State Dept.’s updated report does little to clear the path for Obama to make a decision thwarting the pipeline
Perhaps it was intended to not make waves among environmentalists, however the State Department’s report released on Friday roiled the waters nonetheless. In it the State Department said there could be hundreds more deaths and thousands more injuries than expected over the course of a decade if the Keystone XL pipeline is not built, and freight trains are used instead.
Using a full annual incident dataset for the 10-year period, updates previously released revise estimates, increasing the number of injuries from 700 to 2,947 and number of fatalities from 92 to 434, according to the report.
As Reuters reports, the updated figures are a revision from a January State Department report which said that blocking the controversial pipeline could increase oil train traffic and lead to an additional 49 injuries and six deaths per year.
That finding was a small element of a broader examination of how building the pipeline could impact climate change, endangered species, quality of life and other issues.
But the report mistakenly used a forecast for three months of expected accidents rather than full-year figures, officials said. The correct estimate of deaths should be roughly four times as large – between 18 and 30 fatalities per year.
Officials also revised a footnoted reference to how much electricity would be needed to power pumping stations along the route of the pipeline that would link Canada’s oil sands region to Texas refineries.
Running at something less than full capacity, the pumping stations would not require as much electricity – and so tax power plants less – than originally reported.
The revised figures in the report add contours to the debate over the fate of the Keystone XL pipeline and show that the State Department is aware of the growing reliance of using rail to ship oil and gas. Moreover, a number of incidents in the last year have created greater awareness of the perils in using rail.
A CSX train spilled 50,000 gallons in an April 30, derailment in Lynchburg, Va., in which no one was hurt. That spill followed last year’s derailment in Quebec, which killed 47 people, according to the Daily Energy Dump archives. However, moving oil and gas by rail has become the go-to method of transportation as the Obama Administration stalls while trying to straddle the issue much to the dismay of supporters and to the enragement of Keystone XL foes.
The International Energy Agency estimates that demand for transportation infrastructure is emerging as a major driver of gas’s expanding role in the energy sectors of China and the United States, accounting for 10 percent of gas demand growth. In May the Philadelphia Inquirer had a good example of how the confluence of oil and gas exploration and the need to get it to markets is altering the economic landscape across the country.
A Federal Railroad Association report said more than two-thirds of railway accidents are related to human error. The report did not distinguish between freight or passenger service. The FRA estimates hauling goods by freight rail to be a $60 billion industry covering a 140,000 mile system moving more freight than any other freight rail system worldwide and providing 221,000 jobs.
While the revised estimates was released on a Friday, a day when Washington often dumps reports it finds to be inconvenient as people look ahead to a weekend of leisure and away from day-to-day business, neither supporters nor foes of the controversial project failed to notice. Keystone proponents said that the risk of more deaths strengthens the case in favor of the project, according to the New York Times.
Environmental groups said that the report highlighted the danger inherent in developing the oil sands at all.
State Department officials said the updated information was not likely to influence any decision. Secretary of State John Kerry has sought opinions from several cabinet officials in his deliberations, and State Department officials say he will consider the pipeline’s impact on the environment, economy and national security, among other issues, before making a recommendation to Mr. Obama.
Shawn Howard, a spokesman for TransCanada, the company that hopes to build the pipeline, said the updated report “reaffirms what we have been saying for years: The safest, most environmentally responsible and affordable way to move oil to the markets where they are needed is a pipeline.”
On May 22, Russ Girling of TransCanada confirmed his company is in talks with customers about increasing the use of freight trains for shipping crude oil and gas to the United States.
The report, known as an errata sheet, here, is the Final Supplemental Environmental Impact Statement for the Keystone XL Project. The data obtained for the analysis comes from the FRA. The rail incident analysis is based on nation-wide statistics for Class I freight rail data obtained from the FRA database, the report said. Class I railroads are those with annual carrier operating revenues of $250 million or more.
This latest report does nothing to make President Obama’s job of deciding one way or another easier. His indecision has perhaps given pipeline opponents false hope, because the polls and common sense say it’s the right thing is to construct it. At the same time he has crippled his party’s chances of carrying senate and house seats in states affected by all of the above factors.That’s why the odds of him doing anything until after the November election are low.
Working together, Norway’s parliament and Statoil ASA show their resolve to achieve broader goals
Norway’s Statoil reached a compromise agreement that averts a delay in the country’s biggest offshore play in years
Bloomberg reports the compromise means Staoil will supply electrification to three North Sea oil fields by 2022.
The accord ended weeks of wrangling in parliament over whether to force Statoil ASA to power the installations from land. The deal plans for full electrification of the area, known as Utsira High, while ensuring that the Johan Sverdrup discovery is developed as scheduled, said Nikolai Astrup, an energy committee member for the ruling Conservative Party.
“It’s tight for Statoil but we feel confident that Statoil can deliver,” the lawmaker said yesterday in an interview after a press conference at the Oslo-based parliament.
In an unprecedented move last month, Labor and other opposition parties formed a majority in parliament and demanded that Statoil and other energy companies include three more fields in their power plan for Sverdrup as part of broader efforts to cut greenhouse-gas emissions. The companies would need to start laying cables to the other fields in Sverdrup’s “start-up phase,” they said at the time. Statoil said this could mean delays to the 2019 output start and lead to losses of as much as 20 billion kroner ($3.3 billion).
On the news Statoil shares rose 0.7 percent to 182.9 kroner as of 10:36 a.m. in Oslo. Lundin Petroleum AB, another partner, slid 0.2 percent to 131.2 kronor in Stockholm, Bloomberg said.
Sverdrup was discovered in two parts by Lundin Petroleum AB in 2010 and Statoil in 2011, and Bloomberg said, the find renewed optimism in Norway’s oil industry after a decade of falling output from aging North Sea fields. “The discovery could supply as much as 25 percent of Norway’s crude production 10 years from now, according to the Norwegian Petroleum Directorate. Statoil estimated in December that Sverdrup holds as much as 2.9 billion barrels of oil equivalent even as it cut its resource estimate and delayed the start of output by a year.”
Finding a New Way
The compromise also reveals how the country’s parliament may work in the future after the Green Party gained a seat in last year’s elections. It also shows the efforts of its new conservative prime minister Erna Solberg who was elected in 2013, partially on the promise to “wean Norway off its dependence on oil revenue and ease it towards a more balanced economy in which budget shortfalls are not plugged by the wealth flowing from the North Sea,” as the Economist said.
Norway and it’s state-run oil company Statoil have long-been dominant players in the oil and gas industry after finding major discoveries during the 1960s in the North Sea and the Barent Sea, according to a Daily Energy Dump profile. Norway is the largest holder of natural gas reserves, according to the U.S. Energy Information Agency. The EIA estimates that Norway was the third largest exporter of natural gas in the world after Russia and Qatar, and the 12th largest net exporter of oil in 2013. It overtook Russia last year as the main supplier of the European Union’s natural gas. Statoil ASA controls 70 percent of the country’s oil and gas production. Norway’s government is the largest shareholder of Statoil, owning 67 percent, the Daily Energy Dump article said.
Presumably, today’s news sheds light on yesterday’s news from Rigzone that Statoil had cancelled a rig contract with Diamond Offshore Drilling Inc. eight months earlier than expected, a company spokesperson said on Wednesday, confirming a report by energy news portal Offshore.no. The Ocean Vanguard rig was expected to remain on contract for Statoil until next February at rate of $454,000 per day.
Statoil is preparing to deepen cuts to investment, operating expenses and staff in a bid to generate an extra $5 billion of cash a year, a separate article in Bloomberg said.
The state-controlled explorer wants to meet that target for additional pretax cash flow by 2020 by reducing capital expenditure by as much as 25 percent compared with 2013, trimming operating costs by 15 percent and eliminating 20 percent of its technical staff, according to internal documents seen by Bloomberg News.
