The age of extreme oil: ‘This used to be a forest?’

Over the course of three days spent visiting reserves, band offices and the vast sand dunes left behind by the bitumen-scrubbers surrounding Fort McMurray, the Achuar confronted a reality that may one day be their own. And they didn’t much like what they saw.

This encounter was born of a new dynamic: the age of extreme oil. Gone are the days of sweet Texas crude and boundless Arabian oil fields, when petroleum lay so near the surface that all a company had to do was prick the Earth’s crust and let the black gold gush. To the environmentalists who worry about reaching “peak oil” (and a subsequent decline in fossil fuels), critics can point out accurately enough that the world is flush with new hydrocarbon reserves. They are less quick to acknowledge the epic complexity and risks of most of these new finds.

Alberta’s oil sands are the obvious example: Here, on average, two tonnes of earth must be strip-mined and seven barrels of water heated to steam in order to produce a barrel of oil. It takes a barrel’s worth of energy to produce just three barrels of oil; 30 years ago it would have been 100.

Oil Falls to Six-Month Low on Europe

Oil dropped to a six-month low in New York on concern that Greece will have to exit the euro system, compounding Europe’s debt troubles and curbing fuel demand.

Futures declined 1.2 percent after German Finance Minister Wolfgang Schaeuble said that market turmoil caused by the euro- zone crisis may last two more years. Crude capped its third weekly decline as U.S. consumer confidence fell and oil supplies rose to a 22-year high. Prices are down 11 percent this quarter after climbing 4.2 percent during the previous three months.

Expect lower gas prices heading into Memorial Day

If you’re lucky enough to live in some parts of the United States, you may see gas pump prices fall to around $3.25 a gallon or less in the next week or two. Even West Coast drivers should get some relief from prices that are still above $4 a gallon.

Total: Fallout Of Arab Spring Will Sustain High Prices

LONDON (Dow Jones)–High oil prices will be sustained in part through increased social spending by Middle Eastern governments in the wake of the Arab spring, Total SA Chief Economist Pierre Sigonney said Friday.

A wave of uprisings against long-entrenched rulers in North Africa and the Middle East last spring, which led to the overthrow of Moammar Gadhafi, means that the region’s leaders will have to spend more of their oil revenues on social programs in an attempt to keep a lid on popular discontent.

$85 the make or break price for the oil patch

Canadian Natural Resources Ltd. has rolled out two key numbers: 85 and 75.

Réal Cusson, the company’s senior vice president of marketing, on Wednesday told investors where the price of oil must trade in order for energy companies to make a go of it in the oil sands and shale gas formations.

Qatar Producing Crude Oil At Full Capacity -Energy Minister

SEOUL (Dow Jones)–Qatar is currently producing crude oil at full capacity and is sticking with its OPEC quota, Minister of Energy and Industry Mohammed Bin Saleh Al-Sada said Friday.

Colombia says will increase natgas flow to Venezuela

(Reuters) – Colombia said on Friday it would send 50 percent more natural gas this year to neighboring Venezuela, which has yet to start producing the fuel commercially despite huge reserves.

Colombia currently exports about 200 million cubic feet (mcf) of natural gas per day to OPEC-member Venezuela, but Energy Minister Mauricio Cardenas said that would rise to 300 mcf in September.

Gasoline Cargoes to Brazil May Rise on Ethanol Drop in JBC View

Gasoline shipments to Brazil from the U.S. and Europe may rise as slumping ethanol production encourages consumption of the auto fuel, JBC Energy GmbH said.

Brazilian ethanol production fell more than 40 percent from a year earlier in April, the Vienna-based consultant said in a report today, citing data from the Brazilian Sugarcane Industry Association, or Unica. Output of hydrous ethanol, sold at pumps in Brazilian filling stations, slid 18 percent, JBC said.

Japan extends steep Iran crude oil cut to May

TOKYO (RTRS): Japan’s crude imports from Iran in May will be little changed from April, extending a sharp cut in purchases that began after the United States and Europe said they would impose sanctions against Tehran, traders said on Friday.

G-8 Leaders to Discuss Oil Market as Iran Embargo Nears

The impact on oil prices from sanctions on Iran will be on the agenda when President Barack Obama meets with other leaders of the Group of Eight nations, National Security Adviser Tom Donilon said.

Iran plans to expand oil exploration

PanARMENIAN.Net – Iranian officials announced that the country plans to expand oil exploration throughout the country, especially in Northeastern provinces, Fars News Agency reports.

Wheat exports to Iran near certain; to help settle fuel import bill

NEW DELHI: The government is working out the details of wheat exports to Iran, a move that can help India settle part of its fuel import bill with the oil-rich nation and also reduce its grains stockpile at warehouses.

Venezuela says third diesel shipment sent to Syria

(Reuters) – Venezuela has sent a third shipment of diesel to Syria, the energy minister said on Friday, underscoring President Hugo Chavez’s support of the Middle East country despite its intensified crackdown on protesters.

Earlier this year, Venezuela’s government said it had sent at least two shipments of fuel to Syria, potentially undermining Western sanctions as a rare supplier to the increasingly isolated regime of President Bashar al-Assad.

Turkey warns gas speculators to stay away from Cyprus waters

ANKARA // Turkey on Friday called on major international oil and gas companies seeking licenses to search for gas deposits off Cyprus to withdraw their bids, saying it will not allow exploration to go ahead and threatening to ban them from Turkish energy projects.

FG loses $7billion to crude oil theft

The Federal Government said it is losing about $7billion annually to crude oil theft in Nigeria, at the rate of 180,000 barrels per day.

To stem the trend, which government claimed rose rapidly in the last 12 months because of the collusion of some foreign nationals , a new industry joint task force, JTF, has been set up to tackle the menace.

Proposal to turn Kuwait into world’s oil capital – State’s energy consumption up 66%: Study

KUWAIT: The concept of ‘Kuwait as the world’s oil capital’ will see the light after being studied comprehensively, said, Fadhel Safar Minister of Public Works and Planning and Development revealed on Thursday. On the sidelines of a preparatory meeting for the country’s second mid-term development plan, Safar told KUNA that the idea of turning Kuwait into a world oil capital goes falls in line with the vision of turning it also into a financial and commercial hub. This can be accomplished by offering a complete set of Kuwaiti oil and manufacturing industries by providing job opportunities for 21,000 potential employees, the minister said during last night’s meeting that included the presence of representatives for the Kuwaiti oil and industrial sectors.

Consultant: nimble footwork on gas exports, energy rethink needed

However, the high oil prices have brought to light the weakness of a theory that the world is about to pass an unsustainable peak in oil supplies. New oil and gas resources have magically appeared in improbable locations such as Uganda, offshore Mozambique and the eastern Mediterranean, Chow said.

“The other thing that we’ve learned in the last few years … is the peak oil theory is bunk,” he said.

It turns out that the availability of oil and gas supplies is determined by people’s imagination, their ability to harness innovative technology and by the amount of investment that people are willing to risk, and not so much by geology, he said.

Peak oil debate is over, and U.S. energy independence will be obtained by 2020

Amazingly, a growing chorus of analysts are arguing that the peak oil debate is over and the U.S. will soon achieve energy independence. I agree. It is over, and the U.S. will soon achieve energy independence. However, the implications of this are negative for the economy and jobs, and prove that analysts like Matt Simmons and Richard Heinberg were right in their dire peak oil predictions, as a careful analysis clearly shows.

First India Shale Gas Seen in 4 Years, China Output Nears

Oil & Natural Gas Corp. of India and competitors may drill for at least four years before producing the first commercial shale gas in the nation as China expects to commence output next month and Australia boosts reserves.

Chesapeake Cash Crunch May Shrink as Gas Prices Rise 42%

Rising natural-gas prices have provided some relief to Chesapeake Energy Corp., which has seen its shares plummet this year on management controversy and a looming cash-flow shortfall.

Chesapeake Turns to Jefferies’ Eads in $28 Billion Deals

Fitch Ratings estimates the company’s cash-flow shortfall may reach $10 billion this year. The stock has dropped 36 percent this year and McClendon said this week that Carl Icahn, the activist investor, may be buying shares. Chesapeake rose 6 percent to $14.36 at the close in New York.

Sudan set to devalue pound amid oil crunch

(Reuters) – Sudan will allow foreign exchange bureaux and banks to trade dollars at a level close to the black market rate, effectively devaluing the pound, a senior banking official said on Friday.

Sudan’s economy has been battered since the country lost three-quarters of its oil production to South Sudan when the latter became independent in July. Even though the pipelines are in Sudan, the two have been unable to agree on how much the South should pay to transport its oil.

Ghana Loses GH¢583 million Oil Revenue

Ghana has failed to achieve the targeted oil revenue of GH¢1.250 billion for 2011 as the nation has only raked in GH¢666 million from the commodity.

This represents a shortfall of GH¢583 million, which the Jubilee partners have attributed to the inability of the Jubilee field to produce the estimated 120 barrels of oil daily.

Ethical Oil challenges Harper, Mulcair to back reversal of Ontario pipeline

A pro-oil-sands lobby group is calling on politicians to support a proposal that would see an existing Southwestern Ontario pipeline reversed to send oil from west to east.

“This decision should be a no-brainer,” said Jamie Ellerton, executive director of Ethical Oil. “But it will still be opposed – it will face opposition from radical environmental groups.”

Reviving Arctic oil rush, Ottawa to auction rights in massive area

Ottawa has placed 905,000 hectares of the northern offshore up for bids, clearing the way for energy companies to snap up exploration rights for an area half the size of Lake Ontario. The scale of the offer indicates eagerness in the oil patch to drill for new finds in Canada’s northern waters less than two years after such plans were put on hold following the BP spill in the Gulf of Mexico and a major Arctic drilling safety review.

Exxon Valdez-like oil disaster in Arctic feared

One of Canada’s top experts on Arc-tic issues is warning of the “near-inevitability” of an Exxon Valdez-scale oil spill at a fragile choke point in Alaskan waters if Canada ends up shipping oil-sands fuel to China via pipeline terminals on the British Columbia coast.

Two women charged over WA gas hub protest

Two women have been charged over their protest against the $30 billion gas hub planned by Woodside Petroleum at James Price Point in Western Australia.

Green Peak Oil Stock Expanding in North America

In our new peak oil world of $4 gas and, more and more people are opting for bus travel. The young like it: My girlfriend’s daughter travels by bus almost exclusively, even though she owns a car. None of the problems above are likely to get any better. Airline and gas prices will go up with oil prices. TSA procedures are ever more invasive. Amtrak needs fundamental reform and rail lines that are separate from freight to deliver better service.

Hence the Bus.

Many benefits of wind power make tax credit a smart idea

Entrenched special interests and their friends in Congress are blocking an extension of the production tax credit that has helped drive much of my industry’s growth and helps level the playing field for wind energy. (Oil, coal and other fossil fuels are all highly subsidized and have been for most of the last century.) If the tax credit is not extended soon, 37,000 U.S. wind-industry workers could lose their jobs, according to Navigant Consulting. Not a week goes by now when I do not hear of layoffs due to tax-credit uncertainty. Ohio will be especially hard hit without a production tax credit, as orders for wind turbine components dry up completely.

Break Up Big Wind’s Subsidies

Not that long ago, we noted that the wind power industry has not fulfilled the lofty expectations it generated or met the claims of its more zealous advocates. Expectations and government subsidies are the only sure things that wind farms are creating.

Wind power 100 times cleaner than coal, Colorado NREL researchers say

A kilowatt-hour of of electrcity generated by wind power emits less than one percent of the greenhouse gases as a kilowatt made by burning coal, according to a new National Renewable Energy Laboratory study.

Swapping Out Charcoal With Ethanol

Africa used to boast nearly three million square miles of forest, only about one-third of which remain today. The principal culprit is charcoal production for cookstove fuel, which emits soot that leads to endemic health problems.

Last Ones Left in a Toxic Kansas Town

At the entrance to Treece, something strange happens: Mountains appear on the horizon. Except they’re not really mountains. They’re mounds of toxic stone. Gray, treeless monuments to the town’s more profitable past.

Obama unveils US food security plan for Africa

US President Barack Obama has announced a $3bn (£1.9bn) plan to boost food security and farm productivity in Africa, US officials say.

They say the initiative is aimed at alleviating shortages as world food supplies are being stretched by rising demand in Asia’s emerging markets.

Worse than Keystone

Environmentalists are focused oil and gas, but a bigger carbon disaster may be brewing in the Pacific Northwest.

With Natural Gas Plentiful and Cheap, Carbon Capture Projects Stumble

WASHINGTON — A federal proposal to ban the construction of coal-fired power plants that release all of their carbon dioxide into the atmosphere would seem to smooth the way for carbon capture, a budding technology that traps the greenhouse gas for storage or other uses.

But even as the Environmental Protection Agency prepares to open hearings on the proposed rule, unveiled in March, industry experts say the persistently low price of natural gas is threatening the viability of the nation’s carbon capture projects.

Peak oil debate is over, say experts

THE debate about peak oil is over and the world has used just a fraction of the petroleum it will be possible to extract, an expert believes.

Speaking at the Australian Petroleum Production and Exploration Association (APPEA) 2012 conference in Adelaide, oil major Total’s chief executive Christophe de Margerie said new sources of petroleum, such as tight gas and shale oil, meant that the world had ample supplies of petroleum.

Mr de Margerie said while there were economic and environmental issues which would affect how quickly resources were exploited, there was “definitely not a concern about reserves”.

Oil prices could double by 2022, IMF warned

The International Monetary Fund (IMF) has been warned by its internal research team that there could be a permanent doubling of oil prices in the coming decade with profound implications for global trade.

“This is uncharted territory for the world economy, which has never experienced such prices for more than a few months,” the report warns.

Report is here (PDF)

The difficult future facing black gold

swissinfo.ch: What is likely to happen after “peak oil”?

D.G.: There will be more pressure on the environment. Because conventional oil has already reached its peak, there has been more investment in non-conventional oil over the past few years, but oil sands in Canada, deep sea oil in the Gulf of Mexico and shale oil from the United States cause a lot of pollution. Canada has even withdrawn from the Kyoto climate protocol in order to avoid millions of dollars’ worth of fines because of its oil sands.

Then you have the problem of wars breaking out over resources. For me, the 2003 Iraq war, which killed more than 100,000 people, was quite clearly an oil raid, just like the Libyan war in 2011, with more than 30,000 dead. And Sudan and the recently independent South Sudan are now fighting over oil fields. People are being killed for oil today. That’s a cause for concern.

Peak Oil: The Sun Also Rises

While the net exports concept is a great pedagogical tool, I worry that it may distract us from the ways that even subsidized demand for oil in oil exporting countries responds to changes in the oil price. For instance, Saudi Arabian consumers may not feel the impact of changes in the world price of oil, but their government does.

Carbon, Low Carbon, And No Cash

The IEA doesnt have time for stuff like Peak Oil anymore: the global warming crisis is so serious we will have to give up oil an awful lot sooner than it runs out all on its own – which was one good bit of news. In the meantime however, Jones urged the energy corporations of the IEA countries to increase and accelerate and intensify the production of shale oil, deep offshore oil, heavy oil, Arctic oil, gas-to-oil conversion, coal-to-oil conversion, biomass-to-oil conversion, algae-based oil, biofuels, and what have you, all of them clean of course. Breakthroughs could be coming, the IEA says, on top of those which already came in the shape of shale gas and tarsand oil, the shale gas being possible to convert to oil, and the tarsand oil being possible to use as-is. Cars will of course become much more fuel efficient, due to the global warming crisis, and it goes without saying that electric cars are coming, and nuclear power to charge them up is fine as long as its nicely managed. As Jones added, China and India were aware of the oil problem and had told him they were doing serious things to cut the growth of their oil habit. It was sure.

200 Year Supply Of Oil In Green River Formation

“The Green River Formation—an assemblage of over 1,000 feet of sedimentary rocks that lie beneath parts of Colorado, Utah, and Wyoming—contains the world’s largest deposits of oil shale. USGS estimates that the Green River Formation contains about 3 trillion barrels of oil, and about half of this may be recoverable, depending on available technology and economic conditions. The Rand Corporation, a nonprofit research organization, estimates that 30 to 60 percent of the oil shale in the Green River Formation can be recovered. At the midpoint of this estimate, almost half of the 3 trillion barrels of oil would be recoverable. This is an amount about equal to the entire world’s proven oil reserves.”

Oil Falls to 2012 Low on Greek Debt, Saudi Call for Drop

Oil fell below $94 a barrel in New York for the first time since December as Europe’s debt crisis worsened and Saudi Arabia’s energy minister said prices should decline further.

