to strengthen US partnerships in the
region. Greg Priddy, global oil analyst at Eurasia Group, a political risk consultancy,
said the US was 'actually encouraging the Saudis to export more to China as an offset to
Iran', which faces increasing international pressure over its nuclear programme. Saudi
Aramco, the state oil company, owns half of Motiva Enterprises, a US refinery joint
venture that it helps to supply. Still, there are
signs the world's top crude producer is shifting attention east. Saudi Arabia is ending a
lease for some of the vast storage facilities in the Caribbean it used to dispatch cargoes
to US refineries. Ali Naimi, Saudi oil minister, recently said the kingdom was leasing new
storage in Okinawa, Japan, from which to ship oil to the booming Asian market. 'Asia will
be a huge market,' Mr Naimi said. Saudi Arabia has shouldered the bulk of the output cuts
announced by Opec, the oil cartel. Analysts say it shut in cheaper, heavier crudes in
order to preserve profit margins. This has squeezed
operations at US refineries that specialise in the heavier grades, further damping US
demand for Saudi oil. Amy Myers Jaffe, a research fellow at Rice University in Houston,
said that while market forces had redirected Saudi exports, US energy policy was also a
factor. 'Everything in oil is geopolitical,' she said. 'For sure, the Saudis have commercial reasons . . But oil is
never 100 per cent commercial.'" |
"BP Plc and Royal Dutch Shell Plc may falter in their campaigns to
save billions in oil and gas project costs as a resurgence in drilling and demand for
engineers threaten to revive inflation in the industry. Crude prices doubled to near $80 a
barrel in the past year, prompting producers to resume projects put on hold during the
recession. Oil and gas industry spending will rise 11 percent this year to $439 billion,
according to Barclays Capital. 'Oil price inflation and cost inflation are highly
correlated, albeit with some delay,' said Paul Wheeler, a London-based managing director
in the oil and gas group at investment bank Jefferies International Ltd. “The oil
industry is always people constrained. It’s one of the biggest challenges: a lack of
young engineers and geologists.” |
"The API reported that total US oil consumption is now at the lowest
level, 18.4 million b/d, in 12 years despite the fact that gasoline rose steadily in
January. US gasoline consumption is now about 8.7
million b/d as opposed to a high of 9.6 million reached in July 2007. Consumption of low sulfur diesel fuel, used in heavy trucks is down by
11.5 percent, a bad sign for the US economy." |
"The world’s most powerful investors have been advised to buy
farmland, stock up on gold and prepare for a 'dirty war' by Marc Faber, the notoriously
bearish market pundit, who predicted the 1987 stock market crash. The bleak warning of
social and financial meltdown, delivered today in Tokyo at a gathering of 700 pension and
sovereign wealth fund managers. Dr Faber, who advised his audience to pull out of American
stocks one week before the 1987 crash and was among a handful who predicted the more
recent financial crisis, vies with the Nouriel Roubini, the economist, as a rival claimant
for the nickname Dr Doom. Speaking today, Dr Faber said that investors, who control
billions of dollars of assets, should start considering the effects of more disruptive
events than mere market volatility. 'The next war will be a dirty war,' he told fund
managers: 'What are you going to do when your mobile phone gets shut down or the internet
stops working or the city water supplies get poisoned?' His investment advice, which was
the first keynote speech of CLSA’s annual investment forum in Tokyo, included a
suggestion that fund managers buy houses in the countryside because it was more likely
that violence, biological attack and other acts of a 'dirty war' would happen in
cities....One of Dr Faber’s darker scenarios
involves growing military tension between China and the United States over access to
limited oil resources. Today the US has a
considerable advantage over China because it has free access to oceans on both coasts, and
has potential energy suppliers to the north and south in Canada and Mexico. It also
commands an 11-strong fleet of aircraft carriers that could, if necessary, secure supply
routes in a conflict situation. China and emerging Asia, meanwhile, face the uncertainty
of supplies that must travel from the Middle East through winding sea lanes and the
Malacca bottleneck. American military presence in Central Asia, Dr Faber said, may add to
the level of concern in Beijing. 'When I tell people to prepare themselves for a dirty
war, they ask me: 'America against whom?' I tell them that for sure they will find
someone.' At the heart of Dr Faber’s argument is a fundamentally gloomy view on the
US economy and its capacity to service a growing mountain of debt. His belief, fund
managers were told, is that the US is going to go bankrupt. Under President Obama, he
said, the country’s annual fiscal deficit will not drop below $1 trillion and could
rise beyond that figure." |
"Bank of America and Barclays
Capital, two leading oil traders, have told clients to brace for crude above $100 (£64) a
barrel by next year, before it pushes relentlessly higher over the decade. This is a stark
contrast from recessions in the 1980s and 1990s, when it took years to work off excess
drilling capacity built in the boom. 'Oil has the
potential to flirt with $100 this year. We forecast an average price of $137 by 2015,'
said Amrita Sen, an oil expert at BarCap. The price has doubled to $78 in the last year.
'The groundwork for the next sustained step up
in oil prices is now almost complete. Global spare capacity is likely to be reduced to low
levels within a relatively short time. The global economic crisis has postponed, but not
cancelled, a crunch which would otherwise be starting to bite now,' said Barclays. Francisco Blanch, from Bank of America Merrill Lynch, said crude may touch
$105 next year, with $150 in sight by 2014. 'Approximately 1.7bn consumers in emerging
markets with a per capita income of $5,000 to $20,000 are eagerly waiting to buy cars,
air-conditioning units, or white goods,' he said. China has overtaken the US as the
world's top car market. Mr Blanch expects oil demand to rise by a further 2.8m barrels per
day (bpd) in China and 2.5m bpd in India by 2015, when two giants will be absorbing the
lion's share of Gulf output. Consumption in the West
has already peaked and will fall each year as populations shrink and we waste less, but
the West no longer sets the price. Global use will increase by 8.8m bpd to 95m bpd....Mr Blanch said output from
non-OPEC states is falling by 4.9pc each year, despite Russia's reserves. Saudi Arabia and
the Emirates can plug a quarter of the gap, but global spare capacity must soon drop to
wafer-thin levels – leaving us vulnerable to the sort of 'super-spike' seen in 2008.
The wildcard is whether Iraq can quadruple output to Saudi levels this decade, a target
dismissed by most analysts as pie-in-the-sky. Painfully high prices are needed to unlock
fresh supplies as reserves are depleted in the North Sea and the Gulf of Mexico.
Deep-water rigs off Brazil are costly and require drilling far below the seabed. Canadian
oil sands and US biofuels have break-even costs near $70. While the US, UK, and the Far East are turning to nuclear power, it takes
a decade to build reactors. 'peak uranium' lurks in any case. The oil spike brought the
global economy to a shuddering halt in 2008. This time the crunch may hit before the West
has fully recovered. Whatever happens, the US, Europe and Japan will soon transfer a chunk
of their wealth to the petro-powers. It is a new world order." |
"Billions of barrels of oil may lie trapped in the rocks deep beneath
the ocean floor of the South Atlantic, but finding them and bringing them to market is
likely to be a big struggle — vastly expensive and fraught with political
complications. A study by the British Geological Society suggested that the region could
contain up to 60 billion barrels of oil — a similar-sized deposit to the North Sea.
But such figures may give little sense of how much is recoverable using existing
technology. No drilling has been carried out in the Falklands since 1998, when Shell and
Lasmo drilled six wells in an area to the north of the islands, not far from where the
current drilling programme is set to start next week. Traces of crude were discovered in
all but one of the wells — where gas was found instead — but the following year
the global price of oil fell to $10 per barrel, ending the commercial logic of further
exploration....The drilling site lies in relatively shallow waters about 400 metres
(1,300ft) deep and between 30 and 60 miles north of the islands. Two of the other
companies, Falkland Oil and Gas and Borders & Southern, are prospecting in another
region that lies to the south of the islands in deeper and more challenging waters up to
1,200m (3,900ft) deep. There is a reasonable chance
that at least one of the companies will find oil — but whether it is found in
commercial quantities is less clear. The Falklands are so remote that any oil discovery
would need to be large to justify the multibillion- pound costs of building pipelines,
export terminals and other infrastructure. Then there are the political obstacles with
Argentina, which are likely to deter industry giants such as BP, Shell and Exxon. Until a
resolution with Argentina can be reached over who owns the oil, they are likely to remain
sceptical." |
"With oil majors given the
cold shoulder in many developing countries, it is no mean feat that Exxon
Mobil managed to replace 100 percent of last year’s production with new reserves.
Even so, not all energy is equal. The stuff Exxon
is using to fill its pipeline will be harder to extract and of lower value to
investors....clearing the crucial 100 percent hurdle by S.E.C. standards should be
child’s play in 2010. With reserves of more than two billion barrels of oil
equivalent, Exxon’s latest acquisition, XTO Energy, will replace more than a year of
Exxon’s output at a stroke. The bigger concern for Exxon will be the nature of these
new reserves. On the bright side Exxon is steering away from capricious developing
nations, meaning fewer political headaches. Recent reserve additions have been in
politically placid areas, notably Canada and Australia. But economic risks may offset
fewer political ones. Discoveries of oil that is easy
to extract and refine are failing to keep pace with output. The barrels taking their place
may be tougher or more costly to reach, and therefore less profitable. Hopes are high that cleaner-burning natural gas will
grow in popularity. The trouble is that gas still trades at a discount to its liquid
cousin crude, especially in the United States, where it is worth about half the price of a
barrel of oil. Liquids, about 57 percent of Exxon’s
reserves 10 years ago, are now just half, according to IHS Herold. And squeezing energy
from oil
sands, an increasingly important source for Exxon, is often economical only when oil
trades above $60 a barrel. Conventional wells are generally profitable at just half that
level." |
"EDF could face 'massive' new investment to extend the life of its
French nuclear reactors beyond 40 years, the country’s safety authority has warned.
Extending the life of its French reactors is crucial to EDF,
which is hoping to secure 60-year life-cycles for its plants – a term that is already common in the US. The move comes as the
French state-owned utility faces the prospect of greater competition in its home market
and struggles to
cope with record debt. André-Claude Lacoste, president of the French nuclear safety
authority, said on Tuesday that the watchdog was 'beginning to treat' the question of the
conditions EDF would have to meet to extend the life of its reactors beyond 40 years. 'To
go beyond that without doubt would require massive investment,' he warned. The warning
came as the regulator revealed that EDF has already been forced to commit hundreds of
millions of euros to replacing the ageing steam generators on 34 of its 58 reactors." |
"Two of Britain’s biggest
energy companies are lobbying the Conservative Party to keep some of the nation’s
most polluting power stations operating beyond a deadline set by the European Union, The
Times has learnt. RWE npower and E.ON, the two German-owned companies, have held private
talks with senior Conservative politicians about the legal position of nine coal and
oil-fired power plants due to close by the end of 2015 under new EU pollution rules.
Together, the six coal and three oil-fired plants generate 12.3 gigawatts of electricity,
about 15 per cent of total UK electricity supplies. E.ON and RWE are pressing for at least
some of the plants to be exempted from the EU rules on the grounds that, without them,
Britain could face blackouts by 2015 because not enough replacement stations are being
built." |
"EU companies have taken
millions of acres of land out of food production in Africa, central
America and Asia to grow biofuels for transport,
according to development campaigners. The consequences of European biofuel targets, said
the report by ActionAid, could be up to 100 million more hungry people, increased food
prices and landlessness. The report says the 2008
decision by EU countries to obtain 10% of all transport fuels from biofuels by 2020 is
proving disastrous for poor countries. Developing countries are expected to grow nearly
two-thirds of the jatropha, sugar cane and palm oil crops that are mostly used for
biofuels. 'To meet the EU 10% target, the total land area directly required to grow
industrial biofuels in developing countries could reach 17.5m hectares, over half the size
of Italy. Additional land will also be required in
developed nations, displacing food and animal feed crops onto land in new areas, often in
developing countries,' says the report. Biofuels are estimated by the
IMF to have been responsible for 20-30% of the global food price spike in 2008 when
125m tonnes of cereals were diverted into biofuel production. The amount of biofuels in
Europe's car fuels is expected to quadruple in the next decade. The report attributes the
massive growth in biofuel production to generous subsidies. It estimates that the EU biofuel industry has already received
€4.4bn (£3.82bn) in incentives, subsidies and tax relief and that this could triple
to over €13.7bn if the EU meets its 2020 target. The greatest support to the industry
is exemption from excise duties. Duty at the pump is 20 pence less per litre compared to
conventional fuels although this exemption due to end in 2010, a change which supermarket
Morrisons cited last week as the reason for dropping one of its biodiesel blends. In
2009, the duty on low- sulphur petrol and diesel in the UK was 54.19 pence per litre; for
biodiesel and ethanol it was 34.19 pence per litre." |
"A 'miracle' plant, once thought to be as the answer to producing
renewable biofuels on a vast scale, is driving thousands of farmers in the developing
world into food poverty, a damning report concludes today. Five years ago jatropha was
hailed by investors and scientists as a breakthrough in the battle to find a biofuel
alternative to fossil fuels that would not further impoverish developing countries by
diverting resources away from food production. Jatropha was said to be resistant to
drought and pests and able could grow on land that was unsuitable for food production. But
researchers have found that it has increased poverty in countries including India and
Tanzania. Seeds of discontent: the 'miracle' crop that has failed to deliver... Millions
of the plants have been grown in anticipation of rich returns, only for growers to be hit
by poor yields, conflict over land and a lack of infrastructure to process the oil-rich
seeds. Oil giant BP, which planned to spend almost £32m on a joint venture to set up
jatropha plantations, has now pulled out and the charity ActionAid today warns that
jatropha needs to be cultivated on prime food-growing land to produce significant yields.