The goals are more ambitious than those Statoil made public in February, showing the pressure rising costs are putting on profit margins at the world’s largest oil producers as crude prices stagnate. Stavanger-based Statoil has particular challenges in Norway, where drilling is more expensive than anywhere in the world and labor costs are almost double those in the U.S. [...]
Reducing drilling costs is ranked first among six projects within the program. Statoil said expenses per meter drilled have risen 240 percent in 10 years as the distance drilled per day fell 44 percent. The cost of production wells is 25 percent higher than for peers on mobile rigs and 20 percent higher on fixed rigs, the documents said.
Drilling costs in Norway, western Europe’s biggest oil and gas producer, are the highest in the world and at least 40 percent higher than in the neighboring U.K., a government-commissioned report said in 2012.
It’s been an interesting few weeks for the state-controlled company.
Production in Norway has also been hampered over the last year by labor strife, and news today shows that it is a still unresolved issue, as oil-service unions said wage negotiations may reach an impasse that could trigger a strike, according to Bloomberg.
Moreover, according to a UPI story in May, government data show Norway’s oil and natural gas liquids production was down about 1.5 percent.
On May 21, UPI reported Statoil would keep operations at the platform tied to its giant Snorre field in the North Sea closed to investigate subsea erosion. That platform — Statoil’s Snorre B in the North Sea — is back in full production, the Stavanger Aftenblad daily reported on Friday.
A week later the company arrested more than a dozen Greenpeace activists who boarded a drill ship headed for arctic waters, UPI said. The rig was contracted by Statoil from Transocean that was bound for work in the northern reaches of the Barents Sea.
Additionally, the company is facing calls from at least one shareholder to exit the Canadian tar sands play, according to Punch. “United States investment firm, Boston Common Management, which holds a minority stake in Statoil, has questioned whether the Norwegian state-owned oil company’s Alberta assets – including the producing Leismer project and planned Corner scheme – are sustainable in the long-term, Stavanger Aftenblad reported. [...] Another Statoil investor, Storbrand, backed the findings of the report and said it would support a motion due to be submitted at the AGM by environmental groups Greenpeace and WWF for the company to exit the oil sands.”
Argentina plays to make a change, but it’s hard to see the schizophrenic political culture changing until there is a new government after the 2015 elections
Repsol, the Spain-based oil and gas company, got rid of an enduring headache by selling YPF its South American subsidiary to the Argentine government for $5 billion. The accepted offer was compensation for the country’s seizure of Repsol’s controlling stake in YPF in 2012.
Additionally, in the deal reported yesterday, Repsol said it sold an 11.86-percent stake it owned in Argentina’s YPF energy company to Morgan Stanley for 900 million euros ($1.25 billion), effectively leaving it without a stake in a company it once controlled, according to the Associated Press. The stake represented 46.6 million shares.
Repsol had been used by the government of President Cristina Fernández de Kirchner as a scapegoat for poor policy, and saw YPF nationalized by Kirchner in 2012.
According to the U.S. Energy Information Administration, Argentina is South America’s largest natural gas producer and a significant producer of oil.
However, the heavily regulated energy sector includes policies that limit the industry’s attractiveness to private investors while shielding consumers from rising prices. Consequently, demand for energy in Argentina’s rapidly growing economy continues to rise while production of both oil and gas are in decline – leading Argentina to depend increasingly upon energy imports.
Jonathan Gilbert in a Christian Science Monitor article said with the Repsol deal “Argentina took a crucial step in repairing its international image by settling with Spain’s Repsol over the 2012 re-nationalization of oil company YPF.”
However, the general consensus is that this week’s move alone is not sufficient to allay foreign investor fears.
“This is positive as it finally brings the whole ordeal to an end,” says Jorge Piñon, director of the Center for International Energy and Environmental Policy at the University of Texas. Repsol had threatened legal action against companies that partner with YPF and even sued Chevron, which signed a $1.2 billion deal with the company last year. “But we have to be careful about thinking that [this] absolves Argentina when it acted outside the rule of law,” Mr. Piñon says.
It was in April 2012 that Argentina nationalized Repsol-YPF because it claimed the Spain-based company wasn’t investing enough in exploration. This was part of a number of heavy-handed moves by Kirchner that, even at the time, seemed to be aimed at redirecting criticism for policy and aiming it at outsiders.
At the heart of current investment interest lies the Vaca Muerta, a large oil play in the Neuquén Province that has been considered the biggest shale field outside of North America, and has some impressive numbers, according to Business Insider reporter Mamta Badkar:
- The Vaca Muerta formation covers a total area of 30,000 square kilometers (km2) or 7.4 million acres.
- The discovery has the potential to increase Argentine hydrocarbon production by 50 percent by 2019 according to YPF estimates.
- The field needs investment of up to $42 billion to increase production by 50 percent and will be split at $28 billion for oil production and $14 billion for gas production.
- Initial exploration efforts suggest that there are 927 million barrels of oil equivalent in non-conventional hydrocarbons. An independent study by Ryder Scott, an oil and gas consulting firm confirmed that the Vaca Muerta oil and shale gas formation has more than 21 billion barrels of oil equivalent (BOE).
- Argentina relies on natural gas to meet 51 percent of its energy needs, and natural gas was also one of the most significant facets of its energy trade deficit in 2011, according to Morgan Stanley analyst Paolo Batori. Vaca Muerta has the potential to make Argentina a net exporter of energy.
There are other large fields as well in Argentina. According to Oil & Gas Journal, Argentina had 2.5 billion barrels of proved oil reserves as of January 1, 2012. Argentine government data suggest that Golfo San Jorge Basin (predominantly Chubut and Santa Cruz provinces) claims over 60 percent of remaining proved reserves, followed by Neuquén Basin at 25 percent. PAE’s Anticlinal Grande-Cerro Dragon concession in Golfo San Jorge contains almost 30 percent of the country’s
Most of these are considered mature. But EIA said there are still discoveries nbeign made:
Though most of the recent enthusiasm in Argentina regarding unconventional fossil fuel resources has centered on natural gas, last year YPF announced a large discovery of shale oil in the Loma La Lata field in the Neuquén province in the Vaca Muerta shale formation, the estimated size of which has increased to 741 million barrels of recoverable shale oil.
Argentina’s government said its recent $5 billion settlement with Spanish oil major Repsol SA will clear the way for new energy investment. But there are doubts as to whether the deal will open up Argentina for investment or if investors will try to wait out the Kirchner government. The country is set for elections in 2015.
Jennifer Warren at Seeking Alpha notes Argentina’s demand for energy is driving outside investors toward investing in Argentina, though with much trepidation.
Argentina’s Vaca Muerta, a world-class shale play, received renewed interest after Chevron’s (CVX) announcement in April. “The Vaca Muerta-specific pilot investment was $1.24 billion,” states the first article about the emergent opportunity. In 2014, Chevron added $1.6 billion of investment, signing an accord with Argentina’s state-run YPF SA (YPF). The joint venture, with plans that equal a $15 billion investment, is targeting daily output of 50,000 barrels of shale oil and 3 million cubic meters of gas.” Generally, in the Vaca Muerta, Chevron expects production to grow to 80,000 boe/d by 2017, half of it Chevron’s, according to its investor day presentation. With the unconventional oil and gas production investment in the U.S., and increasingly in Canada, Argentina is also on investors’ radar.
Importantly, the investment climate and political risk inherent in Argentina concerns investors most.
Warren quotes Alex Arellano, who is originally from Argentina and an attorney at Winstead with a extensive business and legal experience in Argentina and Latin America, as saying “there is a general feeling within Argentina that a period of growth and prosperity is near.”
Arellano said, a change in administration could help the business climate significantly. But a challenge for any new administration would be to set clear and predictable policies to help gain the trust of the Argentine investor followed by the foreign investor. “This has not always been the case with the current government,” Arellano said.
