Welcome to the ODAC Newsletter, a weekly roundup from the Oil Depletion Analysis Centre, the UK registered charity dedicated to raising awareness of peak oil.
President Obama exuberantly embraced America’s new oil and gas frontier this week in his State of the Union address. Clearly aiming to steal some Republican election thunder, he pledged to open 75% of potential oil and gas resources, and repeated claims that the US is sitting on enough natural gas to last for 100 years (see insightful commentary on the numbers behind this from Chris Nelder, and more on gas prospects from David Strahan).
The president also played to his environmentalist supporters by promising state aid for clean energy, mandatory disclosure of fracking chemicals, and that oil and gas resources would be exploited safely. These are easy assurances to make, and would be more persuasive if they had not been accompanied — yet again — by the broken-record promise to cut oil company subsidies.
The bullish view of oil and gas supplies trumpeted in Obama’s speech, and in BP’s forecast published last week, was echoed to some degree in the latest EIA Annual Energy Outlook — though with considerably more caution. The agency sees US oil production rising 21% to 6.7 mb/d by 2020 before dropping back towards 6.1mb/d by 2035. Natural gas production rises as a result of a 23% rise in shale gas offsetting the decline in conventional supplies to make the US a net exporter.
On natural gas, the agency followed the lead of the US Geological Survey and reduced its estimate of recoverable gas for the Marcellus shale, although not by quite as much. The EIA cuts its estimate by two thirds, from 410 trillion cubic feet to 141 trillion, whereas the USGS had cut by four fifths.
Yet the EIA forecasts shale gas production will still rise 23%, offsetting the decline in conventional production, to make the US a net exporter. However, this doesn’t look likely to happen any time soon, based on the current economics. Chesapeake Energy became the latest producer to announce output cuts because of the plunging price of gas. The company will idle half of its drilling rigs and concentrate on shale oil production.
Not everyone buys the gas-and-oil-galore story though. Sir David King, former chief scientific advisor to the British government, and James Murray published an article in Nature entitled ‘Oil’s tipping point has passed‘. The report warns that despite new finds and technologies we have reached a point of inelastic supply due to depletion of existing wells. It goes on to warn that more urgency is required in moving away from fossil fuels to protect the economy. In a similar vein, James Hamilton’s new report ‘Oil Prices, Exhaustible Resources, and Economic Growth‘ looks at history to question the premise that new production technology (like fracking) can be sufficient to make up for the lack of genuine major new discoveries. Is anyone listening?
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Oil
Oil production is booming — but for how long?
Lately, President Obama has been talking up the frenzy of domestic oil drilling under his watch. “Right now,” the president said in his State of the Union Address on Tuesday, “American oil production is the highest it’s been in eight years.” Technically, that’s true. But it’s worth taking a longer view. Since 1970, U.S. oil production has actually been in severe decline — and the recent boom is nowhere near enough to reverse it.
Economist James Hamilton offers some historical perspective in this new NBER paper. Thanks to new shale oil drilling in North Dakota and offshore production in Alaska and the Gulf of Mexico, U.S. production has picked up recently and is at about 6 million barrels of oil per day. But that’s still way down from 1970, when production peaked at 10 million barrels per day:…
Has Petroleum Production Peaked, Ending the Era of Easy Oil?
Despite major oil finds off Brazil’s coast, new fields in North Dakota and ongoing increases in the conversion of tar sands to oil in Canada, fresh supplies of petroleum are only just enough to offset the production decline from older fields. At best, the world is now living off an oil plateau—roughly 75 million barrels of oil produced each and every day—since at least 2005, according to a new comment published in Nature on January 26. (Scientific American is part of Nature Publishing Group.) That is a year earlier than estimated by the International Energy Agency—an energy cartel for oil consuming nations.
To support our modern lifestyles—from cars to plastics—the world has used more than one trillion barrels of oil to date. Another trillion lie underground, waiting to be tapped. But given the locations of the remaining oil, getting the next trillion is likely to cost a lot more than the previous trillion. The “supply of cheap oil has plateaued,” argues chemist David King, director of the Smith School of Enterprise and the Environment at the University of Oxford and former chief scientific adviser to the U.K. government. “The global economy is severely knocked by oil prices of $100 per barrel or more, creating economic downturn and preventing economic recovery.”…
IEA Sees 2035 Crude at $247 Barrel, Almost Twice OPEC’s Forecast
The International Energy Agency expects nominal crude prices to reach $247 a barrel by 2035, almost twice the $133 assumed by the Organization of Petroleum Exporting Countries, even as expectations for demand converge.
