Welcome to the ODAC Newsletter, a weekly roundup from the Oil Depletion Analysis Centre at nef dedicated to raising awareness of peak oil.
US oil and gas reserves grew faster than at any time in the past 35 years according to figures released this week by the EIA. The numbers are for 2010 with the increase credited to fracking technology and high oil prices, leading to more exploration and development. While the report will be used to provide further confirmation of a new era of energy abundance, there is growing evidence that the realities when it comes to actual production are not as rosy. Reserve numbers refer to economically viable resources, yet last week saw a list of major energy companies hurting as they were forced into write downs on their US shale gas assets.
Worse could be yet to come as meaningful historical drilling data begins to emerge from more mature regions. According to Bob Brackett, an analyst with Bernstein Research, production from shale oil in the Bakken region of Montana has seen a 40% drop in production since 2006, this despite increased investment and technological improvements. He puts the decrease down to the fact that not all shale oil plays are equal — inevitably the best areas are drilled first — and anticipates the same curve will occur in the much vaunted Bakken play in North Dakota. There have of course been warnings, not least by Art Berman, and Ian Urbina at the NYT, but the popular narrative remains one of abundance.
In the UK, the Energy and Climate Change Committee this week issued a call for evidence on the impact of shale gas on energy markets. The report is to investigate the potential for recoverable gas resources in the UK and globally, look at its potential effects on energy markets, and how it might affect climate change targets. The report is likely to play an important role in the government’s current energy policy wrangles discussed in last week’s newsletter, so it crucial that the committee absorbs the sober analysis referred to above.
The message that the committee will no doubt hear from the energy industry is summed up by Lord Browne, ex BP CEO and chairman of shale gas explorer Cuadrilla, who recently told a conference — the US would be “completely independent of imported oil, probably by 2030” as a result of shale oil, and that its shale gas is “effectively infinite”. It’s just the the kind of fairy dust that many in desperate times will want to believe in.
ODAC will be taking a break for the next 4 weeks. We will be back with more news and comment on September 7th. Thanks for your support.
Oil
EIA sees growth in U.S. oil, natural gas
New technology used in shale formations contributed to the overall increase in U.S. oil and natural gas reserves, an energy official said.
The U.S. Energy Department’s Energy Information Administration reports that proven oil reserves in the United States increased 13 percent in 2010 to 25.2 billion barrels. Proven natural gas reserves passed 300 trillion cubic feet for the first time in U.S. history in 2010 to reach 317.6 tcf…
A mountain-top take on the “flood of oil supply”
If Montana is a microcosm of the world, one message to glean is that we are not in the midst of a decades-long flood of oil supply in the United States, as many suggest. Instead, the red lights are blinking across the exuberant U.S. oil patch. As you recall, much has been made in recent months about the momentous prospects for U.S. oil and gas, which are said to be leading a global fossil fuel revolution, with meaningful implications for fortune-hunters and geopolitical players alike: North America will be independent of outside oil producers, the U.S. will experience an industrial revolution, and OPEC will drift into laggardly inconsequence. So what to think about the latest news from folks approaching the punch bowl with bad intentions?
Let’s start with Montana, and the now-legendary Bakken shale oil formation. Bob Brackett, an analyst with Bernstein Research, studied a dozen years of shale oil drilling data for this mountainous state bordering Canada. What he found was a steep oil production increase through 2006 — surpassing 100,000 barrels a day — followed by a fast, 40 percent decline to about 60,000 barrels a day today. The plummet is counterintuitive because the time frame coincides with a capital spending binge by the industry — tens of billions of dollars poured into the new innovations and technology that have opened up the Bakken and other shale plays. So why has Montana’s production dropped? “Resource plays,” Brackett writes in a note to clients today, “have limited/finite drilling locations. The best locations get drilled early, the less economic ones later, and once they are drilled, operators move on.” In other words, Brackett told me in a followup email, “industry drilled the low hanging fruit first, and now can’t find the same quality of opportunity.”…
Analyst: Calif. shale oil field results disappoint
A California oil field thought to be one of the biggest in the U.S. has been producing much less oil than hoped, according to a report by Alliance Bernstein analyst Bob Brackett.
The field, a formation of rock known as the Monterey Shale, was thought to have 15 billion barrels of “technically recoverable” reserves, according to government estimates. That’s triple the amount of oil found in huge and newly prolific fields in North Dakota and Texas. The formation lies under the San Joaquin Valley in central California. Most of the locations probed so far have been northwest of Bakersfield…
Gas Liquids ‘Bloodbath’ Brings Shale Pain To Oil Market
The shale boom that sent natural-gas prices to a 10-year low is being felt for the first time in the oil markets.
