State Dept. Revises Key Injury, Fatality Numbers from Hauling Oil Upward

BNSF eastbound oil train in Bad Rock Canyon. Empties making the return trip to North Dakota for more Bakken oil. Near Columbia Falls Mont. Photo taken Jan. 5, 2013 by Roy Luck, courtesy of WikimediaCommons.

BNSF eastbound oil train in Bad Rock Canyon. Empties making the return trip to North Dakota for more Bakken oil. Near Columbia Falls Mont. Photo taken Jan. 5, 2013 by Roy Luck, courtesy of WikimediaCommons.

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.

In January the State Department concluded the Keystone Pipeline would have a neutral impact on carbon emissions, according to HotAir’s Erika Johnsen, who also posted on the Friday report here.

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.

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Accord Reached Avoiding Delays for Big Norwegian Offshore Oil & Gas Projects

Seadrill West Epsilon Jack-up drilling rig at Bergen Group Rosenberg shipyard outside Stavanger, Norway. Photo by Lars Christopher Nøttaasen from May 2009, courtesy of WikimediaCommons.

Seadrill West Epsilon Jack-up drilling rig at Bergen Group Rosenberg shipyard outside Stavanger, Norway. Photo by Lars Christopher Nøttaasen from May 2009, courtesy of WikimediaCommons.

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.

Overcoming Obstacles

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.”

 

 


Searching for a Makeover, Argentina Completes $5B Deal with Repsol

Shale Basins of South America. Courtesy of the U.S. Energy Information Administration.

Shale Basins of South America. All images courtesy of the U.S. Energy Information Administration.

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.

YPF is the largest oil producer in the country, and prior to the license cancellations, it accounted for one-third of the country’s total output, EIA said. It also holds significant interest in four refineries, and produces over 20 percent of the country’s total natural gas output, making it the second largest natural gas producer.
But the lure of capturing riches in Argentina may still be too strong to ignore the schizophrenic government being guided by Kirchner. And the question now is: Will a $5 billion payout to foreign investors be enough to woo more investors?

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

ar-mapreserves.

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. 

 

Oil prod and cons 2011

 

 

 


Arctic Exploration: Could a Really Cold War Begin Here, or Will the U.S. Shy Away

Arctic oil and natural gas resources, courtesy of the U.S. Energy Information Agency

Arctic oil and natural gas resources, courtesy of the U.S. Energy Information Agency

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.

 


Friday Energy News Dump: Japan Hemorrhaging as Iran Grimly Reaps Profits, and Other Life-and-Death Headline Metaphors

2012-08-07T150457Z_3_CBRE87611IN00_RTROPTP_2_REFINERY-OPERATIONS-CHEVRON-RICHMOND

Trying to Stop a Death Spiral: Japan Approves Energy Plan Reinstating Nuclear Power

Reaping a Windfall: Iran’s Gas Exports Rise by 258 Percent

Vulnerable to a Fare-thee-well: Steps Underway to Protect Grid, Says Energy Regulator

I’m Not Dead Yet: Why The Utility ‘Death Spiral’ Is Dead Wrong

The Irony is Killing Me: The Energy ‘Trilemma': How Did We Get Here? Energy Used to be One of the UK’s Success Stories

The Government’s Deadening Hand: Energy Firms to Fed: Hands Off Banks’ Commodity Trading

Oil & Gas, Showing a Lot of Life: Energy Exploration ETFs: A Bright Spot in The Choppy Market

Ohio’s Killer Policy: Energy Efficiency Timeout Debated

A Poplar New Life: Wisconsin Researchers Discover Poplars May Be Key to New Biofuel Technologies

Solar and Green’s Morbid Numbers: Yingli’s Warning Casts First-Quarter Shadow for Solar As Green Market Swoons

Picture courtesy of WikimediaCommons


Risks Abound: What Energy Means to Scottish Independence and Its Future

The Magnus Platform is in the northern UK sector of the North Sea, about 100 miles north-east of the Shetland Islands. At the time of it's construction at Nigg, Scotland, the jacket was the largest (by weight) steel jacket ever built at 40,000 tons. For many years it was BP's single biggest asset worldwide.

The Magnus Platform is in the northern UK sector of the North Sea, about 100 miles north-east of the Shetland Islands. At the time of it’s construction at Nigg, Scotland, the jacket was the largest (by weight) steel jacket ever built at 40,000 tons. For many years it was BP’s single biggest asset worldwide.

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[333]. 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[334], 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


Skipping the water in fracking; solar back in Ohio’s crosshairs; wind reaches new peaks

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The push to extend fracking to arid regions is drawing attention to water-free techniques

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.

Via Instapundit

Ohio lawmakers take up wind, solar energy rule 

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.

Bosch to abandon solar business

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. Solar

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.

Wind power peaks in the UK, Denmark and U.S.

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.

Go to the link. There’s also info on Xcel Energy’s Upper Midwest region, Puget Sound Energy, and Electric Reliability Council of Texas and its wind refining improvements. 580px-Windmill

Renewed tax credits buoy wind industry

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


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