The IEA, which represents 28 oil-consuming nations, bases its assumptions on increasing marginal costs as more supply is needed to balance higher demand, according to a report received by e-mail today. OPEC, supplier of 40 percent of the world’s oil, said in the joint statement it expects prices to be much lower, based on “the behavior of marginal costs, the impact of dollar exchange-rate movements on recent prices and potential future developments, and signals from futures prices.”…
Iran Set to Turn Off Oil Supply to Europe
The European Union embargo on Iranian oil will only come into effect in six months, but the leadership in Tehran wants to act first: Exports to Europe are set to be halted immediately. It is a move which could mean added difficulties for struggling economies in southern Europe.
It’s a move which has tit-for-tat written all over it, but one which could nonetheless have a serious impact: The Iranian government wants to present a bill to parliament this weekend calling for an immediate halt to oil deliveries to Europe. The move, with most reports citing the Iranian news agency Mehr, has come about in response to the EU agreement to impose sanctions against Iran, which were announced earlier this week…
Oil Gains a Second Day After Federal Reserve Commits to Low Interest Rates
Oil rose for a second day in New York on speculation that Federal Reserve plans to keep U.S. interest rates near a record low will bolster investor demand for commodities.
Futures advanced as much as 1.3 percent after the Fed’s announcement sent the dollar to its lowest in more than a month against the euro, making assets priced in the U.S. currency more attractive. The Federal Open Market Committee said yesterday it expects its benchmark interest rate to stay “exceptionally low” at least until late 2014. A wider ban on Iranian oil than that announced this week by the European Union could boost crude by $30 a barrel, the International Monetary Fund said…
Fossil fuels are sub-prime assets, Bank of England governor warned
The huge reserves of coal, oil and gas held by companies listed in the City of London are “sub-prime” assets posing a systemic risk to economic stability, a high-profile coalition of investors, politicians and scientists has warned Bank of England’s governor, Sir Mervyn King.
In an open letter on Thursday, they tell King that the global drive to reduce carbon emissions could mean billions of pounds of fossil fuel reserves will rapidly lose value and cause a “major problem” for institutional investors and pension funds…
Gas
U.S. Cuts Estimate for Marcellus Shale Gas Reserves by 66%
The U.S. Energy Department cut its estimate for natural gas reserves in the Marcellus shale formation by 66 percent, citing improved data on drilling and production.
About 141 trillion cubic feet of gas can be recovered from the Marcellus shale using current technology, down from the previous estimate of 410 trillion, the department said today in its Annual Energy Outlook. About 482 trillion cubic feet can be produced from shale basins across the U.S., down 42 percent from 827 trillion in last year’s outlook…
Chesapeake to Cut Number of Gas Rigs
Chesapeake Energy, the nation’s second biggest natural gas producer, announced Monday that it would cut production of gas in response to plummeting prices.
The announcement was not unexpected, and it followed a trend that has been under way for several months: oil and gas companies have been transferring drilling rigs to oil fields from natural gas fields. But given that Chesapeake has been the industry’s most public champion of natural gas, its announcement of an 8 percent cut in daily production led to a substantial rally in gas prices that had fallen last week to their lowest level in a decade…
North America
Obama’s speech and some sober talk about the oil patch
In his State of the Union address last night, President Barack Obama spoke of the United States’ unaccustomed new impact on global energy — in addition to its habitual role as a world-class oil glutton, the U.S. is delivering a growing volume of oil and natural gas that has already shaken assumptions, and looks likely to roil geopolitics in a way favorable to Americans.