Williams Partners LP (WPZ) joined Marathon Oil Corp. (MRO) and Devon Energy Corp. (DVN) yesterday in blaming a glut of propane and related products for lower profits in the second quarter. Next week more companies are expected to show the effects of falling prices for so-called natural-gas liquids used in backyard barbecues and motor fuels as producer Chesapeake Energy Corp. (CHK) and Targa Resources Partners LP (NGLS), a pipeline and storage company whose trading symbol is NGLS, release earnings.
The “NGL bloodbath,” as it was dubbed by Tudor, Pickering, Holt & Co. last month, is rippling across the oil and gas industry as explorers cut production and reduce cash flow projections, service companies forecast lower demand for drilling rigs, and pipeline partnerships suffer falling revenue for their gas liquids processing plants. The price of an ethane- propane NGL mix is down 58 percent from a high in January, outpacing the 19 percent drop in crude from a February peak…
Russia’s July oil output up to 10.34 mln bpd
Russian oil output, the world’s largest, rose to 10.34 million barrels per day (bpd) in July from 10.32 million bpd in June, keeping it just ahead of its nearest rival, Saudi Arabia, Energy Ministry data showed on Thursday.
Saudi Arabia pumped 10 million bpd in July, a Reuters survey showed. Russia’s post-Soviet record was 10.36 million bpd…
Iraq Kurdistan oil export restart may be temporary
Iraq’s semi-autonomous region of Kurdistan plans to halt oil exports on August 31 if the central government does not make all outstanding payments, which could mean the proposed increase in Iraq’s overall shipments to world markets will be brief.
Kurdistan said on Wednesday it would restart exports this week in a bid to end the payments dispute with Baghdad. The Kurdistan Regional Government says the central government has withheld payment of $1.5 billion (963.6 million pounds)…
Oil Glut Forecaster Maugeri Admits Duff Maths
This article was first published in EurOil, 24 July 2012, and by 2degreesnetwork, 30 July 2012.
Move over peak oil, the world is heading for glut, according to a recent report by Leonardo Maugeri, a former executive with the Italian oil company Eni. Subtitled “the unprecedented upsurge of oil production capacity and what it means for the world”, the report claims the next decade could see the largest increase in production capacity since the 1980s, leading to prolonged overproduction and “a significant, stable dip of oil prices”. Good news for motorists and the world economy then, and bad news for tar sands producers and OPEC members who need more than $100/barrel to rub along these days. But is this scenario remotely credible?…
Oil Rises From Three-Week Low on Speculation of More U.S. Jobs
Oil rebounded from the lowest close in almost three weeks in New York before a report that may show hiring in the U.S. increased.
Futures rose as much as 0.9 percent, trimming a second weekly decline. Employers probably added 100,000 workers in July after an 80,000 gain in June, according to a Bloomberg News survey ahead of government data today. Tropical Storm Ernesto may develop into a Category 1 hurricane by Aug. 6, the U.S. National Hurricane Center said. Oil fell 2 percent yesterday after the European Central Bank failed to assure investors it was ready to take immediate steps to support the economy…
U.S. orders major Enbridge oil pipeline review after leak
The U.S. pipeline regulator raised pressure on Enbridge Inc on Thursday over the latest spill on its U.S. oil pipeline network, demanding that it submit a plan to improve the safety of the entire 1,900 mile system before restarting a key Midwest line.
The U.S. Pipeline and Hazardous Materials Safety Administration said it added new conditions to this week’s corrective action order for the restart of Line 14 to address failures on that pipeline as well as a string of others in recent years on its U.S. system, part of the world’s longest network for transporting oil and petroleum products…
BP profits plunge 96pc to $238m in second quarter
BP profits have nosedived from $5.4bn (£3.4bn) to just $238m in the second quarter after it was hit by huge impairment charges, including a drop in value of shale gas assets, and the decision not to proceed with a flagship drilling project off Alaska.
The oil major said the 96pc slump in ‘replacement cost profit’ for the three months to the end of June reflected a net loss on non-operating items of $3.3bn…
Iran Oil Shipping To Resume As Insurers Step In: Corporate India
India, the third-biggest buyer of Iranian oil, will offer state-backed insurance to tankers, helping the nation’s biggest sea carrier to resume cargoes from the Persian Gulf nation hit by international trade sanctions.
Shipping Corp. of India will soon start services to Iran as Indian insurers have agreed to give as much as $100 million of cover per voyage, Chairman Sabyasachi Hajara said without specifying a timeframe. Prior to the sanctions, European companies provided unlimited protection against risks including oil spills and collisions, he said…
Gas
Shale Writedowns Begin As Lower Prices Follow Record M&A
The record slump in natural-gas prices signals companies from BHP Billiton Ltd. (BHP) to Ultra Petroleum Corp. (UPL) are at risk of writing off billions of dollars of assets following a bubble in U.S. shale-gas acreage.