For the last eleven years, the Kirchners, for the most part, have set the country’s policies through their “party” FPV (Frente Para la Victoria). FPV belongs to the Peronist party, so it is technically not a full political party but an alliance. Because the FPV has been in power for 11 years, even if the FPV loses the elections in 2015, it will take some time for policies to change. I would expect the current policies to stay in place for some time even if there is a change in the elections. To my knowledge, Argentina does not have a large anti-fracking movement, probably because most of the energy resources in Argentina are found in regions with little to no population. For example, Vaca Muerta is in the middle of the Patagonian desert.
A correspondent for the Christian Science Monitor in Buenos Aires, Stephen Kurczy said,“The agreement with Repsol is not enough to attract foreign investment. Caution will continue to rule.”
He said Cabinet Chief Jorge Capitanich thought the settlement would “open the door for increased energy investment,” but noted Capitanich also said the government will need a total of about $149 billion of investment for infrastructure projects over the next decade.
Indeed, a good guess is that large multi-nationals like Chevron, that have the where-with-all to stand up to a Kirchner government, might make probe deeper, but that caution will still be the rule.
Add in the other factors: distrust, high inflation, import restrictions, strong government regulation in the energy sector, and a government accused of falsifying economic data on which investors rely, and it’s hard to see much changing before 2015.
News that Russia has increased its interests and pursuits of an arctic foothold have been percolating for awhile but now comes an effort to gain a stronger purchase to begin hydrocarbon exploration
If there is place and way to start a new Really Cold War — by accident or by design — it would be a competition for energy resources in the Arctic.
Today comes a story from the English-language version of RT, a Russian viewpoint news channel and website, which said Russia is preparing to bring in the biggest bid to the UN to explore for hydrocarbons, while extending the country’s reach beyond its boundaries.
Ahead of Moscow preparing to file a 1.2 million square kilometer Arctic waters bid to the UN later this year, President Vladimir Putin commissioned Russian ministries to get ready to take the new territories in the Sea of Okhotsk under full control and protection.
The Russian president ordered maintenance of border patrols of the extended sea shelf be in place by July 1, 2014.
Russia’s Defense Ministry has been instructed to ensure maritime authorities extend the Russian shelf in the Sea of Okhotsk beyond the generally recognized 200 nautical miles zone by December 1, 2015.
The Foreign Ministry is obliged to bring all the necessary documents, including new maps of the Sea of Okhotsk and scientific data serving as proof of Russia’s bid, to the UN by March 1, 2015. [...] Last year, Russian energy giants, Gazprom and Rosneft, were granted rights to develop large hydrocarbon deposits recently discovered in the Pechora and Kara seas. The find could be a pot of gold for Russia’s gas industry.
Russia’s move into the Arctic can be seen as multi-pronged. It moves Russia closer to Asia, helps establish its own hegemony, and gives the U.S. another geopolitical shove. Still, there are motives for all sides to work together to accomplish energy exploration in a dangerous climate. All the countries bordering the Arctic are members of the Arctic Council and are working under agreements signed in 1991 outlining environmental and emergency guidelines.
So far, Russian and U.S. authorities have been saying the right things, as Putin has said Russia is ready to work with the Arctic Council, and President Obama has said, “The Arctic region is peaceful, stable, and free of conflict,” according to Secretary of Defense Chuck Hagel. But underneath there seems to be a tension building and actions that could heighten them.
In May 2013, Obama unveiled a 13-page U.S. strategy for the Arctic, according to the Associated Press, and other news outlets. The strategy asserted that nations must protect the region’s fragile environment and keep it free from conflict. “At the same time, however, the U.S. wants to make sure it is not left behind as countries like Russia, China, Canada and Norway map out plans ranging from gas and oil exploration to research and military exercises,” the AP said.
Russia’s military resumed a “permanent Arctic presence” in Sept. 2013, RT said in a separate story, marked by the arrival of a task group of 10 warships and support vessels to the western coast of Kotelny Island in the Novosibirsk (New Siberian Islands) Archipelago. “The task group is headed by Russia’s most powerful battleship and the flagship of the Northern Fleet, cruiser Peter the Great (Pyotr Veliky). The group is accompanied by four nuclear icebreakers facilitating the passage through areas with particularly thick ice.”
The Obama Administration in November said energy exploration in the largely untapped Arctic region could heighten international tensions, but that countries must work together to avoid conflict, the AP reported Hagel saying with regard to the increased interest in the Arctic’s lucrative oil and gas deposits. Hagel’s comments came as the military finalized plans to expand operations in the vast waters of the Arctic
It’s unclear because of Obama’s cutbacks in defense budgeting (see here also) whether the U.S. has the willpower to fill the wide gaps in satellite and communications coverage, add deep-water ports and buy more ships that can withstand the frigid waters or break through the ice.
An EY study says, the region above the Arctic Circle accounts for only about 6 percent of the Earth’s surface area, but it could account for as much as 20 percent of the world’s undiscovered but recoverable oil and natural gas resources.
The existence of hydrocarbon resources in the Arctic has been known for decades, but only in recent years has the opening to full-scale resource development and navigation — such as the fabled Northwest Passage that would connect the Atlantic and Pacific Oceans, or the Northern Sea Route that will connect Europe and western Russia with eastern Russia and Asian markets — become technically and economically feasible. [...] In 2008, the United States Geological Survey (USGS) released the first-ever wide-ranging assessment of Arctic oil and gas resources, estimating the region’s undiscovered and technically recoverable conventional oil and natural gas resources. Of the 33 Arctic sedimentary “provinces” that the USGS evaluated, 25 were found to have a greater than 10% probability of having oil or gas deposits larger than 50 million barrels of oil equivalent. The USGS assessment concluded that approximately 90 billion barrels of oil, 1,669 trillion cubic feet of gas, and 44 billion barrels of natural gas liquids (NGLs) may remain to be found in the Arctic. Of the total 412 billion barrels of oil equivalent (boe), approximately 84% is expected to be found offshore, and about two-thirds (67%) of the total was natural gas.
The Arctic region contains portions of eight countries — Canada, Denmark/Greenland, Finland, Iceland, Norway, Russia, Sweden and the United States. Finland and Sweden do not border on the Arctic Ocean and are the only Arctic countries without jurisdictional claims in the Arctic Ocean and adjacent seas, according to EY, which is member firm of Ernst & Young Global Limited, an assurance, tax, transaction and advisory services provider. And most of the hydrocarbons are believed to be in relatively shallow water, about 500 meters or about 1,500 feet.
While the Obama Administration claims to be pivot toward Asia about as often as it pivots toward the U.S. economy, between its muddled Middle East policy and regulatory rules-making at home, it really hasn’t done much geopolitically in Asia, though in energy it has continued its tariff war on solar panels with China.
Russia, on the other hand, is reaching out to China and Japan in its Arcitc policy as well. A Feb. 1, article in The Diplomat notes that:
The Arctic region has moved to the center of world politics in 2014, siting high on the energy security agenda of most East Asian countries, including China and Japan. The latter has recently been stepping up its efforts to build a stronger foothold in the area. Those efforts have been given a boost recently by Tokyo’s discovery of a new friend with a prominent role on the Arctic chessboard: Russia. A successful Japan-Russia rapprochement has the potential to serve as a game changer for both countries.
An April 11 Reuters story said Russia’s pivot toward Asia and the East made strategic sense.
In Yamal – which in the local Nenets language means “the end of the earth” – a $27 billion liquefied natural gas (LNG) scheme is assuming major political as well as economic significance.
The project fits well with a more aggressive eastward push by Moscow since the United States and European Union imposed sanctions over its annexation of Crimea from Ukraine last month.
Instead of sending gas by pipeline to long-standing EU customers, Russia aims to ship LNG from the remote Yamal peninsula by sea largely to Asian buyers such as China, which has avoided confronting Moscow since Russian troops took control of Crimea. [...] With the EU and Ukraine discussing ways to cut their reliance on Russian gas, Moscow has courted its Asian partners more aggressively, hoping to capitalize on record prices for LNG in Japan, China and South Korea. [...] A deal between Gazprom and China has been in the works for at least 10 years. If one is finally struck, Putin could hold this up as proof that Western attempts to isolate Russia are destined to fail.