West Texas Intermediate slid as much as 2.6 percent to the lowest level this year. Brent crude, trading at about $110 a barrel today, should drop to $100 as supply outweighs demand, Saudi Oil Minister Ali al-Naimi said yesterday in Adelaide, Australia. Futures also slipped after Greece failed to agree on a unity government and European Union officials considered the nation’s possible exit from the euro. Hedge funds cut bullish bets on oil by the most in three years, data showed last week.

Naimi Says Brent Oil Should Drop to $100 as Supply Tops Demand

Crude prices should fall because global supply is outweighing demand, according to Saudi Arabia’s oil minister, Ali al-Naimi.

“We want a lower price than where it is now,” al-Naimi said in Adelaide today. “We need to get the price to a level of around $100” a barrel for London’s Brent crude, he said. Saudi Arabia is the world’s biggest oil exporter.

National Hurricane Center Tracking Two Pre-Season Storms

The National Hurricane Center is tracking two pre-season storms in the Atlantic and Pacific oceans today.

The stronger of the two is located in the Pacific about 550 miles (885 kilometers) south-southwest of Acapulco, Mexico and has a 50 percent chance of becoming a tropical depression in the next day or two, according to a bulletin from the center in Miami.

UK gas prices sink on poor demand, ample supply

LONDON (Reuters) – British prompt gas prices sank on Monday due to ample supply and below-average demand but upcoming maintenance outages and cooling temperatures may drive gains later in the week.

Why China’s Slowdown Could Be Good for US, Europe

China’s economy may be on track to grow at its slowest pace in a decade, but there’s a silver lining to this: lower commodity prices may actually benefit the U.S. and Europe, just when they most need it.

Palm Oil Plunges Most in 14 Months on Europe Debt Crisis

Palm oil slumped the most in more than 14 months on concerns that an escalating debt crisis in Europe and a deepening economic slowdown in China may curb demand for commodities.

Lower jeepney fares starting Tuesday

MANILA, Philippines – Commuters will once again pay P8 minimum fare for public utility jeepneys starting tomorrow (May 15). The Land Transportation Franchising and Regulatory Board (LTFRB) on Monday issued a recalll order on the P0.50 provisional fare increase being implemented since March.

The LTFRB’s order came on the heels of a major price rollback implemented by oil companies on Monday. The companies cut prices by P1.70/ liter for gasoline and P1.50/liter for diesel.

In Bahrain, the spark behind Pearl Revolution still glows

While other Arab nations are engaging in elections and self-rule after the removal of dictators, Bahrain remains solidly in the control of King Hamad bin Isa Al Khalifa and his family. After negotiations with protesters broke down, Khalifa called in the troops from the Gulf Cooperation Council, a union of Gulf states dominated by Saudi Arabia, and its troops forced demonstrators from the streets.

The Bahrain Center for Human Rights says the crackdown left 73 people dead. Human Rights Watch reported serious abuses by security forces, saying five people who were detained died under torture.

UK warns of more EU Iran sanctions if no change

BRUSSELS (Reuters) – The European Union will impose tougher sanctions on Iran if it fails to take concrete steps to allay international concerns over its nuclear program, British Foreign Secretary William Hague said on Monday.

Six world powers, including Britain, are due to meet Iranian officials for another round of negotiations over the nuclear issue in Baghdad on May 23.

Turkey cuts Iranian oil imports in April vs March

Turkey’s cut its crude oil imports from Iran steeply in April from unusually high levels in March but its purchases were still close to last year’s average, meaning Ankara has yet to slash buying to the extent sought by Washington, data from shipping sources showed.

Turkey said on March 30 that it would cut imports of oil from Iran by 20 percent from last year’s quantities, ceding to US pressure to reduce purchases.

Iran Company to Renovate Syrian Hydropower Plants, Press TV Says

Safa Nicu Sepahan Co., a privately owned Iranian company, reached an agreement with Syria’s government to renovate two hydroelectric power stations in northern Syria, the state-run Press TV reported.

The company will refurbish the al-Furat dam at an estimated cost of 14.8 million euros ($19 million) and the al-Baath plant for 767,000 euros, according to a report published on the news channel’s website. The al-Furat power station on the Euphrates River has the potential to generate 800 megawatts of electricity and the al-Baath 75 megawatts.

EU slaps new sanctions on Syria

(CNN) — European Union foreign ministers agreed Monday to impose fresh sanctions on Syria as a U.N.-backed peace plan — along with all other diplomatic efforts — has yet to stop the carnage that mounts every day.

The EU ministers agreed to an assets freeze and visa ban on two firms and three people believed to provide funding for the regime, according to the office of EU foreign policy chief Catherine Ashton.

A month after ‘cease-fire,’ where does Syria stand?

(CNN) — It’s been a month since the “cease-fire” was due to come into effect in Syria as the first step in a U.N.-backed peace plan, with a team of U.N. monitors on the ground to observe the progress.

But clearly, there is no let-up in the violence. Daily reports spill in of bombings, shootings, explosions and more as opposition groups and the regime forces of President Bashar al-Assad battle for more than a year.

So, where does the Syria conflict stand now?

Drowned Libya oil chief feared going home

VIENNA (Reuters) – Spat at in public by a fellow Libyan who called him a thief, watching his back on long walks through Vienna, eating poorly; Muammar Gaddafi’s fugitive oil supremo was a troubled man in the months before he was found drowned in the Danube two weeks ago.

Just whom, or what, Shokri Ghanem feared may hold a key to his mysterious sudden death, just as he was under mounting pressure to reveal what he knew of suspect deals with foreign oil buyers that made billionaires of the late dictator’s family.

Nigeria president unlikely to risk oil graft crackdown

ABUJA (Reuters) – Nigerian President Goodluck Jonathan is coming under pressure to prosecute top officials implicated in a $6.8 billion fuel subsidy fraud, but many of the suspects are allies he is unlikely to go after if wants to keep his power base intact.

It has been three weeks since parliament produced a report detailing massive corruption in a state subsidised petrol import scheme and Jonathan has yet to indicate how he intends to respond.

Argentina as No Claims-Nation Revealed in Repsol Losses

Repsol YPF SA (REP), the Spanish oil explorer seeking $10.5 billion from Argentina for seizing its assets, will line up behind companies from Exxon Mobil Corp. to Unisys Corp. yet to be repaid by the most-sued nation on earth.

There are 26 cases pending against Argentina, more than any other country, at the World Bank’s International Centre for Settlement of Investment Disputes in Washington, the principal arbitration court for claims against sovereign countries. So far, it has refused to pay any of the tribunal’s judgments, according to a Bank of America Merrill Lynch economists’ report.

Brazil, Venezuela, and Mexico: three ways to nationalize oil

Argentina’s renationalization of its biggest oil company, YPF, recently caused an outcry. But the cases of oil nationalization in Brazil, Mexico, and Venezuela show that outcomes can vary widely.

Crescent Won’t Provide Cash to Dana Gas for Sukuk Payment

Crescent Petroleum Co., Dana Gas PJSC’s biggest shareholder, has no plan to provide cash to the United Arab Emirates-based natural gas producer to help pay a $1 billion Islamic bond due in October.

BHP leaves door open to U.S. shale gas write-down

ADELAIDE (Reuters) – BHP Billiton’s petroleum chief executive left the door open to the possibility of a write-down on the company’s U.S. shale gas assets on Monday, but defended their long-term value.

Kurt Cobb – Chesapeake And JPMorgan: Risk (Mis)Management With Other People’s Money

If I were to stake you $50,000 and set you loose in the world’s largest casino, you might try your luck in a big way at a number of games to see if you could double or maybe even triple your good fortune. But it would be an entirely different matter if the $50,000 were your own money. You might decide to take advantage of the casino’s restaurant for which you would at least get a meal in return for your money. You might even test your skills with a few hundred dollars. But unless you were a gambling addict, you would be on your way pretty soon after the house had taken the few hundred dollars you decided you could afford to lose.

Running some of America’s largest corporations is more like the former situation than the latter. This past week, two corporate titans proved just how easy it is to gamble with other people’s money, especially when you know you have little to lose personally.

Japan to Experience Power Shortages This Summer, Panel Says

Kansai Electric Power Co. and two other Japanese utilities may have power shortages this summer without supplies from nuclear reactors, a government panel said.

Kansai Electric, the utility most dependent on nuclear power, may face the biggest shortage of 14.9 percent, the independent committee said in a draft report published May 12. Kyushu Electric Power Co. and Hokkaido Electric Power Co. may have shortages of 2.2 percent and 1.9 percent, the report said.

Chevron Sells 80% of Wheatstone Gas After Deal With Tohoku

Chevron Corp., the second-largest U.S. oil company, said it sold more than 80 percent of the gas from its Wheatstone project in Western Australia after reaching an agreement with Tohoku Electric Power Co.

The Japanese electricity supplier will buy as much as 1 million tons of liquefied natural gas per year under a 20-year agreement, Roy Krzywosinski, managing director of Chevron’s Australian unit, said yesterday in Adelaide.

Tepco Expects Narrower Net Loss as Government Takes Control

Tokyo Electric Power Co. (9501) expects a narrower annual loss after a government-approved business plan proposed measures including an increase in electricity rates to return the company to profitability in two years.

Japan grapples with post-tsunami suicides

TOKYO, Japan – More than 60 people have committed suicides related to last year’s 9.0 quake and tsunami, which triggered meltdowns at a nuclear plant in Fukushima, the Japanese government says.

The data comes as a family prepares to file the first lawsuit against the Tokyo Electric Power Co. over the suicide of Hamako Watanabe, a 58-year-old woman who set herself on fire in wake of the disaster.

6 hybrid supercars on the cutting edge

Rising gas prices and tougher U.S. government gas-mileage requirements for the coming years have forced the car industry to take hybrid cars very seriously.

There’s a whole new generation of so-called plug-in hybrid cars in the pipeline. These supercars can be recharged with household electricity, which is much cheaper than running a gasoline engine to recharge the battery.

Willing to Pay (a Little) for Clean Energy

The perception that the American public is adamantly opposed to higher energy costs is at the root of most political opposition to policies favoring the adoption of renewable energy. But a new study of public opinion finds that people are in fact willing to pay to move to cleaner energy.

Growing the grunt: developing green biofuels for Australia

In 300 BC, the Syrian city of Antioch had public street lighting fuelled by olive oil. At the 1900 Paris World Fair, German inventor Rudolph Diesel demonstrated his engine powered by peanut oil.

Biofuels are not new, but many of the technologies are, and interest in renewable, sustainable biofuels has recently been rising due to worry about peak oil and price pressures, vulnerability of energy supplies, dependence on imports, and greenhouse emissions.

Permaculture Visionary: “We Don’t Need to Wait for Permission” to Transform Our Societies

Four years ago, a British educator and permaculturist named Rob Hopkins initiated what has since become one of the most rapidly evolving and far-reaching social experiments of our time. The Transition movement – which encourages people in cities and towns across the world to devise their own unique, local solutions to peak oil and climate change in the absence of meaningful government action – has developed a spirited and devoted following and garnered praise from the likes of Bill McKibben and Richard Heinberg. Rob’s latest book, “The Transition Companion,” looks at how the movement has evolved from its beginnings in tiny Totnes, England, to hundreds of communities all over the world. “The Transition Companion” is available now from Chelsea Green Publishing. Rob recently spoke with Chelsea Green Associate Editor Brianne Goodspeed.

Backfiring Cookstoves Point Way to Assessing Aid Schemes

In Orissa, households were randomly assigned to three waves of stove construction, and researchers measured a meaningful reduction in smoke inhalation in the first year after a stove was installed. Over a longer period, however, they saw no health benefits and no reduction in fuel use. That’s because once the stoves and chimneys developed cracks, the villagers generally chose not to fix or maintain their new devices but instead went back to their old, smoky ways of cooking.

This doesn’t suggest the clean-cookstove campaign should be abandoned so much as slowed down. It would be wise to test various designs in real-life settings, and, where necessary, take more time to human-proof models. Clean-cookstove advocates need to develop incentives for families to stick with the stoves, and they need to study why many villagers in the India trial embraced the devices yet continued using their conventional cooking fires as well. Otherwise, the innovative stoves of today could wind up in the same junk piles as models from efforts decades ago.

The man who takes on the environmental conservatives

Mr Hauge is the founder of Bellona, an environmental non-governmental organisation (NGO) that advocates controversial practices such as burying greenhouse-gas emissions underground. It has forged close ties with industry and government alike. Most of its annual budget, which ranges between US$10 million (Dh36.7m) and $12m a year comes from corporations.

Petition calls on Brazilian president to veto ‘catastrophic’ forest code

More than 1.5 million people in Europe, the US and elsewhere have petitioned the Brazilian president, Dilma Rousseff, to veto a law that critics say could lead to the loss of 220,000 square kilometres of Amazonian rainforest, an area close to the combined size of the UK and France.

Time, place and how wood is used are factors in carbon emissions from deforestation

When trees are felled to create solid wood products, such as lumber for housing, that wood retains much of its carbon for decades, the researchers found. In contrast, when wood is used for bioenergy or turned into pulp for paper, nearly all of its carbon is released into the atmosphere. Carbon is a major contributor to greenhouse gases.

“We found that 30 years after a forest clearing, between 0 percent and 62 percent of carbon from that forest might remain in storage,” said lead author J. Mason Earles, a doctoral student with the UC Davis Institute of Transportation Studies. “Previous models generally assumed that it was all released immediately.”

Eating wisely can lower carbon footprint: Study

London: Consumers can help curb greenhouse gas emissions by reducing the quantity of food they buy, serve and waste, a study says.

According to the study conducted at the University of Edinburgh, UK, some 360,000 tonnes of milk poured down kitchen sinks in Britain creates a carbon footprint equivalent to exhaust emissions of 20,000 cars annually, or 100,000 tonnes of CO2.

New Zealand Government Mulls Break For Importers Of Greenhouse Gas-containing Goods

WELLINGTON (Bernama) — The New Zealand government announced Monday it was considering allowing importers of goods containing synthetic greenhouse gases to pay a levy rather than submit them to the country’s fledgling emissions trading scheme (ETS).

The proposals were welcomed by new car dealers and other importers who feared the ETS obligations would be too costly, Xinhua news agency reported.

U.N. cap-and-trade system: Good for China and India, but who else?

The United Nations-administered cap and trade system to reduce planetary greenhouse gases through investment in “green” projects in developing countries has directed most of its billions of dollars in investments to China and India, two of the world’s most notorious polluters.

Indeed, China and India together have gotten more than 70 percent of the more than 4,100 projects so far registered for the system, while most developing nations, aside from a handful, have gotten hardly any at all, according to the system’s own accounts.

The Figueres family led Costa Rica’s revolution, and now its green revolution

Say the name Figueres in Costa Rica and it’s bound to get a reaction. José “Don Pepe” Figueres led the 1948 revolution, was president three times, nationalised the banks and gave women and black people the vote. His daughter Christiana is the UN’s climate chief trying to steer almost 200 countries through the most complex international negotiations ever attempted; and her brother José María was one of Latin America’s youngest ever presidents at the age of 39.

Now José María – who coined the phrase “there’s no planet B” when head of the World Economic Forum – has joined his sister in the fight for a global energy revolution by taking over as head of the climate change business thinktank Carbon War Room, which aims to get business to cut gigatonnes of carbon by sharing best practice information.

Norway acts as others drag feet on carbon emissions

The industry is banking on country-specific conditions, such as a need for carbon dioxide for oil recovery in the United States or government support in China, to drive projects and technology innovation in the years ahead.

The idea of going solo when it comes to the quest to bury carbon emissions underground reflects a growing sentiment among nations that they are alone when it comes to the fight against global warming.

In Rhode Island, Protecting a Shoreline and a Lifeline

The problematic part of Matunuck is about 1,400 feet of beach, parceled into private lots, between two old sea walls that extend in opposite directions and were built before state regulations came into effect. Along some parts of this open stretch, there are less than a dozen feet of sand protecting the road — the town’s lifeline — from the water.

In theory, this leaves the neighborhood with three basic courses of action. It can protect the beachfront, it can protect the road or it can retreat and move away from the encroaching shoreline, as a growing number of environmentalists and scientists recommend.

Almost nobody here likes that last option. “If we do this, how far do we retreat?” asked Frank Tassoni, the president of the Mary Carpenter’s Homeowners’ Association, which includes residents who keep trailers and small cottages on the tract of land across the road from the beach. “If we keep doing this, Rhode Island will be gone. We’re trying to find a balance. We’re not killing baby seals out here.”