According to one estimate, up to one million hectares of jatropha – an area
equivalent to Devon and Cornwall combined – are being cultivated around the globe,
despite little evidence that it can produce enough oil to make the crop commercially
sustainable....despite jatropha's much-lauded ability
to grow where food crops cannot flourish, campaigners say there is evidence that
commercially viable yields can only be obtained in fertile soil. In India, forecasted
annual yields of three to five tonnes of seeds per hectare have been scaled back to 1.8 to
two tonnes. The Overseas Development Institute, a leading international development
think-tank, has stated that 'as the mainstay of people's livelihoods, jatropha looks
distinctly marginal'." |
"Saudi Arabia must be 'very serious' about any possible peak in oil
demand, which is an 'alarm' for OPEC’s biggest exporter to diversify its economy, a
Saudi Oil Ministry adviser said. Saudi Arabia is making a push into renewable energy and
is starting its first carbon-capture project, Oil Ministry adviser Mohammad al-Sabban said today at the
Jeddah Economic Forum. The country will start
injecting carbon dioxide into Ghawar, the world’s largest oilfield, in 2012, he said. 'Talk of oil demand peaking is an alarm to speed up the economic
diversification process,' al-Sabban said. 'The challenges facing Saudi Arabia are huge: we
need to develop Saudis in order to be innovative, creative, to catch up with the rest of
the world.' The world’s largest oil producer is investing in new industries such as
aluminum and steel and pushing for more science and technology in education as it seeks to
diversify away from dependence on income from exporting crude oil. More than 25 percent of
the kingdom’s youth are unemployed. Oil demand in some developed industrialized
nations is contracting, partly as a result of the economic slowdown. Those concerns are
different from 'peak oil' theorists who say oil production has already reached maximum
levels and will inevitably decline." |
"Britain's gas storage capacity
will increase by a third after the Government today officially licenced a new development
but the £600m investment will only be capable of meeting five days' average demand. The Gateway Project, 15 miles offshore, south west of Barrow-in-Furness
will store 1.5bn cubic meters of gas in 20 salt caverns 750 meters below the seabed. It
will be linked by pipeline to the national gas transmission system but will not be in
service until 2014. Britain currently has only one offshore gas storage facility,
Centrica's Rough field in the North Sea, and is vulnerable to winter surges in demand when
supplies are stretched. Total gas storage is equivalent to 16 days demand compared with 88
in France and 77 in Germany." |
"After attacking America's efforts to develop shale gas last week as
'dangerous to drinking water', it seems Russia has decided that not all unconventional
supplies are bad news. Gazprom, the Russian state
energy monopoly and world's largest gas producer, has decided to dip its toe into coal bed
methane. It wants 1.5bn cubic metres of output a year by 2012 from a field in Siberia's
coal-rich Kuzbass area. Russia may have 87 trillion cubic metres of coal-bed methane,
which is the size of 'two Gazproms', says President Dmitry Medvedev. And it's even more
than the 57 trillion cubic metres that has changed the face of US gas production." |
"Canada,
faced with growing political pressure over the extraction of oil
from its highly
polluting tar sands, has begun courting China and other Asian countries to
exploit the resource. The move comes as American firms are turning away from tar sands
because of its heavy
carbon footprint and damage to the landscape.
Whole Foods, the high-end organic grocery chain, and retailer Bed Bath & Beyond last
week both signed up to a campaign by ForestEthics
to stop US firms using oil from Canadian tar sands. The Pentagon is also scaling down its
use of tar sands oil to meet a 2007 law requiring the US government to source fuels with
lower greenhouse gas emissions. Major oil companies such as Shell are also coming under
shareholder pressure to pull out of the Canadian projects. Earlier this year, Shell
announced it was scaling back its expansion plans for the tar sands after a revolt
by shareholders. Producing oil from the Alberta tar
sands causes up to five times more greenhouse gas emissions than conventional crude
oil, according to the campaign group Greenpeace. In
the most significant deal to date, the Canadian government recently approved a C$1.9bn
(£1.5bn) investment giving the Chinese state-owned oil company PetroChina a majority
share in two projects. Prime minister Stephen Harper said: 'Expect more Chinese investment
in the resource and energy sectors … there will
definitely be more.' China's growing investment in the tar sands is seen in Canada as a
useful counter to waning demand for tar sands oil from the US, its biggest customer. The
moves, which have largely gone unnoticed outside north America, could add further tension
to efforts to try to reach a global action plan on climate change." |
"The brains trust of the
Pentagon says it is just months away from producing a jet fuel from algae for the same
cost as its fossil-fuel equivalent. The claim, which comes from the Defense Advanced
Research Projects Agency (Darpa) that helped to develop the internet and satellite
navigation systems, has taken industry insiders by surprise. A cheap, low-carbon fuel
would not only help the US military, the nation's single
largest consumer of energy, to wean itself off its oil addiction, but would also hold the
promise of low-carbon driving and flying for all. Darpa's research projects have already
extracted oil from algal ponds at a cost of $2 per gallon. It is now on track to begin large-scale refining of that oil into jet
fuel, at a cost of less than $3 a gallon, according to Barbara McQuiston, special
assistant for energy at Darpa. That could turn a promising technology into a
market-ready one. Researchers have cracked the problem of turning pond scum and seaweed
into fuel, but finding a cost-effective method of mass production could be a game-changer.
"Everyone is well aware that a lot of things were started in the military,"
McQuiston said. The work is part of a broader Pentagon effort to reduce the military's
thirst for oil, which runs at between 60 and 75 million barrels of oil a year. Much of
that is used to keep the US Air Force in flight. Commercial airlines – such as
Continental and Virgin Atlantic – have also been looking at the viability of an
algae-based jet fuel, as
has the Chinese government. 'Darpa has achieved the base goal to date,' she said. 'Oil
from algae is projected at $2 per gallon, headed towards $1 per gallon.' McQuiston said a
larger-scale refining operation, producing 50 million gallons a year, would come on line
in 2011 and she was hopeful the costs would drop still further – ensuring that the
algae-based fuel would be competitive with fossil fuels. She said the projects, run by
private firms SAIC and General Atomics, expected to yield 1,000 gallons of oil per acre
from the algal farm. McQuiston's projections took several industry insiders by surprise.
'It's a little farther out in time,' said Mary Rosenthal, director of the Algal Biomass
Association. 'I am not saying it is going to happen in the next three months, but it could
happen in the next two years.' But the possibilities have set off a scramble to discover
the cheapest way of mass-producing an algae-based fuel. Even Exxon
– which once notoriously dismissed biofuels as moonshine – invested $600m in
research last July. Unlike corn-based ethanol, algal farms do not threaten food
supplies. Some strains are being grown on household waste and in brackish water. Algae
draw carbon dioxide from the atmosphere when growing; when the derived fuel is burned, the
same CO2 is released, making the fuel theoretically zero-carbon, although processing and
transporting the fuel requires some energy. The industry received a further boost earlier
this month, when the Environmental Protection Agency declared that algae-based diesel
reduced greenhouse gas emissions by more than 50% compared with conventional diesel. The
Obama administration had earlier awarded $80m in research grants to a new generation of
algae and biomass fuels. For Darpa, the support for algae is part of a broader mission for
the US military to obtain half of its fuel from renewable energy sources by 2016." |
| "Britain’s relations with Argentina fell last night to their
lowest point since the Falklands conflict in a row over an oil platform that is due to
arrive north of Port Stanley next week. The Ocean Guardian is expected to complete its
journey to the disputed waters 100 miles off the Falklands coast from the Scottish
Highlands as part of a campaign that Britain hopes will bring a black-gold rush to the
windswept, sparsely populated islands. But, almost three decades after Britain and
Argentina fought a bloody 72-day conflict over the islands, its impending arrival has
stoked fury in a country that is still intent on claiming the territory as its own....The
British Foreign Office denied that the oil operations were illegal. 'We are absolutely
clear this is legitimate business in Falkland Islands waters and we will continue to
reiterate our position that we have no doubt about our sovereignty over the Falkland
Islands and the surrounding maritime areas,' a spokesman said. Analysts say that as many as 60 billion barrels of high-grade oil
could be found in a 200 sq mile zone surrounding the islands, which is to be developed by
Desire, AGR and Diamond Offshore Drilling. That could make the Falklands one of the
world’s largest oil reserves, comparable with the North Sea, which so far has
produced about 40 billion barrels." British drilling for Falklands oil threatens Argentine relations London Times, 13 February 2010 |
"Fresh controversy is mounting within the European Union over
biofuels and their unintended impact on tropical forests and wetlands, documents show. One leaked document from the EU's executive, the European
Commission, suggests biofuel from palm oil might get a boost from new environmental
criteria under development. But another contains a warning from a top official that taking
full account of the carbon footprint of biofuels might 'kill' an EU industry with annual
revenues of around $5 billion. The European Union aims to get a tenth of its road fuels
from renewable sources by the end of this decade, but has met with criticism that biofuels
can force up food prices and do more harm than good in the fight against climate change. Most of the 10 percent goal will be met through biofuels, creating a
market coveted by EU farming nations, which produce about 10 billion litres a year, as
well as exporters such as Brazil, Malaysia and Indonesia. Environmentalists say biofuels
made from grains and oilseeds are forcing farmers to expand agricultural land by hacking
into rainforests and draining wetlands -- known as 'indirect land-use change' (ILUC).
Clearing and burning forests puts vast quantities of carbon emissions into the atmosphere,
so the EU risks promoting damage to the climate by creating such a valuable market." |
"Cameco Corp., the world’s
second- largest uranium producer, said crews safely re-entered the main working level of
the Cigar Lake mine in Canada’s Saskatchewan province yesterday after the site was
fully drained of water. Access was established to
480 meters (1,575 feet) underground and inspections of the development are under way,
Saskatoon, Saskatchewan-based Cameco said today in a statement. Cigar Lake, which sits
atop the world’s richest untapped uranium deposit, flooded in October 2006 and again
in August 2008. Work to secure the underground is
expected to be completed before October and an
update on the project will be included in Cameco’s earnings release on Feb. 24, the
company said." |
"The International Energy Agency (IEA) gave the market some fresh
optimism today by boosting its global oil demand forecast by 50,000 barrels per day for
2009 and by 170,000 bpd for this year, on the back of stronger economic projections by the
International Monetary Fund (IMF). Global oil demand
is now estimated at 86.5 million bpd for 2010, up 1.8% year-on-year and a 170,000 barrel
increase compared with agency's last report.
For 2009, global demand is expected to come in at 84.9 million bpd, down 1.5% year-on-year
but 50,000 barrels higher than the last forecast....Growth comes entirely from
non-Organisation for Economic Co-operation & Development (OECD) countries and higher
demand readings from China and Asian countries, the agency said. Demand in non-OECD is now
forecast to increase by 4%, while stagnating at 2009 levels in OECD countries. Meanwhile,
oil price projections for 2009 and 2010 were revised up $1 and $4 respectively, to $58 per
barrel and $75 per barrel." |
"As Europe's leaders gather in Brussels today, they have only one
crisis in mind: the debts that threaten the stability of the European Union. They are
unlikely to be in any mood to listen to warnings about a different crisis that is looming
and that could cause massive disruption. ....the work of the Industry Taskforce on Peak
Oil and Energy Security shouldn't be disparagingly dismissed. Its arguments are well
founded and lead it to the conclusion that, while the global downturn may have delayed it
by a couple of years, peak oil—the point at which global production reaches its
maximum—is no more than five years away. Governments and corporations need to use the
intervening years to speed up the development of and move toward other energy sources and
increased energy efficiency. In the first report from the task force, Lord Ron Oxburgh, a
former chairman of Shell, wrote that 'It is pretty clear that there is not much chance of
finding any significant quantity of new cheap oil. Any new or unconventional oil is going
to be expensive.'... The Taskforce, assimilating
various opinions, believes 92 million barrels a day will be the most that global supplies
will be able to generate, 'unless some unforeseen giant, and easily accessible, finds are
reported very soon.' It may be that the oil
companies are keeping some giant secrets from us but that seems unlikely. So what lies
ahead is a mismatch between supply and demand. According to Chris Skrebowski, of the Peak
Oil Consulting firm, mid-2015 is when the crunch hits. 'This is when capacity starts to be
overwhelmed by depletion and lack of new capacity additions.' Some dubious emails and
slightly dodgy dossiers have cast a new, and unflattering, light on the global-warming
debate, raising the risk of a return to the belief that we can go on consuming oil with
impunity. Being a 'climate-change denier' is in danger of becoming almost fashionable. But
whatever the risk to the climate, scarce and
expensive oil would be a threat to established economies. We need alternatives." |
"Venezuela awarded on Wednesday the largest oil investment of
President Hugo Chavez's 11-year rule, drawing tens of billions of dollars of much-needed
foreign finance to the Orinoco Belt just three years after the leftist leader nationalized
operations there. U.S.-based Chevron (CVX.N) and Spain's Repsol (REP.MC) led groups that
looked beyond the risks of operating in Venezuela to tap into the OPEC member's 100-plus
billion barrels of reserves, a sign oil giants need to replenish crude reserves that are
increasingly under control of producer nations. The results show victories for both sides.