The speech put a spotlight on a new trend of plenty in the U.S. oil patch: On Monday, the U.S. Energy Information Administration reported that the U.S. is in the midst of a dramatic turnaround — by the year 2035, U.S. demand for imported oil will have fallen by 18 percent, to some 7.36 million barrels a day, or a respectable 1.6 million barrels a day less than last year’s volume…
Breaking Down the EIA 2012 Annual Energy Outlook
Every year, the Energy Information Administration (EIA) prepares an Annual Energy Outlook (AEO) which forecasts energy consumption and demand into the future. In its 2012 Annual Energy Outlook Early Release, EIA makes the following projections[ia]:
EIA is still forecasting a fossil fuel future for the United States with fossil fuels representing 77 percent of energy consumption in 2035, compared to 83 percent in 2010…
State of the Union: Obama Opens Public Land and Waters to Energy Industry
President Barack Obama used his State of the Union address tonight to announce the opening of domestic energy development both on public lands and at sea.
The President directed his administration “to open more than 75 percent of our potential offshore oil and gas resources,” a policy that will have an enormous impact on the marine environment of the United States…
New York tidal project ready to go with flow
Start spreading the news, New York could see a tidal energy array deployed in the East River by the end of next year, after the US Federal Energy Regulatory Commission (FERC) awarded its first pilot project license for a tidal energy project to developer Verdant Power Inc.
The company confirmed yesterday that it has been granted a 10 year license that will allow it to “demonstrate the commercial viability” of its tidal stream turbine technology…
Coal
Energy in India: The future is black
STAB a finger at the middle of a map of India and you will hit Nagpur. Some 20 miles (32 kilometres) north-west of the city is a sloping tunnel bored into the rock. Ride two miles down into the gloom, hanging from a wire, and after a torch-lit hike past underground streams and conveyor belts you arrive at a black wall. Sweating men are rigging it with tubes of explosives and wire detonators. Soon they will blast it apart, and down should tumble tonnes of India’s most important commodity: coal…
DOE report projects greater coal production drop
Coal production in Central Appalachia may not decline as sharply over the next five years as previously projected, but the long-term forecast looks even worse, according to a new U.S. Department of Energy report.
On Monday, DOE’s Energy Information Administration increased its estimates of annual regional coal production for each of the next five years, but then projected steeper drops through the rest of the decade, with output reaching a low of 77 million tons in 2020…
Electricity
Energy storage economically viable within five years
Large-scale energy storage technologies could play a major role in electricity grids by 2016, according to a report that predicts the falling cost of storage systems will help accelerate the rollout of intermittent renewable energy technologies.
Energy storage systems such as batteries and fuel cells have long been regarded as a means of more effectively managing grids that rely on large amounts of renewable energy from unreliable intermittent sources such as wind and solar farms…
Toyota Finds Way To Avoid Using Rare Earth: Report
Toyota Motor Corp has developed a way to make hybrid and electric vehicles without the use of expensive rare earth metals, in which China has a near-monopoly, Japan’s Kyodo News reported.
Toyota, the world’s top producer of fuel-saving hybrid cars such as the Prius, could bring the technology to market in two years if the price of rare earths does not come down, Kyodo said, citing a source familiar with the matter…
Nuclear
Plans for Sellafield plutonium reactor rejected
A plan to build a plutonium-burning reactor at Sellafield in Cumbria has been rejected by the UK government’s Nuclear Decommissioning Authority (NDA).
Internal emails seen by the Guardian reveal that the NDA regards the reactor technology as immature and commercially unproven. It would also create large amounts of plutonium-contaminated waste and increase the risk of terrorists acquiring nuclear weapons, the NDA says…
Legal challenge threatens UK’s new nuclear plans
The European Commission could prevent new nuclear plants being built in the UK if it upholds a complaint over alleged unfair subsidies submitted to Brussels by a pro-renewables campaign group.
The Energy Fair group, which comprises high-profile anti-nuclear politicians, lawyers, and environmentalists, argues that the cap on liabilities for nuclear accidents is technically a subsidy, and as such illegal under EU law…
Renewables
Obstacles to Danish Wind Power
During howling winter weather two years ago, the thousands of windmills dotting Denmark and its coastline generated so much power that Danes had to pay other countries to take the surplus.
The incident was the first of its kind, and lasted only a few hours. Low temperatures were an aggravating factor, because Denmark’s combined heat and power plants were also running full bore and generating a lot of electricity…
Solar energy: Flower power
SOLAR-POWER stations take up a lot of room. They need either vast arrays of photovoltaic panels, which convert sunlight directly into electricity, or of mirrors, which direct it towards a boiler, in order to raise steam and drive a generator. The space these arrays occupy could often be used for other purposes.