Offshore-Mag.com, an oil and gas publication sees reason for cooperation in the Arctic because of the inherent risks in drilling in such a harsh environment. It notes the petroleum industry has explored and produced oil and gas in Arctic areas for more than 50 years, onshore and offshore. Factors such as melting sea ice, high energy prices, unrest in the Middle East, demand growth in Asia and the Russia/Norway delimitation agreement have led to significant increases in industry interest across the Arctic region.
Despite the frozen and inaccessible nature of the bulk of Arctic land and sea, the Arctic is not an unchartered and unregulated region as implied in some requests for a new binding Arctic Ocean Treaty.
On the contrary, the binding rules of the Law of the Sea and an extensive set of governance institutions weave their Arctic web year by year – and the bulk of Arctic resources are clearly and unambiguously under national jurisdictions of the Arctic five: Russia, Norway, USA, Canada, and Denmark/Greenland.
The Cold War heritage of military saber-rattling, the presence of virgin strategic resources, and a number of unsettled territorial boundaries have fueled the notion of a potentially destabilizing race to the Arctic. However, the dominant interest of all major Arctic players is peace, stability, and the rule of law based on modern Law of the Sea principles.
Powers such as China, Japan, and Korea have legitimate interests in access to shipping and high-seas water-column resources, and have been accommodated as observers in the Arctic Council and position themselves on commercial terms in shipping, energy extraction, fisheries, research, and tourism. The main threat of military escalation lies in potential conflict overflow from other regions. This is not considered a realistic scenario at present.
The RT article at the top seems to think that the ultimate goal for the U.S. is to establish international order under U.S. leadership. But it’s hard to square that with the actions of the administration, particularly in foreign policy. The more likely reading from here is that the U.S. abdicates its military efforts there unless it needs to defend Alaska and allows Russia all the room it needs. This would mean U.S. companies would need to work with the remaining countries with interests in Arctic energy exploration. And it also probably means U.S. power will be diminished more.
While London Threatens That Scotland’s Energy Prices Could Rise, Questions Over Value and Extent of North Sea Oil and Gas Grease up Political discourse
Scotland is on the verge of voting to become independent from the United Kingdom. Scottish leader Alex Salmond has set Sept. 18, 2014, as the date for an independence referendum, and if the Scots vote for independence it will set off a cascade of events that will reshape the country.
Questions about what how to decouple its currency from the English pound, how a new representative government will be set up, amongst other weighty issues, loom. As CNN reports, “It’s a vote that could end Scotland’s 300-year union with England and Wales as Great Britain — and see it launch into the world as an independent nation of some 5.3 million people.”
One question being hashed out now is how will Scotland’s energy sector fare in the event of independence. Reuters runs a story today reporting Britain’s secretary of energy and climate change Ed Davey cautioning that independence could see a large increase in energy costs, noting that costs of producing energy to power Scotland’s 3 million homes is subsidised by the total 33 million households across Britain, according to reporter Susanna Twidale.
Davey’s words of caution, of course, may be politically expedient, as England is opposed to Scottish independence. Still, he’s words are worth considering. Twidale’s report said “the issue of soaring energy costs has risen up the national political agenda after above-inflation price rises by Britain’s dominant energy suppliers drew public anger last year.”
Currently Scotland provides one third of the United Kingdom’s total renewable generation and receives a quarter of Britain’s renewable subsidies.
“If Scotland were to choose to go it alone, maintaining this level of support would take up a greater proportion of national finances. Meaning either higher taxes, higher energy bills or cuts in other areas,” Davey said.
The government estimates that around 40 billion pounds will be spent on building new renewable energy projects in Britain by 2020 to double its current installed green energy capacity of 20 gigawatts.
Davey also said Scotland was in line to receive more than 6 billion pounds over the next seven years to help pay for infrastructure upgrades to improve electricity supplies to remote parts of the country. He said an independent Scotland would need to find cash for the upgrades from its own coffers.
The Reuter’s story also notes that the Scottish National Party has previously said independence would not undermine the country’s renewable investment.
Perhaps that is the case with renewables, but what of Scotland’s vast North Sea oil operations?
In short, it’s complicated.
Oil & Gas IQ estimates there 6.9 billion barrels of oil and a maximum of 2,661 billion m³ of natural gas, which according to a March 10, Reuters story is a hydrocarbon load worth some $2.3 trillion. The Scottish Nationalist Party’s thrust for independence rests in large part on dissatisfaction with England over North Sea oil and gas. The entire argument for independence is laid out here in a PDF titled “Scotland’s Future, Your Guide to an Independent Scotland.” (The official website is scotreferendum.com.) According to the white-paper:
The oil and gas sector has been a major part of the economy of Scotland since the 1970s. Oil and gas production is estimated to have contributed around £22 billion to Scottish GDP in 2012. Through the success of the last five decades, Aberdeen has become an international oil and gas centre of excellence, home to an industry that is leading the world in many areas, supported by strong academic research in Scotland’s universities. In 2013, oil and gas was the largest single sector in the FTSE 100 Index of leading companies, and a sector in which Scottish firms are leading global players.
Scotland now has a second opportunity to steward our oil and gas assets for the benefit of the nation, as well as supporting the growth of an industry that in many areas is the best in the world.
But whether Scotland would be able to finance its independence and further control its own destiny is open to question, as the Reuter report notes North Seas production is in decline.
and an independent Scotland would face tens of billions of dollars in reduced revenues because of the tax relief companies need to decommission 6,200 miles (10,000 kilometres) of pipeline, 5,000 wells and 475 rigs and platforms in future decades.
“I think it could be a problem,” said Gavin McCrone, a former British civil servant who has written a book about the consequences of independence.
McCrone, who warned in a confidential brief for British ministers in 1974 that North Sea oil would strengthen the nationalist economic case for breaking the union, argues that while an independent Scotland could be viable economically, it could be in for a bumpy ride for a number of years, depending on its currency, fiscal position and how North Sea revenue is handled.
The British government has told Scots they will not be able to keep the pound if they break away and that the size of the United Kingdom – whose economy is 10 times the size of Scotland’s – puts it in a better position to support increasingly expensive North Sea production.
Prime Minister David Cameron, while visiting a BP platform last month in the ETAP fields 150 miles east of the Scottish oil city of Aberdeen, made the case for togetherness.
Brent, the name worldwide markets associate with European crude oil, was the name given to the oil field when Shell opened its first rig there in 1975, and has produced 4 billion barrels of oil equivalent, according to Reuters, while becoming the world’s dominant benchmark along with West Texas Intermediate (WTI). However, production in Britain’s North Sea peaked in 1999, and the Brent Delta platform stopped production in 2011. Decommissioning Brent facilities alone will cost several billion pounds, according to Shell.
Indeed, Scottish independence raises many complicated issues, but there may be few as slippery as its energy questions. It bares watching.
Photo Courtesy of Oil Rig Photos
One of the contentious issues with hydraulic fracturing, and perhaps its most salient is the high use of water. The development of the technology that has transformed the oil and gas industry and been an economic boon to the states that approve of fracking has mostly only been possible where there has been ample water supplies.
Indeed, the high volumes of water being used and its potential impact on the environment has necessitated innovation in how to recycle used fracking water as in Pennsylvania and Ohio, the frontline of the Marcellus Shale gas play.
But what about areas where there is no water such as deserts? Kevin Bullis of MIT’s Technology Review writes that engineers are developing an app for that as well by using carbon dioxide. His salve to environmentalists, whom we imagine would think this is the worst of all choices, is a price on carbon emissions would be need to make it happen on a large scale.
It’s possible to fracture gas-rich rock formations without using any water at all. Indeed, gas and oil companies have been using carbon dioxide this way for decades, albeit on a limited basis. But if this approach is going to be used on a large scale, it will require a major investment in infrastructure for getting carbon dioxide to fracking sites. And in some cases a price on carbon emissions may be the only way to make the economics work. [...]