Oil companies agreed to tough conditions laid down by Caracas while Venezuela softened
fiscal terms in another sign resource nationalism around the world has been weakened by
falling oil prices.....Analysts say the world's reserves of easy-to-produce light oil are
quickly running out, meaning the future of the industry is in difficult production areas
such as the Orinoco Belt, Brazil's deep water fields or Canada's tar sands.....Venezuela's oil production has fallen below 2.5 million barrels
per day (bpd) from more than 3 million bpd in 2001, according to the U.S. Department of
Energy, due principally to limited oilfield investment and lack of qualified personnel." |
"Finding oil and gas to replace the world's fast dwindling reserves
is increasingly risky as rigs probe areas once seen as too difficult or too dangerous, and
costs are rocketing, which could imperil future supply. The cost of discovering each new
barrel of oil and gas has risen three-fold over the last decade as technology has pushed
the frontiers of exploration into ever more remote areas. As old fields run dry, oil
companies are drilling wells in some of the most inhospitable regions, where political,
physical, geological, geographical, technical and contractual risks are high, and they
have had remarkable success....unless consumers pay more for oil in future, some analysts
think we could face an energy supply crunch within a few years. 'The age of cheap oil has
gone and it is not going to come back,' said Paul Stevens, senior research fellow at the
Royal Institute of International Affairs at Chatham House in London. 'The world is not
going to run out of oil tomorrow, but it is more and more expensive to find and will
continue to be so,' he said. 'The worry is that investment may be squeezed as risks rise,
and that could bring us to a looming supply crunch.'....The search for oil has always been
costly and involved risk taking, but the challenges facing explorers have intensified as
wells have moved further offshore, into deeper reservoirs and to places with much higher
political and physical risks. Figures from upstream consultant Wood Mackenzie in Edinburgh
show the cost of finding oil has almost tripled over the last decade even though the rate
of discovery has barely changed. Each barrel of oil equivalent cost an average of just
over $3 to discover last year, compared with just $1.18 in 2001, according to Wood
Mackenzie. Data from BP Plc for the cost of finding new oil show an even bigger increase
-- more than four fold in the five years to 2008. Those figures may seem low given that
world spot oil prices are close to $75 per barrel, but discovery costs need to be
multiplied many times as oil is pumped out of the ground, processed at a refinery and
becomes fuel at a service station. Even established
oilfields, such as those in the North Sea, now have breakeven costs of around $50 per
barrel. The new ultra-deep offshore fields that lie
beneath oceans more than 3 km (1.88 miles) deep and in positions up to 5 miles from rigs
impose even higher costs. Because the rigs work in deeper water, they use more steel, new
technology and are operated by highly trained and expensive specialists." |
"OPEC expects the world will need more of its crude oil this year
than previously forecast, as the organization lowered its outlook for production of
natural gas liquids. The Organization of Petroleum Exporting Countries, responsible for 40
percent of global supplies, predicted in a monthly report today that consumers worldwide
will need 28.75 million barrels a day of OPEC crude in 2010. While that’s 150,000
barrels a day more than anticipated in last month’s report, the resulting 'call on
OPEC' in 2009 is unchanged from last year. 'Required demand for OPEC crude is forecast to
remain almost at the same level as last year, following two consecutive annual declines,'
the group’s Vienna-based secretariat said in the report. 'World oil demand and
non-OPEC supply remained almost unchanged' while 'OPEC NGLs experienced a downward
revision.'....OPEC, next scheduled to meet on March 17 in Vienna, left its forecast for
worldwide oil consumption in 2010 at 85.12 million
barrels a day, which
equates to growth from last year of 800,000 barrels a day. The group’s implementation of a record supply cut announced in 2008
slipped to 53 percent as oil prices around $70 a barrel encouraged members to exceed their
quotas. OPEC Secretary-General Abdalla El-Badri told reporters in
London on Feb. 2 that if market conditions change little and prices stay in their current
range, then ministers will be 'reluctant' to alter their production target at next
month’s gathering." |
"It's not been a great week for the 'greener driver'. First, Toyota
announced it was recalling all its Prius hybrids after detecting a potential fault
with the braking system. And yesterday Morrisons,
the largest supplier of biofuels in the UK, announced
it is withdrawing one of its most popular blends from its forecourts. From 1 April, it
says it will no longer be selling B30, a blend of 30% rapeseed and recycled vegetable oil
and 70% ordinary mineral diesel. The move follows
last November's pre-budget report announcing the '20p per litre duty differential'
subsidy for biofuels was to be axed, although the subsidy for 'used cooking oil biofuels'
would remain for two years.... This is undoubtly a big blow for the fledgling biofuel
industry. However, the true environmental credentials of these blends is debatable.
While they might offer marginal reductions in greenhouse gas emissions compared to pure
mineral diesels, do they, by being reliant on biomass from food crops, act to drive up
prices of commodities such as corn and wheat?" |
"An oil crunch more serious than
the financial crisis threatens to strike Britain within five years, Sir Richard Branson
and other business leaders have warned. Consumers
face a spike in costs for heating, transport, food and other goods, according to the report
entitled 'The Oil Crunch - a wake up call for the UK economy'. It said the challenges
facing the UK would exceed those presented by the financial crisis and said the poorest in
society were most vulnerable to potentially significant increases. The report said
Government must acknowledge the risks to the economy and to produce contingency plans for
transport, retail, agriculture and alternative power. 'Unless we do so, we face a
situation during the term of the next government where fuel price unrest could lead to
shortages in consumer products and the UK's energy security will be significantly
compromised,'' it said. The report was compiled by the Industry Taskforce for Peak Oil and
Energy Security, a group of private British companies whose members include Sir Richard,
Brian Souter, chief executive of Stagecoach, Scottish & Southern Energy boss Ian
Marchant and Philip Dilley, chairman of consultancy firm Arup. Virgin Group founder Sir
Richard - whose airline and rail businesses are sensitive to volatility in the cost of
crude - said businesses and Government should work together to prepare the economy. 'UK
competitiveness will be hampered unless we can develop viable, affordable and secure long
term sources of alternative energy,' he said.... Energy watchdog Ofgem has warned
electricity and gas may become unaffordable for an increasing number of households unless
drastic action is taken to secure power supplies. Oil prices have been particularly
volatile in recent years, spiking at $147 a barrel in July 2008 before plummeting to $32 a
barrel that December amid the financial crisis and onset of the economic downturn. It
climbed again to around $70 to $80 late last year and has stayed relatively static as many
world economies remain under pressure. Global economic woes have pushed the 'oil crunch'
point - when global demand will use up stocks faster than they can be replaced by new
production - back by two years and given governments and firms more time to work out how
to act. But oil prices are still predicted to climb to a sustained level above $100 a
barrel within the next five years. And the UK is seen to be particularly vulnerable to
price fluctuations as it increasingly relies on energy imports." |
"Sir Richard Branson and fellow
leading businessmen will warn ministers this week that the world is running out of oil
and faces an oil crunch within five years. The
founder of the Virgin group, whose rail, airline and travel companies are sensitive to energy prices, will say that the
coming crisis could be even more serious than the credit crunch. 'The next five years
will see us face another crunch – the oil crunch. This time, we do have the chance to
prepare. The challenge is to use that time well,' Branson will say. 'Our message to
government and businesses is clear: act,' he says in a foreword to a new report on the
crisis. 'Don't let the oil crunch catch us out in the way that the credit crunch did.'
Other British executives who will support the warning include Ian Marchant, chief
executive of Scottish and Southern
Energy group, and Brian Souter, chief executive of transport operator Stagecoach. Their call for
urgent government action comes amid a wider debate on the issue
and follows allegations by insiders at the International Energy Agency that the
organisation had deliberately underplayed
the threat of so-called 'peak oil' to avoid panic on the stock markets. Ministers have
until now refused to take predictions of oil droughts seriously, preferring to side with
oil companies such as BP and ExxonMobil and crude producers such as the Saudis, who insist
there is nothing to worry about. But there are signs this is about to change, according to
Jeremy Leggett, founder of the Solarcentury renewable power company and a member of a peak
oil taskforce within the business community. '[We are] in regular contact with government;
we have reason to believe their risk thinking on peak oil may be evolving away from BP et
al's and we await the results of further consultations with keen interest.' The issue came
up at the recent World Economic Forum in Davos where Thierry Desmarest, chief executive of
the Total oil company in France, also broke ranks. The world could struggle to produce
more than 95m barrels of oil a day in future, he said – 10% above present levels. 'The problem of peak oil remains.' Chris Skrebowski, an
independent oil consultant who prepared parts of the peak oil report for Branson and
others, said that only recession is holding back a crisis: 'The next major supply
constraint, along with spiking oil prices, will not occur until recession-hit demand grows
to the point that it removes the current excess oil stocks and the large spare capacity
held by Opec. However, once these are removed, possibly as early as 2012-13 and no later
than 2014-15, oil prices are likely to spike, imperilling economic growth and causing
economic dislocation.'" |
"BP has become the latest oil company to face a shareholder revolt
over its investments in Canada’s controversial oil sands. A coalition of shareholders
has tabled a resolution for the oil giant’s annual meeting on April 15 highlighting
what they describe as the environmental and social risks of tar sands development. The
resolution, which follows a similar action taken by investors in Royal Dutch Shell,
follows BP’s announcement last week that it is set to press ahead with a $10 billion
investment in the industry. Vast reserves of oil lie locked in the bitumen-rich sands of
Northern Alberta but processing them into a heavy form of synthetic crude oil is an
expensive and environmentally fraught activity which critics say is unsustainable and
should be stopped. Shareholders sponsoring the resolution, led by FairPension, include the
Co-operative Asset Management, the Unison Staff Pension Scheme, Rathbone Greenbank, CCLA
Asset Management and other fund managers, foundations and faith groups. Niall O'Shea, head
of responsible investing at the Co-operative Asset Management said: 'BP, which previously
made a virtue of its lack of exposure to oil sands, is now gearing up to exploit them. We
believe that environmental costs may make an expensive business prohibitively so - without
fundamentally addressing the issue of a large net rise in emissions. BP should reassure
shareholders that what they're embarking on is fully costed, prudent and can withstand a
more carbon-constrained world.' The resolution raises
questions about the high costs of producing oil sands, and the risks to BP’s future
profits presented by rising costs for emitting carbon dioxide as well as the legal and
reputational risks stemming from environmental damage." |
"On the face of it the world’s big and publicly quoted oil
companies should be celebrating some pleasing results this week. Royal Dutch Shell
unveiled its results on Thursday February 4th, reporting that it had made $9.8 billion in
2009. Two days earlier BP boasted profits of $14 billion for the same year. Yet these
billions are a disappointment compared with the bonanza of previous years (Shell, for
example, raked in $31.4 billion in 2008 alone) when soaring oil prices pulled profits ever
higher. In the long term, however, the firms’ success depends on sustaining reserves.
The big western oil companies are trying to expand through acquisitions and investment,
but the opportunities do so are becoming scarcer. The firms are spending where they can.
Exxon Mobil, the biggest listed oil company, says that exploration and capital spending
hit $27.1 billion in 2009, 4% higher than in 2008. The company expects to spend $25
billion to $30 billion annually to the same end over the next five years. BP intends to
spend some $20 billion this year on investment in new projects and drilling, roughly the
same level as last year. But there are limits to what money can buy. State-controlled
rivals—in the Middle East, Russia and beyond—jealously guard oil reserves on
their home patches. Few new big fields of oil, at
least those that are easy to reach and cheap to exploit, have been discovered in recent
years. And where new opportunities emerge, such as
in Iraq, Western oil giants are scrambling to pay big sums at auctions for drilling rights
in territory where the local government tightly limits their returns. Even then,
competition from Chinese, Russian and other state-run oil firms can be severe. National
oil companies will often pay prices that would alarm shareholders in the big listed oil
companies. Thus Western firms are increasingly looking for different sorts of growth. One
option is to deploy their expertise in the hunt for oil that is harder to reach, for
example deep offshore, or to go for reserves such as tar sands that are trickier, and so
much pricier, to refine. Another route is to speed up the quest for other energy reserves.
France’s Total has branched out into nuclear-power generation. This week Shell
announced a $12 billion joint-venture with Cosan, a Brazilian producer of ethanol from
sugar cane. This is something of a change of tack. Exxon and Shell are both spending money
on “second generation” biofuels made from algae or waste materials, but these
could take years to develop. Now Shell can sell Cosan’s 'first generation' wares
through it global distribution network. By far the biggest bet laid, however, has been on
natural gas. Around 40% of Shell’s daily production is now in the form of gas. Total
and BP are not far behind. Gas is increasingly important for power generation and heating
and the global market is expected to grow by half by 2030. Big oil companies are keen to
expand, calculating that their skills at managing huge capital projects will be useful
when building gas-liquefaction plants that make the stuff readily transportable. Late last
year Chevron, Shell and Exxon agreed to spend $37 billion to develop the Gorgon field off
Australia, another potentially huge source of gas." |
"Britain’s energy regulator yesterday warned of power blackouts
and spiralling consumer prices and raised the prospect of partial renationalisation of the
industry. In a damning report, Ofgem says Britain’s power industry is in a dire state
and in desperate need of investment. The regulator raised the prospect of direct
government intervention that would wind back the clock on 20 years of deregulation.
Alistair Buchanan, Ofgem’s chief executive, said: 'We do not advocate change lightly,
but all the facts point to the need for reforms now ... Leaving the present system
unchanged is not an option.' In remarks akin to proposals by Ed Miliband, the Energy
Secretary, in an interview with The Times on Monday, Mr Buchanan said that there was
'reasonable doubt' over the security of Britain’s energy supplies before 2015 and set
out proposals to unlock an estimated £200 billion of investment needed to solve a looming
energy crunch. 'Acting earlier will also help keep costs as low as possible for consumers
and business,' he said. Mr Buchanan claimed that the
crisis had been compounded by an 'unholy trinity' of factors — including the impact
of the recession on energy industry investment, Britain’s growing reliance on
imported gas as North Sea supplies are depleted and the closure of nine ageing coal-fired
and oil-fired power stations by 2015 in order to meet new EU pollution laws, a move that
will at a stroke scrap almost a third of UK generating capacity." |
"China overtook the USA for
volumes of new installations and manufacturing of wind turbines for the first time in
2009, according to a
report by the Global Wind Energy Council (GWEC). The world’s wind power capacity
grew by 37.5GW to 157.9GW during the year, with a third (13GW) of these additions made in
China, which doubled its capacity in the period.