Defining deepwater oil as the offshore resource found in water depths over 500 m, the data available as of October of 2010 was pointing to an ultimate around 150 Gb. This is the result of an extrapolation made last year:

Figure 1: world deepwater (>500 m) creaming curve 1971-Oct 2010

The previous ultimate estimate in 2008 was 100 Gb, missing the third cycle in subsalt plays.

Figure 2: world deepwater (>500 m) creaming curve 1971-2007

The cumulative discovery versus time with the data up to October of 2010 implied that most discoveries would be made before 2025.

Figure 3: world deepwater (>500 m) cumulative discovery versus time 1971-2009

Applying the Hubbert linearisation method to oil discovery confirmed an ulitmate of about 150 Gb.

Figure 4: world deepwater (>500 m) oil discovery Hubbert linearisation

The average oil field size has been around 100 Mb the last 20 years and a little less for gas in Mboe. At the same time there is a sharp change in the number of fields since 1995: it was less than 10 before that date and has been over 50 since!

Figure 5: world deepwater (>500 m) annual oil & gas size

The plot of cumulative discovery versus field elevation shows that the break for water depth is more about 200 m rather than 500 m.

Figure 6: cumulative 2P discovery versus field elevation per continent (mid 2009)

An update of this forecast was made with the data available up to October of 2011, this time with deepwater defined as the resource lying under 200 m of water or more.

The IHS claims that deepwater is for depths over 400 m, but the database indicates that in the terrain deepwater is for over 200 m deep. In the US Gulf of Mexico the deepwater royalty relief act of 1995 refers to depths over 200 m (656 ft), but the MMS (now BOEMRE) reports depths from 1000 ft onwards. There is little consensus on the definition of deepwater, just as for ultra deep.

The annual crude less extra heavy oil discovery is shown here since 1900, with both definitions of deepwater (>200 m and >500 m).

Figure 7: world annual crude less extra-heavy oil discovery and deepwater (>200 & 500 m)

The same data, now plotted as cumulative discovery.

Figure 8: world cumulative crude less extra-heavy oil discovery and deepwater

The creaming curve for world deepwater oil, this time defined as over 200 m deep, is here extrapolated with two cycles towards 200 Gb, meaning about 50 Gb for the water column interval 200-500 m. There is enough uncertainty to allow a third cycle, with a possible increase in the ultimate, but another new subsalt play is needed!

Figure 9: world deepwater (>200 m) creaming curve 1969-Oct 2011

Combining oil and gas yields a simpler creaming curve, except for the last 200 fields.

Figure 10: world deepwater (>200 m) oil plus gas creaming curve 1969-Oct 2011

The cumulative discovery versus time plot displays a sharp increase in the last 15 years, cause by the subsalt plays.

Figure 11: world deepwater (>200 m) cumulative discovery

The plot for oil discovery per continent shows that Latin America has the sharpest increase, due to Brasil. In the past there were jumps in the North Sea with Gullfalks, Troll and Snore in 1978, and in the Caspian with Azeri-Chirag-Guneshli in 1985.

Figure 12: world deepwater (>200 m) cumulative oil discovery per continent

The plot for gas discoveries per continent shows the large jump in 1988 with Shtokman, and the recent increase in Asia since 2000.

Figure 13: world deepwater (>200 m) cumulative natural gas discovery per continent

The creaming curve for oil per continent shows that Brasil with the subsalt discoveries has the largest increase and that North America still has some potential, though the average size here is quite less than in Brasil.

Figure 14: world deepwater (>200 m) oil creaming curve per continent 1969-Oct 2011

The creaming curve for gas shows that the best result is for the CIS (Former Soviet Union) with the Barentz and Caspian 9 discoveries. In second comes Asia and the least efficient is North America. The Middle East with 20 Tcf, mainly from Israel, is at a good start.

Figure 15: world deepwater (>200 m) gas creaming curve per continent 1969-Oct 2011

The average field size is about 100 Mb for oil and 400 Gcf for gas.

Figure 16: world deepwater (>200 m) oil & gas average field size

Conclusion

Subsalt discoveries are now well taken into account in the deepwater oil ultimate and have increased it by around 50 Gb since 2008. It is a significant increase, but very small compared to the uncertainty of past world oil discovery, with the 300 Gb of speculative resources (confirmed by Sadad Al-Huseini) in OPEC reserves and with the 150 Gb correction from ABC1 reserves (used in scout databases) to 2P reserves. For more than ten years I corrected the ABC1 reserves data for the FSU by 30% to reduce them to 2P. This is based on the comparison of ABC1 field data with ultimates obtained from oil decline profiles in some Russian fields. Now Gazprom publishes in their annual report both the ABC1 and 2P reserves, the latter from audits, showing that this 30% correction is correct for oil and gas (ratio 2P/ABC1 = 70 %); nevertheless this figure seems higher for condensate.

Figure 17: Gazprom reserves ratio 2P/ABC1 2003-2010 from annual reports

Furthermore, I have some doubt on the reliability of some deepwater oil reserves figures. My paper entitled “Deepwater GOM reserves versus production” (part I, part II and part III) shows that the oil estimate of deepwater fields reserves seem optimistic for the Gulf of Mexico, and in particular, Thunder Horse.

The Brasilian subsalt reservoirs are complex and there is little historical production, with only a pilot project online since October of 2010 in Tupi, now called Lula (with 14 wells already drilled) with 6 Gb of 2P reserves. The BG Group, which holds a 25% stake at Lula, has reported on the first production test with a FPSO, three producing wells and one gas injector. While it was expected to reach maximum production at 100 000 b/d, it actually peaked at 70 000 b/d in December of 2011, and has registered a decline of 5 000 b/d in the following two months.

Figure 18: Lula first production: Oct 2010-Jan 2012 from BP Group

In its 2012 annual report, the BG Group forecasts gross production capacity in this play to reach 2.3 Mboe/d in 2017, with a total of 13 FPSO in the Lula, Cernambi (formerly Iracema) and Guara fields.

Deepwater oil production will help reduce the decline in world oil production from aging fields. The IEA claims that four Saudi Arabias need to be discovered by 2030 to replace the present decline in production (about 5 %/a). The deepwater ultimate is likely to represent less than half of Saudi Arabia’s oil ultimate. It is not enough!

WSJ: ‘Undisclosed’ Chesapeake debt looms

A US report contends that the embattled Chesapeake Energy has “previously unreported liabilities” summing to $1.4 billion resulting from a programme that allowed it to exchange future oil and gas production for cash up front.

The Wall Street Journal analysed 10 of the company’s Volumetric Production Payment agreements and projected that the costs associated with the arrangements was far higher than $600 million over 10 years previously estimated.

Chesapeake wins breathing space with $3 bln loan

(Reuters) – Chesapeake Energy Corp said it had received a $3 billion loan from Goldman Sachs and Jeffries Group that will give it breathing room to sell assets and close a funding gap this year.

The company, which has been embroiled in a corporate governance crisis that prompted its move to replace co-founder Aubrey McClendon as chairman, said the new unsecured loan will be used to repay money borrowed under its existing $4 billion revolving credit facility.

Report: Pickens sells shares in Chesapeake Energy

Billionaire and former oil magnate T. Boone Pickens’s investment firm has reportedly sold more than half a million shares in Chesapeake Energy, the embattled natural-gas company.

Oil price declines on slower China growth

NEW YORK (AP) — The price of oil fell Friday after reports that China’s economy appears to be slowing down.

China, the world’s second-largest oil consumer, reported a sharp decline in both investment and industrial production growth in April. A slowdown in China could push oil consumption — and prices — lower this year.

Higher Oil Futures Margins May Boost Volatility, IEA Says

Rising margin requirements in oil futures trading may increase volatility and concentrate market share in the hands of large speculators, the International Energy Agency said.

The Obama administration proposed rules on April 17 to strengthen the oversight of the U.S. Commodity Futures Trading Commission to give it authority to raise margin requirements in oil futures trading.

Essar Oil Reports Quarterly Loss as Refining Margins Shrink

Essar Oil Ltd. (ESOIL), the operator of India’s second-biggest non-state refinery, posted a loss for the third straight quarter after earnings from turning crude into fuels declined.

China returns to Iranian North Pars while problems remain at South Pars

The China National Offshore Oil Corp (SINOC) has announced readiness to restart working on development of Iran’s North Pars gas field five years after Iran threatened to cancel the contract due to the Chinese company’s repeated delays, the ISNA News Agency said in a report on Monday.

Venezuela’s PDVSA confirms $3 billion bond

The issue is Venezuela’s first of the year and might kickstart further borrowing to help President Hugo Chavez boost public spending ahead of an October election.

In recent years, PDVSA has enjoyed growing profits thanks to high global oil prices, but has also issued record amounts of debt to cover its own operating budget, transfers to central government, and heavy spending on social programs.

Nigeria power privatisation winners named in October

ABUJA (Reuters) – Nigeria’s privatisation body said on Saturday the preferred bidders for state power assets would be announced in October, hoping to alleviate chronic electricity shortages holding back Africa’s second biggest economy.

Nigeria plans to sell off 11 distribution and 6 generation companies as part of plans to privatise a power sector rife with inefficiency and corruption.

Gas’ gain could be coal’s loss

The coal industry, which employs thousands of Ohioans, has long been assailed by environmentalists as the fossil of fossil fuels — primitive, dying off and unable to adapt to a world more conscious of its carbon footprint.

Now it faces pressure from a competitor, natural gas, which is cutting into coal’s most important customer base, utility companies.

Shale gas to put South Australia on front foot as global energy superpower

“As recently as 2006, US natural gas production was in decline but drilling technology advances have allowed US companies to commercialise gas found in deep shales, which has caused the country’s gas production to rise sharply,” he said.

“Natural gas from shale is now the fastest-growing contributor to total primary energy in the US. Only a few years ago, the US was planning to import gas from other countries but now it is building major liquified natural gas terminals to export its oversupply of shale gas.

“The SA shale industry is still in the early stages of development but many people think the state is very well positioned to capitalise upon its shale gas resources on a large scale.”

Fracking reaches point-of-no-return for EU legislators

What the issue boils down to in Europe is that there is no consistent line taken since there is plenty of unknowns. However, what is needed is a process that properly includes citizens and communities in decision-making related to shale gas, shale oil or coal bed methane. HEAL endorses free and fully-informed consent of local communities which is not applied for most fracking projects prior to both exploration and exploitation phases, while they should be placed at the heart of the discussions.

Researcher questions impartiality of industry-backed oilsands education program

EDMONTON – An industry-funded program that offers high school teachers a six-day trip to Fort McMurray to “experience Alberta’s oilsands” is being expanded across the country.

While the operators of Inside Education say they work hard to ensure their programming offers plenty of balance, others say informing educators about controversial developments shouldn’t be left to those with most to gain from them.

Local Author Predicts Strong Future For Energy Resources

Jay Warmke of Blue Rock Station said he wrote the book, When The Biomass Hits The Wind Turbine, because he believes there are more energy resources available than the average person recognizes.

“I hate to be the one to break it to you, but we’ve gone past peak oil, we’ve gone past peak coal, we’ve gone past peak natural gas, and what that means is that half of all of the supplies on this planet has been used up, and that’s the easy half,” he said. “I’m always struck at how people feel hopeless. Everything has been used up and they have no hope, and I wanted to do some research to see [if this was] the case.”

Gill Tract Farm Essential for Post-Peak Oil Food Security

Without food, we cannot survive and without local farms to grow and supply food in a post-peak oil world, the costs associated with traditional long-distance, oil-reliant food production will continue to soar and become unsustainable.

At the heart of the dispute over the Gill Tract, a 10-acre plot of Class-1 agricultural soil in Albany owned by UC Berkeley and currently being occupied by as many as two-dozen farmers, is a grassroots movement to ensure local food sovereignty, sustainability and security.

A Higher Price Tag for a Nuclear Project

The flagship project of a hoped-for but not-yet-realized “nuclear renaissance,” the Vogtle 3 and 4 reactors under construction near Augusta, Ga., may cost about $900 million more than had been estimated, the Southern Company said in a filing this week with the Securities and Exchange Commission.

Battery maker A123 Systems expects a first-quarter loss of $125 million

Battery maker A123 Systems expects a first-quarter loss of $125 million, reflecting weak demand for electric vehicles and a recall of potentially defective batteries.

Conservative thinktanks step up attacks against Obama’s clean energy strategy

A number of rightwing organisations, including Americans for Prosperity, which is funded by the billionaire Koch brothers, are attacking Obama for his support for solar and wind power. The American Legislative Exchange Council (Alec), which also has financial links to the Kochs, has drafted bills to overturn state laws promoting wind energy.

Now a confidential strategy memo seen by the Guardian advises using “subversion” to build a national movement of wind farm protesters.

Cracking the Smart Energy Market

Research from several pilot projects has shown that people who use these types of devices are saving money on their monthly bills, in some cases up to 20 percent.

Yet despite the upbeat prediction from Parks Associates, consumer response has been mostly lukewarm, according to Neil Strother, an analyst with Pike Research. He said that fewer than 1 percent of homes in North America had installed some form of in-home energy management system by the end of 2011.

A meeting of minds on a sustainable future?

The unresolved issue remains whether the focus should be on critical changes that governments, largely in developing countries, will need to make to convince investors that aligning asset allocation with the green economy will provide superior risk-adjusted returns ‘business as usual’. Or, whether there will be agreement to modify longer-term trends in production and consumption patterns to recognise ecological limits of natural resource use.

California and Quebec Near an Agreement for Trading of Carbon Permits

SAN FRANCISCO — California and Quebec moved to knit together their fledgling carbon markets on Wednesday as California proposed a new regulation allowing cross-border trading of the permits that industries must acquire to cover their emissions of greenhouse gases.

Climate clash: Corporate giants caught as groups skirmish

Some corporate giants are caught in the middle of a battle between a think tank skeptical of manmade global warming and an environmental group that it is trying to undermine its financial health.

‘We Are Losing the Planet’

The environmental movement is losing momentum and governments around the world are ignoring their responsibility for slowing climate change. Greenpeace head Kumi Naidoo, however, remains optimistic. In an interview, he explains his new vision for a sustainable world — and how the pope can help.

Scientists urge action on world’s biggest problems

LONDON (Reuters) – Scientists from 15 countries are calling for a better political response to the provision of water and energy to meet the challenge of feeding a world of 9 billion people within 30 years.

The joint statement by some of the world’s leading science academies was issued on Thursday ahead of the G8 summit in the United States. It is part of the annual lobbying effort aimed at focusing the attention of world leaders on issues the scientific community regards as crucial.

For the first time, the scientists argue that looming shortages in water and energy supplies should be treated as a single issue.

Could Water Bring Jobs Back to the U.S.?

Have you gotten the memo yet? You can stop worrying about peak oil: the United States is sitting on centuries of natural gas and Canada is full of tar sands. But then there is water. No less than Morgan Stanley Smith Barney declared “peak water” the challenge of the century last December in a report upholstered with authoritative graphs showing the heating of the world and the shrinking of water resources. Words almost failed report writers as they declared, “Water may turn out to be the biggest commodity story of the 21st century, as declining supply and rising demand combine to create the proverbial perfect storm.”

Oil likely to stay high despite good supply – IEA

LONDON (Reuters) – Tension between Iran and the West is likely to keep oil prices high despite a dramatic improvement in world supply and a big build in stocks, the International Energy Agency (IEA) said on Friday.

The agency, which advises 28 industrialised nations on energy policy, said soaring global oil supply from OPEC countries and the United States far outpaced global demand, curbed by poor economic activity in developed nations.

The agency said global oil supply rose 600,000 barrels per day (bpd) to 91 million bpd in April and was now 3.9 million bpd over year ago levels, with 90 percent of the increase coming from OPEC.

Saudi Arabia has said it pumped 10.1 million bpd last month, its highest for more than 30 years, in a bid to meet growing demand and curb oil prices, which hit a three-and-a-half-year high in March.

OPEC Says ‘Plentiful’ Global Oil Supplies Outpace Demand

The Organization of Petroleum Exporting Countries said that global oil supplies are outpacing demand levels, keeping its forecast for world consumption this year unchanged.

OPEC, scheduled to meet next month, is producing 8.3 percent more crude than it considers necessary this quarter, data released today by the Vienna-based group show. This has helped inventories in developed nations to reach “comfortable levels,” equivalent to about 59 days worth of consumption, according to an e-mailed report.