Two researchers from the Massachusetts Institute of Technology have now devised a better and more compact way of laying out arrays of mirrors. Slightly to their chagrin, however, and somehow appropriately, they found when they had done the calculations that sunflowers had got there first…
UK
‘Carbon floor price’ plans dealt a blow by MPs
Government plans to prop up the price of emitting carbon dioxide for businesses have been dealt a blow by MPs, who have blasted the proposals as a handicap to British companies.
The “carbon floor price” would ensure that companies were paying a minimum price for producing carbon, in contrast to the European Union’s existing emissions trading scheme under which the price of emissions can plunge to near zero. By propping up the cost of carbon, and therefore of fossil fuel energy, the floor price is intended to encourage companies to use energy more efficiently, thereby saving money, and install new technology to cut carbon…
Solar subsidies cuts: UK government loses court appeal
The government lost its appeal on Wednesday against a judge’s ruling that its cuts to solar power subsidies were illegal, suggesting thousands of homes and businesses will now be able to claim the higher payments.
Three court of appeal judges unanimously rejected the appeal from Chris Huhne, the secretary of state at the Department of Energy and Climate Change (Decc), who said he would be taking the case on to the supreme court. “We want to maximise the number of installations that are possible within the available budget rather than use available money to pay a higher tariff to half the number of installations,” he said…
Cornwall Council pioneers community solar power push
Solar arrays have become an increasingly common sight for residents of Cornwall, after the council confirmed that installations have been completed at around 40 sites in the county as part of one of the largest council-led renewable energy projects in the UK.
Solar installation firm Solarcentury confirmed today that prior to Christmas it completed 38 installations on private and council buildings, including schools, colleges, libraries and leisure centres…
Bristol energy firm aims to give lower bills, new jobs, new investment
Plans to establish a citywide energy services company for Bristol will lead to lower household fuel bills, 1,000 new green energy jobs and up to £2billion investment in the city economy.
That was the message from Bristol City Council leader Barbara Janke after the city was awarded a £2.5 million grant from the European Investment Bank (EIB)…
Government cuts see Liverpool Council cut 4,000 homes solar power building plan
PLANS to build solar panels on around 4,000 homes in the city have been scrapped by Liverpool Council in the face of Government cutbacks.
More than £1.5m investment will be scrapped because of the decision, while thousands of Liverpool families will face higher fuel bills than expected, with many pushed into “fuel poverty”…
Ecotricity aims to make a splash with new marine energy business
Ecotricity has today confirmed it has entered the marine energy sector, announcing ambitious plans to install 200 SeaRaser wave power devices off the UK coast within the next five years.
The company believes the 240kW device has the potential to produce electricity at just 2p per kilowatt hour (kWh), which is not only significantly lower than the government’s projections for all other renewable energy technologies, but also undercuts new nuclear power, which is estimated to cost 10p/kWh, and natural gas power which costs 8p/kWh…
First UK marine energy park to be built in south west
Britain’s first marine energy park will be developed in the south west of the country, in a bid to speed up the commercial expansion of the wave and tidal industry from 2020, the UK government said on Monday.
Over the past seven years, over 100 million pounds ($155 million) have been invested in the UK’s south west marine energy industry…
Geopolitics
Turkey warns Iraqi PM over sectarian conflict
Turkish Prime Minister Tayyip Erdogan warned his Iraqi counterpart, Nuri al-Maliki, on Tuesday that Ankara would not remain silent if he pursued a sectarian conflict in his country.
A war of words between the two neighbors has added to heightened regional tension. Turkey fears Iraq is heading toward a full-scale sectarian war while Baghdad has accused Ankara of meddling…
China hits back at US wind turbine import investigation
The Chinese government has hit back against a US investigation into exports of wind turbine towers, warning that the escalating trade spat runs counter to global efforts to curb carbon emissions and could damage clean-energy co-operation between the two countries.
The US Commerce Department announced last week that it will respond to a complaint by a group of American wind turbine tower manufacturers over low-cost towers imported from China and Vietnam by launching a formal probe into whether the imports breach trade rules…