'China is putting strong efforts into developing the country’s tremendous wind
resource. Given the current growth rates, it can be expected that the even the unofficial
target of 150GW will be met well ahead of 2020,' said Li Junfeng, secretary general of the
Chinese Renewable Energy Industries Association." |
"ENI SpA's chief executive said Thursday that the Italian energy
company will pull out of Iran after current contracts to develop two gas fields there run
out, as international pressure grows to isolate the country over its disputed nuclear
program. Paolo Scaroni also said the company plans to raise around euro1.5 billion from
selling off shares in three gas pipelines in order to settle a European Union antitrust
dispute. He told reporters that the company won't prolong contracts it signed in 2001 to
develop two Iranian gas fields. Iran has the world's second largest gas resources after
Russia and has resisted global pressure - including U.S. sanctions - over its program to
enrich uranium. Iran says its program is peaceful but the U.S. says it suspects Iran is
trying to build nuclear weapons." |
"The last time Britain suffered a
winter this bitter, the phrase 'energy security' meant having a full coal scuttle. Now
it's all about natural gas. Forty years ago, few houses had central heating and those that
did ran on imported oil. Today, following the North Sea bonanza of the 1970s and 1980s,
gas heats almost every home and generates over 40 per cent of our electricity, making
Britain the world's fifth largest consumer. Only the US, Canada, Russia and Iran guzzle
more. But these days Britain's gas supply is apparently on thin ice. Until the beginning
of this year, National Grid had only once been forced to issue a Gas Balancing Alert
– warning the market that supply might not meet demand and urging suppliers to pump
harder. Since then it has issued another four. The first came early in the big freeze,
when demand was running 30 per cent higher than a normal January day. A fault at Troll,
one of the main Norwegian gas fields, caused imports through the Langeled pipeline to drop
sharply and the wholesale gas price to jump from 30p to 60p per therm. Eventually, more
gas started to flow and the danger passed, but not before electricity generators had
switched from gas to coal-fired power stations, and industrial customers with
interruptible supply contracts had been cut off, disrupting businesses around the
country....None of this would have happened a few years ago, when North Sea production
meant Britain was more than self-sufficient in gas. But after a 30-year boom, UK output
finally peaked in 2000 and started to fall – slumping more than a third by 2008. In
2004 Britain became a net importer for the first time, and National Grid expects we will
have to import three-quarters of our gas by 2015. That makes Britain increasingly
vulnerable to any future supply interruptions like those last month, or when Russia next
cuts off Ukraine in their long-running dispute over gas prices. The Government insists
energy security is enhanced by having a range of sources of imported gas: pipelines from
Belgium, the Netherlands and Norway, along with three new Liquefied Natural Gas (LNG)
terminals in Wales and Kent, where tankers can deliver from as far afield as Qatar and
Trinidad & Tobago. But having the infrastructure does not guarantee the gas will come
to Britain. According to John Hall, countries like France and Germany that have long-term
contracts with major suppliers such as Norway are far better placed than Britain, which
buy on the open market. 'We have the import facilities but we don't have the contracts to
safeguard supplies when things go wrong,' says Mr Hall. 'Britain comes after everyone else
as far as Norway is concerned.' Britain's rising import dependency makes it increasingly
vital to have substantial amounts of gas in storage to draw down in a crisis, and the
Tories jumped on the spate of alerts in the New Year to charge the Government with
negligence over the issue. Britain has 4.3 billion cubic metres of storage capacity, which
amounts to less than 5 per cent of annual consumption, compared with more than 20 per cent
in Germany and almost 25 per cent in France. With British storage already depleted by
winter demand, Shadow Environment Secretary Greg Clark said remaining stores would last
only eight days at current levels of consumption. In fact, storage levels have fallen far
lower during previous crises – down to less than three days' supply last February,
which is when Russia last cut off supplies to Ukraine. Energy Secretary Ed Miliband
accused the Tories of using meaningless statistics, and in one sense he's right, but not
necessarily in a good way. Expressing storage in terms of days' supply overstates the
safety margin, because the gas could never be withdrawn that quickly. Three quarters of
Britain's gas storage is held at Rough, a depleted gas field off the Yorkshire coast
operated by Centrica, where suppliers can deposit gas during the summer when prices are
low, and withdraw it for sale in the winter when prices are higher. During the recent
alerts, Rough was delivering gas at its maximum rate – 45mcm per day – which
represents just 10 per cent of current demand. The vulnerability of having so much storage
in a single field was highlighted three years ago, when a fire at Rough closed the
facility for six months. The closure came just two months after an earlier Ukraine crisis
and, had the two coincided, the consequences could have been severe....Luckily the recent
alerts came at a time when the world is awash with gas, the result of new LNG production
capacity in the Middle East, new 'non-conventional' sources of gas in the US, and the
recession, which has depressed demand in Europe by some 10 per cent. The International
Energy Agency expects this glut to continue until around 2015, but many analysts predict
the market will then tighten sharply. 'Around the
middle of the decade we expect a perfect storm of falling domestic gas production,
economic recovery and tightness in the global LNG market,' says Professor Stern, 'and we
might not get very much warning. It could flip in a matter of weeks.' Britain's vulnerability to interruptions in the gas supply could be
worsened by our response to the "energy gap" resulting from the closure of
ageing coal and nuclear power stations over the next decade. In total, the closures amount
to 20 gigawatts (GW), or one third of peak electricity demand. The Government hopes much
of the gap will be filled by renewables, and last month announced the companies that have
won the right to build offshore windfarms under its ambitious plans to develop 32GW
offshore by 2020. But given the Government's record on renewables, many fear the targets
will not be met. If so, the 'energy gap' is likely to be filled by new gas-fired power
stations. Figures from New Power, an industry
journal, show that 15GW of new gas-fired stations are either under construction or have
received planning permission, with a further 15GW in the wings. Editor Dominic Maclaine says 'there is a new dash for gas in power
generation'. That is likely to raise the proportion of electricity generated from gas even
further, and increase Britain's vulnerability in the case of supply disruptions. In that
case, without a major increase in storage capacity, future gas supply crises could also
leave us in the dark." |
"Britain's offshore wind revolution, launched with great fanfare by
Gordon Brown last month, may struggle to get halfway to its ambitious goals and should be
scaled down in favour of a new dash for gas to keep the lights on over the next
10 years, BP warned last night. Tony Hayward, chief
executive of the UK's largest oil company, said that British government ministers risked
being seduced by 'headline-grabbing options' such as offshore wind and clean coal in a bid
to bolster energy security and meet
climate-change goals. BP makes billions of pounds a year from oil and gas, but is also
investing in onshore wind farms in America. Talking to the Guardian exclusively, the BP
boss said he was not calling for the third round of wind licensing in the deep waters of
the North Sea to be shelved. But he did believe that the heavily subsidised move into wind power should be slowed
down, because it would not deliver anything like the targets set for it: possibly 15
gigawatts of power rather than the 25GW the wind industry expects. And in a speech due to
be delivered to the London Business school today, he says: 'Energy efficiency, gas-fired
power, lighter cars and biofuels all offer relatively low-cost routes, while other
headline-grabbing options are not the most cost-effective. With today's technology, carbon
capture to make clean coal, for example, is very expensive. Offshore wind is also costly
– for example in comparison to onshore wind, which is now a big business for BP in
the United States – and indeed to nuclear.' Hayward told the Guardian that wind
power, like nuclear energy, was nowhere near being commercially viable and would rely for
some time on "sovereign" intervention by governments. Instead, he said, there
should be more emphasis put on gas, which was very commercial, using a mixture of what
remained of UK North Sea supplies and imports. The BP man believed the UK should drop its
'paranoid' concerns about gas imports from Russia and accept that piped and
liquefied natural gas from overseas sources offered a better solution to help beat global
warming and energy insecurity in the short term. 'There is a lot of gas in the world.
There are a lot of diverse sources of gas in the world. The paranoia has been about
Russia, but it is misplaced. We have approximately
zero Russian gas in the UK [imported currently] and if you look at Europe, the imports of
Russian gas into Europe have halved since 1980.' Hayward, whose Russian TNK-BP joint
venture is a major part of the wider oil company's business, said the fear of Russia using
energy as a political weapon was 'massively exaggerated'. He believed Britain should not
be concerned even if Siberian gas accounted for 10% of Britain's imports, as long as 90%
came from a diverse group of suppliers such as Norway, Qatar and Algeria, as they already
did....The BP chief executive did agree with Ofgem's
Alistair Buchanan that the UK had reached a critical point in its energy history and
needed to change the market model with increased government involvement. 'It has been true
throughout history that at certain points in time government has had to intervene to shift
the boundaries of the market to allow the right market structure to evolve,' said Hayward.
He added: 'We did not displace coal with gas in the 1960s and 1970s without a massive
government intervention ... we are probably at one of those points again.'" |
"BP raised its oil and gas production levels by 4%, while Shell saw a 2%
fall over 2009. But the latter has also been looking madly for cost-savings and has rowed
back on plans to invest more heavily in carbon-intensive
tar sands. Hayward has kept Browne's sunburst logo
and 'beyond petroleum' slogan on its marketing material but has followed Shell into
Canada's tar sands. The BP boss – an improbably youthful 52-year-old – says he
is not cutting back there despite mounting criticism from green groups that they are in
danger of triggering runaway global warming. He is keen to emphasise that BP is engaged in
a much more limited way than Shell while steering clear of the more controversial mining
techniques. 'BP has never been in the strip-mining of the tar sands and never will be. We are focused on so-called steam-assisted gravity drainage, which is much more akin to conventional reservoir engineering …
therefore the environmental footprint on the ground is no more or worse than normal oil or
gas operation.' 'It is clearly carbon-intensive and we also see that it will remain
commercial even with a very high legislative price of CO2'. Tar sands are part of a wider
diversity of supply of energy sources that the world is going to require, Hayward argues,
dismissing the idea that the growing pressure on the US military not to use these imports
will bear fruit. By 2015 BP could be providing
100,000-200,000 barrels a day from this source for which the company is preparing two US
refineries specially to process the crude. 'The likelihood of the US army not using a
secure local supply of energy is quite low …
Canadian heavy oil is going to be a very important part of America's energy,' he argues.
He rejects the suggestion that exploiting tar sands contradicts the "beyond
petroleum" mantra, seeing it instead as just another fuel source on top of its wind,
solar and biofuel investments. He is particularly upbeat about the prospects of the latter
even allowing for the food-not-fuel arguments that arose when crop-price increases were
blamed on biofuels. By 2020 up to 10% of global petrol supplies will be made up of
plant-based biofuels, Hayward believes, while the figure could be as high as 20% in the
US. BP is preparing for this by making big investments of between $5bn-$6bn in Brazil on
sugar-based ethanol 'first-generation' biofuels. But BP is also working on synthetic
'second generation' biofuels in conjunction with US chemical group, Du Pont, in this
country. The wind operations that BP is involved
with are based onshore in the US where the land is cheap and planning easy to obtain. But
Hayward makes clear he has enormous reservations about the North Sea wind 'revolution'
launched by the UK government. He questions whether the UK can build 14 to 15 gigawatts
(GW) of offshore wind by 2020, never mind the 25-27GW – the total expected by
ministers and industry here. Equally, he questions how quickly nuclear power plants can be
built and whether a rush will help either develop in the most cost-efficient way....The straight-talking oil explorer, who is said to still enjoy the
occasional triathlon, is an optimist and has little time for those who argue the world has
passed, or is even approaching, peak oil supplies. 'I personally – and BP – have
never believed we will see peak oil because of supply. We always believed we would see
peak oil because of demand. There will come a time – I believe it is beyond 2020
– when because of the changes in the energy portfolio, because of the drive for
energy efficiency, because of the introduction of biofuels, demand for oil will peak.'
There is plenty of oil in the world, he argues, not least in Iraq, where BP has staff
working on the ground, even ahead of important political elections. Hayward expects Iraq's oil production to grow from a couple
of million barrels a day today to close to 10m, putting it on par with Saudi Arabia. This
makes it 'a big part of oil security for the world.'" |
"Total has previously mentioned 100 Mb/d [for the peak of global oil
production] and that they are now saying 95 Mb/d shows that they are approaching the
conclusion that my Ph.D. student Fredrik Robelius presented in his thesis. That scenario had a maximal production of 93 Mb/d in 2018. The
requirement for that level of production was that production from 7 giant oil fields in
Iraq would commence immediately. The fact that this
has been delayed makes it all the more difficult to reach that production level." |
"Energy regulator Ofgem today
warned Britons may not be able to afford to heat their homes in the years ahead unless
there is radical overhaul of the country's energy supplies. The regulator warned the
country's current system may not be sufficient to ensure 'secure and sustainable' power
across the country beyond 2015. In announcing
proposals for a radical range of options (pdf), including setting up central buying of
power, Ofgem's chief executive, Alistair Buchanan, admitted that maintaining the current
free-market approach was no longer an option. Energy
bills could rise between 14% and 25% by 2020 as the industry pays for the £200bn cost of
investment needed to overhaul of the current system. He warned that increasing number of
consumers would be unable to afford the cost of heating their homes. The proposals could
force the government to undo the privatisation of the energy markets led by Margaret
Thatcher and could force a form of nationalisation again if it decides to implement
central buying of power. The regulator had previously warned that average household gas
and electricity bills could reach nearly £2,000 a year without drastic action to shore up
supply. Buchanan said: 'Our evidence shows that
Britain has a window of opportunity to put in place far-reaching reforms to meet the
potential security of supply challenges we may face beyond the middle of this decade. We
do not advocate change lightly, but all the facts point to the need for reforms now to
provide resilient supply security. Acting earlier will also help keep costs as low as
possible for consumers and business.'...The regulator
said reform was needed because of a confluence of events ranging from the global financial
crisis, significant worldwide demand for investment in energy, tough EU emissions targets,
the closure of ageing power stations and an increasing dependency on gas imports. The regulator set out five key issues: • A need for unprecedented
levels of investment over many years in difficult financial conditions and against a
background of increased risk and uncertainty. • The uncertainty in future carbon
prices is likely to delay or deter investment in low carbon technology and lead to greater
decarbonisation costs in the future. • Short-term price signals at times of system
stress do not fully reflect the value that customers place on supply security which may
mean that the incentives to make additional peak energy supplies available and to invest
in peaking capacity are not strong enough. • Interdependence with international
markets exposes Britain to a range of additional risks that may undermine the country's
security of supply. • The higher cost of gas and electricity may mean that increasing
numbers of consumers are not able to afford adequate levels of energy to meet their
requirements and that the competitiveness of industry and business is affected." |
"Global oil demand is set to
peak between 2020 and 2030, as falling developed
world demand balances growing demand in emerging markets, the chief executive
of Europe's largest oil company said on Tuesday. Tony Hayward told Reuters
Television that government policies in the developed world were eroding demand at the rate
of 1 percent per year. Hayward said this was contributing to an oversupply of refineries,
which was prompting rivals to close and sell facilities. However, he added: 'We've got the
right set of refineries.'" |
"China aims to raise the annual
production capacity of shale gas to 15-30 billion cubic meters by 2020 as part of its
response to recent widespread gas shortages, the
Ministry of Land and Resources said. The National Development and Reform Commission, the
country's top economic planner, is reviewing a plan to encourage the development and
utilization the unconventional gas source in an effort to meet rising energy demand
without excessively increasing greenhouse gas emissions, the ministry said in its in-house
newsletter..." |
"Royal Dutch Shell, Europe's
second biggest energy company, is poised to become the biggest oil major in biofuels as it battles to
reassure investors about profitability. The Anglo-Dutch company has signed a memorandum of
understanding with the most powerful Brazil bioethanol producer, Cosan, in a joint venture
said to be worth $12bn (£8.19bn). The move, if
finalised, will cement Brazil's position as the world's alternative energy superpower with
the potential to ship huge quantities of fuel to the United States and Europe. Shell will
now lobby the US administration to reduce its tariffs on biofuel imports in a move that
could transform profitability. The company hopes the aggressive moves into biofuels it has
plotted for two years will signal to investors that it has growth potential as it readies
itself to announce what is expected to be a 40% drop in quarterly profits on Thursday.