“Higher OPEC crude oil production underscores the current trend of plentiful supply in excess of market requirements,” OPEC’s secretariat said in its Monthly Oil Market Report.

Oil finds itself on slippery slope

Record production levels, weakening demand, and a declining risk profile in the Gulf have put an end to three consecutive monthly gains in oil prices, Opec said in its monthly report yesterday.

Oil Heads for Second Weekly Drop as Supply Exceeds Demand

Oil fell in New York, heading for a second weekly drop, on concern that Europe’s debt crisis will worsen and curb fuel demand as global crude supplies increase.

Futures slipped as much as 1.4 percent, retreating for the seventh day in eight. OPEC is producing 8.3 percent more crude than it considers necessary this quarter, data released yesterday by the Vienna-based group showed. Prices narrowed their declines after the International Energy Agency said today global oil markets are “marginally tighter” and predicted that geopolitical risks to crude supply will keep prices high.

Long, climbing road

The biggest problem with the almost constantly increasing petrol prices in SA is that demand is quite unresponsive to price changes: South Africans don’t tend to buy less of the stuff when the price rises.

Fuel users are in this sense almost held hostage to the international price of crude and the rand-dollar exchange rate — these determine the basic fuel price, which makes up 59% of the pump price. Consumers have also been hit by an additional 28c/l in the pump price from increases in the fuel levy and the Road Accident Fund.

Peak oil revisited: the real challenges are investment and sustainability, not availability

The general perception of global oil reserves is unnecessarily gloomy and far removed from reality, even among many policymakers and academics. This is dangerous because it obscures the real and serious economic and environmental challenges faced by the oil sector, argues Noé van Hulst. The Director of the new Energy Academy Europe calls on the oil industry to devote more effort explaining the public what the real challenges are.

GOP: ‘You Think We’re Going To Have A Press Conference Now To Congratulate The Administration For Decreasing Gas Prices?’

The GOP’s plan to blame Obama’s policies for rising gasoline prices has run into one small bump in the road. Gasoline prices have dropped $0.15 a gallon in the past month, to $3.79 per gallon this week, down from its peak of $3.94 in early April, according to The Energy Information Administration.

Prompt gas slump defies Norway supply cutback

(Reuters) – British prompt gas prices fell slightly on Friday morning on forecasts of warmer temperatures this weekend and healthy supply despite cutbacks in Norwegian flows due to maintenance work.

The start of scheduled maintenance at Norway’s Ormen Lange gas processing plant cut supplies via the Langeled pipeline – Britain’s main sub-sea import line – but did not impact prices because the drop was in line with expectations.

Saudis face growth limits over natural gas supplies

A shortage of natural gas could affect future industrial growth in Saudi Arabia, according to the head of Jubail Industrial City, the world’s largest petrochemical cluster.

Difference Engine: Awash in the stuff

EVEN as it tries to slow production down, America is still pumping three billion more cubic feet (85m cubic metres) of natural gas a day out of the ground than it can consume. The country has become so awash in the stuff since “fracking” (hydraulic fracturing of gas-bearing shale deposits) began barely five years ago that the price has plummeted from $8 per thousand cubic feet to $2. (A thousand cubic feet of natural gas contains roughly a million BTUs of energy.) Not that long ago, natural gas was a tenth of the price of oil in energy terms; now it is a 50th.

If the natural-gas companies go on producing at the current rate, all the storage reservoirs in America will be full by autumn. With nowhere left to put the stuff, its marginal price will fall to zero. Such a situation is unsustainable.

Fracking does not pose serious risk

A University of Aberdeen study on hydraulic fracturing or fracking for gas says that the process “does not pose a significant environmental risk”, but there are potential risks to ground water from “poor well design or construction”.

The study for the Environmental Protection Agency (EPA), published today, also finds that Europe’s geology may be far more complex than that in the US, where the fracking industry is well developed.

Shale Gas Explorer Says U.K. Production May Start in 2014

Cuadrilla Resources Ltd., a U.K. shale-gas explorer that suspended drilling in northwest England after causing minor earthquakes, expects to resume work this year and said gas production may start in 2014.

“By the first quarter of 2013, we will be far enough along in the exploration program to say this makes sense to go ahead and apply for a full field development permit,” Cuadrilla Chief Executive Officer Mark Miller said in an interview. “Production could be under way as early as 2014.”

Granville Township suspends use of brine

GRANVILLE TOWNSHIP — The controversy about a technique used to drill oil and gas wells in deep-lying shale has caused Granville Township to pay closer attention to a byproduct of that drilling it uses for road maintenance: brine.

The township trustees have suspended their use of brine for melting ice on township roads pending an investigation of the possible health and environmental risks of its use, Township Trustee Paul Jenks said.

Lights Go Out in Spain as Cuts Plunge Highways Into Darkness

Cars went barreling along the highway in darkness, ferrying families from Madrid to the beaches of Catalonia during the Easter holiday season, the black stalks of unlit streetlamps flicking past their windows. Truck drivers honked angrily as motorists switched on their full beams to pick out curves in the road, momentarily dazzling oncoming traffic.

Motorists traveling along the main highway linking the Spanish capital to Seville and the rest of the south face similar challenges.

“In some stretches it looks like they’ve been switching off the lights, in others they are missing the bulbs or the cables,” says Pascual Cabello, 32, who runs a fleet of eight trucks. “It’s only going to get worse,” he adds.

Natixis plans to shut commodities brokerage unit

NEW YORK/PARIS (Reuters) – French bank Natixis said it plans to close its commodities brokerage division, as one of the oldest ring-dealing members of the London Metal Exchange becomes the latest victim of the European debt crisis.

Qatar buys ‘major’ stake in oil giant Shell

LONDON — Qatar is continuing its overseas buying spree, snapping up a stake in Royal Dutch Shell and reportedly also eyeing a chunk of Italian oil major ENI .

A Shell spokeswoman confirmed that Qatar had bought a stake but declined to say how large.

Eni probe will not stall Kazakh oil project-official

(Reuters) – Kazakhstan will develop its massive Kashagan oilfield regardless of an Italian investigation into the business activities of key consortium partner Eni in the former Soviet republic, a Kazakh Oil and Gas Ministry official said on Friday.

Cyprus gets 15 bids for offshore gas search

(Reuters) – Cyprus received 15 bids for its second offshore hydrocarbons licensing round, including energy heavyweights Petronas, Total, and Kogas, energy minister Neoclis Sylikiotis said on Friday.

Riddles, mysteries and enigmas

FEW people outside Russia have ever heard of Gunvor—and Gunvor would probably prefer it that way. It is the world’s fourth-biggest oil trader, and at its peak handled roughly a third of Russia’s seaborne exports of crude oil. We suspect that Gunvor has been driving down the price of Russian oil. An investigation by The Economist into Gunvor’s trading in Urals crude, a benchmark blend in north-west Europe, suggests that such a strategy could have helped the firm buy oil in Russia cheaply and, in theory, earn inflated profits when it sold the same oil on the international market at full price.

Iraq Oil Output Beating Iran Ends Saddam Legacy

Iraq, seeking to more than double oil output by 2015, is poised to overtake Iran as OPEC’s second- largest producer by the end of the year as sanctions hobble crude production in its Persian Gulf neighbor.

Iraq is pumping at the highest rate since Saddam Hussein seized power in 1979, supported by foreign investors such as Exxon Mobil Corp. and BP Plc (BP/) that are developing new fields and reworking older deposits. The country produced 3.03 million barrels a day in April, 7.7 percent more than in March, while Iranian production declined to 3.2 million barrels a day, according to an OPEC monthly report yesterday. Iraq’s output last exceeded Iran’s in 1988, when the countries ended their eight-year war, statistics compiled by BP show.

Gulf Arab states face obstacles to unity push

(Reuters) – Gulf Arab leaders meeting on Monday will discuss closer union between their six states because of what they see as growing threats from Iran and al Qaeda after the Arab uprisings, but significant political obstacles loom.

Syrians take to the streets after deadly bombings

(CNN) — Syrians took to the streets in protest Friday, a day after massive suicide bombings ripped through the capital, killing dozens in the nation’s deadliest attack since an uprising started 14 months ago.

New attacks hit some areas Friday, killing at least five people, according to the Local Coordination Committees of Syria, an opposition group.

Cnooc Deploys Oil Rig as Weapon to Assert China Sea Claims

China’s first deep-water drilling rig began operations near islands in the South China Sea in a move to assert Beijing’s territorial claims as travel agencies suspended tours to the Philippines amid safety concerns.

Pirates Hijack Greek-Owned Tanker off Oman

Pirates have hijacked a Greek-owned oil tanker carrying 135,000 metric tons of crude oil while in the Arabian Sea off Oman, the vessel’s manager said.

Oil rig workers make nearly $100,000 a year

NEW YORK (CNNMoney) — It may be dangerous, difficult work, but oil drillers are well compensated for the job: In 2011 the average salary for rig workers and other industry personnel was $99,175.

JPMorgan faces backlash over ties to Sudan

NEW YORK (CNNMoney) — For the second year in a row, JPMorgan Chase is recommending shareholders vote against a proposal calling for the bank to stop investing in companies that “substantially contribute to genocide or crimes against humanity.”

Specifically, the proposal points to JPMorgan’s big stake in Chinese oil giant PetroChina, the publicly-traded arm of China National Petroleum Company, which has been widely recognized and condemned for helping finance genocide in Sudan.

South Sudan Hunts for Loans as Oil-Output Halt Dents Economy

South Sudan is negotiating loans to boost the value of its currency and keep its economy afloat as foreign-exchange reserves decline after the country halted oil production, Deputy Finance Minister Marial Awou Yol said.

The East African nation has secured a $100 million line of credit from Qatar National Bank and will receive a $500-million loan within a month from an unidentified provider, Yol said in an interview in Juba, the capital, on May 8. Loans are also being sought from countries including China.

Arch Coal Lures Lenders With Coal in Ground: Corporate Finance

Lenders are allowing Arch Coal Inc. (ACI) to borrow $1 billion without the typical level of restrictions, helping the company overcome plunging energy prices as it cuts spending after two quarters of cash outflows.

The fourth-largest U.S. producer of coal, saddled with $4.1 billion of debt, will use proceeds of a term loan to refinance obligations and eliminate maturities until 2016 while increasing liquidity. The company is reducing its revolver by $1 billion and loosening restrictions on the existing credit line.

Africa miner SNR opens new coal export route

LONDON (Reuters) – South African coal miner Strategic Natural Resources Plc (SNR) will open a new coal export route using the East London port in the Eastern Cape when its joint venture marketing firm begins shipments in December.

SNR has formed the joint venture company with Swiss-based trader Trasteel to sell SNR’s anthracite coal, the South African firm said on Wednesday.

Why Green Gold Is The ‘New’ Black Gold

As the world pursues ever more dangerous environments in order to discover untapped reserves, the concept of Peak Oil begins to take a more realistic shape. Companies like BP and Transocean know all too well the risks of exploring the deepwater frontier for abundant crude oil. Even Canadian oil sands leader Suncor Energy would have to admit that such innovative sources of oil are coming at a much higher price and cost of efficiency than they once did. But if black oil is on the way out due to increasing costs passed down to industry, what’s going to help alleviate the growing void?

Energy Experts Discuss Economy of Oil at Shasha Seminar

Wesleyan hosted the 10th Annual Shasha Seminar for Human Concerns on April 19-20. The Shasha Seminar is an educational forum for Wesleyan alumni, parents, faculty and friends that provides an opportunity to explore issues of global concern in a small seminar environment.

Endowed by James J. Shasha ’50 P’82, the seminar supports lifelong learning and encourages participants to expand their knowledge and perspectives on significant issues. The 2012 theme was The Political Economy of Oil.

The Peak Oil Crisis: Perspective

While waiting to see how the Iranian nuclear confrontation and the various Eurozone crises sort themselves out, there is time to step back and look at the interaction of the major forces that will shape our future. While the problems of oil depletion are already upon us, shrinking resources are only a part of global dynamics currently.

There are at least six major forces moving civilization in the world today: 1) population growth: 2) economic growth; 3) political stability; 4) technological innovation; and more recently 5) resource depletion and 6.) climate change. There are, of course, other less obvious change-producing forces at work in the world – theology, geology, and culture to name a few–but these six look like a good place to start thinking about the interaction of change. Our six forces are intertwined so that significant movement in one will eventually result in feedbacks affecting some or all of the others.

Showdown at the H2O Corral

Tombstone, Arizona (CNN) — There’s a popular saying in the American West: Whiskey’s for drinking, but water’s for fighting over. This dusty little city, made famous by the Gunfight at the O.K. Corral, has a dilly of a water fight on its hands.

Tombstone, population 1,400, is suing the federal government — and it is likely to be a landmark legal battle.

Insight: Canada’s oil sand battle with Europe

(Reuters) – There’s a science to using science.

On May 9, the government of Alberta released a study into the extra carbon emitted by crude produced using oil sands instead of more conventional sources. The study, by a unit of California-based Jacobs Engineering Group, found that emissions from oil-sand crude are just 12 percent higher than from regular crude.

But the report was not just about the science. It also sent a political signal to Europe: Canada’s fight over oil sands is not done yet.

Analysis: Canada may seek to silence some foes of new pipeline

CALGARY, Alberta (Reuters) – Some opponents of the proposed C$5.5 billion ($5.5 billion) Northern Gateway oil pipeline to Canada’s Pacific Coast may not get a chance to be heard as scheduled by the regulatory panel looking at the plan because of federal government moves to streamline the country’s environmental review process.

How Brazil Is Making an Example of Chevron

For all its global reach and technological sophistication, the second-largest U.S. energy company (ranked behind only ExxonMobil in market capitalization) didn’t have an effective plan for a sudden and multifront assault that included populist protest, political posturing, and criminal prosecution—for, in Chevron’s view, cleaning up after itself. Part of the blame rests with Chevron’s top executives in Brazil. The company represented itself in a critical foreign market with a surprisingly provincial American face. Buck, by all accounts a talented and exacting internal corporate leader, is not the statesman Chevron needed to explain the Frade accident to Brazil’s media.

State power

Expect for a brief period of nationalisation in the run-up to and during the second world war, Japan’s electricity industry has always been proudly private. Indeed, for much of its history, it was fiercely independent. In the 1920s the competition was so brutal that rival salesmen would brawl outside their customers’ premises to win the right to flog cheap electricity.

Sadly, those days are long gone. Since the 1980s the utilities have looked more like bloated government departments than red-blooded businesses. Their bosses have tended to be lawyers more familiar with pulling the levers of political than electric power.

End Polluter Welfare Bill Would Stop Coal, Oil, Gas Subsidies

WASHINGTON, DC (ENS) – Senator Bernie Sanders, a Vermont Independent, and Congressmen Keith Ellison, a Minnesota Democrat, today introduced a legislation to end billions of dollars in subsidies for the oil, gas and coal industries.

The Sanders-Ellison End Polluter Welfare bill abolishes federal policies making Americans taxpayers pay for fossil fuel company investments. Under current law, more than $110 billion in federal subsidies would go to the oil, coal and gas industries in the coming decade.

EPA to remove vapor-capturing rubber boot from gas pump handles

The Obama administration and the Environmental Protection Agency announced Thursday they intend to phase out the rubber boots on gas pump handles now used to capture harmful gasoline vapors while refueling cars.

The EPA says the vapor-capturing fuel pumps are redundant because more than 70% of all cars on the road today are equipped with on-board systems that capture the harmful vapors.

Honda wins appeal of small-claims hybrid ruling

A California Superior Court Judge has reversed the high-profile verdict in a small claims case filed by a woman who claimed her Honda Civic Hybrid delivered significantly worse than the maker’s advertising claimed it would.

Couple gets 84 mpg in Passat diesel on real roads

A couple well-known for fuel mileage records on regular roads notched 84.1 mpg in a Volkswagen Passat diesel with six-speed manual.

That high mileage let them go 1,621.1 miles on a single tank of fuel in a three-day ramble through nine states from Houston to Northern Virginia, VW and the couple say.

Saudi Arabia Plans $109 Billion Boost for Solar Power

Saudi Arabia is seeking investors for a $109 billion plan to create a solar industry that generates a third of the nation’s electricity by 2032, according to officials at the agency developing the plan.

The world’s largest crude oil exporter aims to have 41,000 megawatts of solar capacity within two decades, said Maher al- Odan, a consultant at the King Abdullah City for Atomic and Renewable Energy. Khalid al-Suliman, vice president for the organization known as Ka-care, said on May 8 in Riyadh that nuclear, wind and geothermal would contribute 21,000 megawatts.