Fracking with carbon dioxide has a number of potential advantages. Not only would it eliminate the need for millions of gallons of water per well, it would also eliminate the large amounts of wastewater produced in the process (see “Studies Link Earthquakes to Wastewater from Fracking”).
Water-free fracking could also solve other problems. In conventional fracking, half the water pumped into a well flows back to the surface, but the other half stays in the rock formation. The water that’s left behind can block the path of the natural gas, slowing down production and possibly decreasing the total amount a well can produce over its lifetime, [Robert Dilmore, a research engineer at the U.S. National Energy Technology Laboratory] says.
When carbon dioxide is used instead of water, most of it comes back out of the well (where it can be captured and used again). This in turn allows natural gas to flow out more freely. Some recent research suggests that using carbon dioxide can also result in a better network of fractures, making it easier to extract the fuel.
Using carbon dioxide as a fracking agent is not new. Wyoming has been using it, according to Bullis. Gasfrac Energy Serivces Inc. of Calgary is using propane as a fracking agent, and Kittanning-Pa.-based MDS Energy Ltd. moved to nitrogen fracking, according to Timoty Puko of the Pittsburgh Post Tribune, whose article goes into greater detail on the role being played by non-water substances.
And, Bullis said in his to-be-sure paragraph that there are still many challenges to carbon dioxide fracking than infrastructure, such as carbon dioxide needing more pressure to condense because it’s a gas, unlike water, and thus fracture the rock. However, this will be an interesting development to watch as the shale gas revolution continues forward.
According to the Associated Press, Ohio lawmakers are considering whether to scrap its renewable energy standard. That standard requires power companies to generate a portion of their electricity from renewable sources such as solar and wind.
In hearings last week, Ohio Senate Public Utilities Chairman Bill Seitz, a Cincinnati Republican, reopened discussions on the 2008 state law, which said utilities must produce 12.5 percent of their electricity from renewables by 2025. The law also set energy efficiency targets to be met by the companies.
A surge in shale gas drilling that’s promising new domestic supplies of a traditional energy source has added a new twist to the debate.
Opponents of the mandates say they fatten electric bills in a state whose rates are already higher than some neighbors. Some also question global warming and those who use it to push for reduced use of coal-fired power plants.
There are similar thresholds in 29 other states and the District of Columbia, the article said. It is not clear whether the standards actually help or not.
There are more signs the solar industry is coming to heel because of market pressures. On Friday the AP reported that German engineering company Bosch is abandoning its solar energy business, because there is no way to make it economically viable amid overcapacity and huge price pressure in the industry.
The solar power industry has been hit by falling subsidies, weaker sales and increasingly stiff price competition, especially by Chinese manufacturers. [...] The solar energy division, which employs about 3,000 people, lost around 1 billion euros ($1.3 billion) last year. The company said that, despite efforts to reduce manufacturing costs, it was unable to offset a drop in prices of as much as 40 percent.
Robert Bosch GmbH’s move came after German industrial conglomerate Siemens announced last October that it would give up its loss-making solar business, the article said.
James Montgomery of Renewable Energy World reports a different sort of peak on Monday, noting that wind energy generated more than 5 gigawatt-hours (GWh) of electricity consistently over a 48-hour period last week. What is notable is that is enough to power more than 10 percent of the country’s overall electricity needs, and the equivalent of nearly four out of every 10 homes, according to Montgomery.
More notably, The United Kingdom and Denmark are leading your Europe in the wind revolution.
The UK is far and away Europe’s leader in offshore wind, accounting for nearly 60 percent of the region’s total 5 GW offshore capacity in 2012 (Denmark is net with 18 percent). The UK now has 870 turbines running in 20 offshore wind farms (twice as much as Denmark), including 243 of Europe’s total 293 new offshore wind turbines that were grid-connected in 2012. Earlier this month (March 7) the London Array had 141 of its 175 wind turbines online (3.6 MW each), able to generate 507 MW of energy. The final turbine was installed in December and the project should be fully operational later this spring.
Speaking of Denmark, earlier this month Danish wind turbines sent nearly 4 GW into the electricity grid, only about 800 MW shy of meeting the nation’s entire energy needs. (Though in reality the energy is sold to other European countries.) The Danish government has targeted wind to produce half its electricity by 2020, double its current rate.
Yet it seems despite the advances the wind industry still cannot stand on its own feet yet. The New York Times Diane Cardwell reports an uptick in wind-related projects following a deep slump last year. The projects, however, are not new, but are merely picking up form whence they were abandoned, she said.
The rush to development is in large part because of Congress. Lawmakers had allowed a popular incentive, known as the production tax credit, to lapse at the end of last year, but then renewed it in January. They also changed the requirement so that projects only have to be under construction by the end of the year to qualify, rather than fully operational, as had traditionally been the case.
“We are now back on the treadmill trying to get as much of our portfolio qualified for the P.T.C. by the end of this year,” said Paul J. Gaynor, First Wind’s chief executive, referring to the credit. Without the renewal, he said, “I think we would have had zero megawatts to develop.”
Projects take such a long time to finish, industry executives and analysts say, that development and manufacturing will continue to pick up through this year and next, potentially spilling over into 2015.
Indeed, the flurry of activity may represent more of a shuffle than an expansion. Developers are mainly dusting off projects they already had in the works, rather than seeking out new business, while others are trying to sell off unfinished projects, experts and executives said.
Cardwell reports there may be other problems in bringing more wind projects on line, as “demand for new power plants is relatively low because of a sluggish economy; natural gas is cheaper and, especially in the West, many utilities are choosing to meet state renewable energy mandates with solar.”
Images from Wikimedia Commons
Rapidly advancing technologies are opening up astonishing sources of oil and gas all over the world. We are entering a new era of fossil fuels that is reshaping global economics and politics—and the planet.
That’s the subhed for an article by Vince Beiser at Pacific Standard. For more than 100 years humans have been pulling oil from the ground, and it’s probably been just as long that humans having been predicting the end of oil as a resource, nowadays known by the phrase “peak oil.” Writes Beiser:
The story of Kern River reflects our entire history with oil: every time we think we’re starting to run out of it, new technologies arise that find us more. The widely circulated fears of a few years ago that we were approaching ‘peak oil’ have turned out to be completely wrong. From the Arctic to Africa, nanoengineered materials, underwater robots, side-scanning 3-D sonar, specially engineered lubricants, and myriad other advances are opening up titanic new supplies of fossil fuels, many of them in unexpected places—Brazil, Australia, and, perhaps most significantly, North America. ‘Contrary to what most people believe,’ declares a recent study from the Harvard Kennedy School, ‘oil supply capacity is growing worldwide at such an unprecedented level that it might outpace consumption.’
Yet, much to the consternation of many, it never really does go away. New technologies continue to open the way for more and deeper drilling. Daniel Yergin comes back to this time and again in his great read “The Prize, The Epic Quest for Oil, Money & Power,” which has the review from Publisher’s Weekly said, “limns oil’s central role in most of the wars and many international crises of the 20th century.”
It also points to how, as another reviewer at the above-linked site puts it, “how oil went from freewheeling business of refiners and speculators to an instrument of great geopolitical importance.”
As Beiser writes, “[f]or centuries, the ever-shifting map of where energy comes from has defined much of the character of our world.” That’s as true now as ever as the following stories help convey.
The New York Times’ Stanley Reed reports “Italian energy giant Eni began Monday to restart operations of the trans-Mediterranean natural gas pipeline it closed Saturday after fighting between two Libyan militias threatened its gas complex west of Tripoli.”
Since the fall of Col. Muammar el-Qaddafi in 2011, Libya has been in a state of chaos as rival militias vie for turf and treasure. But until now the armed groups have left Libya’s oil and gas fields alone — or in Eni’s case, have even carefully protected the operations, which keep the country’s lights on and the money flowing in.