Analysts expect the group to report a quarterly profit of $2.9bn. This would take its
annual profit to $13.4bn, down on the $31.4bn it made in 2008. There are suggestions the
company will make further job losses on top of the 5,000 already announced. The joint
venture is intended to more than double Cosan's existing bioethanol production, which
currently stands at 2bn litres. Cosan is Brazil's leading bioethanol producer in a country
where virtually all new cars run on sugar cane. But there are serious reservations among
environmentalists that the growing attraction of biofuels in Brazil could see agricultural
land earmarked for food shifted to fuel crops, creating pressure to chop down more
rainforests....Biofuel in the UK powers 2.7% of the country's transport according to the
Renewable Fuels Agency. Britain is on target to meet its 5% target by 2014." |
| "The Government is drawing up plans for a wholesale reform of
Britain’s energy markets that could wind back the clock on 12 years of deregulation.
In an interview with The Times, Ed Miliband, the Energy and Climate Change Secretary, said
that Britain’s existing, highly liberalised market regime, introduced under Labour in
1998, was failing to deliver the investment needed to cut UK carbon emissions by more than
a third by 2020. A market structure was being designed to boost long-term investment in
low-carbon sources of electricity, including wind parks, nuclear reactors and fossil fuel
stations equipped with carbon capture and storage (CCS) technology. Mr Miliband said: 'We
are going to need a more interventionist energy policy to deliver the low-carbon
investment we need....Mr Miliband said that details
of the reforms would be in a document to be published in April called Roadmap to 2050,
published with the 2010 Budget. He said that the changes were essential to help Britain to
prepare for a doubling of electricity demand by 2050, driven by other policy objectives
such as a growth of electric cars and a move from gas to electricity for heating.'" Labour prepares to tear up 12 years of energy policy London Times, 1 February 2010 |
"In their exuberance, oil- and gas-industry officials repeat a single
refrain when describing the natural gas from Pennsylvania's Marcellus Shale: A
game-changer. Tony Hayward, chief executive officer of oil giant BP P.L.C., was the latest
to gush enthusiastically when he called unconventional natural gas resources like the
Marcellus 'a complete game-changer.' 'It probably
transforms the U.S. energy outlook for the next 100 years,' Hayward said Thursday at the World Economic Forum in Davos, Switzerland.
The breathtaking emergence of natural gas as America's energy savior was not in the cards.
Just four years ago, after Hurricanes Katrina and Rita devastated Gulf Coast rigs and
rattled gas markets, energy pundits forecast a bleak winter of short supplies, high
prices, and low thermostats. The vast scale of
shale-gas resources has come into focus quickly, and industry officials are touting the
possibility of steady supplies for decades to come. The Potential Gas Committee in
Colorado last year revised its outlook of America's future gas supply - up 35 percent in
just two years. The forecast was the highest in its 44-year history. The Marcellus Shale is the nation's fastest-growing producing area.
Though it lies under five states, about 60 percent of its reserves are in Pennsylvania,
according to Terry Engelder, a Pennsylvania State University geologist. 'In terms of its
impact on Pennsylvania, this is probably without peer in the last century,' said Engelder,
whose projections in 2008 alerted the public about the size of the Marcellus. 'America's energy portfolio has undergone a first-order paradigm
shift just in the last two years,' he said. 'This is
such an exciting thing.'....Not everyone has climbed aboard the bandwagon. Some
environmentalists are uneasy about the hydraulic-fracturing process that has unlocked the
shale gas. The technique requires the injection of millions of gallons of water into a
well to break up the shale to initiate production. And some
analysts say they believe the gas industry's estimates are too optimistic. 'I would look
at all this with a bit of healthy skepticism,' said Arthur E. Berman, a Houston
gas-industry consultant, who says he believes some operators have overstated the
production potential and understated the cost of Texas shale-gas wells. His pointed criticism got him banished from one trade journal - and
invited to speak at scores of investor workshops. 'Two years ago, we were talking about
importing gas from the Middle East,' he said. 'And now we have a hundred-year supply of
domestic gas?' Berman said he had been unable to conduct a similar analysis of Marcellus
wells because Pennsylvania law allows operators to keep their production data secret for
five years, unlike other states, where output is reported to taxing authorities
promptly. 'If something looks too good to be true,' he said, 'I need to look more
closely.' Questioning voices such as Berman's are uncommon in the industry, which portrays
natural gas as abundant, cheap, and cleaner than coal and oil - a domestically produced
'bridge fuel' to ease the transition to renewable wind and solar generation." |
"The International Energy Agency
(IEA) expects total natural gas output in the EU to decrease from 216 billion cubic meters
per year (bcm/year) in 2006 to 90 bcm/year in 2030. For the same period, EU demand for
natural gas is forecast to increase rapidly. In 2006 demand for natural gas in the EU
amounted to 532 bcm/year. By 2030, it is expected to reach 680 bcm/year. As a consequence,
the widening gap between EU production and consumption requires a 90% increase of import
volumes between 2006 and 2030. The main sources of
imported gas for the EU are Russia and Norway. Between them they accounted for 62% of the
EU’s gas imports in 2006. The objective of this thesis is to assess the potential
future levels of gas supplies to the EU from its two main suppliers, Norway and Russia.
Scenarios for future natural gas production potential for Norway and Russia have been
modeled utilizing a bottom-up approach, building field-by-field, and individual modeling
has been made for giant and semi- giant gas fields. In order to forecast the production
profile for an individual giant natural gas field a Giant Gas Field Model (GGF-model) has
been developed. The GGF-model has also been applied to production from an aggregate of
fields, such as production from small fields and undiscovered resources. Energy security
in the EU is heavily dependent on gas supplies from a relatively small number of giant gas
fields. In Norway almost all production originates from 18 fields of which 9 can be
considered as giant fields. In Russia 36 giant fields account for essentially all gas
production. There is limited potential for increased gas exports from Norway to the EU,
and all of the scenarios investigated show Norwegian gas production in decline by 2030.
Norwegian pipeline gas exports to the EU may even be, by 2030, 20 bcm/year lower than
today’s level. The maximum increase in exports of Russian gas supplies to the EU
amount to only 45% by 2030. In real numbers this means a mere increase of about 70 bcm In
addition, there are a number of potential downside factors for future Russian gas supplies
to the European markets." |
"Using biofuel in vehicles may
be accelerating the destruction of rainforest and resulting in higher greenhouse gas
emissions than burning pure petrol and diesel, a watchdog said yesterday. The Renewable
Fuels Agency also warned that pump prices could rise in April because of the
Government’s policy of requiring fuel companies to add biofuel to petrol and diesel.
More than 1.3 million hectares of land — twice the area of Devon — was used to
grow the 2.7 per cent of Britain’s transport fuel that came from crops last year.
Under the Renewable Transport Fuels Obligation, a growing proportion of biofuel
must be added to diesel and petrol. This year fuel must be at least 3.25 per cent biofuel
on average. By 2020 the proportion will be 13 per cent. The agency’s first annual report revealed that fuel companies had
exploited a loophole to avoid reporting the origin of almost half the biofuel they
supplied to filling stations last year. The origin of fuel from land recently cleared can
be described as 'unknown'. Last year Esso reported the source of only 6 per cent of its
biofuel and BP reported 27 per cent. Shell was the best-performing of the main oil
companies but still failed to report the origin of a third of its biofuel....From March
2011 companies will be required under a European directive to report the previous use of
all the land from which they derive their biofuels. However, they will also gain an
additional loophole because they will not have to admit using rainforest land if the trees
were removed before 2008." |
| "Algae have
been touted as a solution to environmental worries over biofuels, but they may be a
long way from providing a truly green option. Unlike maize, soya beans and oilseed rape
(canola), algal farms don't take up valuable farmland, so algae-based biofuels don't
threaten food supplies. However, Andres Clarens at the University of Virginia in Charlottesville has
modelled the environmental impacts of algal farms and concludes that they require six times as much energy as growing land plants - and emit
significantly more greenhouse gases (Environmental
Science and Technology, DOI:
10.1021/es902838n). 'You have to add a whole lot more fertilisers, and the
environmental cost of producing these is the primary drawback,' Clarens says. Using waste
water instead of fertilisers helps, but not enough, he says. The only trick that tipped
the balance in favour of algae in his models was to use nutrient-rich household waste like
concentrated urine to fertilise the algae, but this would require new infrastructure and
so is no short-term fix." |
"Royal Dutch Shell chief
executive Peter Voser cannily chose the safe ground of an exclusive interview with
the Financial Times to finally admit the all-too-obvious - the Canadian oil sands
development Shell has touted as a major growth driver is instead a costly distraction, on
which time is now being called. Mr Voser said the massive expansion the company had
previously planned for its Athabasca Oil Sands Project (AOSP) - envisioning growth from
the current 155,000 barrels per day (bpd) capacity to an eventual 770,000bpd - was now
'clearly scaled down' and would be 'very much slower'. Over the past few years Shell has emphasised heavy investment in
so-called 'unconventional' hydrocarbon sources, both Canadian oil sands and gas-to-liquids
projects elsewhere, as a substitute for the new conventional oil and gas resources the
company has been notably lacking since its reserves-booking scandal of 2004. But the
relatively high costs of new oil sands developments in particular mean scant profits with
oil prices anchored stubbornly in a $70-$80 a barrel trading range. As recently as
November, Shell oil sands head John Abbott indicated the in-construction $14bn (£8.69bn)
AOSP Expansion 1 project, coming onstream later this year to boost total AOSP output to
255,000bpd, needs oil prices around $60 per barrel just to break even. And new investments
would require higher prices. Two previously-slated medium-term expansions of 100,000bpd
each are on ice indefinitely, and any serious AOSP growth beyond de-bottlenecking, which
could add perhaps some 100,000bpd in small increments by 2020, seems moot. Mr Voser was
not questioned on what this strategic U-turn means for Shell's resource base, defined as
its portfolio of hydrocarbon exploitation opportunities not yet migrated into developed
reserves. But the effective scrapping of further large-scale AOSP growth will presumably
have a material impact - while oil sands currently account for 8.4 per cent of proved
Shell reserves, totalling 11.9bn barrels-of-oil-equivalent (boe), they were previously
thought to account for perhaps a third of Shell's total resource base, estimated at 66bn
boe." |
"At a meeting of oil leaders at
the World Economic Forum at Davos, Tony Hayward, group chief executive of BP, said that
there was a 'supply challenge' for the industry which would have to increase output to
100mbd - a new peak for oil. Mr Hayward said that at present the world was producing
between 83 and 84mbd. He said he hoped Iraq would become a major oil player,
producing up to 10mbd in the next decade if the political situation remains relatively
stable. A need for a new peak in oil production will
dismay environmental campaigners who hoped that the West’s declining reliance on oil
would mean less CO2 emissions. Instead, demand from the emerging economies, including
India and the other BRIC countries, China, Russia and Brazil, will lead to new record
levels of consumption. Mr Hayward’s comments were supported by Peter Voser, the chief
executive of Shell, who said that the industry would have to find up to $27trn of
investment over the next 20 years to meet demand. At the session new figures from
PriceWaterhouseCoopers revealed that non-OECD countries will account for two-thirds of
world consumption by 2030. Mr Hayward said that demand from non-OECD nations would
increase by 40pc. 'The obvious thing in the mature markets of Europe and the United States
is that demand for oil products is in structural decline,' Mr Hayward said. He argued that
demand was now coming from the East, pointing out that China sold 13m cars last year. 'The challenge is how do we meet this growing demand for oil and
keep a lid on price?' Hayward said.....Turning to Iraq, Mr Hayward said that he was 'cautiously
optimistic' that the country could increase world supply. 'BP has a major contract to
redevelop an existing field that BP first found in 1953,' Mr Hayward said, revealing that
he wanted to increase BP production from 1mbd to 3mbd. Iraq could eventually produce
10mbd. Mr Voser said that although much of the oil in Iraq was 'easy oil' (onshore and
relatively accessible) its technology was 20 years behind much of the rest of the sector. He also argued that although renewables would be able to supply some of
the increase, there needed to be a 'more balanced discussion between oil and renewables'
and that increasing gas supply had a lot of potential. 'There is plenty of gas. Here we
have an energy source which from a CO2 point of view is better than other fuels –
than for example coal for electricity generation.' Andrew Liveris, chairman and chief
executive of Dow Chemical Company, one of the largest industrial users of oil in the
world, said that price stability was essential for economic growth. He revealed that in
2002 the cost to the company of its oil needs was $8bn and that had risen to $32bn by
2008. At times such was the volatility of the market there would be a '10pc aberration' in
the oil price in a week. 'We need certainty, we need predictability,' he said." |
"A controversial method of
extracting gas from shale rocks and coal seams pioneered in the US has been described by
the head of BP as a 'complete game changer' that would transform the future of energy in
that country over the next 100 years. Excitement in the industry over 'unconventional' gas
supplies has led to a wave of investment in America which Tony Hayward, BP's chief
executive, believes could eventually spread around the world. '[Unconventional gas is a]
complete game changer in the US,' he said in answer to a question at an energy summit
which was part of the World Economic Forum in Davos, Switzerland.' 'It probably transforms the US energy outlook for the next 100 years.
It's yet to seen if it can be applied globally.'....There
is also speculation that there could be shale-based gas schemes available in mainland
Europe now that new drilling and extraction techniques have been proven in the US, largely
Texas, Wyoming and Pennsylvania. Development of
these reserves in major quantities has sent the price of natural gas spinning downwards in
America but promises a much-sought increase in self-sufficiency. It also offers a lower
carbon footprint than oil....Unconventional gas has burst to prominence as US-based oil
companies – often led by smaller independents – have used new directional and
horizontal drilling techniques to exploit new reserves. But rock formations have to be
broken up with a mixture of water, sand and chemicals in a process called hydraulic
fracturing.....Environmentalists have major reservations about these techniques, saying
enormous amounts of water are needed and that the drilling can pollute local water tables.