The clearest sign came yesterday, when BG Group Plc (BG/) and Encana Corp. (ECA) said they were writing down a total of $3 billion in the value of their gas properties in North America…
Electricity
India blackouts leave 700 million without power
More than 700 million people in India have been left without power in the world’s worst blackout of recent times, leading to fears that protests and even riots could follow if the country’s electricity supply continues to fail to meet growing demand.
Twenty of India’s 28 states were hit by power cuts, along with the capital, New Delhi, when three of the country’s five electricity grids failed at lunchtime….
Blackouts highlight diesel needs, price problems
Diesel use in India temporarily spiked during two days of massive power cuts which left hundreds of millions of people without grid power, highlighting increasing clamour for the fuel to back up a rickety national grid.
Hot weather across the country and a shortfall in annual monsoon rains had already pushed demand as the grid struggles to meet peak consumption. The government has had to halve prices for farmers needing pumped water – ruling out any subsidy cut…
Climate change threatens California power supply: report
California’s electricity sector is more vulnerable to climate change than previously thought, as higher temperatures will impede the state’s ability to generate and transmit power while demand for air conditioning rises, a report said Tuesday.
The data is part of the latest report released by the California Natural Resources Agency and the California Energy Commission, which are trying to help state and local leaders prepare for life in the hotter, drier California of the future…
Renewables
EDF profits rise 4.6pc as renewable energy replaces nuclear
EDF saw profits rise 4.6pc in the first half of the year as growth in renewable energy offset lower nuclear output.
The French state-controlled utility said that it also saw an 8.2pc jump in sales to €36.2bn (£28.2bn). For the January-to-June period, net income was €2.8bn…
Germany’s energy transformation: Energiewende
“THE quieter the evening, the more you hear it,” says Wilfried Bockholt, mayor of Niebüll in North Friesland. He mimics the sound of a 55-metre-long rotor whirling round a windmill’s mast. He is a driving force behind the “citizens’ wind park”, but he has mixed feelings. A region famed for broad horizons is now jagged with white spires. “They alter the landscape completely,” he laments.
North Friesland’s wind boom is part of Germany’s Energiewende (energy transformation), a plan to shift from nuclear and fossil fuels to renewables. It was dreamed up in the 1980s, became policy in 2000 and sped up after the Fukushima disaster in March 2011. That led Angela Merkel, the chancellor, to scrap her extension of nuclear power (rather than phasing it out by 2022, as previous governments had planned). She ordered the immediate closure of seven reactors. Germany reaffirmed its clean-energy goals—greenhouse-gas emissions are to be cut from 1990 levels by 40% by 2020 and by 80% by 2050—but it must now meet those targets without nuclear power…
UK
MPs drill down to assess shale gas impact
A committee of influential MPs has launched an inquiry into the impact of shale gas on energy markets, just weeks after declaring the controversial energy source could play a small but important role in boosting the UK’s energy security and cutting carbon emissions.
The Energy and Climate Change Committee yesterday invited businesses and other stakeholders to submit evidence to a new enquiry exploring the impact of a possible “shale gas revolution” on energy markets around the world…
EDF looks to spread UK nuclear costs
French energy giant EDF may seek more partners to share the costs of new nuclear plants in the UK and has appointed a financial adviser to consider its options.
The company plans to invest tens of billions of pounds in building two nuclear reactors at Hinkley Point in Somerset and two at Sizewell in Suffolk…
UK cuts feed-in tariff for solar panels
The UK’s solar industry maintained it has a sunny outlook on Wednesday despite dull summer weather and fresh cuts to the feed-in tariff subsidy for solar panels.
From today, anyone installing solar panels will receive 16p per kilowatt hour of electricity generated, compared with 21p previously, and will receive the subsidy for 20 years instead of the 25-year duration that was formerly available…
Transport
Foes of EU airlines carbon plan say back U.N. scheme
Seventeen countries opposed to an EU law that makes all airlines pay for carbon they emit on flights to and from Europe reaffirmed they want to keep working on an alternative plan at the U.N. global aviation body, a senior U.S. official said.
The European Commission has repeatedly said the only grounds for waiving its scheme, which has stirred threats of an international trade war, would be if the U.N.’s International Civil Aviation Organization (ICAO) could come up with an equally effective world-wide solution to rising airline emissions…
Abu Dhabi launches region’s first rapid electric car charger
Abu Dhabi has installed the first rapid charging station in the Middle East, reducing the time taken to recharge electric cars by over 90 percent, it was announced this week.
The CHAdeMO-certified Rapid Charger, the first of its kind in the region, has been installed at Masdar City, the low-carbon development backed by the Abu Dhabi government, and was in collaboration with Mitsubishi Heavy Industries…