‘The energy installations have been left out of the instability because there is wide recognition about as to how important they are to the economy,’ said Richard Cochrane, a security analyst at IHS.
Why the militias crossed a line this past weekend is not entirely clear. One theory, not denied by Eni, is that the two militias were fighting for the privilege of guarding Libya’s most important oil and gas installation, as well as the economic and political benefits that accrue to whoever has that status.
The pipeline is the single transmission conduit for Libyan natural gas to Italy and, from there, elsewhere in Europe, Reed said.
Walter Russell Mead highlights how Burma’s new democracy is opening the hydrocarbon door for its energy industry, amongst other industries, and giving it the potential for great wealth.
Because exploration (especially offshore) has been limited, numerous foreign energy companies are on the move. ‘There has never been a better time for you to come to Myanmar and search for opportunities in the oil and gas sectors,’ Burma’s Energy Minister Than Htay told Big Oil bigwigs at a conference in March last year. Another conference attended by international oil companies took place in Yangon today; the Burmese government pledged to put up‘over 20′ offshore blocks for auction by April. This is in addition to 18 onshore blocks opened for bids in January. ‘In our language,’ a Burmese oil tycoon told Agence France-Presse, ‘we call [oil and gas fields] ‘treasure troves’ as we can expect that they can bring us a large amount of treasure.’
“Burma also sits astride one of the most important sea trade routes in the world, and its territory abuts China—for now the most populated and resource-hungry market in the world. These are big opportunities for an infant democracy,” Mead said.
In a related story, via Mead, YahooNews reports that Myanmar plans to put over 20 offshoreoil and gas exploration blocks up for auction by April.
China is poised to become a major importer as well. Htin Aung said China’s 495 mile gas pipeline, which connects the Bay of Bengal with Yunnan province in southwest China, will start operations in June, while a parallel 481 mile oil pipeline will begin pumping in September.
The pipelines are strategically important to China, which now routes most energy imports through the narrow Strait of Malacca and wants to develop an alternate supply route. The pipelines pass through an area of northeastern Myanmar where violence recently broke out between the government and ethnic Kachin fighters who want greater self-rule. China has been concerned about the skirmishes and brokered peace talks between the two sides in February.
Oil and gas are often blamed for many misfortunes. But it seems politics is its midwife.
Indeed, even when governments — or governments of free countries, at least — don’t want to improve their country’s oil supplies it is hard to stop, as this Congressional Research Service report said. From the summary:
Congress is faced with proposals designed to increase domestic energy supply, enhance security, and/or amend the requirements of environmental statutes. A key question in this discussion is how much oil and gas is produced each year and how much of that comes from federal and non-federal areas. On non-federal lands, there were modest fluctuations in oil production from fiscal years (FY) 2008-2010, then a significant increase from FY2010 to FY2012 increasing total U.S. oil production by about 1.1 million barrels per day over FY2007 production levels. All of the increase from FY2007 to FY2012 took place on non-federal lands, and the federal share of total U.S. crude oil production fell by about seven percentage points.
Natural gas prices, on the other hand, have remained low for the past several years, allowing gas to become much more competitive with coal for power generation. The shale gas boom has resulted in rising supplies of natural gas. Overall, U.S. natural gas production rose by four trillion cubic feet (tcf) or 20% since 2007, while production on federal lands (onshore and offshore) fell by about 33% and production on non-federal lands grew by 40%. The big shale gas plays are primarily on non-federal lands and are attracting a significant portion of investment for natural gas development.
The summary continues by noting that “the number of producing acres may or may not be a function of how many acres are leased, and the amount of acres leased may or may not correlate to the amount of production[.]“
In conclusion the report said there are substantial, and already accessible, oil and natural gas reserves and resource potential in federal areas. And, that in the end it is red tape that holds back drilling on Federal lands compared to that done on non-fedral lands. But that is a far cry from no drilling at all on federal land, as even the opening up the Arctic National Wildlife Refuge show.
Beiser’s article is a full read and illuminating, covering how the world continues to change because of advances in oil and gas extraction technology, and, of course, politics.
All of this amounts to an economic bonanza, generating hundreds of thousands of jobs nationwide (though the areas where the drilling is actually taking place don’t always get the benefits they expect, as Lisa Margonelli explains in “The Energy Debate We Aren’t Having”). Moreover, it might bring the U.S. closer to the long-held dream of energy independence. The federal Energy Information Administration predicts imports of oil and other energy supplies will drop to 13 percent of total U.S. energy use by 2035, down from 29 percent in 2007.
And the fracking boom is only just beginning. There are believed to be oceans of yet-untapped shale gas and oil in Argentina, China, and several countries in Europe.
“Maybe we’ll figure out a means to innovate our way out of climate change, or at least slow its progress enough that we can adapt to its impacts. If there’s one thing our history with fossil fuels shows, it’s that we are unbelievably good at adapting, at finding new ways to overcome problems once thought impossible to solve,” he said, at the end.
Update: Made a slight grammatical edit in first paragraph.
Clifford Krauss of the New York Times reported yesterday that “a federal judge in New Orleans approved on ThursdayTransocean’s agreement with prosecutors to plead guilty to a misdemeanor charge and pay $400 million in criminal penalties for its role in the 2010 Gulf of Mexico oil well blowout that left 11 workers dead and resulted in a yearlong moratorium on deepwater drilling.”
Transocean’s criminal fine is the second highest assessed for an environmental disaster, but it pales in comparison with the $1.26 billion in criminal fines that BP was assessed for the same accident, which spewed millions of barrels of crude oil into the gulf, fouling hundreds of miles of beaches in Louisiana, Mississippi and Alabama. [...]
The company has also agreed to pay $1 billion in civil penalties, and will be on probation for five years. Much of the money Transocean has agreed to pay will go toward research for oil spill prevention and response and to restore coastal natural habitat, including barrier islands off the coast of Louisiana.
Now the long legal process surrounding the 2010 accident will focus again on BP.
He said the Switzerland-based owner and operator of the Deepwater Horizon oil rig was charged with negligently discharging oil into the gulf. By midday Friday, shares of Transocean Ltd. RIG -5.33% were off 4.6%, according to MarketWatch.
Obama’s friends in the environmental movement and Hollywood on one side. Obama’s friends in Big Labor allied with his enemies in Big Oil on the other. What’s a Democratic president to do? [...][Obama's 'friends'] know that last year the president put off deciding on the pipeline until after the election Now it appears he would rather do anything than make a choice that is going to make some of his most influential supporters very unhappy.
The other problem for the protesters is public opinion. Polls have consistently shown that most Americans support building the pipeline. In a Rasmussen poll released in January, 59 percent of those surveyed were in favor. On Wednesday, the petroleum institute released its own poll putting the number at 69 percent. [...]Given that pressure, and especially given the new fact of a safer route for the pipeline, it’s hard to see Obama saying no. But so far, the president just can’t face his environmental and Hollywood allies with the bad news. Even when they come to the White House to see him.
Witness the $20 million deal Solazyme announced last week with Japanese conglomerate Mitsui & Co. to develop new algae oils for the oleochemical industry. Oleochemicals are natural oils derived from palm, cocoanut and other plants and are used to make everything from detergent to plastics.
A $20 million deal is pocket change in the global oleochemical business but the collaboration with Mitsui gives Solazyme entrée into an Asia-based industry looking to diversify. As demand skyrockets with the burgeoning middle classes in countries like China and India, palm oil producers and buyers have come under fire from environmentalists for widespread deforestation in countries like Indonesia that contribute to climate change and extirpation of endangered wildlife.
Solazyme is building two production facilities in the United States and one in Brazil that will have a capacity to produce 450,000 metric tons of algal oil, Woody said.