Solar Installers Offer Deals, Gaining Converts

HOLMDEL, N.J. — Jay Nuzzi, a New Jersey state trooper, had put off installing solar panels on his home here for years, deterred by the $70,000 it could cost. Then on a trip to Home Depot, he stumbled across a booth for Roof Diagnostics, which offered him a solar system at a price he couldn’t refuse: free.

Mr. Nuzzi had to sign a 20-year contract to buy electricity generated by the roof panels, which he would not own. But the rates were well below what he was paying to the local utility. “It’s no cost to the homeowner — how do you turn it down?” Mr. Nuzzi said on a recent overcast morning as a crew attached 41 shiny black modules to his roof. “It was a no-brainer.”

Assessing Whether Solar Panels Make Sense for You

Part of the appeal here is that customers can not only reduce their energy costs but fix them for a long period of time, avoiding the unwelcome surprise of a suddenly high bill because, say, natural gas prices have shot up again. Customers also avoid having to figure out how to claim the various incentives and benefits for which they qualify as a renewable energy producer.

But there are some things to look out for. Going solar does not mean going off the grid. A typical roof array will not handle all of a home’s electricity needs since it produces power intermittently. So customers will still get a bill from the utility, though probably a much smaller one. Many contracts also have escalator clauses, with the payments increasing over time, so it is important to determine if your energy costs are likely to go up or down if you were to stick solely with the utility.

Germany Delays Solar Subsidy Cut in Blow to Angela Merkel

Germany’s upper house voted to renegotiate a bill backed by Chancellor Angela Merkel that would cut subsidies for solar power after state leaders from her own party said the plan would threaten jobs.

The Neighborhood Visualizer Maps The Resource Intensity Of Your City

How much material did it take to build your house? How much energy did it use? This new interactive map tells you exactly how much you and your neighbors are using.

An ocean of troubles (review of The Ocean of Life: The Fate of Man and the Sea, by Callum Roberts)

Overfishing, global warming and pollution threaten to transform the ocean—and perhaps life as we know it.

The coming arms race for Arctic oil (excerpt from The Eskimo and the Oil Man, by Bob Reiss)

From a national security standpoint, the Russian said, when it comes to the problem of terrorists of the future attacking oil infrastructure, or of fighting in the Mideast interrupting international oil supply, “Arctic is more safe than Persian Gulf, yes?

“But in Arctic we have problems, icebergs. If we stop operations in times of icebergs it is not very good, yes? Another problem is oil spill in ice. Recovery? Practically zero,” he said. But he did not look worried.

On the contrary, he was smiling. He had an answer! His eyes lit up and his blunt fingers stumbled over the keyboard, stopped, lifted a pen, sketched.

“We need special technology for Arctic, yes?”

Astounded, I realized he was drawing an underwater nuclear powered tanker, a kind of huge submarine that, he said, would travel beneath the ice, arrive at a sea bottom wellhead, attach itself to piping—as in the sketch—and suck up oil or gas.

Baked Alaska

From interviews with Yup’ik hunters and elders in the Alaskan villages of St. Mary’s and Pitka’s Point by researchers from the U.S. Geological Survey, conducted as part of a study of indigenous people’s experiences of climate change. A summary of the USGS findings was published last fall in the journal Human Organization.

Political-Risk Insurer Underused as Climate Talks Fail

A World Bank Group agency providing insurance, including political-risk coverage, in developing nations is being underutilized by 30 percent because of a lack of demand as the United Nations fights to protect the climate.

Game Over for the Climate

GLOBAL warming isn’t a prediction. It is happening. That is why I was so troubled to read a recent interview with President Obama in Rolling Stone in which he said that Canada would exploit the oil in its vast tar sands reserves “regardless of what we do.”

If Canada proceeds, and we do nothing, it will be game over for the climate.

Global Warming: An Exclusive Look at James Hansen’s Scary New Math

How can NASA physicist and climatologist James E. Hansen, writing in the New York Times today, “say with high confidence” that recent heat waves in Texas and Russia “were not natural events” but actually “caused by human-induced climate change”?

It wasn’t all that long ago that respected MIT atmospheric scientist Kerry Emanuel flatly refuted the notion that you can pinpoint global warming as the cause of an extreme weather event. “It’s statistical nonsense,” he told PBS.

The paper considers two different approaches for modeling future oil supply:

1. The economic/technological approach, used by the US Energy Information Administration (EIA) and others, and
2. The geological view, used in peak oil forecasts, such as forecasts made by Colin Campbell and forecasts made using Hubbert Linearization.

The analysis in the IMF Working Paper shows that neither approach has worked perfectly, but in recent years, forecasts of oil supply using the geological view have tended to be closer than those using the economic/technological approach. Since neither model works perfectly, the new paper takes a middle ground: it sets up a model of oil supply where the amount of oil produced is influenced by a combination of (1) geological depletion and (2) price levels.

This blended model fits recent production amounts and recent price trends far better than traditional models. The forecasts it gives are concerning though. The new model indicates that (1) oil supply in the future will not rise nearly as rapidly as in the pre-2005 period and (2) oil prices are likely to nearly double in “real” (inflation-adjusted) terms by 2020. The world economy will be in uncharted territory if this happens.

It seems to me that this new model is a real step forward in looking at oil supply and the economy. The model, as it is today, points out a definite problem area (namely, the likelihood of oil high prices, if growth in oil production continues to be constrained below pre-2005 rates of increase). The researchers also raise good questions for further analysis.

At the same time, I am doubtful that the world GDP forecast of the new model is really right–it seems too high. The questions the authors raise point in this direction as well. Below the fold, I discuss the model, its indications, and some shortcomings I see.

The Two Models

Economic /Technological Approach. With the economic/ technological approach, the assumption is made that high oil prices will encourage substitution and/or new oil production. Because of this, high oil prices are not expected to persist. Instead, the most important consideration in determining future oil supply is the level of future demand. The level of future demand, in turn, is primarily driven by anticipated GDP growth, since world GDP growth and world oil production growth tend to be highly correlated.

In effect, models of this type assume that whatever oil supply is needed will be available; they don’t consider the possibility that geological considerations may limit oil supply over the long term. As an example of how well these models have worked for prediction, the paper shows a graph of historical EIA forecasts (Figure 1, below).

Figure 1. Graph showing that oil production forecasts by the US Energy Information Administration have been revised downward, year after year, from paper.

Each year, EIA’s forecasts have been adjusted downward, because actual oil supply growth was lower than forecast.

Models Based on the Geological View. The paper considers forecasts of oil supply such as those of Colin Campbell (shown in ASPO-Ireland Newsletters) and forecasts based on Hubbert Linearization to be models based on the Geological View. The paper observes that forecasts of oil supply based on geological view have tended to be too low, but not by as big a margin as those made using the economic/technological approach. As an example, it gives the following graph of changes in forecasts by Colin Campbell.

Figure 2. Colin Campbell Forecasts of Future Oil Supply, from paper.

A review of the two methods by the IMF group indicates that neither works precisely as hoped, but each has some validity. While oil production did not rise as fast as the economic/technological view would predict, higher oil prices have allowed oil production to stay on more or less a plateau after 2005, rather than declining as predicted by geological methods. The new model in the IMF Working Paper combines indications from both points of view, using an approach that allows them to estimate the relative contribution of geological impacts vs higher prices.

How the Two Methods are Combined

The oil supply equation in the new model is set up so that there are two different ways that the forecast oil supply can change. There is a downward tug from oil depletion at the same time that there is an upward tug from oil prices. It is expected that in the short run, high prices will get producers to utilize spare capacity, and over a longer period (estimated at 4 to 6 years), it will get producers to add new capacity. I will not try to explain all the variables and coefficients, but the blended supply equation is

Figure 3. Oil Supply Equation

In the above equation, q_t is the quantity of oil produced in year t and Q_t is the cumulative quantity produced in year t, so the ratio q_t / Q_t produces the familiar downward-sloping line one sees in charts used for Hubbert Linearization. The first two terms to the right of the equal sign are the ones based on the geological approach to depletion. The later terms depend on p_t, which is price of oil at the time “t”. Adding the p_t terms tends to raise the line at later periods so it does not slope downward as quickly as if depletion were the only factor affecting the relationship.

Growth Rate of GDP

In the model, high oil prices have some impact on GDP, but as we will see in Figure 5, below, not very much. There are two places in modeling GDP where high oil prices come into play. The first is in the Potential Growth Rate of GDP. According to the paper,

The growth rate of potential world GDP is specified as fluctuating around an exogenous long-run trend, with oil price changes making the fluctuations more severe. Oil prices are allowed to have persistent but not permanent effects on the growth rate of GDP. . . The estimated steady state world potential growth rate of potential GDP equals four percent. The average annual growth rate of real oil prices, which is the growth in oil prices at which the model assumes zero effect of oil prices on output growth, is seven percent. The results indicate that an oil price growth that is higher than that historical average has a small but significant negative effect on the growth rate of potential. [emphasis added]

Interesting–the model assumes real oil price growth of 7% per year has no impact growth rate of GDP. Perhaps this is supposed to be picked up by the second place where high oil prices come into forecasting GDP, called Output Gap. This is an excerpt from what the paper says about Output Gap:

Apart from allowing for an effect of higher oil prices on the growth rate of potential output, the model also allows for the possibility that higher oil prices can cause fluctuations in the amount of excess demand in the economy. . . . Similar to the equation for potential, the coefficient estimates show that high oil prices have a small but significant negative effect on excess demand, and that this effect is highly persistent.

Model Output

When all is said and done, what does the IMF model forecast?

Figure 4. Oil Output Forecast with Error Bands, (in gigabarrels per year), from report.

The forecast for future world oil supply, shown in Figure 4 above, is similar to EIA’s most recent forecast of world oil supply (but lower than earlier EIA estimates). Oil supply is expected to rise a 0.9% per year. An alternate tighter oil supply forecast is given as well.

The forecast for world GDP growth (shown in Figure 5 below) is not too much different from standard estimates, either. The point forecast is about four percent per year.

Figure 5. World GDP (in logs) forecast with error bands, with 2011 world GDP normalized to 1.00, from report.

The thing that is different in this analysis is oil prices (in inflation adjusted dollars). Forecast oil prices are expected to be much higher that what the EIA is estimating.

Figure 6. Oil price forecast with error bands (in 2011 Real $) from report.

The report points out that these high oil prices are a real concern. The report says:

The predicted average annual growth rates of oil output are well below the historical forecasts of EIA, but above the forecasts of proponents of the geological view. . . . However, this projected positive trend in oil production comes at a steep cost, because the model finds that it requires a large increase in the real price of oil, which would have to nearly double over the coming decade to maintain an output expansion that is modest in historical terms. Such prices would far exceed even the highest prices seen in 2008, which according to Hamilton (2009) may have played an important roll in driving the world economy into a deep recession.

Need for Enhancements /Areas of Concern Pointed Out by Authors of Paper

The authors raise of the IMF Working Paper raise the following issues:

1. Impact of high oil prices on GDP growth. The expected impact of a continued rise in oil prices on forecast GDP is small, according to the model as constructed. Perhaps the relationship should be non-linear (convex) instead of linear. More generally, what is the importance of the availability of oil inputs for continued overall GDP growth? The report mentions studies showing the close connection between energy growth and GDP growth, such as by Ayers and Warr.

2. Substitutability for oil. What is the substitutability between oil and other factors of production? Is it reasonable to assume that elasticities of substitution will become greater over time? Or is there a possibility that there are limits to the extent of substitutability of machines and labor for energy?

3. Is there a pain barrier? At some point, does the effect of high oil prices on the economy change, and become much worse?

4. Independence of Technology from Fossil Fuel Availability. Perhaps a reduction in fossil fuel availability will negatively affect the availability of future technology improvements since, for example, it takes fossil fuels to make new more efficient cars. This has not been reflected in the model.

5. Smaller Amounts of “Spare” Oil Capacity Available in the Future. The model reflects amounts of OPEC spare oil production capacity available in the past. In the future, less spare production capacity seems likely.

My Comments on the Paper

The IMF is to be commended on putting together this analysis. To me, the big step forward is that questions about the impact of geological depletion of oil on the economy are starting to be addressed. The fact that the paper also points out the level to which oil prices will need to rise, if oil production is to rise at 0.9% a year between now and 2020, is important as well.

Some of the issues I see that aren’t addressed in the paper:

1. Factors underlying world long term growth rate, other than energy. It would seem to me that there are a number of factors which have permitted long term world economic growth, over and above the economic growth enabled by fossil fuels. Some of the following seem to be diminishing in importance, so perhaps the forecast of a 4% world GDP growth rate going forward is too high, apart from oil supply issues:

a. Trend Toward Globalization. The trend toward globalization has allowed greater synergies to occur, and thus has contributed to world GDP growth. The trend toward globalization started over 4,000 years ago, with trade from northwest India to the Mediterranean region (Chew). In recent years, we seem to be approaching a maximum level of world globalization. In fact, higher price of oil has been raised as an issue cutting back on trade of bulky, low valued items (Rubin). Higher cost of oil may also have an adverse impact of commercial airline flights for international companies to oversee their distant operations, because the costs of these flights is now supported by a large number of international tourists, and this international tourist trade may dry up. Thus, the trend toward globalization that has been supporting world GDP growth in the past may not persist, and may even reverse.

b. Growth in Education. Part of what has supported world GDP growth is likely growth in education, since literate workers are better able to use technology. There is evidence that the advanced economies are now plateauing in terms of educational level of new workers, relative to the existing work force. Even less advanced economies, such as China, are showing much higher levels of literacy. (See this post). To the extent that educational levels are reaching a plateau, the “boost” to historical GDP rates that came from this factor can be expected to be lessened.

c. Growth in Debt. GDP growth is enabled by debt growth. Consumers are able to purchase more goods and services, with increased levels of debt; businesses are able to increase their investment in new plants and equipment through more debt; and governments are able to undertake the development of new construction, roads, and other development, through the addition of more debt. But we seem to be reaching limits on debt growth. Theory also suggests that higher levels of debt are enabled by higher economic growth rates (Tverberg). Governments have been aware that increased borrowing can be used to pump up economic growth, but limits are being reached on the amount of debt that can be added. To the extent that debt fails to grow as quickly in the future as it has in the past, this can be expected to have an adverse impact on world GDP growth rates.

d. Quantitative Easing and Extraordinarily Low Interest Rates. An argument can be made that GDP growth of advanced economies in recent years has been held up by quantitative easing and extraordinarily low interest rates. These would seem to be a temporary fixes that cannot be continued long-term. If this is the case, world GDP rates can be expected to be lower in the future, regardless of oil supply growth.

2. Limits on Substitutability of Other Fossil Fuels for Oil. The paper does not address the issue of whether there are limits of substitutability of other fossil fuels for oil. Stationary (as opposed to transportation) uses of oil have been substituting away from oil for years. There are millions of vehicles and other machines that use oil currently in operation. There will be a high cost in replacing these before the end of their normal lifetimes. Also, significant fossil fuels will be required for making vehicles and supporting infrastructure that use another fossil fuel source.

3. Limits on Capital Available for New Investment in Substitutes for Oil, and in New Oil Production. In recent years, we have made heavy use of debt financing for new investment. Government subsidies have also been used. To the extent that debt financing and government subsidies are less available, less investment can be expected in the future.

4. Impact of High Oil Prices on Diverse Parts of the Economy, Not Reflected in the Model. For example, prices of homes may be affected by high oil prices. People with less discretionary income are less likely to “trade up” to a more expensive homes, so high oil prices seem to be one of the reasons for the decline in home prices (Tverberg). Lower home prices affect ability of homeowners to borrow against the value of their homes for new purchases, so affect GDP, apart from oil price’s direct impact on the number of new homes built.

5. Which comes first: Oil Growth or Economic Growth? The assumption in the model is that GDP growth drives oil growth. While this is true, it is to some extent a “chicken” and “egg” situation. Perhaps the availability of inexpensive oil and other fossil fuels is one of the main drivers of economic growth (in addition to the other drivers I mention in the subparts of Item 1 above). Perhaps the cycle is started by the availability of cheap fossil fuels for industrial use and continued by the increased demand to which this growth gives rise.

* * *

I appreciate the work that has been done by the IMF in putting together this model and look forward to seeing further enhancements to the model. The work that has been done and the questions that are being raised are important ones.

I expect that commenters to this post will be able to point out other plusses and minuses of the model. The report itself is very interesting. Again, it can be found at The Future of Oil: Geology versus Technology.

This article originally appeared on Our Finite World.