The Texas Oil and Gas Accountability Project has blamed hydraulic fracturing for making
people ill and poisoning cattle by polluting water supplies, which is denied by the oil
and gas industry....But there are already bills being prepared for Congress that would
tighten restrictions on unconventionals and Exxon has inserted a clause in its takeover
documents for XTO that enable it to scrap the transaction if there were changes to the law
that made hydraulic fracturing 'illegal or commercially impracticable'." |
"There is still plenty of oil in
the ground and the world should put aside fears about 'peak oil', the head of the Saudi
state oil firm Saudi Aramco said on Thursday. 'The concern about peak oil is behind us,'
chief executive Khalid al-Falih told a session on energy supplies at the World Economic
Forum in Davos. The peak oil theory that oil supply
is at or near its peak gained currency when prices zoomed to a record of nearly $150 a
barrel in 2008. The issue remains a concern for many in the industry. Total's chief executive Thierry Desmarest said the world would
struggle to surpass 95 million barrels per day (BPD) in the future -- 10 percent above
present levels. 'The problem of peak oil remains,'
he told the same panel. His contention was swatted aside by Falih. 'Of the 4 trillion
(barrels) of oil the planet is endowed with, only 1 has been produced,' Falih said.
'Granted most of what remains is more difficult and complex (to exploit) ... there's no
doubt we can do a lot more than the 95, 100 (million barrels) that are projected in the
next few decades. Saudi Arabia has a long list of projects in its portfolio that would
more than offset declines, he said." |
"Venezuela Oil Minister Rafael Ramirez was leaving Wednesday
for Russia and then to China to discuss plans for developing heavy crude blocks in the
eastern Orinoco region, the Venezuelan government said in a statement." |
"CNNC International Ltd. on
Monday said it will acquire a 37.2% stake in the Azelik uranium mine in Niger through an
acquisition of Ideal Mining Ltd. for as much as $414 million Hong Kong dollars (US$53.3
million), extending its footprint to Africa for the first time. The deal comes as China rapidly expands its capacity to generate nuclear
power as part of a strategy to minimize use of coal and crude oil, which are widely blamed
for making Chinese cities among the smoggiest in the world. CNNC International is the sole
platform for its parent, China National Nuclear Corp., to secure uranium resources
overseas. Shares of CNNC International jumped 8.3% to HK$8.88 in Hong Kong trading Monday.
CNNC International's financial controller, Philip Li,
said the company is looking for acquisition targets in Kazakhstan to boost its uranium
reserves in order to fuel China's nuclear power boom.
'We hope to become the largest uranium supplier in China in the long run. We will buy more
uranium mines through acquisitions or our parent if the project can deliver a reasonable
return for us,' he said. The Africa mine is expected to start production in the second
half of the year, Mr. Li said." |
"It is past midnight in a jet high above the Persian Gulf, and one of
the key figures in global energy shows no sign of retiring. Instead, Christophe de
Margerie, CEO of the French oil giant Total, zeroes in on a favorite target: criticisms of
oil companies by environmental groups, gathered in Copenhagen for the U.N. Climate Summit.
'People say they are inventing electric cars,' de Margerie says, puffing on a Marlboro.
'Well, where is the electricity coming from? Flowers? Maybe someday. But what is available
now is oil and gas.' The argument is delivered in de Margerie's trademark style: blunt and
impassioned, with an almost cocky certitude. He credits his confidence to years spent
traveling — 'moving my ass,' as he calls it — and witnessing the world up close.
All that time on the road has convinced him of this: oil supplies will soon run seriously
short, and until we come up with something better we need to make sure we suck every last
drop from every last nook and cranny on the planet. 'We don't know everything,' he says.
'But on oil reserves and production we know a lot. And it's our duty to speak out.'....In
an industry famous for being opaque, de Margerie speaks openly about the nightmare
scenario — oil shortages — that most energy firms prefer to avoid or deny. De
Margerie says the possible effects on the world economy of dwindling oil supplies are so
great 'I am not prepared to shut my mouth.' Shortly after taking over at Total, he jolted
oil executives at a London conference by stating the industry would be unlikely to produce
more than 100 million barrels a day, far below the 120 million or so the International
Energy Agency estimates the world could produce by 2030, and which will be needed for
Asia's galloping growth. De Margerie now says 90
million barrels a day is 'optimistic.' Audiences
regularly ask him when he thinks we might use earth's last drop of oil, and de Margerie
says that date is decades off. But it's important to realize, he says during an interview
with TIME, 'what will happen very soon is that oil supplies will not cover demand. That
won't mean there is no oil. There are oil reserves,
but you will need to invest billions and billions to get it.'" |
"United Nations climate talks are a bigger threat to top oil exporter
Saudi Arabia than increased oil supplies from rival producers, its lead climate negotiator
said on Sunday. Saudi Arabia's economy depends on oil exports so stands to be one of the
biggest losers in any pact that curbs oil demand by penalizing carbon emissions.....The possibility that oil demand might peak this decade was a
'serious problem' for Saudi Arabia, Sabban said. The
kingdom had looked at the assumptions behind studies that pointed to demand peaking in 2016 and
saw 'some truth in it,' Sabban said. The kingdom was
watching future demand projections closely and would match any future investment in
capacity expansion with demand, Sabban said. 'We
will continue keeping the same spare capacity but no more,' he said. Saudi had plenty of
spare capacity to increase output if global demand warrants, Sabban said. Demand should
grow this year with the economic recovery, he added. The kingdom completed a program to
boost its capacity last year, coinciding with the global contraction in oil demand due to
the economic recession, and led record OPEC output cuts, leaving it with more than double
the spare capacity it targets. The kingdom has around
4.5 million bpd of spare capacity while having a policy of holding 1.5 million to 2.0
million bpd to deal with any surprise outage in the global oil supply system. The kingdom
is producing around 8 million bpd. Meanwhile Saud
Arabia plans to invest heavily in solar energy technology, Sabban said, and hopes to begin
exporting power from solar energy by 2020. Saudi Oil Minister Ali al-Naimi has said the
kingdom aims to make solar a major contributor to energy supply in the next five to 10
years." |
"It is only a matter of days
before the last of Iraq’s yet-to-be awarded oil contracts are due to be signed,
bringing to a close a two-stage, seven-month process under which Western energy majors
have gained access to a country with the planet’s third-largest oil reserves. Such
deals will inevitably be a focus of the UK oil sector’s year-end reporting season,
which begins the following week, and the annual round of strategy presentations to
investors that starts shortly after. No more so than for BP, which has a 38 per cent
interest in Rumaila, the vast 18 billion-barrel field in southern Iraq that was the
biggest single project on offer, and Shell, which has stakes in two other bumper schemes:
the first phase of West Qurna, where it is working alongside ExxonMobil, and Majnoon,
where it has teamed up with Malaysia’s Petronas. Indeed, with the exception of Chevron, which failed to secure licences in
either round, Iraq is destined to become a significant contributor to the output of the
world’s 'super major' oil companies for many years to come. But rather than welcoming
such deals as a fillip to future profitability, shareholders might instead come to rue
them. Not because of the large sums of capital expenditure involved, or the political and
security risks of operating in what remains a volatile territory. Rather, contends RBS,
the opening up of Iraq — or rather the unprecedented production commitments the
majors have signed — threaten to pull long-term oil prices steadily lower. 'Investors
expecting the imminent return of oil price rises fuelled by increasing Chinese demand may
be disappointed,' says David Cline, RBS’s oil and gas analyst. 'Instead, the
rehabilitation of Iraq may dominate oil markets and weigh on prices for much of this
decade.'... It is that view that underpins Mr Cline’s prediction that oil prices,
currently hovering around $75 a barrel, will inexorably slide over the next few years to
touch $50 by 2016 — not far above the nadir reached in late 2008 amid the height of
the financial crisis. That perspective sets RBS firmly apart from both the oil futures
market, which prices in a rise in Brent crude to $94 a barrel by the middle of the decade,
and rival investment banks, whose consensus forecasts assume a price of $82 a barrel by
2013. Mr Cline’s case is persuasive. If newly agreed contracts are honoured, Iraq
faces a period of output growth unparalleled in the history of the oil industry: a
quintupling of production capacity to nearly 12 million barrels a day by 2017, about the
same level that Saudi Arabia, the world’s biggest producer, is forecast to reach in
the next few years. On consensus forecasts of global oil consumption that take
China’s growth into account — that is, consecutive annual rises of 1.5 per cent
— RBS calculates that Iraq’s increase in output will satisfy 88 per cent of
projected oil demand over the next eight years (see chart, below). If further Iraq
contracts are signed and production from Kurdistan also starts to pick up, that figure
would be even higher. RBS believes that such developments could between them add a further
4 million barrels a day by the end of the decade. What is unusual about Iraq is that its
oilfield contracts are predicated on oil production rising to a peak within six or seven
years of the licence award but then staying at those levels for at least as long: seven
years in the case of those granted under the first licence round (such as Rumaila and West
Qurna phase 1) and up to 13 years for those handed out in the second (including West Qurna
phase 2, won by Lukoil of Russia and Statoil of Norway). Such terms are in stark contrast
to commercial agreements forged elsewhere in the world, where fields are worked at a peak
levels for only a few years at most. Sceptics suggest that security problems, inadequate
transport and export infrastructure and the potential imposition by Opec of quota
restraints on Iraq (which have been suspended since its invasion of Kuwait 20 years ago)
mean that the projected rapid growth of the country’s oil output is unlikely to be
met....RBS concedes there are difficulties but counters that its forecasts are pegged on
binding contracts agreed with multinational companies that are experts in oilfield
development — and face substantial fee penalties if they fail to deliver. Of course,
most investors’ time horizons do not stretch too far. Increases in Iraqi output will
be modest until 2013 and, as next month’s full-year results season is set to confirm,
a rebound in oil prices has underpinned a strong recovery in profits." |
"The British oil major and its
partner China National Petroleum Corporation won the right to develop the massive Rumaila
field in a historic televised oil field auction last June. The contract was formally
signed in November. But amid rising public anger about the foreign 'colonisation' of
Iraq's oil fields, Shatha al Musawi, an independent MP, is contesting the prize contract
in her country's federal court. Iraq's efforts to
boost its oil output could lift it from being the 11th biggest producer to the top three,
after years of under-investment and neglect under its former leader Saddam Hussein. If
successful, Mrs al Musawi's case could set a legal precedent that would invalidate all the
agreements that Iraq secured last year – with BP, CNPC, ExxonMobil, Petronas, Royal
Dutch Shell, Eni, Gazprom and Lukoil. The court is due to hear the case next week, on
February 1, with Mrs al Musawi arguing that the BP contract violates the constitution on
four counts. She claims that the deals with foreign oil companies need to be properly
approved by parliament under Iraq's constitution. The government contests the allegations
and it is trying to get the case thrown out, insisting that its actions were lawful....BP
was the first oil major to secure a long-term contract in Iraq, when it agreed to cut its
fee per barrel from $3.99 to $2. Many oil majors were shocked by the fact that Iraq
insisted on much lower returns than they are used to being paid. The Rumaila field, which
contains 17bn barrels, is considered one of the world's prime oil fields." |
"Cameco Corp. says it's on track
to restart development of its flood ravaged Cigar Lake mine as early as this spring and
remains focused on doubling its production by 2018,
while sticking close to its uranium core. Saskatoon, Sask.-based Cameco has struggled with
the Cigar Lake project as a result of two floods in the past three years, leading to long
delays in production.....The mine was originally set to begin production in 2007. That was
gradually pushed back to 2011, which is the most recent company estimate. Mr. Goheen said
yesterday that Cameco will put out new production and cost estimates at the end of the
first quarter. Some analysts are now expecting
production to begin around 2013. Cameco's last cost
estimate for its share of capital costs
was about $508-million in March, 2007, according to a company spokesman. Cameco is the
mine operator and has a 50-per-cent stake in the project. French nuclear giant Areva Group
owns a 37-per-cent stake, Idemitsu Canada Resources Ltd. holds 8 per cent and Tepco
Recources Inc. has 5 per cent. Once up and running, Cigar Lake is expected to produce 18
million pounds of uranium annually, half of it belonging to Cameco. Mr. Goheen said the
company is also making uranium its sole focus, in particular after selling its stake in
Centerra for proceeds of about $871-million late last year. 'The focus in the company
right now front and centre is moving from 20 to 40 million pounds [of production],' Mr.
Goheen said. He said the production target doesn't rely on new acquisitions, but that the
company is always looking for new opportunities to grow." |
"One-quarter of all the maize
and other grain crops grown in the US now ends up as biofuel in cars rather than being
used to feed people, according to new analysis which suggests that the biofuel revolution
launched by former President George Bush in 2007 is impacting on world food
supplies. The 2009 figures from the US Department of
Agriculture shows ethanol production rising to record levels driven by farm subsidies and
laws which require vehicles to use increasing amounts of biofuels. 'The grain grown to
produce fuel in the US [in 2009] was enough to feed 330 million people for one year at
average world consumption levels,' said Lester Brown, the director of the Earth Policy
Institute, a Washington thinktank ithat conducted the analysis. Last year 107m tonnes of
grain, mostly corn, was grown by US farmers to be blended with petrol. This was nearly
twice as much as in 2007, when Bush challenged farmers to increase production by 500% by
2017 to save cut oil imports and reduce carbon emissions. More than 80 new ethanol plants
have been built since then, with more expected by 2015, by which time the US will need to
produce a further 5bn gallons of ethanol if it is to meet its renewable fuel standard.