A South Dakota Senate committee endorsed a measure Thursday that would provide financial incentives to encourage the stalled construction of wind power projects in the state, according to Chet Brokaw of the Associated Press. The 6-1 vote came after “lawmakers and industry representatives said construction of wind farms has drawn to a standstill in South Dakota because the state imposes much higher taxes during construction than neighboring states do.”
Reporting from Madrid, Reuters reporters Tracy Rucinski and Jose Elías Rodríguez said Foreign investors in renewable energy projects in Spain have hired lawyers to prepare potential international legal action against the Spanish government over new rules they say break their contracts.
According to the article, international funds have invested more than 13 billion euros ($17 billion) of renewable energy assets in Spain. They say that the government has reneged on the terms of their investment after Spanish Parliament approved a law on Thursday that cuts subsidies for alternative energy technologies.
That measure, along with other recent laws including a tax on power generation that hit green energyinvestments especially hard, will virtually wipe out profits for photovoltaic, solar thermal and wind plants, sector lobbyists say. [...]
Spain’s Industry Minister Jose Manuel Soria defended the law in Parliament on Thursday, saying that the measures were necessary to eliminate the accumulated 28 billion euro ($37.4 billion) tariff deficit in the electricity system. [...]
That deficit, built up through years of the government holding down electricity prices at a level that would not cover regulated costs including renewables premiums, is at the heart of Spain’s energy sector woes.
According to the article, the problem is that the cost of the subsidies were not passed on fully to consumers because that would have pushed prices to unprecedented highs.
Shares of Apache APA -3.30% declined 2.1%, with energy stocks the sole sector in the S&P 500 SPX -0.07% to post losses, , according to MarketWatch reporter Claudia Assis. Apache late Thursday disclosed lower-than-expected production growth goals, disappointing analysts, Assis reported. It announced a flat $10.5 billion capital expenditure budget that allocates about a fifth of its resources to projects that will contribute to production in 2014.
The company also said it would sell $2 billion in assets, without disclosing the properties, and will focus on repaying debt and focusing on long-term value for shareholders.
Apache went through a $16 billion buying spree in recent years, snapping up assets in the U.S., U.K., Australia and other locales.
To make matters a bit worse, the company was involved in a well incident late Thursday, U.S. regulators said.
It prevented a blowout in one of its wells in the Gulf of Mexico and reported an underground flow of natural gas at the well, the Bureau of Safety and Environmental Enforcement said.
Other decliners incude coal miner Peabody Energy Corp.BTU -2.32% , with shares down 1.4%, and Range Resources Corp. RRC -1.90% , down 1.5%, according to Assis. Oil-field-services firm Halliburton Co. HAL -1.45% lost 0.2%. Nabors Industries Ltd. NBR -1.76% declined 0.1%. Exxon Mobil Corp. XOM -0.31% shares were off 0.2%, and ConocoPhillips COP -1.33% shares retreated 0.3%. Chevron Corp. CVX -0.75% shares declined 0.5%, she said.
Reuters is reporting that French utility GDF Suez plans to build and operate Africa’s largest wind farm in the desert in southern Morocco. The goal is to expand its presence in emerging markets with fast-growing power needs, according to the article.
The company will invest around 90 million euros in the project, which is due to enter service at the end of next year, Chief Executive Gerard Mestrallet told a conference call on Thursday.
The Tarfaya wind park will have an output of 300 megawatts, representing around two-fifths of the country’s total wind energy capacity.
The Associated Press reports from Lagos, Nigeria that ExxonMobil PLC has warned that it won’t be able to meet its production forecast for Qua Iboe crude oil pumped from Nigeria due to pipeline repair work, declaring “a ‘force majeure’ warning for shipments of its Qua Iboe crude oil — meaning the company cannot cover the promised supply from the field.”
Nigeria, which produces more than 2 million of barrels of oil a day, is a top crude oil supplier to the U.S., according to the AP.
At Forbes, Ken Silverstein shows how biomass use may help coal plants. By co-firing biomass, or wood chips, pollution cold be reduced. But there is a question of whether the cost is too high, and environmentalists, have their own worries.
Fossil-fired generation is now under intense scrutiny. But some utilities are reinventing their existing coal facilities so that they can simultaneously burn biomass. State regulators are generally giving their approval, although environmentalists are warning that cutting down trees to make it work is a no-no and that using wood waste or scraps is a more plausible option. [...]
Like any budding fuel source, biomass is not without its critics. Building such a power plant from scratch is a hugely expensive undertaking. FirstEnergy Corp., for example, shuttered its plans to convert an existing coal facility to a 312-megawatt biomass unit, concluding it was financially infeasible.
Estimates are that it cost double that of a coal unit, which produce twice the oomph, or BTUs, as do wood chips. That means that power plants have to burn two-times the wood as they do with coal.
That has led the Manomet Center for Conservation Sciences to say that the net effect on greenhouse gas emissions is higher. Generally, if more trees are cut down then there would be fewer of them to absorb the carbon emissions. [...]
At least 20 utilities in North America are now using wood chips to replace 5-25 percent of the needed coal or natural gas.
Bloomberg’s Christine Harvey reports that the cost of heating oil rose to the highest level in nearly four months on speculation that a snow storm in the U.S. Northeast will boost demand for distillates and drain stockpiles on the East Coast. East Coast supplies slipped almost 3 percent in the week ended Feb. 4, the Energy Information Administration said.
Heating oil for March delivery advanced 4.4 cents, or 1.4 percent, to $3.2433 a gallon on the New York Mercantile Exchange at 9:13 a.m., the highest level since Oct. 11. Volume was 11 percent below the 100-day average at 9:14 a.m. New York time.
The premium of March futures over April increased 0.34 cent to 2.70 cents a gallon.
Stockpiles of distillates including heating oil and diesel fuel fell 1.22 million barrels to 40.1 million last week, a fourth consecutive weekly decline, EIA data show. That’s also the lowest seasonal level in at least 10 years, according to data compiled by Bloomberg.
A National Geographic story says the start of a new cleaner energy drive for an oil-reliant Mexican nation has upended lives in the region’s native farming and fishing villages.
Outsiders increasingly covet the power of those air currents as energy that can be captured by modern turbines and transported to nearby factories and distant cities. Largely thanks to Oaxaca’s unique geography, Mexico’s wind power capacity expanded to 1,350 megawatts in 2012, according to reports from a national wind industry conference in Mexico City last month, marking nearly a 140 percent expansion in capacity in a single year. Stands of the turbines now fill Oaxacan horizons, with more planned as developers pour millions of dollars into wind farms. While bringing development to the isolated area, the turbines have disrupted pastoral lifestyles and divided villages over leasing fees and other benefits promised to local communities.
According to David LaGesse, the story’s author, local groups opposing the developments say the companies have turned communities against each other as they negotiated land leases, while others complain the developers cheated villages by not paying fair prices and abandoning promised development projects.
The Shanghai Daily reports the Indonesian government seeks to speed up development of geothermal energy to replace fossil fuel energy whose consumption continues to rise amid accelerating economic growth and dwindling oil production. (H/T EnergyDigger.com)
Director General of New Renewable Energy and Conservation, Ministry of Energy and Human Resources, Rida Mulyana said that Indonesia will further intensify synergy and boost coordination between relevant agencies.
‘In the years ahead, geothermal energy will be more optimized so that it can reduce fuel consumption,’ she said, quoted by the Antara news wire.
The director also said that the government will complete the development of 28 points of geothermal locations in partnership with the Ministry of Forestry.
Indonesia’s oil production has decreased in recent years, making it a net oil importer country and exit from the Organization of the Petroleum Exporting Countries in 2008.
The largest economy in Southeast Asia has expanded by more than 6 percent since 2010 and is expected to grow by 6.8 percent this year and 7 percent in 2014.
The rising gross domestic product has pushed higher demand for energy consumption.
Indonesia is an archipelago country and home to 129 active volcanoes, according to the Shanghai Daily. Last year we posted that Germany had teamed up with Indonesia to explore its geothermal options.