The content for this post was originally published in Norwegian here and here.

Figure 01: The chart above shows a forecast for crude oil production from the 21 discoveries presently sanctioned for development on the Norwegian Continental Shelf (NCS) and which are scheduled to start flowing from 2012 to 2016.
In Figure 5 these and a forecast for Johan Sverdrup are shown as parts of a forecast of crude oil production from NCS. Click on all charts to enlarge and to open in a new window.

After oil prices moved upwards and settled at a higher level starting around 2005, a new wave of exploration resulted in sanctions for developments of several new and known discoveries that previously had been on hold due to lack of profitability.

These new developments are expected to add up to 350 kb/d of additional oil production, reaching a peak in 2016. This is by itself impressive given the location of the discoveries (offshore, water depth), their size and the total efforts required to bring these to fruition. These 21 developments have been estimated to hold total recoverable reserves of 1 Gb crude oil, 140 Gcm (Gcm = Bcm: Billion cubic meters) of natural gas, around 23 Mb condensates and around 164 Mb NGLs.

These 21 new developments are “small fields”. What characterize “small fields” are rapid buildup and a short plateau followed by aggressive (high) decline rates. Total investments for these 21 developments are now estimated to be around 225 billion NOK (2011) or US$40 billion. Most of the developments shown in Figure 1 have been estimated to be profitable for crude oil prices ranging from US$40 – US$90/bbl.

HISTORY OF NORWEGIAN CRUDE OIL DISCOVERIES

Figure 02: The chart shows the history and status of total annual discoveries (stacked columns) of crude oil from the start of oil exploration on the NCS in the mid 60’s until the end of 2011.
The light green columns show what has been sold and delivered. Dark green shows estimated total remaining recoverable reserves. The yellow columns show total discoveries that have not been sanctioned as of end 2011.
Furthermore, the chart shows annual extraction (thick black line) of crude oil since oil production started back in 1970. In the chart is also included a table identifying the year of discovery and name for all fields with more than 1 billion barrels (Gb) of recoverable crude oil.

Figure 2 shows that:

• The bulk of discoveries on NCS was made in the early years of exploration (see also Figure 3 where total discoveries are sorted by decade) and these presently heavily depleted fields still contribute a major part of total Norwegian crude oil production (see also Figures 6 and 7).
• 1979 stands out as the year with most total crude oil discoveries on NCS including amongst others: Oseberg, Troll and Snorre.
• Until 1987 more oil was annually discovered than what was extracted. Then, with the exceptions of 1991, 1992 and 2010 (Johan Sverdrup) more crude oil was extracted than was discovered. The depletion of the oil reserves is also illustrated in Figures 4 and 5.
• The number of and total amounts of discovered oil grew after oil prices moved above US$50/bbl in 2005. This suggests that oil companies have had several prospects in the drawer that became economically attractive to explore with the increase in oil prices and the income growth that allowed for drilling them.

The discovery in 2010 of Johan Sverdrup (formerly Aldous Major South/Avaldsnes), which saw its reserves number soar following an appraisal well in the fall of 2011, is very much an “outlier” relative to the size of the discoveries in the last two decades. Figure 2 also shows that new discoveries that are found to be profitable are fast tracked for production development.

The growth in oil prices in recent years has resulted in a positive economic climate for exploration, allowing more prospects to be drilled and thus establishing more reliable estimates of recoverable volumes from these discoveries.

Based upon data in the public domain from the operators and the authorities (NPD), it has been estimated that the recent discovery of Skrugard will be profitable at an oil price around US$60/bbl (340 NOK/bbl) at a discount rate of 7%. Skrugard is now estimated to hold 250 – 280 Mb of recoverable oil and the field is located at 72 degrees North at a water depth of 390 meters (1,300 feet) and 200 kilometers (125 miles) offshore.
One way to look at these recent developments is that Norway in general is about to run out of discoveries that are profitable in the US$40 – US$60/bbl range.
Could a new wave of exploration and developments be set off at an even higher oil price, say US$150/bbl?

Food for thought is that future discoveries and developments are likely to be smaller than those that set off the past and present waves. If new discoveries are smaller, we are likely to need both a higher price and a larger number of field developments to combat depletion and decline from a growing number of ageing fields.

If this is viewed together with the extraction costs for oil from shale (tight oil) mainly in the U.S. and oil sands in Canada which both require an oil price in the range of US$60 – US$90/bbl, this very much documents that the price for the marginal barrel has now moved higher.

There is a catch here. Buyers of oil do not care about the development costs (or required breakeven prices). Instead the market sets the price as primarily based on the supply/demand balance. If the crude oil price were to temporarily retreat this would threaten the economics of some developments and also defer investments in new capacities.

Figure 03: The figure shows the discovery of crude oil for each past decade of oil operations in Norway. The light green bars show what is sold and delivered. Dark green is estimated total remaining reserves. The yellow bars show discoveries that have not been sanctioned as of the end of 2011.

The figure shows that most of Norwegian crude oil was discovered in the seventies and that total discoveries slowed until the discovery of Johan Sverdrup, Skrugard and Havis, and there are still some years left of this decade.

Figure 04: The figure shows the history and total discoveries of crude oil by year (stacked columns) from oil exploration started on NCS and as of year-end 2011. The figure is also referred to as a “creaming curve”. The light green bars shows what has been sold and delivered. Dark green is the total remaining reserves. The yellow bars show the total of discoveries that presently are not sanctioned.

The discoveries from the 70s presently yield more than 28% of total Norwegian oil production, (refer also to Figures 6 and 7), and these will continue to make a significant contribution to the total Norwegian oil production.

Figure 4 shows that discovered Norwegian oil reserves are now around 75% depleted.
Figures 4 and 5 below should be useful for understanding the time horizon and level of future Norwegian crude oil production.

ACTUAL AND A FORECAST OF NORWEGIAN CRUDE OIL PRODUCTION

Figure 05: The chart shows actual crude oil production by field from the NCS for the years 1970 to 2011. Furthermore, I have prepared a forecast until 2040 based upon the reserve and resource data from NPD as of end 2011. The forecast is based upon each field’s R/P ratio, projected decline rates for each field, estimated remaining recoverable reserves, sanctioned developments (those shown in Figure 1) and NPD estimates of recoverable reserves for recent discoveries (such as Johan Sverdrup, Skrugard, Havis etc.). The forecast does not incorporate effects from fields that may be closed down as these become unprofitable. The forecast is subject to changes from revisions in estimates of recoverable reserves in producing fields and discoveries, new commercial discoveries in mature areas, the Barents Sea and later Lofoten/Vesterålen.

The parameter that will most influence future Norwegian crude oil production is and will continue to be the oil price. Figure 5 also illustrates that the biggest discoveries are made early, rapidly put into production. Then, with time, as prices rise to a high enough level, the smaller discoveries are developed. Figure 5 shows that the decline in Norwegian crude oil production continues to defy the strong price growth in recent years. The growth in crude oil prices has helped offset the fall in Norwegian crude oil production and stimulated increased exploration activity and made some past discoveries profitable.

In discussions about the time horizon and levels for the Norwegian crude oil production there seems to be a deficit of realistic and unbiased understandings about future production levels relative to what is now publicly known about estimates of remaining recoverable reserves, discoveries and yet to find.

Norwegian crude oil production peaked in 2001 and as of 2012 it has declined about 50% from the peak. This fact has been overshadowed by the oil price growth in recent years. This increase in prices has more than compensated for the decline in the amount of crude sold and delivered (and natural gas volumes), and has helped to maintain and grow annual Norwegian gross income.

Norwegian Petroleum Directorate’s (NPD) has forecast that crude oil production for 2012 will decline to 1.61 Mb/d from 1.68 Mb/d in 2011. Norway also produced 0.08 Mb/d of condensates and 0.28 Mb/d of NGLs in 2011. Norwegian domestic oil consumption is now around 0.2 Mb/d and present expectations are that Norway will continue to be a net exporter of crude oil, albeit at a diminishing rate, for the next 25 to 30 years.

OIL PRICE AND GROSS INCOME

A production level that only meets Norway’s domestic needs will not leave anything for exports. Norway presently has an annual trade deficit, excluding income from the petroleum sector, of around US$20 – US$25 billion.

To run a balanced trade and cover domestic consumption Norway needs to produce 0.7 – 0.8 Mb/d at current prices. This level is presently expected to be reached within 15 years.

(Admittedly, income from Norwegian natural gas sales needs to be included, but in 15 years these sales are also forecast to have substantially declined.)

Figure 06: The figure shows the Norwegian crude oil production divided into discoveries by decade. The figure also shows the development of the annual price of oil.

The figure above illustrates the effects from discoveries by decade and that the major discoveries in a new oil province are made early.

The chart could also leave the impression that oil prices really took off as Norwegian oil production started to decline.

Figure 07: The figure shows Norwegian crude oil production divided into discoveries by decade. The figure also shows the development of the annual gross value of the Norwegian crude oil production in U.S. dollars.

As the oil price moved strongly upwards, it also pulled gross incomes from crude oil sales up. What is often overlooked with this increasing revenue is the decline in volume. The price increase for oil in 1979 gave a boost to the gross income from the Norwegian crude oil sales. Later, the increase in gross income was driven primarily by volume. A tighter global supply/demand balance in 2004 ushered in a sharp rise in prices of oil which more than compensated for the decline in oil production and thus sent the gross income from the Norwegian crude oil production to new heights.

Average crude oil price was around US$97/bbl in 2008 and in 2011 US$111/bbl. In 2008 the Norwegian crude oil production was 2.11 Mb/d and by 2011 it had declined to 1.68 Mb/d.

Predicting near term developments of the oil price with any precision is difficult. The growth in total debt in the last three decades caused aggregate demand (also for oil) to be pulled forward, and debt growth also provided price support. A wide spread deleveraging and introduction of austerity measures, which now seems to be in its infancy, could be expected to affect oil demand in the near term and perhaps reduce oil prices.

In this post, I consider the limited impacts of climate policy on fossil-fuel production and discuss estimates of fossil-fuel production in the long run. Since this is a cross post, with the original aimed at an audience with a climate interest, it includes introductory material that will be familiar to most Oil Drum readers. I would like to acknowledge the comments on my two earlier TOD posts, The Coal Question and Climate Change and The Coal Question, Revisited, that have helped me in writing this post.

1. Climate Policy and Fossil-Fuel Production

I will start with the notion that the response of carbon dioxide in the atmosphere has slow components that will dominate over time, like the exchange with the deep ocean and weathering of rocks. David Archer expressed this vividly, “A better approximation of the lifetime of fossil fuel CO2 for public discussion might be 300 years, plus 25% that lasts forever.” This means that from a climate perspective, it really does not matter whether we burn a particular ton of coal now or at the beginning of the Industrial Revolution—what counts is the total that the world burns in the long run.

This has several consequences. First, a national policy to reduce fossil-fuel consumption, like mileage standards for cars, will have little climate impact if it does not change world consumption in the long run. Actually, because oil is traded in a world market, mileage standards may have no effect on world oil consumption even in the short run. Figure 1 shows a plot of annual production versus price. Except for the years around the 1979 Iranian revolution, production increased steadily, and the price stayed below $50 per barrel in today’s money. However, starting in 2004, the plot went vertical, with a price range of more than 2:1, but with production varying by only 2%. If this is the case, when the United States reduces consumption, it will be offset by increased consumption elsewhere.

Figure 1. Supply vs price for world oil. Gt means billions of metric tons. This figure is an extension of one published in 2009 by Euan Mearns at The Oil Drum. Data are from the BP Statistical Review and from Brian Mitchell, 2007, International Historical Statistics, Palgrave-MacMillan.

Second, a new fossil-fuel resource resulting from improved technology like shale gas adds to long-term fossil-fuel production, increasing any climate effects. This is true even if the shale gas reduces carbon-dioxide emissions temporarily by partially displacing coal in electricity production.

The final implication is that resources must be walled off from future production to have an effect on climate. My favorite example of this, not least because of the political skill involved, was the creation of the Grand Staircase-Escalante National Monument in Utah by the Clinton Administration. This area contains most of the Kaiparowits Plateau coal field, which is a big one. The Utah Geological Survey estimated the minable coal at 11Gt. For comparison, annual US coal production is about 1Gt. The action was not popular in Republican Utah, which might have gotten $30 per ton for the coal. President Clinton, a Democrat, made his announcement across the border in swing-state Arizona, which he carried in the election two months later. Even though we can acknowledge President Clinton’s political ability, we should be cautious in crediting him with a full 11-Gt reduction in future production because it is not clear how much production would have taken place without National Monument status. Past production only comes to 40,000 tons, with none since the 70′s. It is worth noting that the US Geological Survey estimate for the recoverable coal was 4Gt, much less than Utah’s.

Can climate policy significantly reduce world fossil-fuel production in the long run? At the G8 meeting in L’Aquila, Italy, in 2009, our leaders pledged an 80% reduction in greenhouse-gas emissions by 2050. This proclamation is certainly meant to encourage the countries of the world to commit to this reduction, but so far only the UK has passed the legislation for it.

For perspective, it is worth looking at the historical record before and after the Kyoto Agreement was signed in 1997. Figure 2 shows world fossil-fuel carbon-dioxide emissions, taken from the BP Statistical Review. Do you see a decrease in emissions after the agreement was signed? I don’t either; if anything, emissions accelerated. It is worth noting that the EU and the US show the same percentage decline in emissions, 0.4%/y over the last 10 years, even though the EU countries all ratified the Kyoto Agreement and the US did not.

Figure 2. Annual world fossil-fuel carbon-dioxide emissions. 2012 is the year countries are judged on whether they have met their Kyoto commitments. The 2012 marker is an extrapolation, based on the average growth rate over the past ten years.

The figure also shows where an 80% reduction in 2050 would take us. It is not easy to convey the enormity of what our leaders agreed to. One comparison we can make is to the collapse of the Soviet Union. From 1990-1999, fossil-fuel emissions fell 40% there, and this was no one’s idea of a good time. To get to 80%, the entire world need to do this four times, voluntarily. Not going to happen. What were they smoking?

What about policy impacts at the local level? My home state of California has implemented an ambitious renewable-energy policy through a series of laws, starting with Assembly Bill 1078 in 2002 and culminating in Senate Bill 2 in 2011. These commit the state to a 20% renewable share for electricity in 2010, and a 33% renewables share in 2020. In California-speak, renewables means no large hydro and no nukes. In his signing letter for Senate Bill 2, Governor Jerry Brown wrote, “With the amount of renewable resources coming on-line, and prices dropping, I think 40%, at reasonable cost, is well within our grasp in the near future.”

Well, we are half-way from 2002 to 2020 now. How is California doing? You can judge the progress in Figure 3. The in-state renewables share has actually fallen during this period. California missed its 2010 goal badly, but it appears that the only result of this was to set an even more unrealistic goal for 2020. Governor Brown seems to be smoking something also.

Figure 3. Renewable shares in Californa. The data for the figure come from the California Energy Almanac. Incidentally, if you like plans, this web site is great. But if you want data….

It is hard for me to think of a bigger disconnect between the politics and the reality. What is going on here? Table 1 shows the renewables shares by source. The biggest is geothermal, which peaked in 1992. Biomass is stuck because pollution rules make it is difficult to get permits to build an incinerator in California. Small hydro is no longer favored and it shows. The one bright spot is wind from Oregon and Washington, but wind imports are not going to get us anywhere near 33% by 2020. Most surprising is that the solar share has been flat for ten years, even though California’s solar resources are stupendous.

Table 1. Renewables shares for California electricity in 2010 and 2010. I have broken out in-state and imports for wind, but the total is shown for the other sources.

What this tells us is that there is no magic climate-policy wand that will let us set the total fossil-fuel production in the long run to a particular number. This is not to say that climate policy does not have short-term effects. The EPA’s proposals for carbon-dioxide emissions limits certainly discourage utilities from building new coal plants. If I were a Kentucky coal miner who lost his job this year I would likely blame the EPA. However, the current coal plants could be operated for generations to come, so the coal can be consumed eventually. In addition, even if American customers are lost, an offsetting export market may develop because American coal mining costs are low. Wyoming miners can make money selling coal at $10 per ton, while the price in the main export market, East Asia, is over $100 per ton. This depends on being able to ship the coal to East Asia at a cost that would meet the market price there.

2. Reserves vs. Resources

So, independently of climate policy, how can we estimate production of oil, gas, and coal in the long run? Economists have shown surprisingly little interest in this problem, but many geologists and engineers have been fascinated by it.