According to Brown, the growing demand for US ethanol derived from grains helped to push
world grain prices to record highs between late 2006 and 2008. In 2008, the Guardian
revealed a secret
World Bank report that concluded that the drive for biofuels by American and European
governments had pushed up food prices by 75%, in stark contrast to US claims that prices
had risen only 2-3% as a result." |
"As many as 1,400 jobs at one of Britain’s largest oil
refineries are under threat after Chevron said last night that it was planning a
restructuring that would involve sweeping cuts across its global refining operation. The
announcement, which came after notice was given to employees on Monday, has raised fears
relating to Chevron’s refinery at Pembroke in South Wales, which employs 600
permanent workers and 800 contractors. A UK spokesman for Chevron, the second-biggest
American oil company, confirmed that the future of Pembroke was being considered but that
no final decisions had been taken.....Unions and Chevron workers in Wales reacted angrily
to the announcement, saying that they were deeply concerned about the possible
implications of the redundancies and for Britain’s energy security.... The oil refining business has been hit by a combination of low
margins and the recession. The threat of tougher carbon regulation is also a concern,
particularly for operators of plants in Europe." |
"A major new oil sands
project by international players ConocoPhillips Co. (COP-N50.60-1.64-3.14%) and Total SA is the
latest sign of recovery in northern Alberta, a driver of the Canadian economy that had
been waylaid by soaring construction costs and a steep drop in the price of crude. Conoco of Houston and Paris-based Total said Tuesday they are
expanding their Surmont project south of Fort McMurray, Alta., to 110,000 barrels a day
from a current capacity of 27,000, buoyed by results from the first phase that was
completed in 2007. The companies didn't disclose a
price, but based on recent industry costs the investment will likely be about
$1.5-billion. Since the financial crisis,
oil sands development has proceeded slowly, as some companies retrenched after a period in
which they were faulted for expanding too quickly. Today, new projects are considered more
carefully, and the Surmont expansion joins a small group that is going ahead, including
Suncor's Firebag and Imperial Oil Ltd.'s Kearl." |
"Shell chief executive Peter Voser will be forced to defend the
company's controversial investment in Canada's tar sands at his first annual
general meeting, after calls from shareholders that the project be put under further
scrutiny. A coalition of institutional investors has forced a resolution onto the agenda
calling for the Anglo-Dutch group's audit committee to undertake a special review of the
risks attached to the carbon-heavy oil production at Athabasca in Alberta. Co-operative
Asset Management and 141 other institutional and individual shareholders raise
'concerns for the long-term success of the company arising from the risks associated with
oil sands.' Shell, which will hold its AGM in May, has been one of the lead companies in
moves to develop oil reserves that are either mined or sucked out of the ground using
expensive and energy-intensive techniques. BP
and Total of France are also engaged in the sector. Shell has
insisted that 'unconventional' hydrocarbon sources such as tar sands are all justified to
ensure that the world does not run out of oil too soon. But environmentalists have
condemned their exploitation as "the biggest environmental crime in history"
and said it must be stopped before it tips the planet over into runaway climate
change....Shell disputes the scale of the pollution but also says it will
use carbon, capture and storage techniques to mitigate any negative impact. This argument
has not stopped environmentalists – or shareholders – from opposing the plans. 'Given Shell's level of commitment to oil sands there is a greater
obligation to shareholders to reassure how it would cope under a number of scenarios,'
said Niall O'Shea, head of responsible investing at Co-operative Asset Management. 'What
if carbon capture and storage proves too costly in the oil sands? What if sustained high oil prices and carbon regulation lead to switching
away from marginal, high-cost, high-carbon sources? And then there's the cost of cleaning
up the locality. Companies must be more rigorous and transparent with their investors,' he
added....'Given Shell's level of commitment to oil sands there is a greater obligation to
shareholders to reassure how it would cope under a number of scenarios,' said Niall
O'Shea, head of responsible investing at Co-operative Asset Management. 'What if carbon
capture and storage proves too costly in the oil sands? What if sustained high oil prices
and carbon regulation lead to switching away from marginal, high-cost, high-carbon
sources? And then there's the cost of cleaning up the locality. Companies must be more
rigorous and transparent with their investors,' he added." |
"Ageing coal-fired
power stations should be exempted from environmental regulations and kept open to stop the
lights from going out, the chief executive of E.ON UK has urged the government. Paul Golby told the Guardian that some of the coal and oil-fired plants
due to close this decade because of European pollution regulations should remain
operational and ready to come online during periods of peak demand such as those
experienced in recent weeks. The Guardian revealed this month that almost 100
large power users had to switch to alternative sources when National Grid triggered clauses
in their interruptible supply contracts." |
"Oil and gas sector spending is
forecast to grow by 12 percent this year, driven by
large national oil companies, according to the latest research. Total capital expenditure
of leading listed oil and gas companies is expected to exceed $798bn, a report by
GlobalData released on Thursday said." |
"Goldman Sachs Group Inc. said that shortages will reappear in the crude
oil market as supply fails to keep pace with a recovery in demand. Global oil consumption
will return to levels seen before the financial crisis by the third quarter of this year, Goldman analyst Jeffrey Currie said in a presentation
in London today. At the same time, projects to bring new oil to consumers are still
lagging as a result of the credit crunch, he said. 'By 2011, the market is back to
capacity constraints,' Currie said in slides shown with the presentation. 'The financial
crisis created a collapse in company returns which has significantly interrupted the
investment phase.' Crude oil futures traded around $78 a barrel in New York today, having
recovered 78 percent last year with the passing of
the biggest economic shock since World War II.
Investment into new oil capacity is being held up because 'political impediments on the
flow of capital are still very large,' Currie said at the conference." |
"North Sea oil and gas
exploration dropped by 35 per cent last year, taking it back to levels last seen five
years ago, according to figures published by Deloitte yesterday. Only 78 new wells were drilled in 2009, compared with 121 in 2008.
Exploration activity was down by almost half, appraisals by a quarter. Meanwhile, new
drilling in the Norwegian North Sea shot up by 18 per cent last year thanks to a more
generous tax regime..... Despite the signs of recovery elsewhere in the economy, there are
no green shoots in UK Continental Shelf (UKCS) exploration activity so far because of the
long lead times of the oil and gas industry. Some improvements are expected in 2010. The danger is that lower exploration rates now will lead to a
market dip in production in the future, as the oil and gas industry's long lead times feed
through. 'We've got to keep things going year on
year or production will drop back, the decline will be accelerated, and we will not make
the most of what we have,' Mike Tholen, the economic director at industry group Oil and
Gas UK, said. There are also worrying implications for Britain's oil and gas industry. 'If
companies providing resources to the UK see the market starting to shrink they will move
their resources elsewhere in the world and then the decline will snowball,' Mr Tholen
said." |
"The US has expressed concern to
Chinese officials about Beijing's attempts to buy up global oil reserves for the long
term. 'We are pursuing intensive dialogue with the Chinese on the subject of energy
security, in which we have raised our concerns about Chinese efforts to lock up oil
reserves with long-term contracts,' David Shear,
deputy assistant secretary of state for East Asian and Pacific affairs, told the House
Armed Services Committee yesterday. 'We will continue to engage them on this subject at
very senior levels,' he told the panel, which was holding a hearing on recent security
developments in China. Shear was responding to questions by Republican Roscoe Bartlett,
who said he was worried that the Chinese were 'aggressively buying up oil all over the
world' and might not share it with other countries in the future. China, the world's
second-largest oil consumer, has been pressing ahead with efforts to secure long-term
access to natural resources such as oil and minerals to help fuel its rapid economic
growth. China has been encouraging state-owned oil companies to expand upstream
investments abroad and to increase crude stockpiles. China's oil companies have been
snapping up energy assets all over the world, including stakes in Canadian oil sands
projects, an oilfield in Iraq, and buying the Swiss oil explore Addax Petroleum, reported
Reuters." |
"The recession has put a dent in
future North Sea oil and gas production, with companies tapping fewer new oil reserves in
2009 than in previous years of operations there. Only eight new oil and gas fields -
expected to produce a combined total of 140m barrels over their lifetime - began
production in 2009, according to Wood Mackenzie, the industry consultants.That compares with an average of 600m barrels of new reserves brought on
stream each year between 2004 and 2008. New start-ups are critical to extending the life
of Britain's oil and gas industry. Production at the North Sea's old fields has been
declining since the start of the last decade, driving companies out of the region,
reducing tax revenues and increasing UK dependence on foreign supplies.... Geoff Gillies,
the author of the research, noted that the decline was not due to a lack of drilling
opportunities in the area. 'Some companies weren't able to drill even if they wanted to,
due to the downturn and subsequent restricted access
to capital funding and tightening of capital budgets,'
he said." |
"British business has had it tough in the big freeze. Consumers have
turned up the thermostat to counter the plunging temperatures and industry has had to
suffer power cuts to make up the shortfall. Angst over national power supplies has rarely
been so severe. Yet the solution for the office, the factory or the depot may lie not in
billion-dollar international energy deals but on its doorstep. IGas, a coal-bed methane group, began a campaign yesterday to
persuade large energy users to allow it to set up mini-gas production facilities on their
sites and supply them directly with a substantial proportion of their gas requirements.
The move comes after National Grid issued four gas-supply warnings in the space of a week.
Last week more than 100 industrial users suffered a temporary cut when supplies were
interrupted because a Norwegian gasfield was shut down. IGas said that it had been granted planning permission for a full
production site at Ellesmere Port, the industrial town in Cheshire that is home to car and
chemicals companies, with a view to selling its gas to one of the businesses based there.
Work on a pilot site at Keele University, which will be taking the gas produced, is
already under way. The group has submitted planning applications for another four sites,
including one next to the Trafford Centre in Manchester. It believes that there could be
as many as 50 by 2014, each producing enough gas to supply the equivalent of 100,000
homes. The production sites, which could be easily located in a car park next to a factory
or office building, will sit above 11 areas, covering 1,754 sq km in the North West, where
coal seams are known to exist....It believes that once planning permission has been
granted on a site, it could be operational within a month. The gas produced would be
cheaper than buying it from the grid. IGas also claims it would be more environmentally
friendly because the gas is not being transported vast distances. The process, along with
other unconventional gas-production techniques, such as extracting from shale, has a very
low profile in Britain and is responsible for less than 0.5 per cent of its gas supplies.
It is common in the United States and Australia and IGas
thinks that the method could provide 10 per cent of the national supply....Jeremy Nicholson, director of the Energy Intensive Users Group, said
that the impact on big gas users would have been much greater if it had not been for the
recession reducing demand. Supply alerts, he added, would become more common. As a result,
any way of securing a dedicated supply was becoming increasingly attractive, he said.
“It’s not the same as being at the end of a long pipe, the risks of which are
becoming quite apparent.” |
"Russia rescued British energy consumers by ensuring a
steady flow of gas into the power network as supplies from Norway
faltered during the cold weather, industry customers users said today. As the National Grid warned of a
'high' possibility
of shortages in the north-east and south-west owing to another cold snap, the Major
Energy Users' Council said Britain had been lucky to survive without shortages. Eddie
Proffitt, chairman of the council's gas group, said: 'The [British] gas industry has coped
very well but we have been lucky. It would have been desperate if we had seen the kind of
disputes between Russia and Ukraine that have reduced gas flows on the continent in the
past two or three Januaries.' Politicians said four 'gas balancing alerts' – warnings
of pending shortages – in the space of a week meant it was time Britain reviewed its
whole energy policy. 'This winter has shown the system we have devised does not have the
resilience it should have. It runs on a 'just-in-time' principle which has economic
benefits when it works but risks ending up in a 'just-too-late' if all goes wrong,' said
John Hemming, MP for Birmingham Yardley. 'If the Russians had hit the kind of problems
with its neighbours seen in previous years then we would have toppled off the knife edge
we have been sitting on with our gas supplies.' The
disruptions to supplies from Norway – normally seen as highly reliable – left
Britain importing gas through the interconnector pipeline which runs from Zeebrugge in
Belgium to Bacton in north Norfolk. In previous years shortages from Siberia have led
German and Dutch suppliers to halt gas exports to Britain. The National Grid admitted that much of the stress in the gas supply
system had been caused by technical problems on Norwegian fields such as Ormen Lange and
Troll but said everything was back to normal. A Grid spokeswoman insisted the gas alerts
had worked as they were expected to: drawing new supplies from other sources, such as
liquefied natural gas on board vessels and the continent. She declined to comment on what
would have happened if Russian gas had not been flowing normally. The Major Energy Users'
Council also had serious concerns that changes to the regulatory regime next year could
make the situation worse. Proffitt said there were 1,250 customers around Britain on
'interruptible' gas contracts, but this number would fall to 27 by October 2011 when new
Ofgem regulations come into force. 'Some of our members are very concerned about this
because they fear a supply shortage could lead to demands that sites lose their gas. Many
of those who choose to have interruptible contracts have back-up power sources such as
diesel-fired generators,' he said. Nearly 100 customers had
their power cut at one stage last week, including the Vauxhall car plant at Ellesmere
Port on Merseyside." |
"The US overtook Russia as the
world’s largest natural-gas producer last year as operators tapped unconventional
resources while demand in Russia plunged amid the country’s worst economic decline on
record. US output advanced 3.9%t in January through October to 18.3 trillion feet (519 billion cubic metres), according to the latest
Department of Energy data. Russian output, about four-fifths of which comes from state-run
Gazprom, plunged 17% in the period to 462 billion cubic metres.....The US growth trend may
indicate that Gazprom will not be able to break into the US market as it had planned,
Mikhail Korchemkin, head of East European Gas Analysis, said in a Bloomberg report.
Gazprom set a target to take as much as 10% of the US market by 2020 through LNG sales
from Arctic plays, Gazprom executive Alexander Medvedev said in June. The surprising boost
shale gas has given US output has closed the world’s biggest energy consumer to some
imports and 'created a huge oversupply of LNG in Europe,' Korchemkin said. In July, Qatari
LNG prices in the UK fell as low as $75 per thousand cubic metres compared with Gazprom
prices of between $210 and $220 per thousand cubic metres for countries in the European
Union under long-term deals, Korchemkin said. Gas deliveries from Norway and Qatar to
Europe in the third quarter outpaced European growth in consumption while Russian exports
lagged behind, according to the International Energy Agency. European imports from Qatar
more than doubled to 4 billion cubic metres in the third quarter from the same period the
previous year. Supplies from Norway rose 27% to 21.1 billion cubic metres while overall
European imports grew 10% to 100.1 billion cubic metres, according to the IEA. Imports
from the former Soviet Union grew 8.6% to 32.6 billion cubic metres. 'There are winners
and losers in the world gas business,' Korchemkin said. 'The losers are Gazprom, Nigerian
National Petroleum Corporation, Turkmengaz' and NAK Naftogaz Ukrainy. European imports
from Nigeria fell 38% to 2.1 billion cubic metres in the period, according to the report.
