Welcome to the ODAC Newsletter, a weekly roundup from the Oil Depletion Analysis Centre.
We’ll be taking a two week break for the holidays and will be back with the next newsletter on January 6th 2012. If you’ve found the newsletter useful this year, please do let us know by sending a donation our way. Thanks for your support.
The big oil news this week was that OPEC came to an agreement — albeit a bit of a fudge — showing something of a recovery from June’s “worst meeting ever”. Last time around the group failed to agree new quotas and was upstaged two weeks later by the IEA releasing strategic reserves to offset loss of production from Libya. This time it was important for OPEC to rally and demonstrate that it can still be effective. In the event the new quota essentially ratifies the current status quo. OPEC members are pumping at about 30mb/d and that is the new quota. Individual country quotas were not set, so is there really a quota or isn’t there — your guess is as good as ours.
What is troubling OPEC leaders most, and indeed quite a few others, is the lack of clarity about the global economy and therefore global oil demand. Europe is now expected to go back into a “mild” recession, the US is still staggering along under its own huge burden of debt, and there are signs that China could be about to experience a slow down led by the bursting of their property bubble. With political and geopolitical uncertainty also in the mix who would like to predict what 2012 will bring?
One thing that does look certain is that controversy of shale gas will be on the increase during 2012. The release of a US Environmental Protection Agency (EPA) draft report at the end of last week linking poisonous chemicals found in water to hydraulic fracture operations in Wyoming has called the safety of the industry further into question. The company responsible for the drilling Encana Oil & Gas was quick to label the report inconclusive, but this was bad news for the industry. The report may result in further delays to fracking operations in the UK which were suspended in June following earthquakes and are subject to review following a report linking drilling activity to the quakes. That said, licenses and planning permission are still being granted for new projects as was evident from Cuadrilla’s success last week to secure rights to drill in an area of West Sussex.
While the UK is deciding what it thinks of shale gas, it has apparently given the overwhelming thumbs up to wind and solar. A YouGov poll carried out for the Sunday Times (and then not published) demonstrated that 56% of Brits support building more wind energy capacity. The figure is surprising given the frequent hostile press given to wind power, exemplified by a report from the Adam Smith Institute this week, “Renewable energy: Vision or mirage?“, which argues government policy on renewables is misguided and should replaced with a greater focus on gas and nuclear.
It was still a good week for renewables though as a new report by the Climate Change Committee showed rising energy bills have been caused overwhelmingly by the wholesale gas price, not environmental subsidies. Gas and electricity bills rose by £455 between 2004 and 2010, of which green measures added just £75. And of that, £45 went towards improving household energy efficiency, and just £30 towards low carbon generation. So at most, renewables have raised bills by 8 pence per day — hardly exorbitant.
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Oil
OPEC Opts to Increase Its Level of Output
The Organization of the Petroleum Exporting Countries agreed on Wednesday to increase its production target for the first time in three years, a move that appeared to signal that Saudi Arabia and Iran had put aside their recent differences on oil policy, at least temporarily.
The move should have little lasting effect on oil prices because the production target of 30 million barrels is closely in line with the current output by the organization, and targets were not set for individual countries. But the agreement had symbolic value coming six months after a meeting of OPEC ministers ended in disarray when they failed to reach a consensus to lift production…
Oil Trades Near Six-Week Low, Heads for Second Weekly Decline
Oil traded near a six-week low and headed for a second weekly decline in New York while remaining above moving averages that tend to support buying.
Futures were little changed in New York after falling 1.1 percent yesterday on reports that showed U.S. industrial production shrank for the first time since April and European factory output contracted. The contract gained as much as 0.6 percent earlier today after reaching technical support along the lower Bollinger band, according to data compiled by Bloomberg. On the 30-day chart, this indicator is at $93.62 a barrel, close to where futures halted yesterday’s decline. Buy orders tend to be clustered near chart-support levels…
Oil Sector Sets Sights High in Iraq
Oil companies active in the south of Iraq have beefed up security to deal with fears over the security implications of the U.S. troop withdrawal, but they say the pullout hasn’t caused them to change plans to significantly ramp up production.
“We have to wait and see.…If the security situation deteriorates that means we will hire more security personnel to protect us,” said an executive of one of the oil majors…
Exxon’s deal with the Kurds inflames Baghdad
The oil giant has defied Iraq’s government by signing up to drill in disputed territory
The great Iraqi oil rush has started to exacerbate dangerous communal tensions after a major oil company ignored the wishes of the central government in Baghdad and decided to do business with its main regional rival…
Chevron’s Oil Spill in Brazil Prompts $10.6 Billion Lawsuit
A Brazilian lawsuit that seeks to halt Transocean Ltd. (RIG) and Chevron Corp. (CVX) operations after an oil spill would reduce the country’s offshore drilling at a time when it wants to double output in ten years.