First we need to distinguish two terms, reserves and resources:

Reserves refers to oil, gas, and coal that have been discovered and characterized (proved), and that one could produce and sell at a profit now. People distinguish between the oil (or gas or coal) in place, and recoverable reserves that make an allowance for what is left behind when production is finished. Proved, recoverable reserves for oil, gas, and coal have been tracked at the national level for many years.

Resources refers to oil, gas, and coal that are of economic interest. This is a broader term than reserves. At the national level, resources are not well defined or tracked, and they are subject to political winds. In practice, resources means whatever a speaker wants it to mean. As a result, the statement in the President’s recent State-of-the-Union Address, “We have a supply of natural gas that can last America nearly 100 years,”conveys little information.

The boundary between the reserves and resources is not fixed. New technology and higher prices can cause resources to shift to the reserves category. For one example, because of new horizontal drilling and hydrofracturing technology, some shale gas can now be counted as reserves rather than resources. As another example, high oil prices have enabled production from the Canadian tar sands, and Canadian oil reserves are now 3rd largest in the world.

Perhaps surprisingly, reserves can also shift to resources. In 1913, US coal reserves were 4Tt (trillion metric tons). A hundred years later after 60Gt of production, American coal reserves are now 240Gt. The early reserves criteria were too optimistic—seams as thin as 1 foot down to a depth of 4,000 feet down were counted. However, this coal was not mined a hundred years ago, and it is not mined now. Over time, as it has became clear that the criteria were too optimistic, the US Geological Survey tightened up the rules, and other countries followed their lead.

We will develop estimates first for coal, and then for oil and gas together. At this point, future production for other sources like methane clathrates and oil shales is speculative, and they will not be considered.

3. Coal Production in the Long Run

In energy terms, world coal production is 95% of world oil production, and coal is on track to pass oil this decade. Coal markets are regional—85% of coal is consumed in the country it was mined. This means we need a regional analysis. I have given one in a paper in the Journal of Coal Geology that considers the world in 14 regions. I will only summarize the results here. The approach in the paper is to fit an s-curve (logistic or cumulative normal) to the cumulative production history, and to use the top of the s-curve as an estimate of the total production in the long run. Coal has a long production history that we can use to test our ideas. Several regions are very late in the production cycle, with a current annual production that is a thousand times less than the cumulative production. The results for these mature regions are summarized in Table 2 below.

Table 2. Production for four mature coal regions. This table is an updated version of one that appeared in my Coal Geology paper.

One way to estimate the long-term production is to add reserves to the cumulative production. Early reserves and production history are available for each of the regions. Surprisingly, this approach gives numbers that are too high. For example, Japan and South Korea have produced only 21% of the early reserves plus cumulative production. The other regions also show this pattern. Across the four regions, the average is only 26%.

The results of the s-curve fits are given in the “Long-term production projection” and “Long-term production projection range” columns. “Long-term production projection” gives the current estimate, and the range column indicates how the projections have evolved since 1900 (since 1950 for Japan and South Korea). The average range in percentage terms is 38%, so this gives the uncertainty in the estimate. It is interesting that in each case, it appears that the range will include the actual long-term production. However, we cannot be sure of this until the last mine in each region shuts down.

How should we interpret these results? None of the mature regions has come close to producting its reserves, so for coal at least, we might take the reserves as an upper bound on future production. It is interesting that the IPCC in its scenarios assumes that a multiple of the reserves could be produced. However, there is no historical precedent for this in any of the mature regions. On the other hand, the s-curve fitting ranges do appear to predict the long-term production correctly, with an error of about plus or minus 20%.

We can estimate the long-term production for the entire world by adding the results for the 14 regions. The latest world reserves at year-end 2008 were 861Gt and the world cumulative production at that time was 303Gt. This gives a total of 1,164Gt. The s-curve fits updated for the 2010 production give a long-term production of 723Gt, 62% of the reserves plus cumulative production. Thus, the pattern of underproducing reserves that we saw in the mature regions appears to be repeating.

The analysis also indicates that the world reaches 90% of the eventual long-term production in about 60 years. This result should be viewed as a current trend, rather than a projection with uncertainties, because historical shocks that changed the production rate. For example, production slowed after the collapse of the Soviet Union. For the mature regions the production at the 90% point had fallen to about 40% of the peak production. So at that point you would need a Plan B or use less.

4. Oil and Gas Production in the Long Run

In contrast to coal, about half of world oil and gas is exported, and we can consider a world analysis. Usually oil and gas are considered separately, but there is really not a clear distinction. They often come out of the same wells and some products like propane are sold pressurized as liquids and burned as gases. Figure 4 shows the production history.

Figure 4. Production history for world oil and gas, taken from the BP Statistical Review. Here toe stands for metric ton of oil equivalent. It is an energy unit equal to 42GJ.

Notice that the world shifted to a slower pace after the 1989 Iranian Revolution. For this reason, I will start the curve fits a few years after the revolution. The approach I use here was popularized by Ken Deffeyes in two very interesting books, Hubbert’s Peak and Beyond Oil. The technique is called Hubbert linearization, in honor of the geophysicist King Hubbert, who first used it for this purpose. In Hubbert linearization, the cumulative production is plotted on the x-axis, and the growth rate for the cumulative is plotted on the y-axis (Figure 5). Algebraically, the growth rate can be expressed as p/q, where p is the annual production and q is the cumulative production. This kind of plot linearizes a logistic function. The chief advantage of Hubbert linearization is that it gives one an excellent way to visualize the fit. There are some disadvantages that are discussed in my Coal Geology paper.

Figure 5. Hubbert linearization for world oil and gas. This is same data as Figure 4, but replotted with different axesw. The point for the reserves plus cumulative production is calculated from various editions of the BP Statistical Review.

In the Hubbert linearization, the x-intercept gives the estimate for the long-term production. In the figure, I vary the starting point from 1983 to 1995 to give a sense of the uncertainty. The range is 530-680Gtoe. This range contains the reserves plus cumulative production, 608Gtoe. This is different from coal, where countries under-produced reserves. This agreement is fortuitous; it is easy to identify factors that might bias oil and gas reserves high and low. US oil reserves have historically been close to ten years of future production, which clearly makes them too low as an estimate for total future production. On the other hand, OPEC oil reserves have often been criticized for arbitrary increases and lack of outside auditing, and may be biased high.

I will not give the analysis here, but it turns out the curve fits indicate that the world reaches 90% of the long-term oil and gas production around 2070, just like coal. Again, this does not mean that production would cease by then, but it is likely to be half the peak value and dropping. And as for coal, we would either need to use less or replace the energy from a different source.

5. Discussion

Oil and gas are really quite different from coal, and we should not expect their reserves to necessarily have the same relationship to long-term production. Oil and gas are usually hidden in geological traps, and they are difficult to find. Once found, however, oil and gas are relatively easy to produce—the pressure helps. Governments can even arrange turn-key concessions, and the money starts rolling in. On the other hand, coal is a rock, and it is easy to identify most of the major coal fields at outcrops. But there is nothing easy about mining coal underground. To get a sense for this, watch Michael Glawoggen’s documentary on Ukrainian coal miners. I am sure most of us would prefer to get our electricity from solar panels in our yard to manually hewing coal underground if we could afford it. However, coal provided the first rung on the energy ladder for many of the world’s economies, and our society reflects the scientific, technical, and social experience of underground coal mining. And coal has a similar importance in many countries that are on their way up today.

Table 3 summarizes the results. For coal, I use the curve fits, because they have proved more reliable in the mature regions than reserves. For oil and gas, the curve fits are consistent with reserves, and reserves are used. The current world production is also shown for comparison.

Table 3. Summary of results, expressed both in energy terms as Gtoe and as carbon dioxide emission as CtC, billions of metric tons of carbon content in the emitted carbon dioxide. At the world level the energy content of a ton of coal in the BP Statistical Review has historically averaged half that of a ton of oil. For these carbon-dioxide calculations, I have used the carbon coefficients in the BP Statistical Review. It should be kept in mind that the long-term production includes the current cumulative production. To estimate the total future production, you would need to take the difference of the two.

How do these emissions compare with the IPCC numbers? The forthcoming 5th Assessment Report uses representative concentration pathways, RCPs for short. The total carbon-dioxide emissions here, 857GtC, fall between RCP2.6 (peaking around 660GtC in 2070) and RCP4 (1,100GtC and rising in 2100). However, these RCPs assume an effective climate policy. They start with a prescribed top-of-atmosphere forcing and work backwards to a published scenario. It would be more appropriate to compare the emissions here to RCP8.5. This is the only RCP that is unconstrained by climate policy and it might be said, even by geology, with cumulative emissions of 5600GtC in 2500.

For people in the renewables business, what are the implications of a 60-year time frame for reaching 90% of the eventual long-term production? I do not know, but I will guess. You will be facing economic headwinds for decades, and competing with rent seekers who are better at securing favorable rules than they are at actually producing energy. You will be dependent on subsidies and renewables targets, in other words, on other people’s money. But as the Iron Lady observed, other people’s money runs out.

What Is the Limiting Factor?

In yesteryear’s empty world capital was the limiting factor in economic growth. But we now live in a full world.

Consider: What limits the annual fish catch — fishing boats (capital) or remaining fish in the sea (natural resources)? Clearly the latter. What limits barrels of crude oil extracted — drilling rigs and pumps (capital), or remaining accessible deposits of petroleum — or capacity of the atmosphere to absorb the CO2 from burning petroleum (both natural resources)? What limits production of cut timber — number of chain saws and lumber mills, or standing forests and their rate of growth? What limits irrigated agriculture — pumps and sprinklers, or aquifer recharge rates and river flow volumes? That should be enough to at least suggest that we live in a natural resource-constrained world, not a capital-constrained world.

Oil Falls to Four-Month Low on European Votes, U.S. Jobs

Oil fell to the lowest level in more than four months after European election results fed speculation that austerity efforts will be derailed and weaker-than-expected jobs data underscored concern the U.S. economy may falter.

Futures pared losses after slumping as much as 3.2 percent to the lowest intraday price since Dec. 20. The euro declined to a three-month low after France elected Socialist Francois Hollande as president and Greek voters backed anti-bailout parties. Crude extended a 4 percent drop on May 4 after U.S. payrolls rose by the least in six months.

Survey: U.S. gasoline prices drop 7 cents

“The price decline comes from lower crude oil prices,” said publisher Trilby Lundberg.

That’s good news for consumers, but it comes from a negative place, she said.

“Oil prices themselves are down because the oil market sees economic weakness in Europe and the United States, which is a negative for oil demand,” said Lundberg.

OPEC output target rise not yet on agenda: Algeria

ALGIERS (Reuters) – Raising the output target set by the Organization of the Petroleum Exporting Countries is not on OPEC’s agenda for now but probably will be, Algerian Energy and Mines Minister Youcef Yousfi said on Sunday.

Asked about the prospect of increasing the target, Yousfi told state radio: “For the moment that is not the object of our discussions, but probably that will come at the OPEC level.”

MidEast oil supply reliable – Qatar energy min

Qatar’s energy minister said on Monday oil production in the Middle East remains reliable and there is no shortage of supply in the market.

“Supply from the Middle East has been reliable despite perceived disturbances in the region… there is no shortage of oil,” Mohammed Saleh al-Sada said during a Middle East Petroleum & Gas Conference in Bahrain, organised by Conference Connection.

South Korea says UAE, Saudi promise more oil

(Reuters) – The United Arab Emirates and Saudi Arabia have promised to fill any gap in South Korea’s oil imports if supplies from Iran are disrupted, South Korean Minister of Strategy and Finance Bahk Jae-wan said on Monday.

“So far the UAE and Saudi Arabia have promised to provide more oil than now if things get worse. They have promised to fill the gap,” he told reporters on the sidelines of a bilateral economic meeting with UAE officials in the capital Abu Dhabi. He said no oil volumes had been specified so far.

Effects of Arab awakening on the global oil industry

The MENA region has massive hydrocarbon resources (some 60 percent of the world’s proven oil reserves and 45 percent of global gas reserves). Most of those resources are concentrated in the Gulf Cooperation Council (GCC) region, which is home to approximately 40 percent of the world’s proven oil reserves and 25 percent of natural gas reserves. So, the MENA region, and the GCC region in particular, is of great importance to the global energy market and to the economic stability and prosperity of the world. The current political unrest has already been reflected by a surge in oil prices, but the world hopes that this will be the only short-term effect of the transitional phase that the region is currently experiencing.

Fuel-Oil Shipments to Singapore Rebound in June; 16 Ships Booked

Fuel-oil shipments to Singapore rebounded from May, with 16 tankers carrying 3.38 million metric tons scheduled to arrive in Singapore from outside Asia in June, vessel-charter data compiled by Bloomberg show.

The tankers, including 10 very large crude carriers, have been booked to collect the fuel for ships and power generators from ports in Europe and the Caribbean, according to data from shipbrokers including Poten & Partners Inc. in New York. The cargo volume compares with 2.68 million tons reported for June arrival as of last week.

Record Gas Use by U.S. Utilities Fails to Drive Up Price

U.S. utilities led by Southern Co. (SO) are burning a record amount of natural gas for generating electricity without triggering a forecasted boost to the fuel’s price from near 10-year lows.

The power companies used 34 percent more gas in February than a year earlier, Energy Department data show. Even Atlanta- based Southern, historically one of the largest U.S. coal-plant operators, is on pace to consume more of the cleaner-burning fuel than coal in 2012 for the first time in its 100-year history. Utilities are the nation’s biggest gas consumers.

Hedge Funds Bet Wrong Before Biggest Slump Since October

Hedge funds raised bets on higher commodity prices for the first time in six weeks, just before the biggest three-day slump since October as U.S. jobs data fell short of expectations and European manufacturing contracted.

For China, Oil Helps Lift Other Exports

BEIJING — A $1 trillion oil-fueled trade windfall could not be better timed to help companies move into higher-value products and rebalance the economy in China, the world’s biggest exporter.

Fast-growing countries producing oil and other commodities are taking advantage of the windfall from the recent gains in prices for those commodities, buying about half of the $2 trillion worth of goods sold by China overseas.

Iran government denies plans to treble gasoline price

DUBAI (Reuters) – Iran’s government denied on Monday it would treble the price of gasoline as part of subsidy reforms that have been commended by the IMF but caused anger at home among a population struggling under Western trade sanctions.

In a statement carried by the Fars news agency, the office of President Mahmoud Ahmadinejad said talk of a threefold price increase – broadcast on Friday by Ahmadinejad’s bitter critic, the speaker of parliament – was “entirely false”.

Clinton presses India to cut oil imports from Iran

U.S. Secretary of State Hillary Rodham Clinton urged energy-starved India on Monday to reduce its Iranian oil imports to keep up pressure on the Islamic republic to come clean about its nuclear program.

In meetings in the capital, New Delhi, Ms. Clinton was expected to push for India to find alternative sources of oil on the international market.

Iran’s strategic relevance for India

United States Secretary of State Hillary Clinton’s statement in Kolkata urging India to curtail its oil import from Iran signifies increasing pressure that India is likely to face on its dealings with Iran from the US in an election year.

It is not to undermine the threat to global peace that might emanate, should Iran decide to go in for nuclear weapons, but the US also needs to understand India’s strategic compulsion and its critical dependence on Iran for its sustained growth and development. India and Iran have had long civilizational links, but that did not prevent Iran from providing material support to Pakistan, in its wars with India, both in 1965 and 1971.

India Said to Plan 20% Cut in Iran Oil Imports This Fiscal Year

India plans to cut its oil imports from Iran by 20 percent this financial year, four Indian government and refinery officials with direct knowledge of the matter said.

Asia’s third-biggest importer of crude will curtail its purchases from the Persian Gulf nation to 14 million tons from 17.5 million tons in the 12 months ending March 31, the officials said. They asked not to be identified because they aren’t authorized to speak on the subject.

India Said to Deny Local Branch for Iran Bank on U.S. Pressure

India barred an Iranian bank from opening a branch in the country because of U.S. pressure, making it harder for the Persian Gulf state to settle oil trades with its second-biggest crude customer, two people with knowledge of the matter said.

Polls open in Syria amid heavy security, scattered violence

(CNN) — Polls opened Monday in Syria, with more than 7,000 candidates vying for 250 seats in parliament amid mounting international pressure on President Bashar al-Assad to step aside.

The opposition urged Syrians to boycott the elections, saying a vote for any of the candidates amounted to a vote for al-Assad.