Turkmenistan’s route to Europe was closed when Gazprom stopped purchases in April of
this year. Gazprom’s share of the European market may fall further as it refuses to
show flexibility by giving a temporary price discount to European buyers, Korchemkin said.
This may result in Gazprom exports to Europe remaining flat at levels just above
contractual minimums over the next five to 10 years while others take advantage of growth,
he said. Russia surpassed the US in gas production in 2002, pumping 539 billion cubic
metres versus America’s 536 billion, according to figures from UK supermajor BP.
Russia, which has the world’s largest reserves and a quarter of Europe’s market,
led the world in output from 1986 to 1996 and again in 1999, the year after the government
defaulted on $40 billion of domestic debt and devalued the ruble. The EIA said full-year
US output probably increased 3.7% to the equivalent of 624 billion cubic metres. The
agency is slated to release November data on 29 January. Russia’s annual output fell
12% to 582 billion cubic metres. Demand for gas in Russia, the world’s largest user
of the fuel after the US, contracted last year along with the economy. Prime Minister
Vladimir Putin said 30 December that annual gross domestic product declined 8.5%, the most
since the collapse of the Soviet Union in 1991." |
"All the recent panic about UK gas supplies hasn’t developed
into any kind of lights-off crisis. If anything, it has shown that the eminently sensible National
Grid has a good warning system in place to make sure industry is flexible about
switching from gas to other forms of generation when there are exceptional weather
conditions or production problems. But what the
current situation does highlight is some of the cracks in the UK’s energy planning
pipeline that could develop into real shortages in future. One of the most worrying
examples is our dependence on coal as a back-up fuel when there is abnormal demand for gas
in cold weather. At the moment, our emergency coal-fired stations are hurtling along at
full capacity to help warm and power homes and businesses. However, a European Union
directive from two years ago says 10 of the dirtiest stations must close by 2015 or after
20,000 hours of generation. We are currently planning for these to come off the system in
2015. But if you look at the latest figures for their progress, some have already used up
almost half of their allotted hours after just two out of eight years. If they carry on
burning up coal at this rate, they could come off the system as early as 2012 – only
two out of the 10 plants are generating power in keeping with the shutdown timetable. This is worrying analysts at Inenco. 'Alternative forms of generation will
need to be online way before the these plants reach their 2015 deadline or the
‘generation gap’ could occur at some point after 2012,' says Nick Campbell. 'If
we continue down the line of gas fired generation and not a diverse generation portfolio,
then the impact of extraordinary cold weather or supply side issues on gas could have a
major impact on the power market. 'The situation means the government needs to bring new
storage facilities and renewable energy projects online more quickly, amid fears that the
plants may have to stop power generation way before they are due to be decommissioned in
six years time.'”Both gas and wind power need back-up in cold weather. If the coal
stations are going to burn out sooner than we thought, the need for extra gas storage and
import capacity becomes even more pressing." |
"There have been few worse years for
the US motor industry than 2009. Sales plunged, two of the big three — General Motors
and Chrysler — went into bankruptcy and now it emerges that the US market was
outstripped by China for the first time. The China
Association of Automobile Manufacturers revealed yesterday that a record 13.6 million
light vehicles were sold in China in 2009, compared to around 10.4 million in the United
States. Small wonder then that carmakers gathered in
Detroit for the city’s Motor Show — widely considered the most important on the
world circuit — are increasingly looking to China for sales growth." |
"The U.S. Energy Information Administration on Tuesday slightly raised
its estimate for domestic natural gas production in 2010 but still expected output this
year to be down 3 percent from 2009 levels. In its January Short-Term Energy Outlook, EIA
said it expected marketed natural gas production to be down 1.8 billion
cubic feet per day, or 3 percent, this year, primarily due to steep
declines from initial production at newly drilled wells and
the lagged effect of reduced drilling activity. EIA
also forecast U.S. natural gas consumption this year would average about 62.44 bcf per
day, little changed from 2009 demand of 62.45 bcf daily, as growth in residential,
commercial and industrial use is offset by declining demand from the electric power
sector." |
"World oil demand will rise to
86.65 million barrels per day in 2011, up 1.47 million bpd from a year earlier, the U.S. Energy Information Administration said on Tuesday. In its new
monthly energy forecast, the agency also projected 2011 U.S. oil demand would rise to
19.11 million bpd, up 216,000 bpd from 2010. This report offered traders their first
glimpse at the agency's supply and demand forecasts for 2011. At the same time, the EIA
cut its forecast for global growth in petroleum consumption this year to an increase of
1.08 million bpd from 2009. Last month the agency
projected a 1.1 million bpd rise in world oil demand in 2010. The EIA also lowered its outlook for U.S. oil consumption in 2010. The
agency said it now expects a 211,000 bpd rise in demand, down from the 270,000 bpd
increase predicted in the previous report. Although the rebound in oil demand will be led
by developing countries in 2010, richer nations should 'begin to show significant oil
demand growth in 2011 in response to improving economic conditions,' the EIA said." |
"Britain's electricity network
is not ready to cope with a plan announced today to massively expand offshore wind
generation, experts have claimed. A 'Super Grid', the first stage of which would cost
£10-15bn to build, would be needed before the country's electricity network could deal
with the huge peaks associated with wind power. The
Crown Estate today announced nine sites around Britain for wind power generation with the
aim of producing up to 32 gigawatts - enough to power 20 million homes - from 6,400
offshore turbines. But those close to the project warned that generating capacity was
leaping ahead of plans to distribute the power....The 'Super Grid' would work by linking
the electricity networks of Britain, Germany, Norway and Denmark to allow the power
generated on windy days to be distributed across the countries. On days when there is
excess capacity the energy could stored or used to pump water at hydroelectric sites to
create generating capacity when the wind drops....It is unclear how the super grid will be
financed and how much each country would contribute to what would eventually be a
pan-European network of undersea cables. The companies building the new wind farms would
contribute a substantial proportion of the cost but they themselves will be supported by
public subsidies for wind power paid for by homes and businesses through higher energy
bills." |
"The inauguration of the
Dauletabad-Sarakhs-Khangiran pipeline on Wednesday connecting Iran's northern Caspian
region with Turkmenistan's vast gas field may go unnoticed amid the Western media
cacophony that it is 'apocalypse now' for the Islamic regime in Tehran. The event sends
strong messages for regional security. Within the space of three weeks, Turkmenistan has
committed its entire gas exports to China, Russia and Iran. It has no urgent need of the
pipelines that the United States and the European Union have been advancing....The 182-kilometer Turkmen-Iranian pipeline starts modestly with the
pumping of 8 billion cubic meters (bcm) of Turkmen gas. But its annual capacity is 20bcm,
and that would meet the energy requirements of Iran's Caspian region and enable Tehran to
free its own gas production in the southern fields for export. The mutual interest is
perfect: Ashgabat gets an assured market next door; northern Iran can consume without fear
of winter shortages; Tehran can generate more surplus for exports; Turkmenistan can seek
transportation routes to the world market via Iran; and Iran can aspire to take advantage
of its excellent geographical location as a hub for the Turkmen exports. We are witnessing
a new pattern of energy cooperation at the regional level that dispenses with Big Oil.
Russia traditionally takes the lead. China and Iran follow the example. Russia, Iran and
Turkmenistan hold respectively the world's largest, second-largest and fourth-largest gas
reserves. And China will be consumer par excellence in this century. The matter is of
profound consequence to the US global strategy....What matters most to Russia is that its
dominant role as Europe's No 1 energy provider is not eroded. So long as the Central Asian
countries have no pressing need for new US-backed trans-Caspian pipelines, Russia is
satisfied. During his recent visit to Ashgabat, Russian President Dmitry Medvedev
normalized Russian-Turkmen energy ties. The restoration of ties with Turkmenistan is a
major breakthrough for both countries....Moscow has chosen to pay a high price, that is
primarily because of its resolve not to leave gas that could be used in alternative
pipelines, above all in the US-backed Nabucco project.....The United States' pipeline
diplomacy in the Caspian, which strove to bypass Russia, elbow out China and isolate Iran,
has foundered. Russia is now planning to double its intake of Azerbaijani gas, which
further cuts into the Western efforts to engage Baku as a supplier for Nabucco. In tandem
with Russia, Iran is also emerging as a consumer of Azerbaijani gas. In December,
Azerbaijan inked an agreement to deliver gas to Iran through the 1,400km
Kazi-Magomed-Astara pipeline. The 'big picture' is that Russia's South Stream and North
Stream, which will supply gas to northern and southern Europe, have gained irreversible
momentum. The stumbling blocks for North Stream have been cleared as Denmark (in October),
Finland and Sweden (in November) and Germany (in December) approved the project from the
environmental angle. The pipeline's construction will commence in the spring." |
"Nine giant new wind farms in the seas around Britain will be
announced today, but few of the 6,000 turbines needed are likely to be built here. Ed
Miliband, the Energy and Climate Change Secretary, will say that the world’s biggest
expansion of offshore wind power, costing £75 billion, will create 70,000 jobs in Britain
by 2020. However, the Government has failed to persuade any of the major wind turbine
manufacturers to open a factory in Britain. The companies granted licences today to build
the farms will not be obliged to source any parts from domestic manufacturers and most are
expected to buy turbines made in Denmark or Germany....The
nine farms announced will generate enough electricity to power more than half of
Britain’s homes, but only when the wind blows. The
turbines will be twice as large as those on land, typically rising 170m (557ft) from sea
level to the tip of the blade. They will stand in up to 70m of water, compared with only
10-25m for existing offshore turbines. They will also be much farther away from the coast,
with the biggest, Dogger Bank, starting 130 miles off the North East coast. Residential
platforms will be built near the turbines to accommodate hundreds of workers who will
carry out servicing and repairs.....The timetable for
the construction will depend on how quickly the finance can be raised and what happens to
the price of the fossil fuels with which wind energy competes. None of the farms is likely
to be generating electricity before 2015." |
"The shutdown of a giant gas
field offshore of Norway has pushed Britain's gas infrastructure into emergency mode,
forcing the closure of industrial companies in the north of England in order to preserve
supplies to homes, shops and offices. National Grid, which operates Britain's gas network,
issued a warning this morning that the system would run short of gas when pressure dropped
in Langeled, a pipeline that brings gas from Norway to a terminal at Easington on the East
coast of England. With demand for fuel at record levels, some gas companies cut off
supplies to some industrial customers on interruptible contracts....Statoil, the Norwegian state energy company, said that Troll, a giant
offshore gasfield suffered a minor technical problem which forced it to shut down
production for one hour. The brief stoppage caused pressure to plunge in Langeled,
prompting National Grid to issue a National Balancing Alert. Statoil said that production
had since resumed to normal levels but a spokesman for National Grid said the alert would
remain until 6am tomorrow pending a review of the pipeline pressure in Langeled. The
Norwegian pipeline which commenced operations two years ago has become a lifeline for
Britain's energy network, supplying about a fifth of the gas consumed in Britain. Demand
for fuel has soared during the recent weeks of exceptional cold. Gas consumption has
reached record levels with demand in recent days as much as 28 per cent above seasonal
norms. Today's alert follows an alert on Monday when Troll ceased production due to gas
leak. Statoil said that the second shutdown was unrelated to Monday's incident. The
cut-off of supplies to customers is the first time for six years, said National Grid that
it has been forced to take such measures. Industrial companies called today for more gas
storage facilities to be built in Britain. EEF, the
engineering employers’ organisation said calls by industry for investment in storage
had been ignored and inadequate incentives were available for investment to bring
Britain's gas storage up to levels that exist on the Continent. 'The longstanding vulnerability in our energy system has today been
exposed and as a nation we now need to take security of our energy supply more seriously,'
said Roger Salomone, EEF’s energy adviser." |
"McKinnon & Clarke, the UK's largest independent energy
consultancy, has called on the Government to take tough decisions and invest in the UK's
energy industry or face the reality of running low on energy. The move comes as the
National Grid today issued the second Gas Balancing Alert this week - unprecedented in
recent times. With low gas reserves and record demand, further concern was raised today as
Norway's largest gas producer, Statoil, announced that production is down at their Kroll A
field - causing a dramatic fall in pipeline supplies to the UK from our biggest import
source. M&C's energy analyst, David Hunter, believes this latest warning throws
a spotlight on the UK's precarious energy position. Mr Hunter said: 'We are seeing
unprecedented levels of demand for gas and as we've heard Norwegian pipeline imports have
just fallen dramatically. This sent the gas system from surplus to deficit very quickly at
a time of very high demand. Outages are not uncommon but occurring during a time of
sustained record demand is making traders and industry very nervous. 'It has been almost
four years since the National Grid last issued a balancing alert - to have two in one week
is unprecedented. This is an urgent call to action for suppliers to find extra gas from
somewhere, and for power generators to reduce demand. 'Although the Norwegian problems are
short-term, the markets and grid operator will be very nervous until supplies return and
this could lead to further price volatility. The UK
has lagged behind other European countries in building gas storage capacity for winter, despite exporting gas to other countries when demand is lower. The
reality is we are the ones who are relying on our European neighbours to keep our lights
on and homes heated." |
| "Canada and China have signed a
deal that will see PetroChina, the market arm of the state-owned China National Petroleum
Corp., investing $1.7 billion in two Canadian tar-sands deposits in Alberta. Canadian Industry Minister Tony Clement said the government gave
PetroChina the go-ahead for the acquisition. Industry sources said the deal was agreed
about two months ago but only finalized before Clement's announcement before the new year.
If successfully exploited, the tar-sands development will secure for China's energy-hungry
economy a substantial resource from about 5 billion barrels equivalent of 'best case'
bitumen. Canada is the world leader in oil produced from tar sands, followed in a smaller
measure by Venezuela. The Canadian tar-sands
industry, centered in Alberta, produces more than 1 million barrels a day of synthetic oil
-- about 40 percent of Canada's oil production -- from the sands currently under
exploitation." China buys into Canadian tar sands exploitation project United Press International, 5 January 2010 |
"Moves made to address carbon emissions are varied, but many
governments seem to be prioritizing low-carbon energy programs as an alternative to fossil
fuels. Fatih Birol [IEA Chief Economist] recently
told the US Council on Foreign Relations of his certainty that developing states are
interested in climate negotiations – and in reducing emissions – far more for energy security reasons than for climate
ones. Diplomatically, he did not suggest that major
industrial states might be acting for much the same reasons." |
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