Volcanic areas, like Indonesia, are a rich source of geothermal energy. The island nation is situated on the so-called ‘Ring of Fire’ volcanic belt, which encircles the Pacific Ocean, accounting for 40 percent of the world’s geothermal reserves – more than any other country.
The government has pinpointed 250 locations where geothermal energy can be produced, including Seulawah on Sumatra, Ijen on Java and Tomohon on Sulawesi. Today, just 15 geothermal plants are in operation, with the last one going live in 1997.
Not all geothermal fields, however, are suited for commercial energy use because they don’t have the right temperature, pressure or permeability.
Most of the geothermal power plants in operation in Indonesia today are run by the state-owned natural gas and oil company PT Pertamina, according to the above linked story in our Daily Energy Dump archive.
Forbes staff writer Christopher Helman looks at the implications of Chesapeake Energy founder Aubrey K. McClendon is resigning April 1.
“The news has caused shares of Chesapeake, the nation’s no. 2 producer of natural gas, to jump 11% in after-hours trading. With McClendon out, a significant obstacle to the takeover of Chesapeake will have been removed.”
McClendon, whom Helman calls “the greatest wildcatter of his generation,” has been under scrutiny from within the company, most notably for his involvement in a sweetheart deal — the Well Participation Program — that allows McClendon to personally invest alongside the company on every well it drills. Helman reports the Chesapeake board’s review has not found any wrong-doing on McClendon’s part.
Chairman Archie Dunham, in a staff email, also said “the company is not for sale” and that Chesapeake would carry out its planned $6 billion in drilling this year, according to Helman. However, McClendon’s departure will open the way for a hostile takeover.
Chesapeake has the deepest collection of shale gas acreage in the country, and although many of those fields are not currently economic to drill at current gas prices, Chesapeake’s reserves wouldrepresent decades of development opportunities for a deep-pocketed energy company.
According to Ernst & Young the fourth quarter of 2012 saw the most oil and gas M&A transactions of any quarter in the past decade. That’s likely to continue into 2013. According to Bernstein Research, Chesapeake would make an excellent acquisition target, especially for Asian state-controlled oil companies. According to Bernstein analyst Neil Beveridge: “It is inevitable that there will continue to be consolidation of small cap E&Ps which have shale acreage or deepwater oil and gas discoveries but insufficient capital to develop these assets. Low risk (discovered buy undeveloped) are exactly the assets Asian NOCs want given their access to low cost financing.”
Chesapeake’s enterprise value (equity plus debt) is on the order of $35 billion. After a takeover premium, the acquisition price of the company would be north of $40 billion. The company has proven reserves of 3.1 billion boe (barrels of oil or the natural gas equivalent). Chesapeake carries a big debt load of more than $13 billion, and hasn’t generated free cash flow from operations for a decade. At its current rate of drilling it has enough acreage to keep its rigs busy for more than 20 years.
Billionaire investor and takeover expert Carl Icahn is a key figure to watch in a potential hostile takeover. In May of last year Icahn bought a 7.56 percent stake in the company and immediately began to put the pressure on, questioning its directors’ close ties to McClendon, insider deals and off-the-books loans.
Last year we had a number of stories on controversy surrounding Chesapeake.
An August shareholders revolt sent the message that the company needed to set a sound business course. This came after McClendon became embroiled in a questionable land deals in Michigan, it was reported that he plotted with Encana, a top competitor, to suppress land prices for a potentially lucrative gas play.
He was also a the center of controversy over reports that he arranged for more than $1 billion in personal loans using his stake in thousands of company wells as collateral. Additionally, the Oklahoma-City based energy explorer, faced a $22 billion cash-flow shortfall after natural-gas prices touched a decade low. That brought on discussions to sell its entire stake in Chesapeake Midstream Partners LP (CHKM) and other pipeline assets.
Chesapeake Midstream, operates pipeline networks in Texas, Louisiana, Pennsylvania and other gas-producing states, and had 3,953 miles (6,360 kilometers) of pipe as of March 31, according to a Bloomberg report. The partnership gets about 75 percent of its revenue from Chesapeake Energy, with the remainder from energy producers such as France’s Total SA (FP) and Norwegian oil company Statoil ASA. (STL) Chesapeake Energy also owned 1,950 miles of pipelines separate from the Midstream partnership as of Dec. 31, 2011.
It wil be interesting to see what happens in California, as the massive Green lobby lubricates its gears for a confrontation with the oil and gas industry. At issue in this story from the New York TImes, is the discovery of a massive shale gas formation in the central part of the state. Called the Monterey Shale, it has the potential to dwarf the Baaken and Eagleford fields, according to the TImes Norimitsu Onishi, reporting from Fellows Calif.
Comprising two-thirds of the United States’s total estimated shale oil reserves and covering 1,750 square miles from Southern to Central California, the Monterey Shale could turn California into the nation’s top oil-producing state and yield the kind of riches that far smaller shale oil deposits have showered on North Dakota and Texas.
For decades, oilmen have been unable to extricate the Monterey Shale’s crude because of its complex geological formation, which makes extraction quite expensive. But as the oil industry’s technological advances succeed in unlocking oil from increasingly difficult locations, there is heady talk that California could be in store for a new oil boom.
Established companies are expanding into the Monterey Shale, while newcomers are opening offices in Bakersfield, the capital of California’s oil industry, about 40 miles east of here. With oil prices remaining high, landmen are buying up leases on federal land, sometimes bidding more than a thousand dollars an acre in auctions that used to fetch the minimum of $2.
This is where the environmental groups come in. According to the Times, these “powerful groups” are pressing the state to strictly regulate hydraulic fracturing, or fracking. Additionally, despite the long history of drilling in the state, and the boom in drilling in Pennsylvania, Ohio, North Dakota, and Texas, because of technological advances like fracking and horizontal drilling, California has relatively loose regulations on these newer methods, according to Onishi’s story.
The Monterey Shale’s geological formation will require companies to engage in more intensive fracking and deeper, horizontal drilling, a dangerous prospect in a seismically active region like California, environmental groups say.
Environmental groups, including the Sierra Club and the Center for Biological Diversity, are suing the Bureau of Land Management and the Department of Conservation to prevent the opening up of further land to oil exploration and to enforce stricter environmental practices.
‘If and when the oil companies figure out how to exploit that shale oil, California could be transformed almost overnight,’ said Kassie Siegel, a lawyer at the Center for Biological Diversity. ‘Fracking poisons the air we breathe and the water we drink. It is one of the most, if not the most, important environmental issue in California.’
Tupper Hull, a spokesman for the Western States Petroleum Association, an industry lobbying group, said oil companies had safely used fracking for decades in California, mostly combined with traditional vertical drilling.
Interestingly, California was once a major player in the oil and gas industry, (see here, here, and here, for some background). And, as Onishi notes in his lede: “Secure in this state’s history and mythology, the venerable Midway-Sunset oil field near here keeps producing crude more than a century after Southern California’s oil boom. Many of its bobbing pump jacks are relatively short, a telltale sign of the shallowness of the wells and the ease of extracting their prize.”
This should be an all-out political and idealogical war and while addressing the larger issues of whether it’s good for Californians, their economy, and the state’s environment, will be most likely campaigned on fear and recrimination, by both sides. California has had economic difficulties (see multiple places like here, and here). But there are signs of it improving (here), though the scenarios are based on projections. Either way there will be an important fight that will likely set the course of its prosperity, whether you count prosperity in environmental terms, or in jobs and economic terms.
Via Walter Russell Mead at his American Interest blog ViaMedia, who sums it up by saying: “The intrigues in this drama are many. Does California’s Democratic Party come down on the side of low income Californians, who desperately need the jobs and state services new oil extraction will fund? Or does it come down on the side of a green lobby that is heavily backed by some of the wealthiest people in the state? To what extent does the wealthy coastal elite control the future of the inland poor in California? Can the GOP use the issue as a wedge to rebuild its credibility in a state it once dominated? Will black gold bail out big blue California?”