Airstrike in Yemen kills al-Qaeda leader on FBI wanted list

SANAA, Yemen (AP) – An airstrike Sunday killed a top al-Qaeda leader on the FBI’s most wanted list for his role in the 2000 bombing of the USS Cole warship, Yemeni officials said. The drone attack was carried out by the CIA, U.S. officials said.

Aquino Open to China Sea Oil Deal Separate From Territory Spat

Philippine President Benigno Aquino said he’s open to an agreement with China that would allow companies to exploit oil and gas resources while the governments separately resolve South China Sea border disputes.

China’s 1st deep-water rig to drill in S China Sea

The first deep-water drilling rig developed in China will be put into service in the South China Sea on Wednesday, the country’s largest offshore oil producer said Monday.

Argentina Taps Ex-Schlumberger Executive Galuccio to Oversee YPF

Argentina President Cristina Fernandez de Kirchner named Miguel Galuccio, a former Schlumberger Ltd. executive, to head YPF SA after Congress approved the government’s seizure of its biggest energy company.

Kuwait’s Gulf Oil wants 350,000 bpd by 2014-15 – KUNA

Kuwait Gulf Oil Company (KGOC) is aiming to increase its oil output to 350,000 bpd by 2014-2015 from 250,000 bpd now, the company’s chairman told state-run news agency KUNA.

KGOC, a unit of Kuwait Petroleum Corp (KPC), is also aiming to boost the gas it extracts from oil fields to 500m cubic feet by the same date, Hashem al-Rifaee said.

Libya’s NOC Says Arabian Gulf Oil Co. Hasn’t Cut Crude Output

Libya’s Arabian Gulf Oil Co. has not reduced crude production, its parent National Oil Corp. said on its website, refuting an earlier statement from the company known also as Agoco.

Aramco to increase trading in oil products

(Reuters) – Saudi Aramco Products Trading Co expects its refined oil products trading volumes to rise to 1.5 million barrels per day (bpd) as its downstream business expands, the firm’s chief executive said on Monday.

Aramco Trading, a subsidiary of state-run Saudi Aramco which plans a major increase in its refining capacity, started commercial operations in January.

Bahrain to award LNG terminal contract this year

(Reuters) – Non-OPEC producer Bahrain plans to award a contract to build its liquefied natural gas (LNG) terminal by year-end, Bahrain’s energy minister said on Monday.

Debate over continued incentives for energy companies

Public money supports the development of nearly every form of energy — a point not lost on a budget-conscious public after California solar company Solyndra Inc. wasted a $500 million federal loan and oil companies continued to rack up profits with nearly record gasoline prices.

A hodgepodge of incentives, from loan guarantees and grants to tax breaks, support coal, oil, nuclear, solar, wind and other projects.

Total ‘on track’ to begin Elgin well operation within days

Total SA (FP), Europe’s third-largest oil producer, said it’s “on track” to begin a well intervention operation to plug a North Sea gas leak in the coming days.

The monthlong gas leak has shut production at the Elgin and Franklin fields and cost the company 50,000 barrels of oil a day. Total’s three platforms at the Elgin and Franklin fields are about 240 kilometers (150 miles) east of Aberdeen, Scotland.

Two Years Later, Grim Photos From the BP Disaster

It’s been two years since the Deepwater Horizon disaster unleashed 4.9 million barrels of oil on the Gulf of Mexico. In the midst of the disaster, BP and its contractors did everything they could to keep people from seeing the scale of the disaster. But new photos released Monday offer some new insight to just how grim the Gulf became for sea life.

The government does a poor job of estimating what it will cost to tear down a nuclear reactor, Congressional auditors say, and it may not be overseeing plant owners well enough to assure that they set aside enough money to do the job.

For a study it plans to issue on Monday, the Government Accountability Office scrutinized 12 of the nation’s 104 power reactors and found that for 5 of them, the decommissioning cost calculated by the Nuclear Regulatory Commission was 76 percent or less of what the reactor’s owner thought would be needed.

Japan shuts down last nuclear reactor

Tokyo (CNN) — As Japan began its workweek Monday morning, the trains ran exactly on time, the elevators in thousands of Tokyo high rises efficiently moved between floors, and the lights turned on across cities with nary a glitch.

What makes this Monday so remarkable is that for the first time in four decades, none of the energy on this working day is derived from a nuclear reactor.

Ford Focus will offer choice side by side: gas or electric

LOS ANGELES — Car shoppers will soon find two Ford Focus sedans sitting side by side when they visit the dealership — one with a gas tank and another with batteries.

The case for interdependence

The physicist-turned international environmental activist Dr. Vandana Shiva gave the opening keynote address at the Living Future “unconference” on May 2 in Portland, Oregon. Shiva is the author of Earth Democracy and Water Wars, among other books, including Soil Not Oil: Environmental Justice in an Age of Climate Crisis (South End Press, 2008). This book posits that the triple threat of climate change, peak oil, the food and agrarian crisis, together, represent a “triple opportunity”—but only if we change our thinking and our systems.

Amid Brazil’s Rush to Develop, Workers Resist

JACI PARANÁ, Brazil — The revolt here on the banks of the Madeira River, the Amazon’s largest tributary, flared after sunset. At the simmering end of a 26-day strike by 17,000 workers last month, a faction of laborers who were furious over wages and living conditions began setting fire to the construction site at the Jirau Dam.

Throughout the night, they burned more than 30 structures to the ground and looted company stores, capturing the mayhem on their own cellphone cameras, before firefighters extinguished the blazes. The authorities in Brasília flew in hundreds of troops from an elite force to quell the unrest.

Food fears feed global scramble for land

LONDON (AlertNet) – It was designed to increase production and exports of vegetable oil, a commodity in short supply after World War Two, and foster growth in post-war Britain and Tanganyika.

Instead, Britain’s scheme to carve out million-acre plantations for growing groundnuts in what is now Tanzania ended in disaster – scuppered by the thick bush that rendered machines to clear land for cultivation useless, and a lack of suitable soil and rainfall for the crop to grow.

Food competition to leave poor hungrier by 2050-expert

LONDON (AlertNet) – In 2008, as world food prices soared as a result of drought-hit harvests, growing grain demand and high oil prices, South Korea had an uncomfortable glimpse of the future.

The country, which imports 70 percent of the grain it needs, suddenly found major wheat and maize producers such as Russia and Argentina imposing export bans, aimed at keeping enough food at home to satisfy demand.

‘Green bullet’ innovations aim to feed world of 9 billion

LONDON (AlertNet) – In flood-hit fields in the Philippines, farmers are testing a hardy new variety of rice that can survive completely submerged for more than two weeks.

In Kenya’s Kibera slum, poor urban families are turning around their diets and incomes just by learning to grow vegetables in sack gardens outside their doors.

And in India, a push to help marginalised rural communities gain title to their land is leading to a significant drop in hunger.

Curbing food speculation – right step to stop hunger?

Some experts say speculation does nothing more than aggravate other factors blamed for price rises, such as climate change, rising demand for food, export bans and soaring oil prices.

However, critics accuse banks, hedge funds and traders of exploiting the deregulation of the global commodity markets, initiated by the United States in 2000, to make a financial killing at the expense of the world’s poor.

FACTBOX-Innovative ways to tackle urban hunger

NEW YORK (AlertNet) – With the world’s population set to swell to 9 billion people by 2050, hunger and undernutrition is expected to take on an increasingly urban face, as 70 percent of the planet’s population become city dwellers.

One promising, if limited, solution is urban gardening.

From Bangkok to Boston, gardens are sprouting on the roofs of high rises, former factories, churches, and garages. Chicken coops and beehives dot rooftops and back gardens from London’s Hackney neighbourhood to the grittiest sections of Chicago.

Here are some innovative urban food projects:

Kenyan villagers grow their way out of food aid

They started to invest in ways of harvesting and conserving water, and to experiment with a mix of indigenous and innovative methods of dry-land farming. The approach quickly bore fruit.

The scheme now has a membership of 3,000 registered households, with 2,000 more hoping to take part.

“It is the first programme I have seen that has managed to end dependence on food aid,” says Lawrence Kiguro, associate director for livelihoods and resilience at international aid group World Vision Kenya, which helped the community-led scheme get off the ground.

Sipping From the Garden Hose? Think Again.

The group tested nearly 200 gardening products, including hoses, gloves, kneeling pads and tools, for lead, cadmium, bromine, chlorine, phthalates and bisphenol A. Over all, they found that two-thirds of the products tested contained levels of one or more chemicals in excess of standards set for other consumer products.

For example, 30 percent of all products tested contained lead exceeding the Consumer Product Safety Commission‘s standard of 100 parts per million for children’s products.

EU nations get cold feet over climate change fund

(Reuters) – EU nations are dithering over how to fill a multi-billion-euro fund to help tackle climate change, just as the region’s executive body hosts talks with countries likely to bear the brunt of extreme weather.

The Climate Fixers

Is there a technological solution to global warming?

Safeguarding Mammoth Trees, Champs of the Ecosystem

Among their many other invaluable roles, the oldsters also store a lot of carbon. In a research plot in California’s Yosemite National Park, big trees (those with a diameter greater than three feet at chest height) account for only 1 percent of trees but store half of the area’s biomass, according to a study published this week in PLoS ONE.

Glacial lake bursts in Nepal, flood kills at least 13 people

A glacial lake burst Saturday in the Nepalese Himalayas, causing a flash flood that killed at least 13 people and left 60 more unaccounted for, PTI reports.

Another signal of the potentially deadly mounting cost of climate change, the flash flood, like several other glacial lakes that have burst in China, is believed to be the result of the melting of the Himalayan glaciers.

NREL develops more precise look at cradle-to-grave greenhouse gas emissions for energy technologies

(Phys.org) — A new approach to assessing greenhouse-gas emissions from coal, wind, solar and other energy technologies paints a much more precise picture of cradle-to-grave emissions and should help sharpen decisions on what new energy projects to build.

The method – a harmonization of widely variant estimates of greenhouse gas emissions by the U.S. Department of Energy’s (DOE) National Renewable Energy Laboratory (NREL) – is being heralded as an important step forward in life-cycle assessments that paints a clearer picture of the environmental penalties and benefits of different technologies.

KSA is now reaching the point where the easy production of oil, as in sink vertical wells at kilometer intervals and watching an average of 10 kbd merrily bubble to the surface, is now largely over. The oilfields are moving increasingly into the more advanced and costly procedures to help sustain a production that would, under earlier production regimes, have long faded into memory. Ghawar, for example, is moving into CO2 injection and some steam assist (likely with the areas with heavier, tar-ier deposits) seeking to maintain an overall 5 mbd production.

But today I want to talk a little about KSA’s increasing use of hydraulic fracturing of their horizontal wells, and offer a little more technical detail about growing cracks through rocks. Consider the problem that high production fields have when a horizontal well runs through a high permeability or densely fractured zone. The impact of this on premature water breakthrough is well documented. The relative preferential movement of water along faults, for example, can be seen in this model from Ghawar.

Figure 1, Relative water movement along faults in Ghawar (Dogru et al)

It is also evidenced by this simulated model of the effect of high fracture densities on the performance of MRC wells, where increasing the drawdown pressure to pull fluid into the wells can lead to premature watering out of the well.

Figure 2. Use of a low drawdown pressure to maintain oil flow.

With low draw down, the flow rates are reduced, but the fluid entering the well remains largely oil (Mubarak et al)

In contrast if the differential pressure is increased (by lowering well pressure) then the greater flow rates allows the underlying water to flow up the fractures and prematurely waterflood the well.

Figure 3. The use of a higher draw down pressure preferentially encourages water migration up the fractures, killing the well prematurely. (Mubarak et al)

It has been obvious to Aramco (who runs the KSA fields) for some time that adding their own fracture paths to the field would result in better performance, and could also help overcome the problem of natural fractures and high-permeability zones such as the Super-K in Ghawar.

Figure 4. Section through conventional dolomite at Ghawar (Cantrell et al) 

 Contrast this with the blue epoxy-filled pores of the super-K layers which indicate the high permeability.

Figure 5. Section through the super-K dolomite (0nly 5-ft from the sample in figure 2, in the same well. (Cantrell et al)

 There is thus an incentive to provide paths for the oil to make it easy to reach the well. What follows is a more advanced discussion of hydraulic fracturing, but for those who are not that interested, the earlier simpler description is given here (TOD and BTE).

Now, just a little bit of extra tech talk. If you take a rectangular piece of Plexiglas – which gets around the geological variations in properties that occur with rock – as an example – and carefully cut a notch into the center of the block, you can grow a crack out from that notch by putting the beam into simple 3-point bending. (We started doing this because we wanted some experimental results to compare with the various theories predominant at the time over the stresses required to initiate fractures).

Figure 6. Crack grown out from a wire-sawn notch in Plexiglas, under 3-point bending. 

 One of the first practical steps you take is to stop using a wire saw for the entire crack, but cut most of the notch with a milling tool, and only use the wire saw for the last few mm. The reason is that the heat on the wire causes a high failure rate of the cutting wire, particularly with a set of neophyte graduate students, and the wire, being diamond impregnated, is very expensive. 

 The next thing that you learn is that if you adjust the crack length, you can grow the crack very slowly and stop ii where you want, so that it is fairly easy to work out how much force you are putting in relative to the crack surface generated, as well as the force required to start the crack. Further, the surface of the fractured surface has a characteristic look, which we called “river lines.”

Figure 7. Surface of a crack grown out slowly from the initial notch (finger for scale) 

 However, if you changed the notch length so that so that it was less of a percentage of the sample width, the crack almost immediately moved much faster, and unless you made a special effort, could not be stopped within the sample (as occurred in Figure 4). And further, the crack surface was very smooth, in contrast with the “river lines” of the slower moving crack.

Figure 8. Crack grown from a shorter notch, with a higher speed of advance in the sample, note the smooth surface. 

 What this shows is something that Dick Bieniawski was also finding in rock itself (as we later also demonstrated). Depending on the initial length of the crack, so the speed that the crack grows at changes, and at the higher speed it moves not around the particles of rock, but often through them. (In our case we were seeing the effects of discontinuities in the Plexiglas as the cause of the deviations in the surface). Dick’s work is given here and here, though I found it in the International Journal of Rock Mechanics and Mining Science (vol 4 no. 4 pp 395 – 430).

Essentially he found, and this has been confirmed by others based on initial geometry,that a crack begins to grow relatively slowly, but then accelerates to a terminal velocity that remains relatively constant. Unfortunately, the papers are behind a paywall, so I cannot use the exact curve that Dick drew, but I am going to approximate it, as follows:

Figure 9. Change in crack velocity with length (after Bieniawski IJRMMS) 

 (Half lengths are used, since for many theories the crack is anticipated to initiate as an oval shape. For the fractures in the field these are usually measured in tens of feet. (Rahim and Al-Qatani) 

 There are two critical points that come out of this work. The first is that it is preferable to start with a crack of a significant length so that the acceleration rapidly moves to a trans-granular surface rather than just growing around the grains. The reason for this is practical in that small cracks can be stopped if they reach an area with a large radius (the reason you drill a hole at the end of a crack to stop it growing through a sheet of metal). Having the crack initially moving faster means that it can overcome small open spaces, and also that it can create a smoother, slicker path along which fluid can flow with less resistance. 

 The other aspect of growing the crack is that if you try putting too much energy into it (for example, by over-pressuring the borehole) the crack will not grow faster; rather it will expend the additional energy by splitting into a number of cracks that deviate off somewhat from the original direction. That also tends not to be a good thing if you are trying to open a single passage way through the rock, wide enough to push particles into, along with the fracturing fluid. To stop that from happening one can, for example, pulse the pressure in the well so that only enough energy gets to the crack tip so as to keep only a single fracture growing out. One also has to ensure that the crack is initiated within the right orientation to the existing stress fields. Aramco have, however, become skilled in determining the effectiveness of the fractures by monitoring, among other things, the temperature flows of fluids into the well.

Figure 10. Induced fracture and the evidence for it from the temperature log (Rahim and Al-Qatani )

 Aramco have started to use hydraulic fractures in their horizontal wells, including those with open hole completions with the interval between packers ranging from 100 to 1000 ft, depending on geology.

The pressure within the packed off section of the horizontal well is then increased until the wall fractures and the crack grows out into the formation. An example of how the pressure changes in the well as the fracture grows is given by Al-Naimi et al.

Figure 11. Pressure plot during the generation of a hydraulic fracture (Al-Naimi et al). 

 Getting the rest of the oil after the best is gone is an ongoing effort, particularly in older fields such as Ghawar. But understanding some of the technology makes it possible to further appreciate what Aramco is developing to further produce some of the more difficult regions within the field. That is a topic for another day.