Federal prosecutors in Campos, in the oil region of Rio de Janeiro state, are suing both companies for 20 billion reais ($10.6 billion) in environmental and social damages and asked a court to suspend their operations, according to a statement yesterday…
Report Seeks Far Tighter Safety System for Oil Drilling
Companies involved in offshore drilling and the government agencies that regulate drilling should take a more robust and systematic approach to ensuring safety, a team of scientific experts advised on Wednesday in a report on last year’s Deepwater Horizon oil spill in the Gulf of Mexico.
Experts from the National Academy of Engineering and the National Research Council found that the explosion on the oil rig, which killed 11 workers and gushed five million barrels of oil into the gulf, followed a series of questionable decisions and showed that few plans had been put in place to anticipate or avoid dangerous events…
Obama threatens to veto pro-polluter payroll tax bill
The White House has confirmed that President Obama will veto a Republican bill that would force the administration to approve the controversial Keystone XL oil pipeline in return for the extension of middle class tax cuts.
The Obama administration is pushing Congress to approve the continuation of payroll tax cuts that are due to expire at the end of the year…
Canada Backs Total’s Oil-Sands Project
The Canadian government approved construction of the first new oil-sands mine in four years Thursday, giving French energy giant Total SA the green light to build the nine billion Canadian dollar (US$8.9 billion) Joslyn North mine in northeast Alberta.
The approval comes as oil-sands projects have been under heavy criticism from environmental groups in the U.S. and Canada, particularly mining projects which tear up large areas of wilderness and create large mining-waste ponds. The industry has countered that technology has allowed it to keep surface disruption to a minimum and reclaim damaged land and eventually clean up waste ponds…
Gas
E.P.A. Links Tainted Water in Wyoming to Hydraulic Fracturing for Natural Gas
Chemicals used to hydraulically fracture rocks in drilling for natural gas in a remote valley in central Wyoming are the likely cause of contaminated local water supplies, federal regulators said Thursday.
The draft report, after a three-year study by the Environmental Protection Agency, represents a new scientific and political skirmish line over whether fracking, as it is more commonly known, poses a threat in the dozens of places around the nation where it is now being used to extract previously unreachable energy resources locked within rock…
Some Blame Hydraulic Fracturing for Earthquake Epidemic
Until this year, this Rust Belt city and surrounding Mahoning County had been about as dead, seismically, as a place can be, without even a hint of an earthquake since Scots-Irish settlers arrived in the 18th century.
But on March 17, two minor quakes briefly shook the city. And in the following eight months there have been seven more — like the first two, too weak to cause damage or even be felt by many people, but strong enough to rattle some nerves…
Firm linked to quakes eyes Sussex drilling
Cuadrilla Resources, the fracking company which counts the former BP chief executive Lord Browne as a director, has been granted a licence to drill for shale gas on a new site in West Sussex.
In a press release slipped out quietly last week, Cuadrilla revealed it had received planning permission and regulatory approval to drill for hydrocarbons in Balcombe, near Haywards Heath…
Nuclear
Areva suspends raft of nuclear power projects
One of the world’s leading nuclear power developers, Areva, has today confirmed a major reorganisation that will see a series of projects suspended in the wake of significant financial losses.
The company announced yesterday that operating losses for this year could reach €1.6bn, primarily as a result of the Fukushima disaster on the value of its uranium mining operations…
Persistent drought in Romania threatens Danube’s power
In Cernavoda, a small town in southeast Romania, social housing projects stretch all along the left bank of the Danube. The now dilapidated buildings sprang up in the 1970s and 1980s, after the dictator Nicolae Ceausescu decided to build the country’s first nuclear power plant there.
In his ambition for power and prosperity, he also ordered a canal to be built from Cernavoda to Constantza, a port on the Black Sea, to shorten the trade route by 400km. The excavations were done by thousands of political prisoners, many of whom died…
Radioactive water leaked at second Japan plant
A Japanese nuclear plant leaked 1.8 tonnes of radioactive water from its cooling system, the government said, heightening safety worries as an atomic crisis continues at another plant.
The leak, discovered Friday, caused no environmental impact as it was contained within an idled reactor at the Genkai nuclear plant in Saga prefecture in the southern Kyushu region, officials said…
UK
Gas, not renewables, is driving up bills, says Climate Committee
Soaring gas prices are contributing far more to increases in household energy bills than policies designed to support renewable energy and the other elements of the green economy, the Committee on Climate Change (CCC) will say today.
New analysis from the independent body finds the majority of homes have seen their annual bills rise from £604 in 2004 to £1,060 last year. But almost two thirds of that increase was down to rises in the wholesale gas price, compared to just a seven per cent increase resulting from renewable energy subsidies…
Over-reliance on wind farms ‘will lead to power cuts’
A report by the Adam Smith Institute and the Scientific Alliance says that wind farms cannot meet the need for energy, leading to “a crisis by the middle of this decade”.
It estimates that five turbines would have to be put up every day to generate the Government’s targeted amount of electricity from wind, which is championed by Chris Huhne, the Energy Secretary…
Poll: Public overwhelmingly backs wind and solar power
The environmental movement might have taken a bit of a battering in recent months from opinion polls suggesting climate change and environmental issues are falling down the public’s list of priorities, but according to a new survey a clear majority still support the rollout of renewable energy technologies.
Despite a high-profile media campaign criticising wind farms and attacking the cost of renewable energy technologies, 56 per cent of people want to see more wind energy capacity in the UK and 74 per cent think solar energy capacity should be increased…
Solar feed-in tariffs fall by half
Subsidies for solar panels installed after Monday will fall by as much as 50 per cent from next April, assuming the government adopts proposals set out in the on-going consultation on its popular feed-in tariff scheme.
The consultation on new rates for photovoltaic (PV) systems with capacity of 250kW or below does not conclude until 23 December. But the government’s controversial package of reforms suggest the proposed cuts will come into force for installations completed 12 days prior to the closing date of the consultation exercise…
Climate
Canada under fire over Kyoto protocol exit
Several countries have criticised Canada for formally withdrawing from the Kyoto Protocol on climate change.
A spokesman for France’s foreign ministry called the move “bad news for the fight against climate change”, a sentiment echoed by other officials…
Transport
Campaign For Better Transport: how to reduce the need to travel
The National Planning Policy Framework will sideline smart growth in favour of out-of-town sprawl – rolling back decades of town centred development. Now campaigners have launched a toolkit to reduce travel demand within local transport plans
The changes which the UK Government proposes to make to the planning system in England have been met with widespread dismay. The loudest criticism has focused on the threat of development posed to areas of ordinary countryside. But equally serious, as Campaign for Better Transport has pointed out, is the threat of more sprawling out of town development which would generate traffic, increase congestion and aggravate other unwanted transport impacts…
Better Place drives into China’s electric car market
China’s first automated battery switching station for electric cars opened yesterday, forming the start of a network that could eventually stretch across the entire country.
The station was installed in Guangzhou’s Pearl River New Town by China Southern Power Grid (CSG) and Better Place, a high profile US firm that is aiming to increase uptake of electric vehicles (EVs) by enabling drivers to swap empty batteries for fully-charged ones in a matter of minutes…
Economy
IMF warns that world risks sliding into a 1930s-style slump
The world risks sliding into a 1930s-style slump unless countries settle their differences and work together to tackle Europe’s deepening debt crisis, the head of the International Monetary Fund has warned.
On a day that saw an escalation in the tit-for-tat trade battle between China and the United States and a deepening of the diplomatic rift between Britain and France, Christine Lagarde issued her strongest warning yet about the health of the global economy and said if the international community failed to co-operate the risk was of “retraction, rising protectionism, isolation”…
China’s epic hangover begins
It is hard to obtain good data in China, but something is wrong when the country’s Homelink property website can report that new home prices in Beijing fell 35pc in November from the month before. If this is remotely true, the calibrated soft-landing intended by Chinese authorities has gone badly wrong and risks spinning out of control.
The growth of the M2 money supply slumped to 12.7pc in November, the lowest in 10 years. New lending fell 5pc on a month-to-month basis. The central bank has begun to reverse its tightening policy as inflation subsides, cutting the reserve requirement for lenders for the first time since 2008 to ease liquidity strains…
Politics
Energy debate must consider demand – not just supply
…We each use around 15 times the energy that we did 300 years ago, before the industrial revolution. US energy secretary, Steven Chu, likes to tell Americans that they each have the equivalent of a hundred slaves working for them. That’s the amount of muscle power that would have to be substituted for fossil fuel. Energy has shaped our society. It governs where and how we live; what we eat; and how we travel.
And yet, despite all the worries about climate change and energy security, there is a fundamental question that we rarely ask: why do we need so much energy to power our lives?…
• Rebecca Willis is an associate of Green Alliance. This article is based on Demanding Less: Why we need a new politics of energy, by Rebecca Willis and Nick Eyre
